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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
----------------
ADVANCED GLASSFIBER YARNS LLC
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3229 58-2407014
(State of formation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
</TABLE>
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AGY CAPITAL CORP.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Delaware 3229 57-1072917
(State of incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
</TABLE>
2556 Wagener Road
Aiken, South Carolina 29801
(803) 643-1377
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
With a copy to:
<TABLE>
<S> <C>
Robert B. Fisher, President Mark F. McElreath, Esq.
Advanced Glassfiber Yarns LLC Alston & Bird LLP
AGY Capital Corp. One Atlantic Center
2556 Wagener Road 1201 West Peachtree Street
Aiken, South Carolina 29801 Atlanta, Georgia 30309-3424
(803) 643-1377 (404) 881-7378
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of Registrants' agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 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. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Price per Aggregate Offering Amount of
Securities to be Registered Registered Note(1) Price Registration Fee
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<S> <C> <C> <C> <C>
9 7/8% Series B Senior
Subordinated Notes due
2009.................. $150,000,000 100% $150,000,000 $41,700
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f), based upon the book value of such securities.
----------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
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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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the SEC +
+is effective. This prospectus is not an offer to sell these securities and we +
+are not soliciting an offer to buy these securities in any state where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 12, 1999
PROSPECTUS
ADVANCED GLASSFIBER YARNS LLC
AGY CAPITAL CORP.
Offer to Exchange their 9 7/8% Series B Senior Subordinated Notes due 2009
which have been registered under the Securities Act
for up to $150,000,000 aggregate principal amount
of their outstanding 9 7/8% Senior Subordinated Notes due 2009
The Exchange Notes:
. The terms of the exchange notes we issue will be substantially identical to
the outstanding notes that we issued on January 21, 1999, except for the
elimination of certain transfer restrictions, registration rights and
liquidated damages provisions relating to the old notes.
. We will pay interest on the exchange notes twice a year, beginning July 15,
1999.
. We cannot redeem the exchange notes before January 15, 2004. After that date,
we may redeem them at certain specified prices. However, before January 15,
2002, we can redeem up to 35% of the exchange notes at 110.125% of their face
amount, plus interest, with money we raise in certain public equity
offerings.
. If we experience certain changes of control, we must offer to purchase the
exchange notes at 101% of their face amount, plus interest.
Guarantees:
. Certain of our future subsidiaries will guarantee the exchange notes on an
unsecured, senior subordinated basis.
The Exchange Offer:
. The exchange offer will expire at 5:00 p.m., New York City time, on ,
1999, unless extended.
. Our completion of the exchange offer is subject to customary conditions,
which we may waive.
. Upon our completion of the exchange offer, all old notes that are validly
tendered and not withdrawn will be exchanged for an equal principal amount of
exchange notes that are registered under the Securities Act.
. Tenders of outstanding notes may be withdrawn at any time prior to the
expiration of the exchange offer.
. The exchange of notes will not be a taxable exchange for federal income tax
purposes.
. We do not intend to list the exchange notes on any national securities
exchange or Nasdaq.
. We will not receive any cash proceeds from the exchange offer.
Notice to Investors:
. You should consider carefully the risk factors beginning on page 14 of this
prospectus before tendering your old notes in the exchange offer.
. Neither the SEC nor any state securities commission has approved or
disapproved of the exchange notes, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is , 1999.
<PAGE>
We have not authorized any person to make a statement that differs from what
is in this prospectus. If any person makes a statement that differs from what
is in this prospectus, you should not rely on it. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, the exchange notes in any
state where such offer or sale is not permitted. The information in this
prospectus is complete and accurate as of its date, but the information may
change after that date.
This exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of old notes in any jurisdiction in which this exchange
offer or the acceptance thereof would not be in compliance with the securities
or blue sky laws of such jurisdiction.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary......................................................... 1
Risk Factors............................................................... 14
Old Notes Outstanding After the Exchange Offer Will Not Have Registration
Rights and We Expect the Market for the Old Notes To Be Illiquid........ 14
Our Indebtedness Results in Significant Debt Service Obligations and
Limitations............................................................. 14
Your Exchange Notes Will Be Subordinate to Our Senior Debt............... 15
Our Indebtedness May Prevent Us from Engaging in Certain Beneficial
Activities.............................................................. 15
We May Not Have Sufficient Funds to Repay the Exchange Notes Upon a
Change of Control....................................................... 16
The Exercise of Put Rights May Adversely Affect Our Operating
Performance............................................................. 16
We Have Only Operated Independently of Owens Corning Since September 30,
1998 and Remain Dependent Upon Owens Corning to Provide Certain
Materials and Services.................................................. 17
We May Have Conflicts of Interest With Our Equityholders................. 17
A Downturn in the Electronics Industry or the Movement of Electronics
Industry Production Outside of North America Could Reduce Demand for Our
Products................................................................ 18
Our Operating Performance is Dependent Upon a Limited Number Of
Customers............................................................... 18
We Depend on a Stable Supply of Borates.................................. 19
Our Customers Could Switch to Other Suppliers of Glass Yarns............. 19
A Disruption at One of Our Facilities Would Significantly Decrease
Production.............................................................. 19
Our Foreign Sales Are Exposed to Risk of Currency Fluctuations........... 20
Changes In Government Regulations Could Reduce Demand for Our Products... 20
Issuance of the Old Notes and Any Note Guarantee May Be Subject to
Fraudulent Conveyance Laws.............................................. 20
We May Suffer Significant Costs to Make Our Systems "Year 2000"
Compliant............................................................... 21
Our Operating Performance is Dependent Upon Good Relations with Our
Employees............................................................... 22
We May Be Responsible for Environmental and Safety and Health Costs...... 22
You Cannot Be Sure That an Active Trading Market Will Develop for the
Exchange Notes.......................................................... 22
Use of Proceeds............................................................ 24
Capitalization............................................................. 24
Unaudited Condensed Pro Forma Financial Information........................ 25
Selected Historical Financial Information.................................. 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 34
Business................................................................... 43
Management................................................................. 51
Operating Agreement........................................................ 53
Certain Relationships and Related Transactions............................. 56
Security Ownership......................................................... 63
Description of Other Indebtedness.......................................... 64
Description of Exchange Notes.............................................. 66
Certain Federal Income Tax Considerations.................................. 104
The Exchange Offer......................................................... 105
Plan of Distribution....................................................... 116
Legal Matters.............................................................. 118
Experts.................................................................... 118
Index to Financial Statements.............................................. F-1
</TABLE>
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WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-4 that we have
filed with the SEC. This prospectus does not contain all of the information set
forth in the registration statement. For further information about us and the
exchange notes, you should refer to the registration statement. This prospectus
summarizes material provisions of contracts and other documents to which we
refer you. Since these summaries may not contain all of the information that
you may find important, you should review the full text of these documents. We
have filed certain of these documents as exhibits to our registration
statement.
In addition, we have agreed that, even though the SEC does not require us to
do so, for so long as any notes remain outstanding, we will furnish to you and
the trustee and file with the SEC all such information, documents and reports
specified in Section 13 or 15(d) of the Exchange Act.
You should direct any request for information to our Chief Financial Officer
at least 10 business days before you tender your exchange notes in the exchange
offer. Our mailing address and telephone number are:
Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
(803) 643-1377
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Some of the information in this prospectus may contain forward looking
statements. Such statements include, in particular, statements about our plans,
strategies and prospects under the headings "Prospectus Summary," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." You can identify forward looking statements by our use of forward
looking terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. Although we believe that our plans,
intentions and expectations reflected in or suggested by such forward looking
statements are reasonable, we cannot assure you that our plans, intentions or
expectations will be achieved. Important factors that could cause our actual
results to differ materially from the forward looking statements we make in
this prospectus are set forth in the "Risk Factors" section and elsewhere in
this prospectus. All forward looking statements attributable to us or persons
acting for us are expressly qualified in their entirety by our cautionary
statements.
CERTAIN MARKET AND INDUSTRY DATA
Unless we indicate otherwise, we derived the glass yarns industry data, our
market share and the percentage of our sales attributable to various end-use
markets in this prospectus from our internal surveys and estimates. We believe
that there are no industry-wide publications or trade associations that report
industry, market and end-use data. No independent sources have verified our
internal surveys or estimates. While this data is shown with numerical
specificity, these estimates are based on sources that are not complete and on
collection methodologies that are not systematic, including:
. routine discussions with customers to estimate existing and projected
global glass yarn sales;
. negotiations with customers in which pricing information was discussed;
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. development of a business model with independent consultants to estimate
glass yarns consumption in the electronics industry;
. our understanding, based on ordinary course discussions with our
customers, of the end-use markets served directly and indirectly by our
customers, which we have used to estimate the percentage of our glass
yarn sales to the electronics, industrial, construction and specialty
markets;
. review of fabric production quantities with major weavers; and
. public statements by competitors, independent financial analysts and a
regional trade association.
These estimates represent our management's good faith assessments and are
believed to be based on methodologies similar to those used by our major
competitors, but nevertheless are inherently subject to inaccuracy.
In this prospectus, we express our capacity utilization as a percentage of
installed bushings in use. Bushings are heat-resistant platinum and rhodium
trays through which molten glass is passed to form glass filaments. The fact
that a bushing is in use does not necessarily indicate that we are obtaining
the highest volumes or margins possible with that bushing. Volume and margin
depend on numerous factors including the production process in use and the
product mix.
USE OF CERTAIN TERMS AND FINANCIAL INFORMATION
Unless the context otherwise requires, as used in this prospectus, the terms
(1) "AGY," "Issuers" or "we" collectively refer to Advanced Glassfiber Yarns
LLC and AGY Capital Corp. and, where the context requires, to the historical
operations of Owens Corning's business of manufacturing and selling glass fiber
yarns prior to September 30, 1998, (2) "old notes" refer to the 9 7/8% Senior
Subordinated Notes due 2009 that we issued on January 21, 1999, (3) "exchange
notes" refer to the 9 7/8% Series B Senior Subordinated Notes due 2009 that
have been registered under the Securities Act of 1933 and that we are offering
in exchange for the old notes and (4) "notes" collectively refer to the old
notes and the exchange notes. All of our historical financial information
contained in this prospectus for the periods prior to and ending September 30,
1998 is based upon the historical financial information of the business prior
to that date.
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PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. It may not
contain all of the information that is important to you. To understand the
exchange offer fully, you should read this entire prospectus carefully,
including the risk factors and the financial statements.
Advanced Glassfiber Yarns LLC
Advanced Glassfiber Yarns LLC is the second largest global supplier of glass
yarns. In 1997, our net sales accounted for approximately 49% of the North
American market and approximately 24% of the global market. We are one of only
two major glass yarns producers with manufacturing facilities in North America
and one of only five major glass yarns producers that supply glass yarns
globally. We produce our glass yarns by converting molten glass into thin glass
filaments which we then twist into yarn. Our products fall into two categories
based on filament diameter:
. heavy yarns, which accounted for 76% of our 1997 net sales; and
. fine yarns, which accounted for 24% of our 1997 net sales.
We are the world's largest producer of fine yarns, and the world's second
largest producer of heavy yarns.
Glass yarns, because of their unique physical properties, are a critical
material used in a variety of electronic, industrial, construction and
specialty applications. Heavy yarns are used in a wide range of applications,
such as printed circuit boards, roofing materials, filtration equipment,
building reinforcements, window screening, aerospace materials and reinforced
tapes. Fine yarns are used primarily to construct laminates for multi-layer
printed circuit boards, which are integral to virtually all advanced electronic
products, including computers, telecommunications equipment, television
equipment, automotive equipment and home appliances. We also produce a
subcategory of heavy yarns known as specialty materials, such as S-2 Glass(R),
a proprietary high-strength glass yarn. Specialty materials, which accounted
for 9% of our 1997 net sales, are used for aircraft laminates, oxygen tanks,
sporting goods and vehicle armor. Fine yarns and specialty materials generally
command higher prices and profit margins than non-specialty heavy yarns,
primarily due to their value-added characteristics.
For the twelve months ended September 30, 1998, our net sales and EBITDA, on
a pro forma basis, were $273.0 million and $80.9 million, respectively. We
attribute our strong results and profitability primarily to the following
factors:
Attractive Industry Fundamentals. The glass yarns industry has historically
been characterized by a limited number of suppliers, high barriers to entry, a
limited number of cost-effective substitutes and high capacity utilization.
There are only five major glass yarns producers that supply glass yarns
globally, with combined sales comprising approximately 80% of total industry
sales. Historically, new entry into the market has been limited due to high
barriers of entry, which include technological know-how and significant capital
expenditure requirements. In addition, we believe that the industry's capacity
utilization generally has been high, which has allowed manufacturers to more
efficiently operate their facilities. Our capacity utilization, as measured by
use of installed bushings, averaged approximately 94% between 1995 and 1997 and
for the first nine months of 1998.
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Stable Customer Base. We sell our products to over 300 customers worldwide,
including every major North American and European weaver and a diverse group of
other domestic and international commercial and industrial users of yarns. We
maintain long-standing relationships with our major customers by collaborating
with them to meet their specific manufacturing requirements and by providing
high quality products and strong customer service. In addition, our customer
relationships generally are stable due to the limited number of global
suppliers of glass yarns and the costs to customers associated with
"qualifying" new suppliers. In order to qualify a new supplier, a customer may
need to modify its own loom set-ups and fabric specifications and also qualify
the new glass yarn supplier with certain downstream manufacturers and weavers.
Furthermore, although glass yarns generally represent a small fraction of an
end product's overall manufacturing cost, product defects can be costly for
customers. Consequently, customers demand high-quality, reliable yarns from
their suppliers and we have established a reputation with our customers for
meeting these demands. As a result of these factors, we have maintained
relationships with each of our top five customers for over 25 years.
Unique Properties of Glass Yarns. The characteristics of glass yarns include:
. high strength-to-weight ratio;
. dimensional stability;
. heat resistance;
. moisture resistance;
. chemical resistance;
. electrical resistance; and
. thermal insulation.
Although carbon and aramid fibers are stronger than glass yarns, they are
significantly more expensive. Other materials, such as steel and wood, are less
expensive but lack the physical characteristics of glass yarns. Given the
unique combination of physical attributes and relative low cost of glass yarns,
we believe few cost-effective substitute products exist.
Diversified End-Use Markets. The characteristics of glass yarn make it the
material of choice for a variety of products manufactured in the electronics,
industrial, construction and specialty markets. Our net sales to these markets
represented 36%, 28%, 27% and 9% of our 1997 net sales, respectively. We
believe that this diversity in end-use applications reduces volatility in
overall demand for our products.
Superior Production Technology and Product Innovation. We believe that we are
the technological leader in the production of glass yarns due to our strong
process engineering and product development capabilities. We pioneered the
glass yarns industry with the introduction of "glass cotton" in the 1930s and
the introduction of fine yarns in the 1940s, and have continued our innovation
with the development of S-2 Glass(R), Zentron(R) and zero twist yarn. We employ
41 technical professionals dedicated to the development of new products,
process improvements and product innovations.
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Business Strategy
Our business strategy includes the following key elements:
Emphasize Fine Yarns and Specialty Materials. We will continue our focus on
increasing the proportion of our net sales attributable to fine yarns and
specialty materials. Sales of fine yarns and specialty materials increased as a
proportion of our net sales from 26% in 1994 to 33% in 1997. We believe our
global leadership in producing fine yarns and specialty materials is a
competitive advantage when targeting manufacturers of sophisticated electronics
and specialty composites.
Develop New Products and Product Innovations. To maintain our technological
leadership position in the glass yarns industry, we conduct an active internal
research and development program aimed at developing new and improved products.
In addition, we have formed several joint product development programs with our
customers such as BGF Industries, Inc., a wholly owned subsidiary of Porcher
Industries, S.A., and certain downstream manufacturers. We also have a
continuing relationship with Owens Corning pursuant to which we and Owens
Corning conduct joint development programs and we share in certain of Owens
Corning's technology and research and development. We will continue our focus
on research and development and our commitment to collaborate with customers to
improve and develop products.
Focus on Operating Efficiency. We continually seek to improve the quality of
our production facilities and our operating systems by utilizing modern
production technology. These new technologies have enabled us to increase
throughput, product quality and operational flexibility. As a result of these
operating improvements, our EBITDA margins increased from 22% in 1993 to 32%
for the last twelve months ended September 30, 1998.
Selective Geographic Expansion. We believe that we have opportunities to
expand our business outside of North America. Approximately 27% of our 1997 net
sales were outside of North America, with approximately 24% in Europe and
approximately 3% in Asia. We believe Asia represents an attractive long-term
opportunity for sales of our fine yarns, despite the region's current economic
turmoil. Certain of our customers are expanding their production capabilities
in Asia to meet the region's demand for glass fabrics used to manufacture
electronic laminates. We anticipate that glass yarns needed for such increased
production will be sourced locally. According to the U.S. Department of
Commerce, the Asian and Australian region represented approximately 50% of the
global supply of printed circuit boards in 1997. Our strategy is to continue to
expand outside North America by co-locating or sharing production facilities
with our customers. This would reduce the risks and capital expenditures
associated with geographic expansion while strengthening our relationships with
these customers.
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The Formation Transactions
Porcher Industries and Owens Corning beneficially own 51% and 49% interests
in AGY, respectively. On July 1, 1998, Owens Corning formed AGY to own and
operate Owens Corning's glass fiber yarns and specialty materials business. On
September 30, 1998, Owens Corning sold a 51% interest in AGY to our largest
customer, Porcher Industries. The total consideration paid by Porcher
Industries was approximately $338.9 million, excluding $3.2 million of
transaction fees. Porcher Industries is a leading global manufacturer of
industrial fabrics and operates in North America primarily through its wholly
owned subsidiary, BGF Industries. In connection with Porcher Industries'
majority purchase, Owens Corning entered into a number of agreements to provide
various raw materials, capital equipment and services to us.
Concurrently with Porcher Industries' majority purchase, we recapitalized AGY
by borrowing a total of $404.0 million through a combination of $254.0 million
under a senior credit facility and $150.0 million under a senior subordinated
credit facility. We used the proceeds of these borrowings to pay (1) cash
distributions of $203.6 million to Porcher Industries and $193.4 million to
Owens Corning and (2) approximately $7.0 million in transaction fees and
expenses.
In connection with the above-described "formation transactions," Porcher
Industries' net cash outlay was $138.5 million, represented by the $338.9
million paid for the 51% interest in AGY, plus $3.2 million in fees paid in
connection with the majority purchase, less the $203.6 million cash
distribution Porcher Industries received from us. Owens Corning received $532.3
million in total consideration, comprised of the $338.9 million paid to it by
Porcher Industries and the $193.4 million cash distribution Owens Corning
received from us.
The net proceeds from the offering of the old notes, together with additional
borrowings under our senior credit facility, were used to repay all amounts
outstanding under our senior subordinated credit facility incurred in
connection with the formation transactions.
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Summary of the Exchange Offer
The Exchange Offer...... We are offering to exchange $1,000 principal amount
of our exchange notes for each $1,000 principal
amount of old notes. As of the date of this
prospectus, $150,000,000 in aggregate principal
amount of old notes are outstanding.
We have registered the exchange notes under the
Securities Act and they are substantially identical
to the old notes, except for the elimination of
certain transfer restrictions, registration rights
and liquidated damages provisions relating to the old
notes.
Resale of the
Exchange Notes......... Based on interpretations by the SEC set forth in
certain no-action letters issued to third parties, we
believe that the exchange notes may be offered for
resale, resold and otherwise transferred by you
without compliance with the registration and
prospectus delivery provisions of the Securities Act;
provided that:
. you are acquiring the exchange notes in the
ordinary course of business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the exchange notes issued to
you in the exchange offer; and
. you are not an "affiliate" of ours.
If our belief is inaccurate and you transfer any
exchange notes without delivering a prospectus
meeting the requirements of the Securities Act or
without an exemption from registration of your
exchange notes from such requirements, you may incur
liability under the Securities Act. We do not assume
or indemnify you against such liability.
Each broker-dealer that is issued exchange notes for
its own account in exchange for old notes which were
acquired by such broker-dealer as a result of market-
making or other trading activities, must acknowledge
that it will deliver a prospectus meeting the
requirements of the Securities Act, in connection
with any resale of the exchange notes. The
accompanying letter of transmittal states that by so
acknowledging and by delivering a prospectus, such
broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities
Act. A broker-dealer may use this prospectus for an
offer to resell, resale or other retransfer of the
exchange notes. We have agreed that, for a period of
180 days after the date of this prospectus, we will
make this prospectus and any amendment or supplement
to this prospectus available to any such broker-
dealer for use in
5
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connection with any such resales. We believe that no
registered holder of the old notes is an affiliate
(as such term is defined in Rule 405 of the
Securities Act) of AGY.
The exchange offer is not being made to, nor will we
accept surrenders for exchange from, holders of old
notes in any jurisdiction in which this exchange
offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of
such jurisdiction.
Accrued Interest on the
Exchange Notes and the
Old Notes..............
Interest on the exchange notes will accrue from the
last interest payment date on which interest was paid
on the old notes, or, if no interest was paid on the
old notes, from the date of issuance of the old notes
(January 21, 1999). Holders whose old notes are
accepted for exchange will be deemed to have waived
the right to receive any interest accrued on the old
notes.
No Minimum Condition.... We are not conditioning the exchange offer on the
tender of any minimum aggregate principal amount of
old notes.
Expiration Date......... The exchange offer will expire at 5:00 p.m., New York
City time, on , 1999, unless we decide to extend
the exchange offer.
Withdrawal Rights....... You may withdraw your tender at any time prior to
5:00 p.m., New York City time, on the expiration
date.
Conditions to the
Exchange Offer......... The exchange offer is subject to customary
conditions, which we may waive. We currently
anticipate that each of the conditions will be
satisfied and that we will not need to waive any
conditions. We reserve the right to terminate or
amend the exchange offer at any time before the
expiration date if any such condition occurs. See
"The Exchange Offer--Conditions."
Procedures for
Tendering Old Notes.... If you are a holder of old notes who wishes to accept
the exchange offer, you must:
. complete, sign and date the accompanying letter
of transmittal, or a facsimile thereof, and mail
or otherwise deliver such documentation, together
with your old notes to the exchange agent at the
address set forth under "The Exchange Offer--
Exchange Agent;" or
. arrange for The Depository Trust Company to
transmit certain required information, including
an agent's message forming part of a book-entry
transfer in which you agree to be bound by the
terms of the letter of transmittal, to the
exchange agent in connection with a book-entry
transfer.
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By tendering your old notes in either manner, you
will be representing, among other things, that:
. you are acquiring the exchange notes in the
ordinary course of business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the exchange notes issued to
you in the exchange offer; and
. you are not an "affiliate" of ours.
Special Procedures for
Beneficial Owners...... If you beneficially own old notes registered in the
name of a broker, dealer, commercial bank, trust
company or other nominee and you wish to tender your
old notes in the exchange offer, you should contact
such registered holder promptly and instruct it to
tender on your behalf. If you wish to tender on your
own behalf, you must, prior to completing and
executing the letter of transmittal and delivering
your old notes, either arrange to have your old notes
registered in your name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take
considerable time.
Guaranteed Delivery
Procedures............. If you wish to tender your old notes and time will
not permit your required documents to reach the
exchange agent by the expiration date, or the
procedures for book-entry transfer cannot be
completed on time, you may tender your old notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery
Procedures."
Use of Proceeds......... We will not receive any proceeds from the issuance of
the exchange notes in the exchange offer. We will pay
all our expenses incurred in connection with the
exchange offer.
Federal Income Tax
Consequences........... We anticipate that the exchange of notes in the
exchange offer will not be a taxable event for
federal income tax purposes. See "Certain Federal
Income Tax Considerations."
Effect on Holders of
Old Notes.............. As a result of this exchange offer, we will have
fulfilled an obligation under the registration rights
agreement dated as of January 21, 1999 among AGY,
First Union Capital Markets and Warburg Dillon Read
LLC and, accordingly, there will be no increase in
the interest rate on the old notes. If you do not
tender your old notes in the exchange offer:
7
<PAGE>
. you will continue to hold the old notes and will
be entitled to all the rights and limitations
applicable to the old notes under the indenture
governing the notes, except for any rights under
the registration rights agreement that terminate
as a result of the completion of the exchange
offer; and
. you will not have any further registration or
exchange rights and your old notes will be
subject to certain restrictions on transfer.
Accordingly, the trading market for untendered
old notes could be adversely affected.
Shelf Registration Under certain circumstances, certain holders of old
Statement.............. notes may require us to file, and cause to become
effective, a shelf registration statement under the
Securities Act, which would cover resales of old
notes by such holders.
Exchange Agent.......... The Bank of New York is serving as exchange agent in
connection with the exchange offer. See "The Exchange
Offer--Exchange Agent."
Summary of the Exchange Notes
Issuers................. The exchange notes will be the obligations of
Advanced Glassfiber Yarns LLC and AGY Capital Corp.
AGY Capital Corp. is a wholly owned subsidiary of
Advanced Glassfiber Yarns LLC.
Securities Offered...... Up to $150,000,000 in principal amount of 9 7/8%
Series B Senior Subordinated Notes due 2009.
Maturity Date........... January 15, 2009.
Interest Payment January 15 and July 15, beginning on July 15, 1999.
Dates..................
Optional Redemption..... We may redeem:
. all or part of the exchange notes beginning on
January 15, 2004, at the redemption prices
described in "Description of Exchange Notes--
Redemption;" and
. up to 35% of the exchange notes originally issued
at any time prior to January 15, 2002 at the
price of 110.125% of their face amount, plus
accrued and unpaid interest, with money we raise
in certain public equity offerings.
Ranking................. The exchange notes are, and any note guarantees will
be, senior subordinated debt. They rank behind all of
our current and future indebtedness (other than trade
payables), except indebtedness that expressly
provides that it is not senior to the exchange notes.
The exchange notes will effectively rank behind any
of our future indebtedness that is secured by any of
our assets to the extent of
8
<PAGE>
the value of such assets, even if such indebtedness
expressly provides that it is not senior to the
exchange notes.
Note Guarantees.........
Certain of our future subsidiaries will guarantee the
exchange notes on an unsecured basis. The note
guarantees will be senior subordinated debts. They
will rank behind (1) all of the indebtedness of the
note guarantors (other than trade payables), except
indebtedness that expressly provides that it is not
senior to the note guarantees and (2) any
indebtedness of the note guarantors that is secured
by any assets to the extent of the value of such
assets.
Mandatory Offer to If we sell certain assets or experience certain
Purchase............... changes of control, we must offer to purchase the
exchange notes at the prices listed in "Description
of Exchange Notes."
Basic Covenants
of Indenture........... We will issue the exchange notes under an indenture
that will contain covenants for your benefit. Such
covenants, among other things, could limit or
restrict our ability and the ability of certain of
our subsidiaries to:
. incur additional debt;
. pay dividends and make distributions;
. repurchase securities;
. make certain investments;
. create liens;
. transfer or sell assets;
. enter into transactions with affiliates;
. issue or sell stock of subsidiaries; or
. merge or consolidate.
However, these restrictions will be subject to a
number of important qualifications and exceptions.
For more details, see "Description of Exchange
Notes--Certain Covenants."
Risk Factors
You should read the "Risk Factors" section, beginning on page 14, as well as
the other cautionary statements throughout this prospectus, to ensure you
understand the risks associated with tendering your old notes in the exchange
offer.
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<PAGE>
Summary Unaudited Pro Forma Financial Information
We have based the following summary unaudited pro forma financial information
upon the historical financial statements of Owens Corning's glass yarns and
specialty materials business. We have adjusted the information based on certain
assumptions that we believe accurately represent the effects of the formation
transactions.
The summary unaudited pro forma statement of operations data for the year
ended December 31, 1997 and for the nine months ended September 30, 1997 and
September 30, 1998 each gives effect to the formation transactions and the
offering of the old notes as if they had occurred on January 1, 1997. We have
prepared the unaudited summary pro forma balance sheet data as of September 30,
1998 as if the formation transactions and the offering of the old notes had
occurred on that date.
The following summary unaudited pro forma financial information does not
include a provision for income taxes because AGY is a limited liability company
and is therefore not subject to income tax.
The summary unaudited pro forma financial statement data does not purport to
be indicative of what our financial position or results of operations would
actually have been had the formation transactions and the offering of the old
notes been completed on such dates, or to project our financial position or
results of operations for any future period. You should read this information
in conjunction with our historical financial statements and the other financial
information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended
December 31, Nine Months Ended
1997 September 30,
------------ -----------------------
(unaudited) (unaudited) (unaudited)
(dollars in thousands)
<S> <C> <C> <C>
Statement of Operations Data:
Net sales................................ $277,357 $209,580 $205,248
Cost of goods sold....................... 191,256 144,630 142,436
-------- -------- --------
Gross profit............................. 86,101 64,950 62,812
Selling, general and administrative
expense................................. 24,027 18,020 18,397
Restructuring costs(/1/)................. -- -- 2,034
-------- -------- --------
Income from operations................... 62,074 46,930 42,381
Interest expense......................... 39,230 29,422 29,422
Other income, net........................ (3,240) (2,440) (2,467)
-------- -------- --------
Income before extraordinary item......... 26,084 19,948 15,426
Extraordinary item(/2/).................. 3,750 3,750 --
-------- -------- --------
Net income............................... $ 22,334 $ 16,198 $ 15,426
======== ======== ========
Other Data:
Depreciation and amortization............ $ 19,799 $ 14,748 $ 15,014
Cash interest expense.................... 37,409 28,057 28,057
Capital expenditures..................... 8,324 5,744 13,509
EBITDA(/3/).............................. 85,113 64,118 59,862
EBITDA margin(/3/)....................... 30.7% 30.6% 29.2%
Ratio of total debt to EBITDA............ -- 5.1x
Ratio of EBITDA to cash interest
expense................................. -- 2.2x
Ratio of earnings to fixed charges(/4/).. 7.8x 1.5x
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
As of
September 30, 1998
----------------------
(unaudited)
(dollars in thousands)
<S> <C>
Balance Sheet Data:
Working capital.......................................... $ 35,734
Total assets............................................. 449,532
Total debt............................................... 409,125
Members' interest........................................ 14,863
</TABLE>
- --------
(1) During the first quarter of 1998, we recorded a $2.0 million restructuring
charge related to personnel reductions at our Aiken and Huntingdon
facilities.
(2) Reflects the write-off of fees of $3.8 million paid in connection with the
senior subordinated credit facility which was originally capitalized as a
deferred financing cost.
(3) We define EBITDA as income (loss) before income taxes, interest expense,
depreciation and amortization expense and cumulative effect of accounting
change. We present EBITDA because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness;
however, you should not consider EBITDA as an alternative to net income
(loss), as a measure of operating results or to cash flows as a measure of
liquidity in accordance with generally accepted accounting principles.
EBITDA margin represents EBITDA as a percentage of net sales.
(4) In calculating the ratio of earnings to fixed charges, earnings consist of
income before extraordinary item plus fixed charges. Fixed charges consist
of interest expense, whether expensed or capitalized, and that portion of
rental expense estimated to be attributable to interest.
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<PAGE>
Summary Historical Financial Information
We present below summary historical financial information of Owens Corning's
glass yarns and specialty materials business. We derived the information for
each of the fiscal years in the three-year period ended December 31, 1997 from
our audited financial statements, which appear elsewhere in this prospectus. We
derived the information for each of the two fiscal years in the period ended
December 31, 1994 and for the nine months ended September 30, 1997 and
September 30, 1998 from unaudited financial statements that we prepared. We
derived our historical financial statements from the historical financial
statements of Owens Corning. We have not adjusted our historical statements of
operations to reflect the effect of supply agreements that we entered into with
Owens Corning in connection with the formation transactions. In our opinion,
the unaudited financial information includes all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation of
the data. Operating results for the nine months ended September 30, 1998 do not
necessarily indicate the results that may be expected for the entire fiscal
year. You should read this information and the accompanying notes in
conjunction with our historical financial statements and the other financial
information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1997 1998
----------- ----------- -------- -------- -------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $246,832 $251,922 $272,395 $274,979 $277,357 $209,580 $205,248
Cost of goods sold...... 189,796 175,047 187,153 180,343 182,366 138,045 134,820
-------- -------- -------- -------- -------- -------- --------
Gross profit............ 57,036 76,875 85,242 94,636 94,991 71,535 70,428
Selling, general and
administrative
expenses............... 12,565 13,157 13,748 14,345 14,813 11,110 11,487
Restructuring
costs(/1/)............. -- -- -- -- -- -- 2,034
-------- -------- -------- -------- -------- -------- --------
Income from operations.. 44,471 63,718 71,494 80,291 80,178 60,425 56,907
Other income, net....... (1,326) (1,354) (3,041) (3,003) (2,688) (2,026) (2,328)
-------- -------- -------- -------- -------- -------- --------
Income before taxes..... 45,797 65,072 74,535 83,294 82,866 62,451 59,235
Provision for income
taxes(/2/)............. 17,535 25,834 29,594 33,051 32,540 24,481 16,226
-------- -------- -------- -------- -------- -------- --------
Income before cumulative
effect of change in
accounting for post-
employment benefits.... 28,262 39,238 44,941 50,243 50,326 37,970 43,009
Cumulative effect of
change in accounting
for post-employment
benefits(/3/).......... -- 5,600 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.............. $ 28,262 $ 33,638 $ 44,941 $ 50,243 $ 50,326 $ 37,970 $ 43,009
======== ======== ======== ======== ======== ======== ========
Other Data:
Depreciation and
amortization........... $ 7,864 $ 8,167 $ 8,604 $ 8,233 $ 8,305 $ 6,128 $ 6,394
Capital expenditures.... 12,811 13,963 8,458 15,314 8,324 5,744 13,509
EBITDA(/4/)............. 53,661 73,239 83,139 91,527 91,171 68,579 65,629
EBITDA margin(/4/)...... 21.7% 29.1% 30.5% 33.3% 32.9% 32.7% 32.0%
Ratio of earnings to
fixed charges(/5/)..... 128x 155x 164x 136x 78x 78x 67x
Balance Sheet Data(/6/)
(at period end):
Working capital......... $ 11,052 $ (1,137) $ (1,493) $ (4,944) $(11,872) $ 19,542 $ 35,734
Total assets............ 147,198 157,185 159,414 163,839 153,961 172,744 445,476
Total debt.............. -- -- -- -- -- -- 404,000
Net assets.............. 33,703 25,439 31,899 36,850 30,940 59,820 15,932
</TABLE>
12
<PAGE>
- --------
(1) During the first quarter of 1998, we recorded a $2.0 million restructuring
charge related to personnel reductions at our Aiken and Huntingdon
facilities.
(2) AGY was established as a limited liability company on July 1, 1998, and is
not subject to income tax, and therefore the data presented above does not
reflect income tax expense for any period subsequent to July 1, 1998.
Income tax expense reflected in the statement of operations for the nine
months ended September 30, 1998 represents the estimated income tax expense
attributable to the results of operations of Owens Corning's glass yarns
and specialty materials business through June 30, 1998.
(3) Effective January 1, 1994, we adopted Statement of Accounting Standards No.
112, "Employers Accounting for Postemployment Benefits." The cumulative
effect of this change in accounting policy was an undiscounted charge of
$5.6 million net of related income taxes of $3.6 million.
(4) We define EBITDA as income (loss) before income taxes, interest expense,
depreciation and amortization expense and cumulative effect of accounting
change. We present EBITDA because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness;
however, you should not consider EBITDA as an alternative to net income
(loss), as a measure of operating results or to cash flows as a measure of
liquidity in accordance with generally accepted accounting principles.
EBITDA margin represents EBITDA as a percentage of net sales.
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income (loss) before income taxes plus fixed charges. Fixed charges consist
of interest expense, whether expensed or capitalized, and that portion of
rental expense estimated to be attributable to interest.
(6) The historical balance sheet data for 1993 through September 30, 1997 have
not been adjusted to reflect the fact that Owens Corning did not contribute
deferred tax assets to us and that Owens Corning retained the following
liabilities: income taxes payable, trade accounts payable and post-
retirement health care benefits for certain of our employees. The September
30, 1998 balance sheet data reflect the elimination of assets not
contributed to us and liabilities not assumed by us, the accounting for the
purchase by Porcher Industries of a 51% interest in AGY and the borrowings
used to effect our recapitalization.
13
<PAGE>
RISK FACTORS
Before you tender your old notes, you should be aware that there are various
risks involved in such an investment, including those we describe below. You
should consider carefully these risk factors together with all of the other
information included in this prospectus before you decide to tender your old
notes in the exchange offer.
Old Notes Outstanding After the Exchange Offer Will Not Have Registration
Rights and We Expect the Market for the Old Notes To Be Illiquid
If you do not exchange your old notes for exchange notes pursuant to the
exchange offer, your old notes will continue to be subject to the restrictions
on transfer of old notes. In general, you may not offer or sell old notes
unless they are registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. We do
not currently intend to register the old notes under the Securities Act. Based
on interpretations by the SEC, we believe that you may offer for resale, resell
or otherwise transfer the exchange notes issued pursuant to the exchange offer
(unless you are an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, so long as you acquired the
exchange notes in the ordinary course of your business and you will not, and
have no arrangement with any person to, participate in the distribution of the
exchange notes. Each broker-dealer that receives exchange notes for its own
account in exchange for old notes, where such old notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such exchange notes. See "Plan of Distribution." To the
extent that old notes are tendered and accepted in the exchange offer, the
trading market for untendered and tendered but unaccepted old notes will be
adversely affected.
Our Indebtedness Results in Significant Debt Service Obligations and
Limitations
We incurred significant debt in connection with the financings described in
the prospectus summary under "The Formation Transactions" and, as a result, we
have significant debt service obligations. As of September 30, 1998, as
adjusted for the offering of the old notes, we would have had approximately
$409.1 million of indebtedness. We also would have had the ability to incur
$52.9 million of additional debt under our senior credit facility. See
"Capitalization." In addition, the indenture governing the notes allows us to
incur additional indebtedness under certain circumstances. If we add new debt
to our current debt levels, the related risks that we now face could intensify.
See "Capitalization," "Selected Historical Financial Information," "Description
of Other Indebtedness" and "Description of Exchange Notes--Certain Covenants--
Limitation on Incurrence of Additional Indebtedness."
Our substantial indebtedness poses important consequences to you, including
the risks that:
. we will use a substantial portion of our cash flow from operations to pay
principal and interest on our debt, thereby reducing the funds available
for working capital, capital expenditures, acquisitions, research and
development and other general corporate purposes;
. our indebtedness may limit our ability to obtain additional financing on
satisfactory terms and to otherwise fund working capital, capital
expenditures, acquisitions, research and development, and other general
corporate requirements;
14
<PAGE>
. our level of indebtedness may make us more vulnerable to economic
downturns and may limit our ability to withstand competitive pressures;
. our debt may bear interest at variable rates which could create higher
debt service requirements if market interest rates increase; and
. our failure to comply with the financial and other covenants applicable
to our debt could result in an event of default, which, if not cured or
waived, could have a material adverse effect on us.
If we successfully implement our business and operating strategies, we
believe we will have enough capital to carry on our business and service our
debt requirements for the foreseeable future. However, if we cannot generate
sufficient cash flow from operations to meet our obligations, we may be forced
to reduce or delay capital expenditures, sell assets, restructure or refinance
our debt, or seek additional equity capital. We cannot assure you that any of
these remedies would be satisfactory or could be effected on satisfactory
terms, if at all. Our ability to pay principal and interest on the exchange
notes and to satisfy our other debt obligations will depend on our future
operating performance. Our operating performance will be affected by prevailing
economic conditions and financial, business and other factors which may be
beyond our control. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"
"Description of Other Indebtedness" and "Description of Exchange Notes."
Your Exchange Notes Will Be Subordinate to Our Senior Debt
Before paying principal and interest on the exchange notes, we must first
make payments on any of our existing and future senior debt that is in default,
including all outstanding amounts under our senior credit facility. As of
September 30, 1998, as adjusted for the offering of the old notes, we would
have had approximately $262.1 million of senior indebtedness. In addition, we
would have had approximately $52.9 million of additional borrowing availability
under our senior credit facility.
Substantially all of our real and personal property we use in our business
operations secures our obligations under our senior credit facility. If we
default on any payments required under any of our secured debt, the secured
lenders could declare all amounts outstanding, together with accrued and unpaid
interest, immediately due and payable. If we are unable to repay amounts due,
the lenders could proceed against the collateral securing the debt. If the
lenders proceed against any of the collateral, we may not have enough assets
left to pay you or other noteholders. Moreover, if we become bankrupt or
similarly reorganize, we may not be able to use our assets to pay you or other
noteholders until after we pay all of our senior debt. In addition, the senior
credit facility may prohibit us from paying amounts due on the exchange notes,
or from purchasing, redeeming or otherwise acquiring the exchange notes if a
default exists under our senior debt. None of our non-United States
subsidiaries will guarantee the exchange notes and the exchange notes will be
effectively subordinated in right of payment to all debt and other liabilities
(including trade payables) of these subsidiaries. See "Description of Exchange
Notes--Subordination of the Exchange Notes and Note Guarantees."
Our Indebtedness May Prevent Us from Engaging in Certain Beneficial Activities
Our senior credit facility and the indenture governing the notes each contain
a number of significant covenants. These covenants could limit or restrict our
ability to:
. incur additional debt;
15
<PAGE>
. pay dividends and make distributions;
. repurchase securities;
. make certain investments;
. create liens;
. transfer or sell assets;
. enter into transactions with affiliates;
. issue or sell stock of subsidiaries; or
. merge or consolidate.
These limitations and restrictions may adversely affect our ability to
finance our future operations or capital needs or engage in other business
activities that may be in our best interests. In addition, our senior credit
facility also requires us to comply with certain financial ratios. Our ability
to comply with these ratios may be affected by events beyond our control. If we
breach any of the covenants in the senior credit facility or the indenture, or
if we are unable to comply with the required financial ratios, we may be in
default under the senior credit facility and the indenture. If we default under
the senior credit facility, the lenders can declare all borrowings outstanding,
including accrued interest and other fees, due and payable. If we use all of
our available cash to repay borrowings under the senior credit facility, we may
not be able to make payments on the exchange notes. See "Description of Other
Indebtedness" and "Description of Exchange Notes."
We May Not Have Sufficient Funds to Repay the Exchange Notes Upon a Change of
Control
If we experience certain changes of control, you will have the right to
require us to purchase your exchange notes at a purchase price equal to 101% of
the principal amount of your exchange notes plus accrued and unpaid interest.
In such circumstances, we may also be required to (1) repay our outstanding
senior debt or (2) obtain our lenders' consent to our purchase of the exchange
notes. If we cannot repay our debt or cannot obtain the needed consents, we may
be unable to purchase the exchange notes. This would be an event of default
under the indenture. Upon a change of control, we cannot guarantee that we will
have sufficient funds to make any debt payment (including purchases of the
exchange notes) as described above. To avoid default, we would try to refinance
our debt. We cannot guarantee, however, that such refinancing, if available,
would be on favorable terms. See "Description of Exchange Notes--Change of
Control."
The events that qualify as a change of control under the indenture may also
be events of default under the senior credit facility or other indebtedness. An
event of default under the senior credit facility would permit our lenders to
accelerate our indebtedness. If we cannot repay such borrowings when due, the
lenders could proceed against the collateral securing the debt.
The Exercise of Put Rights May Adversely Affect Our Operating Performance
Our affairs and the relationship between Owens Corning and Porcher
Industries, our owners, are governed by an operating agreement. Under this
operating agreement, Owens Corning and Porcher Industries each have the right
to "put" their respective ownership interests to us at any time beginning on
September 30, 2003. Funding the put rights would require us to borrow funds.
The operating agreement and the indenture impose certain financial tests and
restrictions on our ability to borrow to fund the put rights. If we satisfy
those financial tests, we would be obligated to purchase
16
<PAGE>
the ownership interest that has been tendered. Even if we satisfy the financial
tests, funding a put right may have a material adverse effect on our financial
condition, results of operations and cash flows. See "Operating Agreement."
We Have Only Operated Independently of Owens Corning Since September 30, 1998
and Remain Dependent Upon Owens Corning to Provide Certain Materials and
Services
Prior to September 30, 1998, we operated as a business unit of Owens Corning
and, therefore, we have a limited independent financial or operating history.
We have historically been dependent upon Owens Corning to provide us with
certain raw materials and capital equipment, in addition to various services,
including research and development, legal, accounting, financial, data
processing, auditing, treasury, cash management, human resource and
administrative services. In connection with the formation transactions, we
entered into supply agreements with Owens Corning under which Owens Corning
continues to provide certain raw materials, capital equipment and various
services to us for limited periods of time. During the terms of these
agreements, our operating success and viability are dependent in part upon the
performance by Owens Corning of its obligations under the agreements. We do not
expect to extend these agreements. Prior to their expiration, we will need to
arrange for sources of raw materials and other equipment and establish
independent operational, management, financial and information systems and
controls. We cannot assure you that we will be able to successfully transition
these services or operate our business independently of Owens Corning. See
"Certain Relationships and Related Transactions."
In addition, some of the capital equipment used in the production process of
glass yarns are not widely manufactured, particularly bushings. Bushings are
heat-resistant platinum and rhodium trays through which molten glass is passed
to form glass filaments. Our bushings are currently manufactured and
periodically reconditioned by Owens Corning. Owens Corning has agreed to
continue to provide bushings and reconditioning services to us for seven years.
See "Certain Relationships and Related Transactions." Only a limited number of
companies are qualified to manufacture and recondition bushings. We would incur
significant costs and a transition period of several months if we switched to
another supplier of bushings. In addition, platinum and rhodium, which are the
primary elements used in the manufacturing and reconditioning of bushings, are
subject to shortages in supply. Any failure of Owens Corning to provide us
bushings or reconditioning services for the bushings or a supply shortage of
platinum or rhodium could have a material adverse effect on our business,
financial condition and results of operations.
We May Have Conflicts of Interest With Our Equityholders
Porcher Industries, through wholly owned subsidiaries, owns a 51% ownership
interest in AGY. A wholly owned subsidiary of Owens Corning owns the remaining
49% ownership interest. As a result of its controlling interest, Porcher
Industries elects a majority of our directors and appoints new management.
Consequently, Porcher Industries has the ability to control our policies and
operations. Circumstances may occur in which the interests of Porcher
Industries and Owens Corning, as our principal equityholders, could conflict
with your interests as debtholders. See "--The Exercise of Put Rights May
Adversely Affect Our Operating Performance," "Management--Executive Officers,
Directors and Other Key Employees," "Security Ownership" and "Certain
Relationships and Related Transactions."
Porcher Industries (including its affiliates, such as BGF Industries) is also
our largest customer. Although we believe that Porcher Industries intends to
operate AGY independently from its other
17
<PAGE>
operations, this relationship may give rise to potential conflicts of interest.
The potential conflicts could include the perception by our other customers
that we may provide favorable pricing terms or disclose confidential customer
information to Porcher Industries, which could adversely affect our
relationships with our other customers. If these potential conflicts of
interest adversely affect such relationships, any loss of business resulting
from such conflicts could have a material adverse effect on our business,
financial condition and results of operations.
A Downturn in the Electronics Industry or the Movement of Electronics Industry
Production Outside of North America Could Reduce Demand for Our Products
We sell our products for use in a wide range of applications in the
electronic, industrial and construction markets. The electronics industry
represents the glass yarn industry's largest market. Any downturn in the
electronics industry, which is susceptible to cyclical and general economic
downturns, would reduce demand for glass yarns industry-wide. A reduction in
overall demand would likely result in increased competition between us and
other producers of glass yarns for customers in other end-use markets and may
cause us to reduce the price of our products which would adversely affect our
profitability.
Primarily as a result of economic turmoil in Asia, demand for electronic
products began to decrease in late 1997 and early 1998. We began to experience
decreased demand for fine yarns in the second quarter of 1998 as both weavers
and laminators reduced their inventory to match reduced demand for electronic
products. This trend continued through the end of 1998. If the demand for fine
yarns does not stabilize or improve, our sales and profitability could be
adversely affected.
In addition, due to the recent economic turmoil in Asia and the resulting
fall in currency exchange rates, imports of goods such as rigid laminates and
printed circuit boards from Asia have increased. This has negatively affected
demand for heavyweight glass fiber fabrics used in the manufacture of
electronic products and produced domestically by many of our customers. The
result was a decrease in demand for our heavy yarns in North America. To the
extent the increased competition from Asian laminators and printed circuit
board manufacturers continues to negatively affect demand for glass fiber
fabrics in North America, our sales and profitability could be adversely
affected.
Our Operating Performance is Dependent Upon a Limited Number of Customers
We depend upon a limited number of large customers for a majority of our
sales. Sales to our top ten customers accounted for approximately 64% of our
net sales in 1997 and approximately 63% of our net sales during the first nine
months of 1998. Sales to our largest customer, Porcher Industries (including
its affiliates, such as BGF Industries), totaled approximately 21% in 1997 and
approximately 19% during the first nine months of 1998. A decrease in business
from, or the loss of, any of our major customers could have a material adverse
effect on our business, financial condition and results of operations.
In addition, our future business, financial condition and results of
operations will depend to a significant extent upon the commercial success of
our major customers and their continued willingness to purchase our products.
Any significant downturn in the business of our major customers could cause
them to reduce or discontinue their purchases from us. This could have a
material adverse effect on our business, financial condition and results of
operations. See "--A Downturn in the Electronics Industry or the Movement of
Electronics Industry Production Outside of
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<PAGE>
North America Could Reduce Demand For Our Products," "--We May Have Conflicts
of Interest With Our Equityholders" and "Business--Marketing and Sales."
We Depend on a Stable Supply of Borates
Borates are one of the primary raw materials used in the production of glass
yarns. We use borates in the production processes at our Aiken facility, which
are sourced from a supplier in Turkey that is owned by the Turkish government.
This supply of borates could be interrupted for a number of reasons, including
political instability in Turkey. Our supply of borates from Turkey is sourced
through Owens Corning under a supply agreement which provides that, if there is
a limited or reduced supply of borates, Owens Corning will allocate a portion
of such supply to us. Any failure of Owens Corning to perform under the supply
agreement or any dispute relating to the allocation of a limited borates supply
could interrupt our supply of borates. Boric acid is considered by some to be a
cost-effective substitute for borates. In order to use boric acid as a
substitute, we would have to alter our production processes. This could take
several months to accomplish, and would require moderate capital expenditures.
Our Customers Could Switch to Other Suppliers of Glass Yarns
Our industry is highly competitive. We believe that the principal competitive
factors affecting the glass yarns industry include:
. quality, performance, pricing and consistency of products;
. responsiveness to customer requirements; and
. ability to maintain stable customer relationships.
Our primary competitors are PPG Industries Inc., Vetrotex, a division of
Compagnie de Saint Gobain, Nitto Boseki Co. and Nippon Electric Glass Co., Ltd.
Some of our competitors may have greater financial and other resources than we
do. We cannot assure you that we will be able to continue to compete
effectively in the future or that other competitors will not enter the glass
yarns industry.
We and PPG are the only major producers of glass yarns with production
facilities in North America. The establishment by one of our competitors of
production facilities in North America or the increase in production capacity
in North America by PPG could materially adversely affect our North American
market share. In this regard, Vetrotex has announced that it intends to build a
plant in Mexico for the production of glass yarns, primarily for use in the
electronics market. Vetrotex has publicly stated that it expects this new plant
to begin operations in the second half of 1999.
A Disruption at One of Our Facilities Would Significantly Decrease Production
A significant portion of our net sales are currently derived from our
production facilities located in Aiken, South Carolina and Huntingdon,
Pennsylvania. The Aiken plant accounted for 61% of our total net sales in 1997
and the Huntingdon plant accounted for 26% of our total net sales in 1997. The
remaining 13% of our total net sales in 1997 was sourced from Owens Corning's
Battice, Belgium and Guelph, Canada facilities. We opened a co-location
facility with BGF Industries in South Hill, Virginia in June 1998. We expect it
to become fully operational in the first quarter of 1999. If there is a
significant delay in this timing or in the qualification of yarns produced at
this facility, our business, financial condition and results of operations
could be adversely affected.
19
<PAGE>
Our facilities are designed to produce specific products. Consequently, some
products produced at one facility may not be produced at another facility. A
temporary or extended interruption in operations at any one of our facilities,
for any reason, including from labor strikes or a natural disaster, whether or
not covered by insurance, could have a material adverse effect on our business,
financial condition and results of operations. See "Business--Manufacturing
Facilities," "Business--Employees" and "Certain Relationships and Related
Transactions."
Our Foreign Sales Are Exposed to Risk of Currency Fluctuations
In 1997, we derived approximately 35% of our net sales from products sold
outside the United States. The United States dollar value of these sales
sometimes varies with currency exchange rate fluctuations. We may therefore be
exposed to exchange losses as a result of such fluctuations that could have a
material adverse effect on our business, financial condition, results of
operations and our ability to pay interest and principal on our debt. Although
we do not currently have a formal policy regarding hedging our currency risks,
we continually evaluate the necessity for entering into currency hedging
agreements to protect us from such risks; however, any such hedging agreements
may not be sufficient to eliminate risks relating to currency fluctuation.
In addition, on January 1, 1999, eleven of the fifteen member countries of
the European Union adopted the Euro as their common legal currency and
established fixed conversion rates between their existing sovereign currencies
and the Euro. We cannot assure you that this conversion will not have a
material adverse effect on our business, operations and financial condition.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Changes in Government Regulations Could Reduce Demand for Our Products
Currently, the importation of glass yarns into the United States is not
subject to import regulations. However, the importation of glass fabrics
containing glass yarn is subject to import quotas, restrictions, duties and
tariffs. To the extent that these import regulations protect domestic producers
of glass fabrics, who are our primary customers, reductions in the level of
restrictions could adversely affect these customers and, consequently, our
business, financial condition and results of operations.
Issuance of the Old Notes and Any Note Guarantee May Be Subject to Fraudulent
Conveyance Laws
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if we, at the time
we issued the old notes:
(1) incurred such indebtedness with the intent to hinder, delay or
defraud creditors; or
(2) received less than reasonably equivalent value or fair consideration
for incurring such indebtedness, and
. were insolvent at the time of incurrence;
. were rendered insolvent by reason of such incurrence (and the
application of the proceeds thereof);
. were engaged or were about to engage in a business or transaction for
which our remaining assets constituted unreasonably small capital to
carry on our businesses; or
20
<PAGE>
. intended to incur, or believed that we would incur, debts beyond our
ability to pay such debts as they matured,
then, in each case, a court of competent jurisdiction could (1) void, in whole
or in part, the notes, and direct the repayment of any amounts paid thereunder
to our creditors, (2) subordinate the notes to our obligations to our existing
and future creditors, or (3) take other actions detrimental to the holders of
the notes. The measure of insolvency for purposes of the foregoing will vary
depending upon the law applied in such case. Generally, however, we would be
considered insolvent if the sum of our debts, including contingent liabilities,
was greater than all of our assets at fair valuation or if the present fair
saleable value of our assets was less than the amount that would be required to
pay the probable liability on our existing debts, including contingent
liabilities, as they become absolute and matured. A note guarantee, at the time
it is issued by one of our subsidiaries, would be subject to the same
fraudulent transfer or conveyance laws as the notes.
We May Suffer Significant Costs to Make Our Systems "Year 2000" Compliant
The term "year 2000 issue" is a general term used to describe the various
problems that may result from the improper processing of dates and date-
sensitive calculations by computers and process control equipment as the year
2000 is approached and reached. These problems generally arise from the fact
that most of the world's computer hardware and software have historically used
only two digits to identify the year in a date, often meaning that the computer
will fail to distinguish dates in the "2000s" from dates in the "1900s." These
problems may also arise from other sources as well, such as the use of special
codes and conventions in software that make use of the date field.
At the beginning of 1998, the management of our information systems and
research and development groups began to assess the year 2000 issue. These
persons have developed and are currently implementing a comprehensive program
to make our information technology assets and non-information technology assets
year 2000 compliant.
We have identified several key systems which need to be replaced because of
year 2000 problems. The systems to be replaced include all financial and order
entry/planning systems and certain process control systems. Replacement of our
financial and order entry/planning systems is necessary to complete the
separation from Owens Corning's computer systems. We expect to begin
implementation and internal testing of these replacement systems between March
1 and September 30, 1999. The systems that will not be replaced will be
upgraded to become year 2000 compliant on the same schedule as the system
replacements.
In addition to internal systems, we are dependent on external suppliers,
including Owens Corning, for the delivery of raw materials and energy. We are
contacting these external suppliers to evaluate their year 2000 compliance
plans and state of readiness and determine whether a year 2000-related event
will impede the ability of such suppliers to continue to provide goods and
services to us. We have not received responses from all of our suppliers as to
the status of their year 2000 programs. We cannot assure you that our key
suppliers will not suffer a year 2000 business disruption. If any of our key
suppliers suffers a year 2000 business disruption, our business, financial
condition and results of operations may be materially adversely affected.
We estimate that we have spent approximately $0.4 million in software and
external consulting costs to address the year 2000 issue. We estimate that our
total year 2000 compliance program will
21
<PAGE>
cost approximately $3.0 million (excluding the cost of internal personnel). We
believe we can fund these costs from cash flow from operations. These costs
also include the cost to establish and test the independent replacement
computer systems discussed above. We cannot assure you that our year 2000
compliance program will not cost significantly more than we currently estimate.
Failure to complete remediation and replacement programs as scheduled could
impact our ability to properly manufacture our products and conduct normal
business operations. If this were to occur, we could experience a material
adverse impact on our financial condition and results of operation. Likewise,
failure of key suppliers to achieve compliance could adversely impact our
ability to manufacture products.
Risks to completing the year 2000 compliance program include the availability
of resources, our ability to discover and correct the potential year 2000
specific problems that could have a serious impact on specific systems,
equipment or facilities and the ability of suppliers and vendors and other
third parties to make their systems year 2000 compliant.
Our Operating Performance is Dependent Upon Good Relations with Our Employees
Labor unions represent employees at both the Aiken facility and the
Huntingdon facility. The collective bargaining agreement covering workers at
the Aiken facility expires on May 2, 1999 and the agreement covering workers at
the Huntingdon facility expires on October 31, 1999. We cannot assure you that
we will be able to maintain good relationships with these labor unions or that
we will be able to successfully negotiate new collective bargaining agreements
on satisfactory terms in the future. If we fail to maintain good relationships
with the labor unions or fail to negotiate satisfactory collective bargaining
agreements, we could face labor strikes or stoppages that would adversely
affect our business, financial condition and results of operations. See
"Business--Employees."
We May Be Responsible for Environmental and Safety and Health Costs
Various federal, state and local environmental laws and requirements govern
the use of our facilities. Such laws and requirements govern: (1) discharges to
air and water, (2) the handling and disposal of solid and hazardous substances
and wastes and (3) the clean-up of contamination from releases of hazardous
substances at our facilities and off-site disposal locations. Laws and
requirements relating to workplace safety and worker health also govern our
operations. These laws and requirements establish formaldehyde, asbestos and
noise standards and regulate the use of hazardous chemicals in the workplace.
We have taken, and will continue to take, steps to comply with these laws and
requirements. We believe, based upon currently available information, that
complying with environmental and health and safety laws and requirements will
not require material capital expenditures in the foreseeable future. However,
we cannot assure you that complying with the foregoing environmental or health
and safety laws and requirements will not adversely affect our business,
financial condition and results of operations. Moreover, we cannot assure you
that future laws, ordinances or regulations will not give rise to additional
compliance or remediation costs which could have a material adverse effect on
our business, financial condition or results of operations.
You Cannot Be Sure That an Active Trading Market Will Develop for the Exchange
Notes
The old notes were offered to a small number of institutional buyers and are
eligible for trading in the PORTAL Market. The exchange notes will be a new
issue of securities for which there is no
22
<PAGE>
existing trading market. We cannot assure you as to the liquidity of markets
that may develop for the exchange notes, your ability to sell the exchange
notes or the price at which you would be able to sell the exchange notes. If
such markets were to exist, the exchange notes could trade at prices that may
be lower than their principal amount or purchase price depending on many
factors, including prevailing interest rates and the markets for similar
securities. First Union Capital Markets and Warburg Dillon Read LLC have
advised us that they currently intend to make a market with respect to the
exchange notes. However, they are not obligated to do so, and any market making
with respect to the exchange notes may be discontinued at any time without
notice. In addition, such market making activity may be limited during the
pendency of the exchange offer or the effectiveness of a shelf registration
statement in lieu thereof. We do not intend to apply for listing of the
exchange notes on any national securities exchange or on Nasdaq. The liquidity
of, and trading market for, the exchange notes also may be adversely affected
by changes in the market for high yield securities and by changes in our
financial performance or prospects or in the prospects for companies in our
industry generally. As a result, you cannot be sure that an active trading
market will develop for the exchange notes.
23
<PAGE>
USE OF PROCEEDS
AGY will not receive any cash proceeds from the exchange of old notes
pursuant to the exchange offer. The net proceeds to AGY from the sale of the
old notes were approximately $141.9 million, after deducting the initial
purchasers' discount and expenses of the offering. AGY used the net proceeds
from the offering, together with additional borrowings under AGY's $315.0
million senior credit facility, to repay all debt outstanding under AGY's
$150.0 million senior subordinated credit facility, which was incurred in
connection with the formation transactions. For a description of certain terms
of the senior credit facility, see "Description of Other Indebtedness--Senior
Credit Facility."
CAPITALIZATION
The following table sets forth the capitalization of AGY as of September 30,
1998 and as adjusted to give effect to the issuance and sale of the old notes
and the application of the net proceeds therefrom as described in "Use of
Proceeds."
The following table should be read in conjunction with the historical
financial statements of Owens Corning's glass yarns and specialty materials
business (the "Business"), the unaudited pro forma condensed financial
information, the related notes and the other information contained elsewhere in
this prospectus. See "Where You Can Find More Information," "Unaudited
Condensed Pro Forma Financial Information," "Selected Historical Financial
Information" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
September 30, 1998
-------------------------
Actual As Adjusted
----------- -------------
(dollars in thousands)
<S> <C> <C>
Long-term debt (including current portion):
Senior Credit Facility(/1/)......................... $ 254,000 $ 262,125
Senior Subordinated Credit Facility................. 150,000 --
9 7/8% Senior Subordinated Notes due 2009(/2/)...... -- 147,000
----------- -----------
Total long-term debt.............................. 404,000 409,125
Members' interest(/3/).............................. 15,932 14,863
----------- -----------
Total capitalization.............................. $ 419,932 $ 423,988
=========== ===========
</TABLE>
- --------
(1) As of September 30, 1998, after giving effect to the offering of the old
notes, AGY would have had approximately $52.9 million of borrowing
availability under the senior credit facility. See "Description of Other
Indebtedness--Senior Credit Facility."
(2) Net of original issue discount of $3.0 million.
(3) Reflects (i) the write-off of fees of $3.8 million paid by AGY in
connection with the senior subordinated credit facility which was
originally capitalized as deferred financing costs and (ii) the $2.7
million paid to Owens Corning by Porcher Industries subsequent to September
30, 1998 as a purchase price adjustment in connection with the purchase by
Porcher Industries of a 51% interest in AGY.
24
<PAGE>
UNAUDITED CONDENSED PRO FORMA FINANCIAL INFORMATION
The following unaudited condensed pro forma financial statements are based
upon the historical financial statements of the Business. The unaudited pro
forma adjustments are based upon available information and certain assumptions
that management of AGY believes are reasonable. These pro forma financial
statements have been prepared to illustrate the effects of the formation
transactions and the offering of the old notes.
The unaudited pro forma condensed balance sheet as of September 30, 1998 has
been prepared as if the formation transactions and the offering of the old
notes had occurred on that date. The unaudited pro forma condensed statement of
operations for the year ended December 31, 1997 and for the nine months ended
September 30, 1997 and September 30, 1998 give effect to the formation
transactions and the offering of the old notes as if they had occurred on
January 1, 1997.
The unaudited pro forma condensed financial statements do not purport to be
indicative of what AGY's financial position or results of operations would
actually have been had the formation transactions and the offering of the old
notes been completed on such dates, or to project AGY's financial position or
results of operations for any future period. The pro forma financial
information and the notes thereto should be read in conjunction with the
historical financial statements of the Business and the other financial
information included elsewhere in this prospectus.
The accompanying pro forma financial statements do not include a provision
for income taxes because AGY is a limited liability company and is therefore
not subject to income tax.
The acquisition of the 51% interest in AGY by Porcher Industries was
accounted for as a partial purchase business combination in accordance with the
provisions of APB No. 16 "Business Combinations" and EITF Issue No. 88-16,
"Basis in Leveraged Buyout Transactions" and is reflected as such in the
historical September 30, 1998 financial statements. The final allocation of the
purchase price is subject to further review by management and is therefore
subject to change. However, that allocation is not expected to differ
materially from the initial allocation.
25
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
PRO FORMA BALANCE SHEET
at September 30, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ----------------------------------------
Post Closing
AGY Adjustment The Offering AGY
---------- ------------ ------------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents............. $ -- $147,000 (/1/) $ --
3,000 (/2/)
(150,000)(/3/)
Accounts receivables,
net..................... 33,393 33,393
Inventories.............. 24,378 24,378
Other current assets..... 1,457 1,457
-------- --------
Total current assets... 59,228 59,228
-------- --------
Net property, plant and
equipment................. 114,098 114,098
Alloy metals............... 35,360 35,360
-------- --------
Total net property,
plant and equipment... 149,458 149,458
Intangible assets.......... 227,678 $2,681(/9/) 230,359
Other assets............... 9,112 (3,750)(/3/) 10,487
5,125 (/1/)
-------- --------
Total assets........... $445,476 $449,532
======== ========
Current liabilities:
Current portion of long-
term debt............... $ 12,750 $ 12,750
Accrued liabilities...... 7,732 7,732
Due to affiliates........ 3,012 3,012
-------- --------
Total current
liabilities........... 23,494 23,494
Pension and other employee
benefit plans............. 14,800 14,800
Long term debt, less
current portion........... 391,250 147,000 (/1/) 396,375
3,000 (/2/)
(150,000)(/3/)
5,125 (/1/)
Total liabilities...... 429,544 434,669
-------- --------
Members' interest.......... 15,932 2,681(/9/) (3,750)(/3/) 14,863
-------- --------
Total liabilities and
members' interest..... $445,476 $449,532
======== ========
</TABLE>
26
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------------------------------------
Formation
AGY Transactions The Offering AGY
---------- ------------ ------------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales................. $277,357 $277,357
Cost of sales............. 182,366 $3,766 (/4/) 191,256
-------- --------
2,844 (/5/)
2,280 (/8/)
-------- --------
Gross margin.............. 94,991 86,101
Selling, general and
administrative........... 14,813 9,214 (/7/) 24,027
-------- --------
Income from operations.. 80,178 62,074
Interest expense.......... -- 37,890 (/6/) $1,340(/6/) 39,230
Other income.............. (2,688) (552)(/4/) (3,240)
-------- --------
Income before
extraordinary item..... $ 82,866 $ 26,084
======== ========
</TABLE>
27
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
<TABLE>
<CAPTION>
Historical Pro Forma
---------- ---------------------------------------
Formation
AGY Transactions The Offering AGY
---------- ------------ ------------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales................. $209,580 $209,580
Cost of sales............. 138,045 $2,742 (/4/) 144,630
-------- --------
2,133 (/5/)
1,710 (/8/)
-------- --------
Gross margin.............. 71,535 64,950
Selling, general and
administrative expenses.. 11,110 6,910 (/7/) 18,020
-------- --------
Income from operations.. 60,425 46,930
Interest expense.......... -- 28,278 (/6/) $1,144(/6/) 29,422
Other income.............. (2,026) (414)(/4/) (2,440)
-------- --------
Income before
extraordinary item..... $ 62,451 $ 19,948
======== ========
</TABLE>
28
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Historical Pro Forma
---------- --------------------------------------
Formation
AGY Transactions The Offering AGY
---------- ------------ ------------ --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net sales.................. $205,248 $205,248
Cost of sales.............. 134,820 $4,631 (/4/) 142,436
-------- --------
1,275 (/5/)
1,710 (/8/)
-------- --------
Gross margin............... 70,428 62,812
Selling, general and
administrative............ 11,487 6,910 (/7/) 18,397
Restructuring costs........ 2,034 2,034
-------- --------
Income from operations... 56,907 42,381
Interest expense........... -- 29,402 (/6/) $20(/6/) 29,422
Other income............... (2,328) (139)(/4/) (2,467)
-------- --------
Net income............... $ 59,235 $ 15,426
======== ========
</TABLE>
29
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(1) Reflects (i) the receipt of $147.0 million of gross proceeds from the
sale of the old notes and (ii) the estimated fees and expenses payable in
connection therewith.
(2) Reflects the receipt of $3.0 million of gross proceeds from borrowings
under the senior credit facility.
(3) Reflects (i) the repayment of $150.0 million of borrowings under the
senior subordinated credit facility and (ii) the write-off of fees of $3.8
million paid by AGY in connection with the senior subordinated credit facility
which was originally capitalized as deferred financing costs.
(4) Reflects the effects of a number of agreements to provide certain raw
materials, capital equipment and services to AGY between AGY and Owens Corning
as described in "Certain Relationships and Related Transactions":
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended ------------------------------------
December 31, September 30, September 30,
1997 1997 1998
------------ ---------------------- -------------
(dollars in thousands)
<S> <C> <C> <C>
Glass marbles supply
agreement(a)............ $2,273 $1,610 $1,881
Borates supply
agreement(b)............ 150 113 113
Alloy and bushing
fabrication(c).......... 2,136 1,711 1,534
Battice facility supply
agreements(d)........... (793) (692) 1,103
------ ------ ------
Pro forma effect on
cost of sales......... $3,766 $2,742 $4,631
====== ====== ======
Sliver supply
agreement(e)............ $ (552) $ (414) $ (139)
====== ====== ======
Pro forma effect on
other income(f)....... $ (552) $ (414) $ (139)
====== ====== ======
</TABLE>
--------
(a) Owens Corning has historically provided glass marbles to AGY at cost.
Pursuant to an agreement with Owens Corning, prices are set to earn a
pre-determined margin for Owens Corning.
(b) Owens Corning buys borates from a third party and has historically
supplied borates to AGY at cost. Pursuant to an agreement with Owens
Corning, prices are set at cost plus transport, process and terminal
fees plus an annual administrative charge of $150,000.
(c) Owens Corning has historically provided alloy and bushing fabrication
services to AGY at cost. Pursuant to an agreement with Owens Corning,
these services are provided to AGY at contractually agreed upon prices.
(d) Owens Corning's Battice, Belgium manufacturing facility produces
certain glass yarn products for AGY's customers. AGY has entered into
an agreement with Owens Corning to purchase glass yarns from the
Battice facility at prices equal to AGY's net sales prices less a fixed
margin.
(e) AGY has historically charged Owens Corning the actual manufacturing
cost of sliver. Pursuant to an agreement with Owens Corning, AGY
supplies sliver to Owens Corning at market prices.
(f) Owens Corning produces Low Tex Type 30 for certain customers of AGY.
AGY intends to enter into agreements with Owens Corning to purchase
these products at AGY's net sales price less a fixed margin, but the
financial impact has not been included in these pro formas.
(5) Reflects the excess of the net pension expense and net post retirement
expense over the amounts recorded historically.
(6) Reflects the interest expense and amortization of the deferred financing
costs associated with the borrowings under the senior credit facility and the
senior subordinated credit facility and the application of the net proceeds
therefrom (the "Financings") and the old notes, as if the Financings and the
offering of the old notes had been consummated as of January 1, 1997.
30
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS--(Continued)
(7) Reflects amortization of the intangible assets arising from the
acquisition by Porcher Industries of a 51% interest in AGY, based upon a 25-
year life.
(8) Reflects additional depreciation and amortization arising from the
partial step-up in basis of plant and equipment to its estimated fair value.
(9) Reflects the additional amount paid to Owens Corning by Porcher
Industries pursuant to a purchase price adjustment agreed to by Owens Corning
and Porcher Industries subsequent to September 30, 1998 in connection with the
sale of a 51% interest in AGY.
31
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth selected historical financial information of
the Business which, prior to the contribution of the Business to AGY by Owens
Corning (the "contribution"), was operated as a business unit of Owens Corning.
The selected historical financial information for each of the three fiscal
years in the period ended December 31, 1997 is derived from the audited
financial statements of the Business, which appear elsewhere herein. The
selected historical financial information for each of the fiscal years in the
two-year period ended December 31, 1994 and for the nine months ended September
30, 1997 and September 30, 1998 is derived from unaudited financial statements
of the Business. The historical financial statements (from which the selected
historical financial information has been derived) have been derived from the
historical financial statements of Owens Corning. The historical statements of
operations have not been adjusted to reflect the effect of the supply
agreements and other transactions to be entered into between AGY and Owens
Corning in connection with the formation transactions. In the opinion of
management, the unaudited financial information includes all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of such data. Operating results for the nine months ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the entire fiscal year. The data presented below should be read in
conjunction with the financial statements of the Business, including the
related notes thereto, included elsewhere in this prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Index to Financial Statements."
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1997 1998
----------- ----------- -------- -------- -------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales................ $246,832 $251,922 $272,395 $274,979 $277,357 $209,580 $205,248
Cost of goods sold....... 189,796 175,047 187,153 180,343 182,366 138,045 134,820
-------- -------- -------- -------- -------- -------- --------
Gross profit............. 57,036 76,875 85,242 94,636 94,991 71,535 70,428
Selling, general and
administrative expense.. 12,565 13,157 13,748 14,345 14,813 11,110 11,487
Restructuring costs(1)... -- -- -- -- -- -- 2,034
-------- -------- -------- -------- -------- -------- --------
Operating income......... 44,471 63,718 71,494 80,291 80,178 60,425 56,907
Other income, net........ (1,326) (1,354) (3,041) (3,003) (2,688) (2,026) (2,328)
-------- -------- -------- -------- -------- -------- --------
Income before taxes...... 45,797 65,072 74,535 83,294 82,866 62,451 59,235
Provision for income
taxes(2)................ 17,535 25,834 29,594 33,051 32,540 24,481 16,226
-------- -------- -------- -------- -------- -------- --------
Income before cumulative
effect of accounting
change.................. 28,262 39,238 44,941 50,243 50,326 37,970 43,009
Cumulative effect of
change in accounting for
post-employment
benefits(3)............. -- 5,600 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income............... $ 28,262 $ 33,638 $ 44,941 $ 50,243 $ 50,326 $ 37,970 $ 43,009
======== ======== ======== ======== ======== ======== ========
Other Data:
Depreciation and
amortization............ $ 7,864 $ 8,167 $ 8,604 $ 8,233 $ 8,305 $ 6,128 $ 6,394
Capital expenditures..... 12,811 13,963 8,458 15,314 8,324 5,744 13,509
EBITDA(4)................ 53,661 73,239 83,139 91,527 91,171 68,579 65,629
EBITDA margin(4)......... 21.7% 29.1% 30.5% 33.3% 32.9% 32.7% 32.0%
Ratio of earnings to
fixed charges(5)........ 128x 155x 164x 136x 78x 78x 67x
Balance Sheet Data(6) (at
period end):
Working capital.......... $ 11,052 $ (1,137) $ (1,493) $ (4,944) $(11,872) $ 19,542 $ 35,734
Total assets............. 147,198 157,185 159,414 163,839 153,961 172,744 445,476
Total debt............... -- -- -- -- -- -- 404,000
Net assets............... 33,703 25,439 31,899 36,850 30,940 59,820 15,932
</TABLE>
32
<PAGE>
- --------
(1) During the first quarter of 1998, AGY recorded a $2.0 million restructuring
charge related to personnel reductions at the Aiken and Huntingdon
facilities.
(2) AGY was established as a limited liability company on July 1, 1998, and is
not subject to income tax, and therefore the data presented above does not
reflect income tax expense for any period subsequent to July 1, 1998.
Income tax expense reflected in the statement of operations for the nine
months ended September 30, 1998 reflected in the statement of operations
for the nine months ended September 30, 1998 represents the estimated
income tax expense attributable to the results of operations of the
Business through June 30, 1998.
(3) Effective January 1, 1994, AGY adopted Statement of Accounting Standards
No. 112, "Employers Accounting for Postemployment Benefits." The cumulative
effect of this change in accounting policy was an undiscounted charge of
$5.6 million net of related income taxes of $3.6 million.
(4) EBITDA is defined as income (loss) before income taxes, interest expense,
depreciation and amortization expense and cumulative effect of accounting
change. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness;
however, EBITDA should not be considered as an alternative to net income
(loss) as a measure of operating results or to cash flows as a measure of
liquidity in accordance with generally accepted accounting principles.
EBITDA margin represents EBITDA as a percentage of net sales.
(5) In calculating the ratio of earnings to fixed charges, earnings consist of
income (loss) before income taxes plus fixed charges. Fixed charges consist
of interest expense, whether expensed or capitalized and that portion of
rental expense estimated to be attributable to interest.
(6) The historical balance sheet data for the periods 1993 through September
30, 1997 have not been adjusted to reflect the fact that Owens Corning did
not contribute deferred tax assets to AGY and that Owens Corning retained
the following liabilities: income taxes payable, trade accounts payable and
post-retirement health care benefits for certain employees of AGY. The
September 30, 1998 balance sheet data reflect the following: the
elimination of assets not contributed and liabilities not assumed by AGY,
the accounting for the purchase by Porcher Industries of the 51% interest
in AGY and the Financings.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
AGY is a Delaware limited liability company formed by Owens Corning to own
and operate its glass yarns and specialty materials business. On July 1, 1998,
Owens Corning contributed substantially all of the assets and certain
liabilities of the Business to AGY. On September 30, 1998, Owens Corning sold a
51% interest in AGY to a wholly owned subsidiary of Porcher Industries. Owens
Corning retained a 49% interest in AGY.
Prior to September 30, 1998, the Business was operated as a business unit of
Owens Corning. Consequently, the historical financial statements contained in
this prospectus have been derived from the historical financial statements of
Owens Corning and have not been adjusted to reflect that certain assets of the
Business were not contributed to, and that certain liabilities of the Business
were not assumed by, AGY. In addition, these historical financial statements
have not been adjusted to reflect the effect of the supply agreements entered
into between AGY and Owens Corning in connection with the formation
transactions. See "Certain Relationships and Related Transactions." The supply
agreements generally require Owens Corning to provide certain raw materials,
capital equipment and services to AGY at Owens Corning's cost plus certain
margins. For a presentation of the adjustments to the Business' historical
financial statements to reflect the foregoing transactions, see "Unaudited
Condensed Pro Forma Financial Information" and the accompanying notes thereto.
Net Sales. AGY recognizes sales upon the shipment of products. Net sales
consist of sales to customers, including discounts and negotiated rebates.
Prices for AGY's products depend upon the terms of its customer agreements and
the category of product being sold. For 1997, prices for heavy yarns, excluding
specialty materials, ranged from approximately $2.00 to $4.00 per kilogram and
prices for fine yarns ranged from $4.00 to $10.00 per kilogram. For 1997,
prices for specialty materials ranged from $12.00 to $29.00 per kilogram. AGY's
net sales increased from $272.4 million for 1995 to $277.4 million for 1997.
This increase in net sales was primarily driven by increases in sales of fine
yarns to the electronics market.
In late 1997 and early 1998, the demand for electronic products began to
decrease primarily as a result of economic turmoil in Asia. However, AGY only
began to experience a decline in demand for both fine yarns and heavy yarns in
the second quarter of 1998. Generally, the effect of a change in demand for
electronic products on AGY's net sales lags behind such changes by several
months. The demand for fine yarns for electronic applications also declined as
both weavers and laminators corrected their inventory to better match the
reduced demand for electronic products. This correction continued through the
third quarter. Management believes that the volume of fine yarn sales has
recently stabilized and will improve modestly in 1999. The demand for heavy
yarns in North America for electronic applications declined due to decreased
demand for electronic products which caused a global decline in demand for
rigid laminates and printed circuit boards. Demand for heavy yarns in North
America has also decreased due, in part, to an increase in imports of rigid
laminates and printed circuit boards into North America. To offset the lower
demand for heavy yarns, over the last eight months, AGY has shifted some of its
capacity to supply industrial and construction markets that have not been
affected by the turmoil in Asia. Management expects the volume of heavy yarn
sales for electronic applications to stabilize in early 1999, though pricing
pressures are expected to continue.
34
<PAGE>
Cost of Sales. Cost of sales consists of raw materials, energy, labor and
manufacturing overhead. These components of cost of sales as a percentage of
total cost of sales averaged 26.6% (raw materials), 8.2% (energy), 23.0%
(labor) and 42.2% (manufacturing overhead), from 1995 to 1997, respectively. On
a pro forma basis, cost of sales would have increased by $8.9 million and $7.6
million, or 4.9% and 5.7%, for 1997 and for the first nine months of 1998,
respectively, primarily as a result of increases in the costs of raw materials,
pension expense and depreciation related to the formation transactions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist of the cost of the Business' employees,
including certain technology personnel, and the estimated costs of corporate
services provided by Owens Corning.
Other Income, Net. Other income, net consists of royalties and technical
service fees earned from a non-exclusive license granted by AGY to Taiwan Glass
Industrial Corporation. The historical financial statements only include the
portion of the royalties and fees attributable to the manufacture and sale of
glass yarn products by Taiwan Glass. Other income, net also includes the net
profit arising from sales by AGY of certain scrap materials generated in the
manufacturing process.
Results of Operations
The following table summarizes the Business' historical results of operations
and historical results of operations as a percentage of sales for 1995, 1996
and 1997 and for the nine months ended September 30, 1997 and 1998.
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
---------------------------------------- --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(unaudited) (unaudited)
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $272.4 100.0% $275.0 100.0% $277.4 100.0% $209.6 100.0% $205.2 100.0%
Cost of sales........... 187.2 68.7 180.4 65.6 182.4 65.8 138.1 65.9 134.8 65.7
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Gross profit............ 85.2 31.3 94.6 34.4 95.0 34.2 71.5 34.1 70.4 34.3
Selling, general and
administrative
expenses............... 13.7 5.0 14.3 5.2 14.8 5.3 11.1 5.3 11.5 5.6
Restructuring costs..... -- -- -- -- -- -- -- -- 2.0 1.0
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Income from operations.. 71.5 26.1 80.3 29.2 80.2 28.9 60.4 28.8 56.9 27.7
Depreciation............ 8.6 3.2 8.2 3.0 8.3 3.0 6.1 2.9 6.4 3.1
EBITDA.................. $ 83.1 30.5% $ 91.5 33.3% $ 91.2 32.9% $ 68.6 32.7% $ 65.6 32.0%
</TABLE>
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September
30, 1997
Net Sales. Net sales decreased by $4.4 million, or 2.1%, from $209.6 million
for the first nine months of 1997 to $205.2 million for the first nine months
of 1998. This decrease was due primarily to decreased demand for electronic
products which began in the fourth quarter of 1997 and the effects of a
stronger United States dollar on sales in Europe. This decrease was partially
offset by slight increases in overall pricing and increased sales for
construction and industrial applications. See "--Introduction."
Gross Profit. Gross profit decreased by $1.1 million, or 1.5%, from $71.5
million for the first nine months of 1997 to $70.4 million for the first nine
months of 1998. Gross profit increased as a percentage of net sales from 34.1%
for the first nine months of 1997 to 34.3% for the first nine months of 1998.
The decrease in gross profit was primarily due to the decline in net sales.
This decrease was partially offset by a more favorable, higher margin product
mix and decreased labor
35
<PAGE>
costs resulting from personnel reductions at AGY's Huntingdon and Aiken
facilities, which were part of a restructuring plan that was implemented in the
first quarter of 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $0.4 million, or 3.6%, from $11.1 million
for the first nine months of 1997 to $11.5 million for the first nine months of
1998. Selling, general and administrative expenses increased as a percentage of
net sales from 5.3% for the first nine months of 1997 to 5.6% for the first
nine months of 1998. The increase was due to normal increases in compensation
expenses.
Restructuring Costs. In the first quarter of 1998, the Business decided to
reduce personnel at its Aiken and Huntingdon facilities by approximately 100
employees during 1998. In connection with the planned personnel reduction, the
Business recorded a $2.0 million charge representing severance costs associated
with the positions to be eliminated. The Business realized cost savings as a
result of its restructuring plan during the first nine months of 1998 and
expects to realize further cost savings for the foreseeable future.
Income from Operations. Income from operations decreased by $3.5 million, or
5.8%, from $60.4 million for the first nine months of 1997 to $56.9 million for
the first nine months of 1998. Excluding the impact of the restructuring costs
described above, income from operations decreased by $1.5 million, or 2.5%,
from $60.4 million for the first nine months of 1997 to $58.9 million for the
first nine months of 1998. This decrease was primarily related to declines in
net sales and gross profit.
EBITDA. EBITDA decreased by $3.0 million, or 4.4%, from $68.6 million for the
first nine months of 1997 to $65.6 million for the first nine months of 1998.
EBITDA margin decreased from 32.7% in the first nine months of 1997 to 32.0% in
the first nine months of 1998. The decrease in EBITDA and EBITDA margin was
primarily due to increased costs related to the restructuring plan and
decreased gross profit.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net Sales. Net sales increased by $2.4 million, or 0.9%, from $275.0 million
for 1996 to $277.4 million for 1997. This increase was due primarily to
increased sales volumes of fine yarn products partially offset by lower overall
pricing.
Gross Profit. Gross profit increased by $0.4 million, or 0.4%, from $94.6
million for 1996 to $95.0 million for 1997. Gross profit decreased as a
percentage of net sales from 34.4% for 1996 to 34.2% for 1997. The increase in
the gross profit amount was primarily due to increased sales volumes of higher
margin fine glass yarns. The decrease in gross profit as a percentage of net
sales was primarily due to lower overall pricing.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $0.5 million, or 3.5%, from $14.3 million
for 1996 to $14.8 million for 1997. Selling, general and administrative
expenses increased as a percentage of net sales from 5.2% for 1996 to 5.3% for
1997. The increase was due to normal increases in compensation expenses.
Income from Operations. Income from operations decreased by $0.1 million, or
0.1%, from $80.3 million for 1996 to $80.2 million for 1997. The decrease was
primarily related to overall pricing decreases.
36
<PAGE>
EBITDA. EBITDA decreased by $0.3 million, or 0.3%, from $91.5 million for
1996 to $91.2 million for 1997. EBITDA margin decreased from 33.3% for 1996 to
32.9% for 1997. The decreases in EBITDA and EBITDA margin reflect the decrease
in gross profit and the increase in selling, general and administrative
expenses.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales increased by $2.6 million, or 1.0%, in 1996 from $272.4
million for 1995 to $275.0 million for 1996. This increase was due primarily
to improved overall pricing and to a slightly more favorable product mix as
the Business sold a higher volume of fine yarns. This increase was offset by a
decrease in sales volumes of heavy yarns and specialty materials.
Gross Profit. Gross profit increased by $9.4 million, or 11.0%, from $85.2
million for 1995 to $94.6 million for 1996. Gross profit increased as a
percentage of net sales from 31.3% for 1995 to 34.4% for 1996. The increases
in the gross profit amount and gross profit as a percentage of net sales were
primarily due to increased production efficiencies relating to furnace
rebuilds during 1995 and 1996, as well as a slightly higher margin product
mix.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $0.6 million, or 4.4%, from $13.7 million
for 1995 to $14.3 million for 1996. Selling, general and administrative
expenses increased as a percentage of net sales from 5.0% for 1995 to 5.2% for
1996. The increase was due to normal increases in compensation expenses.
Income from Operations. Income from operations increased by $8.8 million, or
12.3%, from $71.5 million for 1995 to $80.3 million for 1996. This increase
was primarily related to the increase in production efficiencies described
above.
EBITDA. EBITDA increased by $8.4 million, or 10.1%, from $83.1 million for
1995 to $91.5 million for 1996. EBITDA margin increased from 30.5% for 1995 to
33.3% for 1996. The increases in EBITDA and EBITDA margin primarily reflected
improved production efficiencies.
Liquidity and Capital Resources
Historically, the Business' primary sources of liquidity were cash flows
from operations. Since the consummation of the formation transactions on
September 30, 1998, AGY's primary sources of liquidity have been cash flows
from operations and borrowings under the senior credit facility. AGY's
principal uses of liquidity are to fund operations, meet debt service
requirements and finance AGY's planned capital expenditures, including the
purchase of new management information systems for AGY's headquarters at the
Aiken facility.
Net cash provided by operating activities increased from $29.9 million for
the first nine months of 1997 to $31.0 million for the first nine months of
1998. The increase was primarily attributable to higher net income for the
first nine months of 1998, as compared to the first nine months of 1997, due
to a change in the tax status of AGY on July 1, 1998. The benefit of the
change in tax status was partially offset by an increase in receivables and
inventory for the first nine months of 1998. Net cash used in investing
activities increased from $5.7 million for the first nine months of 1997 to
$13.5 million for the first nine months of 1998. The increase in cash used in
investing activities was due to capital expenditures associated with the South
Hill facility.
37
<PAGE>
Net cash provided by operating activities increased from $59.3 million for
1996 to $69.2 million for 1997. This increase was primarily the result of a
$2.1 million decrease in inventory levels, a $4.0 million reduction in accounts
receivable and a $3.4 million increase in accounts payable which were partially
offset by a $1.1 million decrease in accrued liabilities relating primarily to
incentive compensation. Net cash used in investing activities decreased from
$15.3 million for 1996 to $8.3 million for 1997. This decrease was due to the
reduction in expenditures for refurbishing capital equipment, particularly
rebuilding glass melting furnaces.
Net cash provided by operating activities increased from $56.6 million for
1995 to $59.3 million for 1996. This increase was primarily the result of a
$5.3 million increase in net income and a $2.8 million reduction in accounts
receivable which was partially offset by a $3.1 million increase in inventories
and a $1.4 million decrease in accounts payable. Net cash used in investing
activities increased from $8.5 million for 1995 to $15.3 million for 1996. This
increase was primarily due to an increase in expenditures for upgrading and
refurbishing capital equipment, particularly rebuilding glass melting furnaces.
In connection with the formation transactions, AGY entered into the senior
credit facility, which provides for:
. a six-year revolver in an aggregate principal amount of up to $75.0
million, which includes a $10.0 million swing line sub-facility and a
$30.0 million letter of credit sub-facility;
.a six-year term loan in an aggregate principal amount of $125.0 million;
and
.a seven-year term loan in an aggregate principal amount of $115.0 million.
First Union National Bank serves as agent under the senior credit facility. The
senior credit facility is secured by a first priority lien on substantially all
of the properties and assets of AGY and by a pledge of Porcher Industries'
interest in AGY. As of September 30, 1998, $254.0 million was outstanding under
the senior credit facility and AGY had availability thereunder equal to
approximately $61.0 million. See "Description of Other Indebtedness--Senior
Credit Facility."
AGY also entered into the senior subordinated credit facility with certain
lenders. First Union Investors, Inc. and Warburg Dillon Read LLC served as co-
agents under the senior subordinated credit facility. The senior subordinated
credit facility provided for aggregate borrowings of up to $150.0 million and
was fully drawn by AGY at the closing of the formation transactions. The senior
subordinated credit facility was an unsecured senior subordinated obligation of
AGY. The net proceeds of the offering of the old notes, together with
additional borrowings under the senior credit facility, were used to repay all
amounts outstanding under the senior subordinated credit facility. See "Use of
Proceeds."
The Business has historically financed its capital expenditures through cash
flow from operations. Capital expenditures were $8.5 million, $15.3 million,
$8.3 million and $13.5 million for 1995, 1996, 1997 and the first nine months
of 1998, respectively. AGY expects to make annual capital expenditures
aggregating approximately $23.7 million and $23.5 million in 1998 and 1999,
respectively. The increase in capital expenditures in 1998 was primarily as a
result of approximately $9.0 million of expense incurred in connection with the
start-up of the South Hill facility and increased expenses incurred to finance
furnace rebuilds. AGY anticipates that capital expenditures incurred in 1999
will be made for routine maintenance and rebuilds of glass melting furnaces and
other equipment used in its operations. AGY also intends to spend approximately
$3.0 million for new management information systems in 1999. In addition,
management has planned for the
38
<PAGE>
construction of a new melter at its Aiken facility in 2000. Management
estimates that the cost to construct this melter will be approximately $49.0
million; however, in connection with the construction of the melter, AGY plans
to reduce expenses associated with the rebuild of furnaces by approximately
$12.0 million. The cost of the management information system and the
construction costs for the melter are expected to be funded by cash flows from
AGY's operations. In addition, AGY has minimum future rental commitments
associated with operating leases of $9.1 million through 2003. See Note 5 to
the Financial Statements.
In connection with Porcher Industries' purchase of a 51% interest in AGY, AGY
intends to make a partnership election to step up the basis of certain of AGY's
intangible assets. The resulting increase in amortization expense will allow
the consolidated U.S. tax group of Porcher Industries (which includes BGF
Industries, hereinafter "Porcher U.S.") to significantly reduce its tax
liability, and as a result, Porcher U.S. has agreed to defer the receipt of
annual distributions which AGY was otherwise required to make in order to fund
those taxes, to the extent that such taxes relate to income earned by AGY (the
"Deferred Distributions"). The amortization deductions may be challenged by the
IRS; however, AGY believes the amortization deductions are valid and that AGY
is likely ultimately to prevail in any challenge. If, however, the amortization
deductions are disallowed, AGY will be required to distribute all accumulated
annual Deferred Distributions to the extent that both before and after such
distribution there is not a default under the senior credit facility or the
notes. Moreover, all Deferred Distributions would cease, and AGY would have to
pay in full all future distributions for taxes to Porcher U.S. Based on the
purchase price paid by Porcher U.S. for the 51% interest in AGY, and a 15 year
amortization period, the maximum annual Deferred Distribution will be $6.8
million. The actual amounts of Deferred Distributions may be less if Porcher
U.S.'s share of taxes due with respect to income earned by AGY is less than
$6.8 million. AGY believes adequate funds will be available from net cash flows
and borrowings under the senior credit facility to fund the Deferred
Distributions.
AGY's ability to make scheduled payments of principal of, or to pay the
interest or liquidated damages, if any, on, or to refinance, its indebtedness
(including the notes), or to fund planned capital expenditures will depend on
its future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors
that are beyond its control. Based upon the current level of operations,
management believes that cash flows from operations and available cash,
together with availability under the senior credit facility, will be adequate
to meet AGY's future liquidity needs for at least the next two years. However,
there can be no assurance that AGY's business will generate sufficient cash
flows from operations or that future borrowings will be available under the
senior credit facility in an amount sufficient to enable AGY to service its
indebtedness, including the notes, or to fund its other liquidity needs,
including the construction of a new melter at its Aiken facility. In addition,
AGY may need to refinance all or a portion of the principal of the notes on or
prior to maturity. There can be no assurance that AGY will be able to effect
any such refinancing on commercially reasonable terms or at all. See "Risk
Factors--Our Indebtedness Results in Significant Debt Service Obligations and
Limitations."
Inflation and Seasonality
AGY believes that neither inflation nor seasonality had a material impact on
its results of operations for 1995, 1996, 1997 or the first nine months of
1998. AGY does, however, experience a comparative reduction in net sales during
the months of August and December due to vacation and holiday schedules.
39
<PAGE>
Year 2000
Introduction. The term "year 2000 issue" is a general term used to describe
the various problems that may result from the improper processing of dates and
date-sensitive calculations by computers and process control equipment as the
year 2000 is approached and reached. These problems generally arise from the
fact that most of the world's computer hardware and software have historically
used only two digits to identify the year in a date, often meaning that the
computer will fail to distinguish dates in the "2000s" from dates in the
"1900s." These problems may also arise from other sources as well, such as the
use of special codes and conventions in software that make use of the date
field.
State of Readiness. At the beginning of 1998, the management of AGY's
information systems and research and development groups began to assess the
year 2000 issue. These persons have developed and are currently implementing a
comprehensive year 2000 compliance program to make AGY's information technology
assets and non-information technology assets year 2000 compliant. AGY's
information technology assets are primarily used in the delivery of AGY's
products and services, and are also used in AGY's internal operations, such as
billing and accounting. AGY's non-information technology assets are primarily
micro-processor based process control systems used in the manufacture of AGY's
products.
AGY's year 2000 compliance program consists of several phases. In the first
phase, all systems were evaluated to determine their ability to operate
properly when post-1999 dates are introduced. Certain forward looking systems,
e.g. scheduling systems, need to use post-1999 dates in mid-1999. In the second
phase, internal technical personnel identified appropriate remedial action or
system replacement for each system that was not year 2000 compliant. These two
phases were substantially completed by November 30, 1998. During the third
phase, AGY will develop implementation plans for remedial actions or system
replacement. During the fourth phase, AGY will undertake remedial actions or
system replacements. AGY expects to complete all phases of the year 2000
compliance program by September 1999.
During the second phase of the year 2000 compliance program, AGY identified
several key information technology systems and non-information technology
systems that need to be replaced in order to become year 2000 compliant. The
systems to be replaced include all financial and order entry/planning systems
and certain process control systems. Replacement of AGY's financial and order
entry/planning systems is necessary to complete the separation from Owens
Corning's computer systems. Of the 17 process control systems that were
evaluated, two were identified as having compliance issues sufficient to
warrant total system replacement. AGY expects to begin implementation and
internal testing of these replacement systems between March 1 and September 30,
1999. The systems that will not be replaced will be upgraded to become year
2000 compliant on the same schedule as the system replacements. Upgrading these
systems generally requires less resources than total system replacement.
In addition to internal systems, AGY is dependent on external suppliers,
including Owens Corning, for the delivery of raw materials and energy. AGY is
contacting these external suppliers to evaluate their year 2000 compliance
plans and state of readiness and determine whether a year 2000-related event
will impede the ability of such suppliers to continue to provide goods and
services to AGY. Although AGY has not received responses from all of its
suppliers as to the status of their year 2000 program, AGY believes that its
key suppliers are sufficiently aware of year 2000 issues
40
<PAGE>
and are taking actions to remediate any problems. There is no assurance that
AGY's key suppliers will not suffer a year 2000 business disruption.
Costs to Address the Year 2000 Issue. AGY estimates that it has spent
approximately $0.4 million in software and external consulting costs to address
the year 2000 issue. AGY estimates that its year 2000 compliance program will
cost approximately $3.0 million including the cost to establish and test the
independent replacement computer systems discussed above (excluding the cost of
internal personnel). Such amounts will be charged to operations when incurred.
AGY intends to fund these costs from cash flow from operations.
Risks Presented by the Year 2000 Issue. Management believes that AGY has
identified all material year 2000 issues and implemented a plan to address
these issues prior to any impact on business operations. However, failure to
complete remediation and replacement programs as scheduled could impact AGY's
ability to properly manufacture goods and conduct normal business operations.
If this were to occur, AGY could experience a material adverse impact on its
financial condition and results of operation. Likewise, failure of key
suppliers to achieve compliance could adversely impact AGY's ability to
manufacture, distribute and sell, products.
Contingency Plans. In the event that certain systems are not made compliant
prior to the need to handle year 2000 dates, AGY has considered alternatives to
continue normal business operations. AGY anticipates that process control
systems that do not handle year 2000 dates properly can continue to operate
with some limitation in functions. These systems will be tested to demonstrate
this capability. With regard to information technology systems that are
critical to business operations, management believes that its remediation and
replacement program will sufficiently address year 2000 issues. However, AGY
will continue to evaluate its progress and create additional contingency plans
as necessary.
The estimates and conclusions related to AGY's year 2000 compliance program
contain forward-looking statements and are based on management's best estimates
of future events. Risks to completing the year 2000 compliance program include
the availability of resources, AGY's ability to discover and correct the
potential year 2000 specific problems that could have a serious impact on
specific systems, equipment or facilities and the ability of suppliers and
vendors and other third parties to make their systems year 2000 compliant.
Euro Conversion
AGY may be exposed to certain risks as a result of the conversion by certain
European Union member states of their respective currencies to the Euro as
legal currency on January 1, 1999. The conversion rates between such European
Union member states' currencies and the Euro have been fixed by the European
Union's council. Risks related to the conversion to the Euro could include,
among other things, effects on pricing due to increased cross-border price
transparency, costs of modifying information systems, including both software
and hardware, costs of relying on third parties whose systems also require
modification, changes in the conduct of business and in the principal markets
for AGY's products and services and changes in currency exchange rate risk. AGY
has analyzed whether the conversion to the Euro will materially affect its
business operations. While AGY is uncertain as to the precise impact of the
conversion, AGY does not expect anticipated costs in connection with the Euro
conversion to be material. However, there can be no assurance that the actual
effects of the conversion could not have a material adverse effect on AGY's
business, results of operations and financial condition.
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<PAGE>
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 131 requires
public business enterprises to adopt its provisions for fiscal years beginning
after December 15, 1997, and to report certain information about operating
segments in complete sets of financial statements of the enterprise issued to
shareholders. Segment disclosures will also be required in interim financial
statements beginning in the second year of application. AGY is evaluating the
provisions of SFAS No. 131, but has not determined if additional disclosure
will be required.
SFAS No. 132 "Employers' Disclosure about Pensions and Other Postretirement
Benefits," will become effective in 1998. SFAS No. 132 standardizes the
disclosure requirements for pensions and postretirement benefits and will
require changes in disclosures of benefit obligations and fair values of plan
assets. Comparative disclosures which include prior period information will be
restated to conform with the provisions of SFAS No. 132. AGY will adopt the
provisions of SFAS No. 132 effective December 31, 1998.
On June 15, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999. SFAS No. 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether
a derivative is designated as part of a hedge transaction and, if it is, the
type of hedge transaction. AGY anticipates that, due to its limited use of
derivative instruments, the adoption of SFAS No. 133 will not have a
significant effect on AGY's results of operations or its financial position.
42
<PAGE>
BUSINESS
Advanced Glassfiber Yarns LLC
AGY is the second largest global supplier of glass yarns. In 1997, AGY's net
sales accounted for approximately 49% of the North American market and
approximately 24% of the global market. AGY is one of only two major glass
yarns producers with manufacturing facilities in North America and one of only
five major glass yarns producers that supply glass yarns globally. AGY's glass
yarns are produced by converting molten glass into thin glass filaments which
are then twisted into yarn. AGY's products fall into two categories based on
filament diameter: (i) heavy yarns, which accounted for 76% of AGY's 1997 net
sales; and (ii) fine yarns, which accounted for 24% of AGY's 1997 net sales.
AGY is the world's largest producer of fine yarns, and the world's second
largest producer of heavy yarns.
Glass yarns, because of their unique physical properties, are a critical
material used in a variety of electronic, industrial, construction and
specialty applications. Heavy yarns are used in a wide range of applications,
such as printed circuit boards, roofing materials, filtration equipment,
building reinforcements, window screening, aerospace materials and reinforced
tapes. Fine yarns are used primarily to construct laminates for multi-layer
printed circuit boards, which are integral to virtually all advanced electronic
products, including computers, telecommunications equipment, television
equipment, automotive equipment and home appliances. AGY also produces a
subcategory of heavy yarns known as specialty materials, such as S-2 Glass(R),
a proprietary high-strength glass yarn. Specialty materials, which accounted
for 9% of AGY's 1997 net sales, are used for aircraft laminates, oxygen tanks,
sporting goods and vehicle armor. Fine yarns and specialty materials generally
command higher prices and profit margins than non-specialty heavy yarns,
primarily due to their value-added characteristics.
For the twelve months ended September 30, 1998, AGY's net sales and EBITDA,
on a pro forma basis, were $273.0 and $80.9 million, respectively. AGY
attributes its strong results and profitability primarily to the following
factors:
Attractive Industry Fundamentals. The glass yarns industry has historically
been characterized by a limited number of suppliers, high barriers to entry, a
limited number of cost-effective substitutes and high capacity utilization.
There are only five major glass yarns producers that supply glass yarns
globally, with combined sales comprising approximately 80% of total industry
sales. Historically, new entry into the market has been limited due to high
barriers of entry, which include technological know-how and significant capital
expenditure requirements. In addition, AGY believes that the industry's
capacity utilization generally has been high, which has allowed manufacturers
to more efficiently operate their facilities. AGY's capacity utilization, as
measured by use of installed bushings, averaged approximately 94% between 1995
and 1997 and for the first nine months of 1998.
Stable Customer Base. AGY sells its products to over 300 customers worldwide,
including every major North American and European weaver and a diverse group of
other domestic and international commercial and industrial users of yarns. AGY
maintains long-standing relationships with its major customers by collaborating
with them to meet their specific manufacturing requirements and by providing
high quality products and strong customer service. In addition, AGY's customer
relationships generally are stable due to the limited number of global
suppliers of glass yarns and the costs to customers associated with
"qualifying" new suppliers. In order to qualify a new supplier, a customer may
need to modify its own loom set-ups and fabric specifications and also
43
<PAGE>
qualify the new glass yarn supplier with certain downstream manufacturers and
weavers. Furthermore, although glass yarns generally represent a small fraction
of an end product's overall manufacturing cost, product defects can be costly
for customers. Consequently, customers demand high-quality, reliable yarns from
their suppliers and AGY has established a reputation with its customers for
meeting these demands. As a result of these factors, AGY has maintained
relationships with each of its top five customers for over 25 years.
Unique Properties of Glass Yarns. The characteristics of glass yarns include:
. high strength-to-weight ratio;
. dimensional stability;
. heat resistance;
. moisture resistance;
. chemical resistance;
. electrical resistance; and
. thermal insulation.
Although carbon and aramid fibers are stronger than glass yarns, they are
significantly more expensive. Other materials, such as steel and wood, are less
expensive but lack the physical characteristics of glass yarns. Given the
unique combination of physical attributes and relative low cost of glass yarns,
AGY believes few cost-effective substitute products exist.
Diversified End-Use Markets. The characteristics of glass yarn make it the
material of choice for a variety of products manufactured in the electronics,
industrial, construction and specialty markets. AGY's net sales to these
markets represented 36%, 28%, 27% and 9% of AGY's 1997 net sales, respectively.
AGY believes that this diversity in end-use applications reduces volatility in
overall demand for AGY's products.
Superior Production Technology and Product Innovation. AGY believes that it
is the technological leader in the production of glass yarns due to its strong
process engineering and product development capabilities. AGY pioneered the
glass yarns industry with the introduction of "glass cotton" in the 1930s and
the introduction of fine yarns in the 1940s, and has continued its innovation
with the development of S-2 Glass(R), Zentron(R) and zero twist yarn. AGY
employs 41 technical professionals dedicated to the development of new
products, process improvements and product innovations.
Business Strategy
AGY's business strategy includes the following key elements:
Emphasize Fine Yarns and Specialty Materials. AGY will continue its focus on
increasing the proportion of its net sales attributable to fine yarns and
specialty materials. Sales of fine yarns and specialty materials increased as a
proportion of net sales from 26% in 1994 to 33% in 1997. AGY believes its
global leadership in producing fine yarns and specialty materials is a
competitive advantage when targeting manufacturers of sophisticated electronics
and specialty composites.
44
<PAGE>
Develop New Products and Product Innovations. To maintain its technological
leadership position in the glass yarns industry, AGY conducts an active
internal research and development program aimed at developing new and improved
products. In addition, AGY has formed several joint product development
programs with its customers such as BGF Industries, a wholly-owned subsidiary
of Porcher Industries, and certain downstream manufacturers. AGY also has a
continuing relationship with Owens Corning pursuant to which they conduct joint
development programs and AGY shares in certain of Owens Corning's technology
and research and development. AGY will continue its focus on research and
development and its commitment to collaborate with its customers to improve and
develop products.
Focus on Operating Efficiency. AGY continually seeks to improve the quality
of its production facilities and its operating systems by utilizing modern
production technology. These new technologies have enabled AGY to increase
throughout, product quality and operational flexibility. As a result of these
operating improvements, AGY's EBITDA margins increased from 22% in 1993 to 32%
for the last twelve months ended September 30, 1998.
Selective Geographic Expansion. AGY believes it has opportunities to expand
its business outside of North America. Approximately 27% of AGY's 1997 net
sales were outside of North America, with approximately 24% in Europe and
approximately 3% in Asia. AGY believes that Asia represents an attractive long-
term opportunity for sales of its fine yarns, despite the region's current
economic turmoil. Certain of AGY's customers are expanding their production
capabilities in Asia to meet the region's demand for glass fabrics used to
manufacture electronic laminates. AGY anticipates that glass yarns needed for
such increased production will be sourced locally. According to the U.S.
Department of Commerce, the Asian and Australian regions represented
approximately 50% of the global supply of printed circuit boards in 1997. AGY's
strategy is to continue to expand outside North America by co-locating or
sharing production facilities with its customers. This would reduce the risks
and capital expenditures associated with geographic expansion while
strengthening AGY's relationships with these customers.
Advanced Glassfiber Yarns LLC is a Delaware limited liability company with
headquarters located at 2556 Wagener Road, Aiken, South Carolina 29801, and its
telephone number is (803) 643-1377.
Products
AGY's products are produced based on weight and strength specifications
developed in close cooperation with customers. AGY's products fall into two
categories based on filament diameter: (i) heavy yarns, with a filament
diameter between 7 and 14 microns, which accounted for 76% of AGY's 1997 net
sales; and (ii) fine yarns, with a filament diameter generally up to 7 microns,
which accounted for 24% of AGY's 1997 net sales. Products with finer diameters
generally command higher prices and profit margins.
Heavy Yarns. Heavy yarns are used for a wide range of applications, such as
printed circuit boards, roofing materials, filtration equipment, building
reinforcements, window screening, aerospace materials and reinforced tapes.
Currently, prices for heavy yarns, excluding specialty materials, range from
approximately $2.00 to $4.00 per kilogram. AGY also produces a subcategory of
heavy yarns known as specialty materials, such as S-2 Glass(R), a proprietary
high strength glass yarn. Specialty materials, which accounted for 9% of AGY's
1997 net sales, are used for aircraft laminates, oxygen
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<PAGE>
tanks, sporting goods and vehicle armor. Currently, prices for specialty
materials range from approximately $12.00 to $29.00 per kilogram.
Fine Yarns. Fine yarns, which require a significant level of technical
engineering expertise, generally command higher prices and profit margins than
non-specialty heavy yarns, and are primarily used to construct laminates in
multi-layer printed circuit boards. Printed circuit board customers require a
material that yields a highly uniform, flat surface. AGY is the world's largest
producer of fine yarns and believes that its technological leadership
differentiates AGY from its competitors. Currently, prices for fine yarns range
from approximately $4.00 to $10.00 per kilogram.
The following table sets forth the percentage of AGY's net sales attributable
to its major product categories for the years 1994 to 1997:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1994 1995 1996 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Heavy yarns..................................... 83.6% 80.9% 80.5% 76.0%
Fine yarns...................................... 16.4 19.1 19.5 24.0
------ ------ ------ ------
Total net sales............................... 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
</TABLE>
The following table sets forth an overview of the different markets into
which AGY's glass yarns are sold, the percentage of AGY's 1997 net sales
attributable to each market and some of the end-use applications in each
market:
<TABLE>
<CAPTION>
Percentage
Markets of Net Sales Product Applications
------- ------------ --------------------
<S> <C> <C>
Electronics............. 36% printed circuit boards for personal computers, cellular
phones, pagers, portable computing devices, home
appliances, automobiles, medical equipment, electronic
games, robotics and military and aircraft systems
Industrial.............. 28% filtration bags, thermal insulation, welding curtains,
filament tape, wire insulation, gaskets, conveyor
belts, movie screens, electrical insulation products,
aircraft interior panels, aircraft cargo liners,
battery retainers and separators, reinforced tapes,
skis and grinding wheels
Construction............ 27% reinforced concrete, roofing materials, stucco
reinforcement, insect screening, wall covering,
vertical window blinds, wallboard tape, tile backing
board and draperies
Specialty............... 9% aircraft laminates, vehicle armor, oxygen bottles,
helicopter blades, aircraft flooring, ignition cables,
skis and snowboards
</TABLE>
Marketing and Sales
AGY primarily sells to glass yarn weavers who weave glass yarn into fabric
ultimately used in a wide variety of end-use applications. AGY's customers
include, among others, every major glass weaver in North America and Europe. In
1997, AGY had a customer base of approximately 300 customers with AGY's top
five and top ten customers accounting for 50% and 64% of AGY's 1997 sales,
respectively. AGY's top five customers for 1997 were Porcher Industries,
including its affiliates, such as BGF Industries, Clark-Schwebel, Inc., Bay
Mills Limited, Hexcel Corporation and JPS Converter and Industrial Corp. Among
the different markets in the glass yarns industry, the electronic market is
characterized by a few major customers, each with a strong relationship with
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<PAGE>
AGY but that generally qualify more than one supplier; the industrial and
construction markets are characterized by many customers that generally qualify
only one supplier; and the specialty market is characterized by customers that
require highly specialized yarns produced in a cooperative effort with the
supplier and, consequently, generally qualify only one supplier.
AGY markets its products primarily through a direct sales force with offices
located in the United States, Europe and Asia. AGY's North American customers
are serviced by four sales personnel and one sales manager; Europe is serviced
by three sales personnel and Asian customers by one sales representative. The
marketing and business planning organization consists of four persons,
including two marketing managers (industrial/construction and electronic) and
two product segment leaders (Europe/Asia and North America).
The following table sets forth the percentage of AGY's net sales by
geographic region from 1995 to 1997:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
North America..................................... 68.4% 71.4% 73.1%
Europe............................................ 31.2 27.4 24.2
Asia.............................................. 0.4 1.2 2.7
-------- -------- --------
Total net sales................................. 100.0% 100.0% 100.0%
======== ======== ========
</TABLE>
Manufacturing Facilities
AGY operates three manufacturing facilities in the United States. The
following table sets forth a description of AGY's manufacturing facilities:
<TABLE>
<CAPTION>
1997
Approximate Production Owned
Facility Products Square Feet (in metric tons) or Leased
- -------- -------- ----------- ---------------- ---------
<S> <C> <C> <C> <C>
Aiken, South Carolina... Heavy and Fine 1,540,000 53,100 Owned
Huntingdon,
Pennsylvania........... Fine and Specialty 405,000 6,600 Owned
South Hill,
Virginia(/1/).......... Heavy and Fine 27,200 680 Leased(/2/)
</TABLE>
- --------
(1) The South Hill facility is a co-location facility shared with BGF
Industries, at which AGY and BGF Industries work together closely to
coordinate the production of glass yarns for use solely by BGF Industries'
operations at that facility. AGY opened the facility in June 1998 and
expects it to become fully operational in the first quarter of 1999. See
"Certain Relationships and Related Transactions."
(2) AGY owns all of the equipment located in the South Hill facility, but
leases the building from BGF Industries.
In addition to the facilities that AGY owns or leases, certain subsidiaries
of Owens Corning that operate facilities in Battice, Belgium and Guelph,
Ontario have historically provided AGY with specific products, primarily heavy
yarns, to serve segments of the European and North American markets. Although
these facilities have been retained by Owens Corning, AGY entered into
contracts to purchase specific glass yarns manufactured at these facilities.
See "Certain Relationships and Related Transactions."
Manufacturing Process
Glass yarns are manufactured by mixing raw material at high temperatures to
create molten glass which flows through a bushing to create continuous glass
strands. These strands are spooled,
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<PAGE>
and then twisted to create glass fiber yarns. AGY employs two types of
manufacturing processes for glass yarns, "direct melt" and "indirect melt."
The "direct melt" glass fiber manufacturing process, which is employed at
the Aiken facility, begins when finely ground raw materials, including sand,
limestone, clay, borates and certain specialty chemicals, are blended together
in a bulk quantity called the "batch." The batch is then fed into a furnace
where it is melted at 2,600 degrees Fahrenheit in refractory-lined furnaces.
The molten glass flows to numerous heat-resistant platinum and rhodium trays
called bushings. These bushings have thousands of small, precisely drilled
tubular openings through which glass flows and becomes filaments. The hair-
like filaments are coated with an aqueous chemical mixture called "sizing,"
which protects the filaments during processing and handling, including weaving
or braiding, and ensures good adhesion of the glass fiber to the resin when
manufacturing polymer reinforcements.
After sizing is applied, filaments are gathered together into strands that
go through further processing steps depending on the market into which the
fiber will be sold. The filaments are wound onto intermediate packages by high
speed winders. In most cases, the strands are unwound from the intermediate
packages and are twisted together to form glass fiber yarns that are rewound
onto bobbins for sale to customers.
The Huntingdon facility and the South Hill facility employ a "marble melt
process" (also known as "indirect melt") to manufacture fine glass fiber yarns
using glass marbles as the principal raw material. The glass marbles are
melted in individual furnaces and pulled through bushings to form filaments.
The filaments are sized, wound onto intermediate packages, and twisted in the
same manner as in the direct melt process. The advantage of the indirect
method is that each bushing has its own melting device. This process, which
AGY pioneered, allows AGY to add incremental production capacity with more
reasonable capital expense and construction time and results in a more
consistent product.
Competition
AGY believes that the principal competitive factors affecting the glass
yarns industry include the quality, performance, product pricing and
consistency of products, response to customer requirements and stability of
business relationships with customers.
AGY is one of only five major producers of glass yarns that supply their
products globally. The other global suppliers are PPG, Vetrotex, Nitto and
Nippon Electric. Sales by the five global suppliers accounted for
approximately 80% of total 1997 industry sales. In addition to the five global
suppliers of glass yarns, there are two significant regional manufacturers,
Taiwan Glass, a licensee of AGY's technology, and Nan Ya Plastics Corp., a
licensee of PPG's technology, each of which operates and has significant sales
in Asia. AGY and PPG are the only major producers of glass yarns with
production facilities in North America. However, Vetrotex has announced that
it intends to build a plant for the production of glass yarns, primarily for
the electronics market, in Mexico. Vetrotex has publicly stated that it
expects this new plant to begin operations in the second half of 1999.
Research and Development
To maintain its leadership position in the glass yarns industry, AGY
conducts an active research and development program aimed at improving its
manufacturing processes and developing new and improved products. The research
and development program is managed by AGY's science and
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<PAGE>
technology group. AGY spent $5.6 million, $5.7 million and $5.9 million to fund
the science and technology group in 1995, 1996, 1997, respectively. A portion
of the science and technology group dedicate their efforts to the technical
services organization ("TSO"). The Aiken and Huntingdon facilities each have a
TSO which is organized into technical teams around each major customer
category. The TSO teams in Aiken and Huntingdon are staffed by 19 and 12
people, respectively. The TSO carries out ongoing process and product
improvements and each technical team is led by a product engineer, who is
supported by one or more process experts responsible for troubleshooting
manufacturing problems. TSO teams also have a project engineering group which
is responsible for capital projects. The remaining persons in AGY's science and
technology group are experts in chemistry, chemical applications and process
development. A total of seven employees perform the science and technology
function at the Aiken facility.
AGY has numerous United States patents, patent applications and trademarks.
While AGY considers its patents to be valuable assets, AGY does not believe
that its competitive position is dependent on patent protection or that its
operations are dependent on any individual patent or group of related patents.
However, in some instances, patents and patent protection may deter entry by
new competitors with respect to certain product lines. AGY's policy is to
obtain patents on its new products and enforce its patent rights. In connection
with the formation transactions, Owens Corning assigned and licensed to AGY
certain patents, know-how, marks and business information relating to or used
in AGY's business. In addition, Owens Corning and AGY entered into a support
services agreement pursuant to which they will cooperate with respect to
research and development in certain areas. See "Certain Relationships and
Related Transactions."
Raw Materials and Other Supplies and Sources
The major raw materials used by AGY in the production of glass yarns are
glass marbles at the Huntingdon facility, and silica and borates at the Aiken
facility. AGY purchases glass marbles from Owens Corning pursuant to an
exclusive seven year supply agreement. Silica is readily available and is
currently provided to AGY by a number of local suppliers. AGY primarily uses
borates in its production processes at its Aiken facility, which are sourced
from a supplier in Turkey that is owned by the Turkish government. AGY's supply
of borates from Turkey is sourced through Owens Corning under a supply
agreement which provides that, if there is a limited or reduced supply of
borates, Owens Corning will allocate a portion of such supply to AGY.
In addition to the raw materials involved in the production of glass yarns,
AGY uses specialized capital equipment, such as bushings. Bushings are heat-
resistant platinum and rhodium trays through which molten glass is filtered to
produce glass filaments. AGY's bushings are currently manufactured and
periodically reconditioned by Owens Corning. Owens Corning has agreed to
continue to provide bushings to AGY and reconditioning service for the bushings
for a period of seven years. See "Risk Factors--We Have Only Operated
Independently of Owens Corning Since September 30, 1998 and Remain Dependent
Upon Owens Corning to Provide Certain Materials and Services" and "Certain
Relationships and Related Transactions."
Employees
As of January 31, 1999, AGY had approximately 1,492 full-time employees. As
of such date, approximately 1,408 of the employees were engaged in
manufacturing and related services. Production, maintenance, warehouse and
shipping employees at AGY's Aiken facility are represented
49
<PAGE>
by Teamsters Local Union Number 86, an affiliate of the International
Brotherhood of Teamsters. The collective bargaining agreement with this union
covering such employees at Aiken expires May 2, 1999. Production, maintenance,
warehouse and shipping employees at AGY's Huntingdon facility are represented
by the Union of Needletrades, Industrial and Textile Employees and its local
1034T. The collective bargaining agreement with this union covering such
employees at Huntingdon expires October 31, 1999. Management considers AGY's
labor relations to be generally good.
Environmental Matters
The past and present operations of AGY, including its ownership and operation
of real properties, are subject to extensive and changing federal, state, local
and foreign environmental laws and requirements, including, among others, those
governing discharges to air and water, the handling and disposal of soils and
hazardous substances and wastes, and the remediation of contamination
associated with releases of hazardous substances at AGY facilities and off-site
disposal locations. The operations of AGY are also governed by laws and
requirements relating to workplace safety and health. Management believes that
AGY is generally in material compliance with such laws and requirements.
AGY cannot assure that it will not in the future incur costs or liabilities
relating to environmental or health and safety matters, including those
relating to compliance with laws and requirements, remediation of
contamination, or claims by third parties.
AGY, like all manufacturers of glass yarns, is subject, in certain
jurisdictions, to laws and regulations designed to reduce solid wastes by
requiring, among other things, certain wastes to be degradable in landfills,
minimum levels of recycled content, various recycling requirements, disposal
fees and limits on the use of certain products. In addition, various consumer
and special interest groups have lobbied from time to time for the
implementation of additional environmental protection measures. AGY does not
believe that either the legislation promulgated to date or currently pending
initiatives will have a material adverse effect on its business. There can be
no assurance that any future legislation or regulatory efforts will not have a
material adverse effect on AGY's business, financial condition or results of
operations.
The amended and restated asset contribution agreement, dated as of July 31,
1998, between Owens Corning and AGY, provides that, with respect to
environmental liabilities, Owens Corning will retain all liabilities resulting
from the presence of hazardous substances at or migrating from the sites
contributed by Owens Corning to AGY, as well as all liabilities resulting from
the transportation or arrangements made by Owens Corning for the treatment,
storage or disposal of hazardous substances to any off-site location prior to
September 30, 1998. AGY has not assumed any such liabilities. In addition,
Owens Corning has agreed to indemnify AGY against any losses and damages
arising out of the environmental liabilities retained by Owens Corning;
however, with respect to environmental remedial action, Owens Corning's
indemnification obligations are limited to compliance with the standards set
under applicable environmental laws and such obligations shall be satisfied
upon and to the extent of final approval of such remedial action by the
governing environmental authority.
Legal Proceedings
From time to time, AGY is involved in various legal proceedings arising in
the ordinary course of business. None of the legal matters in which AGY is
currently involved, either individually or in the aggregate, is expected to
have a material adverse effect on AGY's business or financial condition.
50
<PAGE>
MANAGEMENT
Executive Officers, Directors and Other Key Employees
The following table sets forth certain information with respect to the
executive officers, directors and other key employees of AGY:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Robert Porcher........................ 70 Chairman of the Board and Director
Robert B. Fisher...................... 44 President
Catherine Cuisson..................... 33 Chief Financial Officer
Scott R. Northrup..................... 39 Chief Technical Officer
Heinz J. Otto......................... 49 Director
Serge Piolat.......................... 48 Director
Philippe Porcher...................... 45 Director
J. Thurston Roach..................... 57 Director
Jerry G. Hawkins...................... 54 Plant Manager--Aiken
Joseph A. Masciangelo................. 52 Plant Manager--Huntingdon
</TABLE>
Robert Porcher is the Chairman of the Board and a Director of AGY. Mr. Robert
Porcher has been Chairman of the Board of Directors and Chief Executive Officer
of Porcher Industries since 1952. Porcher Industries owns 51% of AGY. Mr.
Robert Porcher beneficially owns 54% of the outstanding capital stock of
Porcher Industries. Since December 9, 1998, Mr. Porcher has served as the
Chairman of the Supervisory Board of Porcher Industries.
Robert B. Fisher is President of AGY. Prior to AGY's formation, Mr. Fisher
was General Manager of the Business since March 1997. Prior to joining Owens
Corning, Mr. Fisher served as Business Manager of DuPont's industrial and
electrical films division from 1994 to 1997. Mr. Fisher served in DuPont's
corporate planning department from 1992 to 1994 and as Marketing and Sales
Manager for the European operations of Philips DuPont Optical from 1989 to
1992.
Catherine Cuisson is Chief Financial Officer of AGY. Prior to AGY's
formation, Ms. Cuisson served as Controller of Porcher Industries since
November 1994. Prior to joining Porcher Industries, Ms. Cuisson served as an
accountant with Coopers & Lybrand L.L.P. Ms. Cuisson obtained the equivalent of
a certified public accountancy degree upon graduating from the Institut
Commercial de Nancy in Nancy, France.
Scott R. Northrup is Chief Technical Officer of AGY. Prior to AGY's
formation, Mr. Northrup served as Technical Services Organization Manager of
the Business' facility in Huntingdon since May 1995. Mr. Northrup joined Owens
Corning in September 1984 as research and development engineer at the Granville
Science & Technology Center.
Heinz J. Otto is a Director of AGY. Mr. Otto has been President of Owens
Corning's Composites Division since 1996. Mr. Otto previously managed the
European operations of Landis & Gyr Corp., a Swiss corporation, and served on
its Executive Board. Prior to joining Landis & Gyr, Mr. Otto held various
management positions with General Electric Company.
Serge Piolat is a Director of AGY. Mr. Piolat has served as a Director of
Porcher Industries' textile division since 1989. Mr. Piolat previously served
as General Manager of Chavanoz Industries, a wholly owned subsidiary of Porcher
Industries. Since December 9, 1998, Mr. Piolat has served as a member of the
Executive Board and Vice President of Porcher Industries.
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<PAGE>
Philippe Porcher is a Director of AGY. Mr. Philippe Porcher has been Vice
President of Porcher Industries since March 1993. Before becoming Vice
President, Mr. Philippe Porcher served as Director of Porcher Industries'
industrial division. Mr. Philippe Porcher is the son of Robert Porcher,
Chairman of the Board and a Director of AGY. Since December 9, 1998, Mr.
Porcher has served as Chairman of the Executive Board of Porcher Industries.
J. Thurston Roach is a Director of AGY. Mr. Roach has been Senior Vice
President and Chief Financial Officer of Owens Corning since January 1, 1999.
Mr. Roach had previously served as President of Owens Corning's North American
Building Materials Systems Business since February 1998. Before joining Owens
Corning, Mr. Roach had been Vice Chairman of Simpson Investment Company since
July 1997. Before July 1997, Mr. Roach had served in various capacities with
Simpson Timber Company since 1984. Mr. Roach has been a director of The Liberty
Corporation since 1994.
Jerry G. Hawkins is Plant Manager--Aiken of AGY. Before AGY's formation, Mr.
Hawkins served as Plant Manager of the Business' Aiken facility since 1994. Mr.
Hawkins previously served in various management positions with Owens Corning
since 1969.
Joseph A. Masciangelo is Plant Manager--Huntingdon of AGY. Before AGY's
formation, Mr. Masciangelo served as Plant Manager of the Business' Huntingdon
facility since 1987. Mr. Masciangelo previously served in various management
positions with Owens Corning since 1969.
Executive Compensation
The following table sets forth the salary and other compensation paid to
AGY's President during the period commencing September 30, 1998 through
December 31, 1998:
<TABLE>
<CAPTION>
Name Principal Position Salary Bonus Other(/1/)
---- ------------------ ------- ------- ----------
<S> <C> <C> <C> <C>
Robert B. Fisher.................. President $42,500 $15,750 $7,214
</TABLE>
- --------
(/1/AGY)reimbursed Mr. Fisher for certain relocation expenses.
Director Compensation
AGY does not pay any compensation to members of its Board of Directors.
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OPERATING AGREEMENT
The following is a summary of certain material terms of the Amended and
Restated Limited Liability Company Operating Agreement of AGY dated September
30, 1998. The summary is qualified in its entirety by reference to the full
text of the operating agreement, which is filed as an exhibit to the
registration statement of which this prospectus is a part.
Organization
AGY is a limited liability company formed under the Delaware Limited
Liability Company Act and is governed by the operating agreement. As a result
of the formation transactions, a wholly owned subsidiary of Porcher Industries
owns a 51% membership interest in AGY and a wholly owned subsidiary of Owens
Corning owns a 49% membership interest in AGY. The purpose of AGY is to
manufacture and sell glass fiber yarns and related specialty materials.
Duration
Under the operating agreement, AGY will be dissolved upon the first to occur
of the following: (i) September 30, 2097; (ii) upon agreement of the members;
(iii) at the election of one member, upon a material breach of the operating
agreement by the other member which is not cured within 90 days following
notice thereof; and (iv) automatically upon the bankruptcy or liquidation of a
member, unless the other member elects to continue AGY.
Governance
The operating agreement provides that the Board of Directors manages the
business and affairs of AGY, subject to the terms and provisions of the
operating agreement. The Board of Directors is comprised of two directors
designated by Owens Corning and three directors designated by Porcher
Industries. Owens Corning's right to designate two directors would terminate at
such time as it no longer holds at least a 10% ownership interest in AGY.
Actions of the Board of Directors require a quorum of at least a majority of
the Board, including at least one director representing each member.
Robert Fisher, formerly Owens Corning's manager of the Business prior to its
contribution to AGY, has been designated in the operating agreement as the
initial general manager of AGY. Porcher Industries has the exclusive right
under the operating agreement to appoint the chief executive officer and the
chairman of the Board of Directors of AGY. All other executive officers of AGY
are to be designated by the Board of Directors.
The following actions require the approval of 75% of a specified quorum of
the Board of Directors:
. the termination of Mr. Fisher during the first year of his employment as
the initial general manager of AGY;
. the issuance of additional ownership interests of AGY;
. materially changing AGY's business plan or the types of businesses
conducted by AGY or engaging in a new business not currently conducted or
contemplated by AGY;
. effecting any merger, consolidation, plan of exchange or similar
transaction to which AGY is a party;
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. selling all or a substantial portion of the assets of AGY other than in
the ordinary course of business;
. mortgaging or otherwise encumbering the assets of AGY other than in
connection with AGY's financing facilities;
. except for certain distributions and in connection with the exercise of
the Put Right (as defined herein), effecting a distribution of any assets
of AGY, including cash, to any member;
. effecting the liquidation or dissolution of AGY;
. the redemption of any ownership interest in AGY other than in connection
with the Put Right;
. entering into any contract with any affiliate of AGY or with any member
(except as set forth in "Certain Relationships and Related Transactions")
other than in connection with the Put Right;
. making any tax election which is materially detrimental to AGY or any
member;
. the sale, license or other disposition by AGY to a third party,
including, but not limited to any affiliate of a member, of Owens Corning
technology that Owens Corning assigned or licensed to AGY;
. incurring indebtedness other than (i) indebtedness necessary in
connection with the Put Right, (ii) as required to effect certain
distributions, and (iii) borrowings under the Revolver (as defined
herein) which do not exceed $75 million in the aggregate; or
. materially amending any of the business, health, safety and environmental
policies adopted by AGY.
All actions of the members require the presence and the affirmative vote of
members holding at least 75% of the outstanding ownership interests in AGY.
Owens Corning's right to require supermajority board approval of any of the
actions listed above, except for (i) the issuance of additional ownership
interests in AGY, and (ii) the sale, license or other disposition by AGY to a
third party, including, but not limited to, any affiliate of a member, of Owens
Corning technology that Owens Corning assigned or licensed to AGY, would
terminate at such time as it no longer holds at least a 10% ownership interest
in AGY.
Transfers of Ownership Interests; Registration Rights
Under the operating agreement, no member may transfer its ownership interest
in AGY prior to September 30, 2003 without the prior written consent of the
other member. In the event a member thereafter decides to sell its ownership
interest, the non-selling member has a 30-day right to make an offer for such
ownership interest. If, within the 30-day period, the non-selling member fails
to make an offer, or the selling member rejects the non-selling member's offer,
the selling member is free to sell its ownership interest to any third party.
At any time beginning on September 30, 2003, each member has the right to
sell all of its ownership interest to AGY (a "Put Right") in the event certain
conditions described below are satisfied. If a member exercises its Put Right,
the value of such ownership interest will be determined by a third party or
parties according to the procedures and criteria set forth in the operating
agreement. AGY's obligation to purchase a member's ownership interest is
conditioned on AGY financing the purchase of the ownership interest from a
third party lender while maintaining or
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obtaining not less than a B rating by either Standard & Poor's or Moody's on
its then-outstanding unsecured debt after giving effect to the purchase. Any
member that exercises its Put Right must reimburse AGY for 25% of certain
expenses incurred by AGY in connection with purchasing such member's ownership
interest. In addition, AGY's ability to fund the Put Right will be subject to
the covenants under the senior credit facility and the indenture for the notes.
In the event AGY is unable to purchase all of a member's ownership interest
upon the exercise of its Put Right, the member may request in writing that AGY
file and use its reasonable best efforts to cause to become effective a
registration statement under the Securities Act, covering the registration of
its ownership interest (or the portion thereof designated by the member).
Certain Distributions
Pursuant to the terms of the operating agreement, AGY will make an annual
distribution (the "Tax Distribution") from its net cash flow and permitted
borrowings under the senior credit facility to each of Owens Corning and
Porcher U.S. in order to fund the taxes payable by each owner on their
proportionate share of AGY's net ordinary income and net capital gain. In
connection with Porcher Industries' purchase of a 51% interest in AGY, AGY
intends to make a partnership election to step up the basis of certain of AGY's
intangible assets. The resulting increase in amortization expense will allow
Porcher U.S. to significantly reduce its tax liability. As a result, the Tax
Distributions will not be made on a pro rata basis and Porcher U.S. will have
an unrecovered distribution amount (the "Deferred Distribution"). The Deferred
Distribution will earn interest at the same rate of interest as the senior
credit facility. If the amortization deductions are disallowed AGY will be
required to distribute all accumulated annual Deferred Distributions to the
extent that (i) both before and after such distribution there is not a default
under the senior credit facility and the notes, and (ii) there are funds to
make such distribution from available cash or borrowings under the senior
credit facility. Thereafter, all Deferred Distributions will cease and AGY will
pay in full all future Tax Distributions to Porcher U.S.
Indemnification
Pursuant to the operating agreement, AGY will indemnify and hold each member
and its affiliates and their respective officers, directors, members,
stockholders, managers, agents and representatives, and members of the Board of
Directors and each officer of AGY, harmless from any and all losses, claims,
damages, costs, liabilities and expenses suffered or incurred by any of such
persons arising out of, resulting from, based upon or in connection with the
management or conduct of the business or affairs of AGY.
The Board of Directors has been advised that, in the opinion of the SEC,
indemnification for liabilities arising under the Securities Act or the
Exchange Act is contrary to public policy and is therefore unenforceable,
absent a decision to the contrary by a court of appropriate jurisdiction.
Other Provisions
The operating agreement, subject to certain exceptions, prohibits members
from disclosing confidential information provided by another member in
connection with the business of AGY. The operating agreement also requires the
members to enter a non-competition agreement with each other and AGY with
respect to the business of AGY. See "Certain Relationships and Related
Transactions--Non-Competition."
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the contribution, many of the components of the Business necessary
for its operation were owned, leased or otherwise controlled by Owens Corning.
Such components include, among others, manufacturing facilities and equipment,
employees trained in the use and repair of the equipment, access to raw
materials, intellectual property rights and know-how and agreements with sales
representatives worldwide.
In connection with the formation transactions, AGY entered into certain
agreements with Owens Corning and Porcher Industries and their respective
affiliates to facilitate the continuing operation of the Business after it was
transferred by Owens Corning to AGY. These agreements are intended to benefit
AGY and the other parties thereto; however, they may result in conflicts of
interest between AGY and such parties.
The following are summaries of such agreements and, as such, are qualified in
their entirety by reference to the full text of the related agreements. Unless
otherwise indicated, all agreements between AGY and related parties referred to
herein were dated September 30, 1998.
LLC Purchase Agreement
Pursuant to a purchase agreement between Owens Corning, AGY and Porcher
Industries dated as of July 31, 1998, as amended, Porcher Industries purchased
a 51% interest in AGY. See "Prospectus Summary--The Formation Transactions."
The LLC purchase agreement required AGY to enter into the supply agreements
described below relating to the conduct of its business with Owens Corning,
Porcher Industries and certain of their respective affiliates. The LLC purchase
agreement also requires each of Owens Corning and Porcher Industries, subject
to certain conditions and limitations, to indemnify the other from any and all
losses incurred by such party which arise out of the breach by the other party
of any of its representations and warranties or any of its covenants contained
in the LLC purchase agreement.
Non-Competition
Pursuant to a non-compete agreement, Owens Corning and Porcher Industries and
their respective affiliates agreed not to compete with AGY in the manufacture
and sale of certain glass yarns and specialty materials currently produced by
AGY. Subject to certain exceptions, Owens Corning and Porcher Industries and
their respective affiliates may not manufacture or sell, among other things,
such business products, for the later of a five-year period beginning on
September 30, 1998 or such date on which either Owens Corning or Porcher
Industries owns less than a 5% ownership interest in AGY. Owens Corning and
certain of its affiliates have retained the right to manufacture certain
limited types of glass yarns.
Employee Benefits
Owens Corning permits current employees of AGY who were employed by Owens
Corning before September 30, 1998 ("Transferred Employees") to remain as
participants in, be covered by, or accrue benefits under, certain Owens Corning
employee benefit plans. AGY reimburses Owens Corning for the cost of such
coverage. These arrangements will terminate as of December 31, 1999, or earlier
if AGY requests. Although AGY does not currently sponsor a defined benefit
pension plan,
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AGY has agreed to pay certain amounts associated with early retirement benefits
under the Owens Corning Merged Retirement Plan (the "OC Plan"). Specifically,
Transferred Employees who, as of September 30, 1998, did not qualify for an
early retirement benefit under the OC Plan will continue to receive credit
toward eligibility for the early retirement benefit for service with AGY. If a
Transferred Employee remains employed by AGY until he qualifies for early
retirement, the OC Plan will treat the Transferred Employee as having elected
early retirement upon retirement from AGY. AGY is obligated to pay Owens
Corning the difference between the lump sum benefit payable to the Transferred
Employee as an early retiree and the lump sum benefit payable to the
Transferred Employee as a deferred vested benefit on the date of retirement
from AGY under the applicable provisions of the OC Plan. These liabilities were
estimated to be $4.4 million as of September 30, 1998. It has not yet been
determined what pension arrangements will be made after December 31, 1999 and
whether or not AGY will assume assets and liabilities attributed to benefits
accrued as of September 30, 1998 relating to Transferred Employees under the OC
Plan.
In connection with the formation transactions, AGY assumed liabilities for
postretirement medical and life insurance benefits with respect to Transferred
Employees, which were estimated to be $10.4 million as of September 30, 1998.
Facilities Arrangements at Aiken
Prior to the contribution, Owens Corning's glass yarn and glass mat
factories, located in adjacent plants in Aiken, South Carolina, shared certain
facilities and services. As part of the contribution, Owens Corning transferred
to AGY its glass yarn plant in Aiken, while retaining ownership of the glass
mat plant. In order to preserve the efficiencies and cost savings created by
the sharing arrangements in existence before the contribution, AGY and Owens
Corning have entered into the agreements described below.
Aiken Sewer Agreement. AGY and Owens Corning entered into a sanitary sewer
agreement pursuant to which AGY permits Owens Corning to use AGY's sanitary
system in Aiken for sanitary wastewater discharges in exchange for the payment
by Owens Corning of 50% of the actual costs of maintaining AGY's sanitary
system. The sanitary sewer agreement will terminate after a period of ten
years, unless extended or otherwise terminated as set forth therein.
Aiken Wastewater Treatment Agreement. AGY and Owens Corning entered into a
wastewater treatment agreement pursuant to which AGY treats at AGY's wastewater
treatment facility in Aiken aqueous industrial and laboratory waste discharged
by Owens Corning. In exchange for such services, Owens Corning pays 22% of
AGY's actual costs of operating the wastewater treatment facility. The
wastewater treatment agreement will terminate after a period of ten years,
unless extended or otherwise terminated as set forth therein.
Aiken Stormwater Agreements. AGY and Owens Corning entered into various
stormwater agreements pursuant to which (i) AGY permits Owens Corning to
discharge stormwater into AGY's two stormwater ponds and (ii) Owens Corning
permits AGY to discharge stormwater into Owens Corning's landfill sedimentation
basin in Aiken. Each party is individually responsible for any sampling and for
complying with their respective stormwater permits. The stormwater agreements
will terminate after a period of ten years, unless extended or otherwise
terminated as set forth therein.
Aiken Landfill Agreement. AGY and Owens Corning entered into a landfill
agreement pursuant to which Owens Corning permits AGY to use Owens Corning's
landfill in Aiken for the
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disposal of waste in exchange for the payment by AGY of 50% of the actual costs
of operating the landfill. The landfill agreement is effective for the
operating life of the landfill, unless earlier terminated as set forth therein.
Facilities Arrangements at Huntingdon
Huntingdon Lease. Owens Corning leases from AGY approximately 9,000 square
feet of AGY's facility in Huntingdon, Pennsylvania for use as a glass mat
manufacturing and distribution facility. The lease will expire on September 30,
2003, unless extended or terminated as provided in the lease agreement. Owens
Corning pays a nominal fixed fee for the term of the lease plus its allocated
share of all building operating expenses, as calculated in the lease agreement.
Huntingdon Air Modeling Agreement. Prior to the contribution, Owens Corning
treated its glass yarn and glass mat manufacturing operations in Huntingdon as
a single facility for environmental compliance purposes. As part of the
contribution, Owens Corning transferred to AGY the entire facility in
Huntingdon, a portion of which it leases back from AGY. In order to maintain
continuity in complying with air emission modeling requirements under
applicable environmental laws, AGY and Owens Corning entered into an air
modeling agreement pursuant to which the parties will treat their respective
facilities in Huntingdon, including the portion leased to Owens Corning, as a
single facility for modeling current and/or projected air emissions. Although
AGY and Owens Corning have agreed to share the costs of such modeling, each
party remains solely responsible for its own environmental liabilities, if any.
The air modeling agreement will terminate after a period of five years, unless
extended or otherwise terminated as set forth therein.
Subleases Relating to Equipment at Aiken and Huntingdon
Prior to the contribution, Owens Corning leased certain equipment used in the
manufacturing of glass yarns at its Aiken and Huntingdon facilities. Owens
Corning agreed to sublease such equipment to AGY on substantially the same
economic terms as provided to Owens Corning in the original leases.
At the Aiken facility, AGY subleases from Owens Corning, pursuant to Owens
Corning's master leases, certain manufacturing equipment owned by Carly 1995
Leasing Trust and a vacuum treatment oven owned by Pitney Bowes Credit
Corporation. AGY subleases other manufacturing equipment from Owens Corning at
its Aiken and Huntingdon facilities pursuant to Owens Corning's master lease
with John Hancock Mutual Life Insurance Company. Specific terms of these
subleases are described below. If any of the master leases are terminated, all
rights of AGY under the related subleases will also terminate.
AGY's sublease with Owens Corning relating to the Carly lease expires on
December 28, 2000. AGY, under certain circumstances, may purchase the equipment
at the termination of the sublease. AGY paid Owens Corning $114,483 pursuant to
such sublease during the fourth quarter of 1998.
The initial term of AGY's sublease with Owens Corning relating to the Pitney
Bowes lease ends on March 31, 2001, but may be extended by AGY for up to two
additional years unless Owens Corning exercises its right to terminate the
sublease. The sublease provides that, under certain circumstances, AGY will be
able to purchase the vacuum treatment oven at the termination of the sublease.
AGY paid Owens Corning $24,480 pursuant to such sublease during the fourth
quarter of 1998.
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The initial term of AGY's sublease with Owens Corning relating to the John
Hancock lease ends on March 31, 2000, but may be extended by AGY for up to two
additional years unless Owens Corning exercises its right to terminate the
sublease. The sublease provides that, under certain circumstances, AGY will be
able to purchase the equipment at the termination of the sublease. AGY paid
Owens Corning $417,988 pursuant to such sublease during the fourth quarter of
1998.
Services Agreements
AGY and Owens Corning have entered into several agreements pursuant to which
Owens Corning performs certain services for AGY that are important to the
success of AGY's operations. Some of these services agreements will only
continue for a short time until AGY hires and trains its own personnel, while
others are intended to continue for a longer duration. These service
agreements, which are described more fully below, provide for the fabrication
and repair of certain equipment, engineering and technical services, sales
agency agreements in Europe and certain administrative and information systems
services. In addition to the services provided for AGY by Owens Corning, AGY
performs certain manufacturing and distribution services for Owens Corning at
the Huntingdon facility, where Owens Corning continues to have operations.
Alloy Services Agreement. AGY and Owens Corning entered into an alloy
services agreement pursuant to which Owens Corning provides, at prices to be
determined annually, certain services relating to the alloying, fabrication and
repair of bushings, thermocouples and glass melter parts constructed from metal
alloys. AGY has agreed to use Owens Corning exclusively for such services
subject to certain exceptions. Owens Corning has also agreed to manage AGY's
inventory of industrial precious metals and metal alloys and, under certain
conditions, to lease to AGY metal alloys for use in bushings, thermocouples and
glass melter parts at prices determined according to the formula set forth in
the alloy services agreement. Such agreement will terminate on December 31,
2005, unless extended or otherwise terminated. AGY paid Owens Corning $740,377
for the refurbishing of bushings during the fourth quarter of 1998.
Support Services Agreement. AGY and Owens Corning entered into a support
services agreement pursuant to which Owens Corning provides certain
engineering, design and technical services to AGY at previously agreed upon
prices for a five-year period. The support services agreement will be
automatically extended each year for an additional one-year term until
termination as set forth therein.
Transitional Services Agreement. AGY and Owens Corning entered into a
transitional services agreement pursuant to which Owens Corning provides
certain corporate administrative and information systems services to AGY and
AGY provides certain services to Owens Corning at mutually agreed upon prices.
The provision of certain benefits administration and information system
services will expire on December 31, 1999. The provision of all other services
provided for in the transitional services agreement will expire on March 31,
1999, unless extended for an additional three months upon the written request
of the party receiving such services.
Manufacturing Services Agreement. AGY and Owens Corning entered into a
manufacturing services agreement pursuant to which AGY provides certain
manufacturing services to Owens Corning to support Owens Corning's glass mat
manufacturing and distribution business in
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Huntingdon. Owens Corning pays an annual fee (to be mutually agreed upon and
periodically reviewed by Owens Corning and AGY) for the provision by AGY of
certain manufacturing, management and ancillary services and pays additional
fees in exchange for AGY's provision of other services that may be requested by
Owens Corning. The manufacturing services agreement will expire on such date
that Owens Corning or any of its affiliates no longer owns a 49% ownership
interest in AGY, unless earlier terminated as set forth therein.
Supply Agreements
Prior to the contribution, Owens Corning obtained the raw materials needed
for the Business from its affiliates or through third party suppliers. Owens
Corning and AGY have entered into supply agreements, more fully described
below, which provide AGY with access to the necessary raw materials through
Owens Corning's affiliated and non-affiliated suppliers. In addition, pursuant
to the agreements described below, AGY purchased certain assets of the glass
yarns business of several of Owens Corning's non-U.S. affiliates. AGY has also
agreed to sell byproducts of one of its manufacturing processes to Owens
Corning.
Byproducts Supply Agreement. AGY and Owens Corning entered into a supply
agreement pursuant to which Owens Corning will purchase the first 10 million
pounds of certain byproducts of AGY's manufacturing processes called dry
chopped yarn and slit hanks that are produced each year by AGY. Each year,
Owens Corning will pay a fixed price per pound for the first 10 million pounds
of byproducts and a higher fixed price for any additional amounts shipped by
AGY. AGY is under no obligation to manufacture any specified quantity of the
byproducts to supply to Owens Corning. The byproducts supply agreement will
expire on December 31, 2003, after which it may be renewed for additional five-
year terms, unless canceled by either party.
Borates Supply Agreement. Prior to the contribution, Owens Corning entered
into an agreement with Etibank, a supplier of borates in Turkey that is owned
by the Turkish government, pursuant to which Etibank mines, processes, sells
and delivers borates to Owens Corning for use in manufacturing glass yarns. AGY
and Owens Corning entered into a borates supply agreement pursuant to which AGY
purchases a certain quantity of borates from Owens Corning at a price equal to
Owens Corning's cost to purchase, transport and process such products plus a
$150,000 annual administrative charge. The borates supply agreement will
terminate on December 31, 2005, after which it will automatically renew for a
period equal to any renewal period in Owens Corning's supply agreement with
Etibank, unless canceled by either party upon 90 days' advance notice.
OC Belgium Agreements. AGY and N.V. Owens Corning S.A., a wholly owned
subsidiary of Owens Corning ("OC Belgium"), entered into a supply agreement
pursuant to which AGY purchases at previously determined prices minimum
quantities of certain fiberglass yarns to be manufactured by OC Belgium at its
facility in Battice, Belgium. AGY also has the option to acquire the Battice
plant's fiberglass yarns manufacturing equipment upon the termination of the
agreement or at the time Owens Corning no longer uses such equipment to produce
fiberglass yarns. The supply agreement with OC Belgium will terminate on
December 31, 2003, after which it may be renewed for additional one-year terms,
unless canceled by either party. In addition, AGY has an exclusive right to
terminate such agreement effective December 31, 2001 upon one year's prior
notice.
AGY and OC Belgium also entered into a purchase agreement pursuant to which
AGY purchased OC Belgium's list of customers that purchase heavy glass yarns
from OC Belgium,
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transferable contracts between OC Belgium and its customers, the finished
products inventory of heavy glass yarns owned by OC Belgium that were located
in its public warehouse in Antwerp, Belgium, and all of OC Belgium's accounts
receivable arising exclusively out of the sale of heavy glass yarns by OC
Belgium.
OC Canada Agreements. The Canadian subsidiary of AGY and Owens-Corning
Canada, Inc., a wholly owned subsidiary of Owens Corning ("OC Canada"), entered
into a supply agreement pursuant to which AGY purchases at previously
determined prices minimum and maximum quantities of certain fiberglass yarns to
be manufactured by OC Canada at its facility in Guelph, Canada. AGY and Owens
Corning intend to append to this agreement an arrangement pursuant to which AGY
will purchase for distribution certain quantities of Low Tex Type 30 yarns at
agreed upon prices. AGY has the option to acquire the Guelph plant fiberglass
yarns manufacturing equipment upon the termination of the agreement or at the
time Owens Corning no longer uses such equipment to produce fiberglass yarns.
The supply agreement with OC Canada will terminate on December 31, 2001, after
which it may be renewed for additional one-year terms, unless canceled by
either party. In addition, AGY has the exclusive right to terminate such
agreement at any time upon 90 days' prior notice.
A wholly owned subsidiary of AGY and OC Canada entered into a purchase
agreement pursuant to which such subsidiary of AGY purchased OC Canada's list
of customers which purchase heavy glass yarns from OC Canada, transferable
contracts between OC Canada and its customers, and all of OC Canada's accounts
receivable arising exclusively out of the sale of heavy glass yarns by OC
Canada.
OC Japan Agreement. AGY and Owens Corning (Japan) Ltd., a wholly owned
subsidiary of Owens Corning ("OC Japan"), entered into a purchase agreement
pursuant to which AGY purchased OC Japan's list of customers which purchase
glass yarns from OC Japan, transferable contracts between OC Japan and certain
of its customers, all of OC Japan's accounts receivable arising exclusively out
of the sale of glass yarns by OC Japan, and the finished products inventory of
glass yarns owned by OC Japan that were located in its warehouses in Tokyo and
Osaka, Japan.
Rio Claro Low Tex Type 30 Agreements. AGY and Owens Corning do Brazil Ltda
("OC Brazil"), a wholly owned subsidiary of Owens Corning, intend to enter into
supply agreements pursuant to which AGY will purchase for distribution certain
minimum and maximum quantities of fiberglass yarns with a bare glass linear
density of 300 at agreed upon prices. These yarns are to be manufactured by OC
Brazil at its plant in Rio Claro, Brazil.
Glass Marbles Supply Agreement. AGY and Owens Corning entered into a glass
marbles supply agreement pursuant to which AGY purchases exclusively from Owens
Corning at mutually determined prices all of AGY's requirements for glass
marbles for use in its glass yarns business. Owens Corning has agreed not to
supply glass marbles to any third party for use in the manufacturing of glass
yarns. AGY has the option to acquire Owens Corning's glass marbles
manufacturing equipment upon the termination of the agreement or at the time
Owens Corning no longer uses such equipment to produce glass marbles. The glass
marbles supply agreement will expire on December 31, 2005, after which it may
be renewed for additional five-year terms by either party, unless terminated by
AGY upon two years' prior notice. AGY paid Owens Corning $1.12 million for
glass marbles during the fourth quarter of 1998.
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Co-location Arrangement with BGF Industries in South Hill, Virginia
Prior to the contribution, Owens Corning entered into a co-location
arrangement with BGF Industries in South Hill, Virginia. As a result of the
formation transactions, AGY has succeeded to Owens Corning's rights and
obligations under the co-location arrangement. As part of the arrangement, AGY
leases approximately 27,200 square feet of segregated space within BGF
Industries' recently built multi-layer plant for the purpose of manufacturing
fiberglass yarn for sale to BGF Industries pursuant to a 10-year renewable
supply contract. AGY paid BGF Industries approximately $900,000 pursuant to
such co-location arrangement in 1998. Also as part of the co-location
arrangement, AGY leases from BGF Industries manpower at an hourly job rate per
employee and BGF Industries provides technical, quality control and improvement
and other non-managerial services to AGY at previously determined rates. The
employee leasing and services contracts end upon the termination of either the
premises lease or the supply contract. The parties also have agreed to certain
confidentiality and disclosure obligations in connection with the co-location
arrangement.
Intellectual Property
In connection with the contribution, Owens-Corning Fiberglas Technology,
Inc., a wholly owned subsidiary of Owens Corning ("OCFT"), assigned to AGY
certain patents, know-how, trademarks and business information, relating to or
used in AGY's business. Owens Corning has also licensed to AGY certain
additional intellectual property assets and rights, mainly patents and know-
how, pursuant to a patent and know-how license agreement and certain related
agreements (collectively, the "Master License") among it, OCFT and AGY. The
Master License grants to AGY a worldwide, paid-up and royalty-free license to
make, have made, use, sell, import and offer to sell glass fiber specialty
products. The license is exclusive for the duration of the non-compete
agreement between Owens Corning and AGY with respect to certain products and
non-exclusive with respect to others, and AGY has sublicensing rights subject
to certain exceptions, restrictions and limitations. The patent license
included in the Master License is for the life of the patent, while the know-
how license is perpetual. The patent and know-how licenses are terminable only
upon the occurrence of certain events. The Master License also includes a
grant-back license by AGY to Owens Corning, under the patents owned by AGY, for
the manufacture, import and sale of certain yarn products. This grant-back
license does not include those products which Owens Corning is prohibited from
selling for the duration of the non-compete agreement. The Master License
further provides that Owens Corning has agreed to render to AGY, upon request
and on terms to be agreed upon, certain services relating to AGY's manufacture
of glass yarn products.
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SECURITY OWNERSHIP
The following table sets forth certain information regarding each person or
entity that beneficially owns more than a 5% ownership interest in AGY. Each
indicated entity has sole voting and investment power with respect to its
respective ownership interest.
<TABLE>
<CAPTION>
Name of Beneficial Owner Ownership Interest
- ------------------------ ------------------
<S> <C>
Porcher Industries, S.A.(/1/)................................ 51%
Owens Corning(/2/)........................................... 49
</TABLE>
- --------
(1) Address is c/o BGF Industries, Inc., 3802 Robert Porcher Way, Greensboro,
North Carolina 27510. Porcher Industries owns 100% of the outstanding
capital stock of Glass Holdings Corp., which owns 100% of the outstanding
capital stock of AGY Holdings, Inc., which is the record holder of a 51%
ownership interest in AGY.
(2) Address is One Owens Corning Parkway, Toledo, Ohio 43659-0001. Owens
Corning owns 100% of the outstanding capital stock of Jefferson Holdings,
Inc., which is the record holder of a 49% ownership interest in AGY.
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DESCRIPTION OF OTHER INDEBTEDNESS
Senior Credit Facility
In connection with the formation transactions, AGY entered into the senior
credit facility with certain lenders pursuant to which the lenders committed to
lend to AGY up to $315.0 million, such amount to be allocated among:
. a six-year revolving credit facility in an aggregate principal amount of
up to $75.0 million (the "Revolver");
. a six-year term loan in an aggregate principal amount of $115.0 million
("Term Loan A"); and
. a seven-year term loan in an aggregate principal amount of $125.0 million
("Term Loan B," and together with Term Loan A, the "Term Loans").
First Union National Bank serves as agent under the senior credit facility.
Repayment. Commitments under the Revolver will be reduced prior to maturity
on September 30, 2004, if, subject to certain limitations, (i) certain non-
ordinary course asset dispositions occur, (ii) AGY or any Credit Facility
Guarantor (as defined below) issues certain debt or equity securities or (iii)
AGY or any Credit Facility Guarantor receives certain insurance proceeds. The
Term Loans will be amortized on a quarterly basis commencing December 31, 1998
based on the following schedule:
<TABLE>
<CAPTION>
Twelve Months
Ending
September 30, Term Loan A Term Loan B
------------- ------------ ------------
<S> <C> <C>
1999........................................... $ 11,500,000 $ 1,250,000
2000........................................... 17,250,000 1,250,000
2001........................................... 17,250,000 1,250,000
2002........................................... 23,000,000 1,250,000
2003........................................... 23,000,000 1,250,000
2004........................................... 23,000,000 1,250,000
2005........................................... 0 117,500,000
------------ ------------
$115,000,000 $125,000,000
============ ============
</TABLE>
The Term Loans will also, in certain circumstances, be prepaid with an
amount, subject to certain restrictions, equal to the excess cash flow of AGY.
Security; Guaranty. The senior credit facility is secured by a first priority
lien on substantially all of the properties and assets of AGY and its
respective domestic subsidiaries, now owned or acquired thereafter and a pledge
of Porcher Industries' membership interest in AGY. The senior credit facility
is guaranteed by AGY Capital Corp. and will be guaranteed by all of AGY's
future domestic subsidiaries (the "Credit Facility Guarantors").
Interest. At AGY's option, the interest rates per annum applicable to the
Revolver, Term Loan A and Term Loan B are fluctuating rates of interest
measured by reference either to: (i) LIBOR plus a borrowing margin or (ii)
First Union National Bank's base rate, which is the greater of the published
prime rate of First Union National Bank or the overnight federal funds rate
plus 0.5% (the "ABR") plus a borrowing margin. The applicable borrowing margin
for the Revolver and Term Loan A ranges from 1.75% to 3.0% for LIBOR based
borrowings and 0.5% to 1.75% for ABR based
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<PAGE>
borrowings. The applicable borrowing margin for Term Loan B ranges from 3.50%
to 3.75% for LIBOR based borrowings and 2.25% to 2.5% for ABR based borrowings.
AGY has entered into interest rate hedging agreements which effectively fix the
rates of interest on Term Loan A and Term Loan B at 4.92% and 5.04% per annum,
respectively, plus the applicable borrowing margin.
Covenants. The senior credit facility contains covenants restricting AGY and
its subsidiaries with respect to the following:
. the incurrence of debt (including guarantees);
. the creation of liens;
. substantially changing the nature of AGY's or its subsidiaries'
businesses;
. the consummation of certain transactions such as dispositions of
substantial assets, mergers, acquisitions, reorganizations and
recapitalizations;
. the making of certain investments and loans, non-ordinary course asset
sales and capital expenditures;
. the making of dividends and other distributions; transactions with
affiliates; and
. AGY's ability to prepay certain debt.
The senior credit facility also requires AGY to comply with certain financial
tests and maintain certain financial ratios. Certain of these financial tests
and ratios include:
. maintaining a maximum leverage ratio;
. maintaining a minimum consolidated net worth;
. maintaining a minimum interest coverage ratio; and
. maintaining a minimum fixed charge coverage ratio.
The senior credit facility also contains customary events of default. An
event of default under the senior credit facility will allow the lenders
thereunder to accelerate or, in certain cases, will automatically cause the
acceleration of, the maturity of the debt under the senior credit facility and
will restrict the ability of AGY and the Note Guarantors (as defined herein) to
meet their obligations to the holders of the notes.
Keep-Well Agreement
In connection with the formation transactions, on September 30, 1998, Owens
Corning agreed to enter into a keep-well agreement with AGY. Until January 14,
2002, if AGY does not have the liquidity necessary to pay interest on the notes
or on the senior credit facility when due, Owens Corning will loan AGY an
amount equal to the aggregate deficiency. The proceeds of any loan shall first
be applied to interest due on the notes and then, subject to certain
limitations, to interest due on the senior credit facility. As of September 30,
1998, the obligation of Owens Corning to make loans to AGY under the keep-well
agreement was limited to a maximum aggregate amount of $65.0 million, and a
maximum annual amount of $20.0 million; provided, however, that the annual
amount will be reduced by $10.0 million after each interest payment date with
respect to the notes. Any loans made to AGY pursuant to the keep-well agreement
will be subordinate to the notes and any amounts outstanding under the senior
credit facility. If AGY were to file for bankruptcy protection, the keep-well
agreement would probably cease to be enforceable.
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<PAGE>
DESCRIPTION OF EXCHANGE NOTES
The exchange notes will be issued under the indenture, dated as of the Issue
Date, between the Issuers, as joint and several obligors, and The Bank of New
York, as trustee. The following summary of certain provisions of the indenture
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the Trust Indenture Act of 1939, as amended (the
"TIA"), and to all of the provisions of the indenture, including the
definitions of certain terms therein and those terms made a part of the
indenture by reference to the TIA as in effect on the date of the indenture.
The definitions of certain capitalized terms used in the following summary are
set forth below under "--Certain Definitions." References in this "Description
of Exchange Notes" section to "AGY" mean only Advanced Glassfiber Yarns LLC (or
any successor or assign thereof that has become such in accordance with the
terms of the indenture) and not any existing or future Subsidiaries that
Advanced Glassfiber Yarns LLC may have in the future; references to the
"Issuers" mean Advanced Glassfiber Yarns LLC and Capital, but not any existing
or future Subsidiaries that either Advanced Glassfiber Yarns LLC or Capital may
have in the future and references to "Capital" mean AGY Capital Corp.
The exchange notes will be issued solely in exchange for an equal principal
amount of old notes pursuant to the exchange offer. The form and terms of the
exchange notes will be identical in all material respects to the form and terms
of the old notes except that: (i) the exchange notes will have been registered
under the Securities Act and (ii) the registration rights and contingent
liquidated damages provisions applicable to the old notes are not applicable to
the exchange notes.
The exchange notes will be unsecured senior subordinated obligations of the
Issuers. The exchange notes will be unconditionally guaranteed, jointly and
severally, on an unsecured senior subordinated basis by all future direct and
indirect Restricted Subsidiaries other than Capital and Foreign Subsidiaries of
AGY (each such guarantee is referred to as a "Note Guarantee" and such
guarantees are collectively referred to as the "Note Guarantees;" each
Subsidiary that provides a Note Guarantee is referred to as a "Note Guarantor"
and such Subsidiaries are collectively referred to as the "Note Guarantors").
As of the date hereof, AGY has one Foreign Subsidiary, which will be a
Restricted Subsidiary. Capital will also be a Restricted Subsidiary.
Initially, the trustee will act as paying agent and registrar for the
exchange notes. AGY may change any paying agent and registrar without notice to
holders of the exchange notes. Holders must surrender exchange notes to a
paying agent to collect principal payments and premium, if any. Principal,
premium, if any, and interest on the exchange notes will be paid by check
mailed to the registered holders at their registered addresses; provided,
however, that all payments with respect to exchange notes the holders of which
have given wire transfer instructions to the Issuers will be made by wire
transfer of immediately available funds to the accounts specified by the
holders thereof.
Principal, Maturity and Interest
The exchange notes will mature on January 15, 2009. Interest on the exchange
notes will accrue at the rate of 9 7/8% per annum and will be payable semi-
annually in arrears on each January 15 and July 15, commencing on July 15,
1999, to the persons who are registered holders at the close of business on the
January 1 and July 1, respectively, immediately preceding the applicable
interest payment date. Interest on the exchange notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from and including the date of issuance. The exchange notes will not be
entitled to the benefit of any mandatory sinking fund.
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<PAGE>
Additional Notes
Subject to the limitations set forth under "--Certain Covenants--Limitation
on Incurrence of Additional Indebtedness," the Issuers may Incur additional
Indebtedness which, at their option, may consist of additional notes, in one or
more series, having identical terms as old notes or exchange notes (the
"Additional Notes"). Holders of such Additional Notes will have the right to
vote together with holders of the old notes and the exchange notes as one
class. No offering of any such Additional Notes is being or shall be deemed to
be made by this prospectus. In addition, there can be no assurance as to when
or whether the Issuers will issue any such Additional Notes or as to the
aggregate principal amount of such Additional Notes.
Ranking
The exchange notes will rank junior to, and be subordinated in right of
payment to, all existing and future Senior Indebtedness of the Issuers, pari
passu in right of payment with all Senior Subordinated Indebtedness of the
Issuers and senior in right of payment to all Subordinated Indebtedness of the
Issuers. At September 30, 1998, after giving effect to the offering of the old
notes, the Issuers would have had approximately $262.1 million of Senior
Indebtedness outstanding (exclusive of unused commitments). All debt Incurred
under the senior credit facility is Senior Indebtedness of AGY, is guaranteed
by all Note Guarantors on a senior basis and is secured by substantially all of
the assets of AGY.
Note Guarantees
In the event that any Person shall become a Restricted Subsidiary (other than
Foreign Subsidiaries but including, without limitation, upon a Revocation of
the Designation of a Subsidiary as an Unrestricted Subsidiary), AGY will cause
such Restricted Subsidiary to execute and deliver to the trustee a supplemental
indenture in form reasonably satisfactory to the trustee pursuant to which such
Restricted Subsidiary shall become a party to the indenture and thereby
unconditionally guarantee all of the Issuers' Obligations under the exchange
notes and the indenture on the terms set forth therein. Thereafter, such
Restricted Subsidiary shall (unless released in accordance with the terms of
the indenture) be a Note Guarantor for all purposes of the indenture.
Each Note Guarantor will irrevocably and unconditionally guarantee, jointly
and severally, on an unsecured senior subordinated basis, the punctual payment
when due, whether at Stated Maturity, by acceleration or otherwise, of all
obligations of the Issuers under the indenture and the exchange notes, whether
for principal of, premium, if any, or interest on the exchange notes, expenses,
indemnification or otherwise (all such obligations guaranteed by a Note
Guarantor being herein called the "Guaranteed Obligations"). Each Note
Guarantor will agree to pay, on a senior subordinated basis and in addition to
the amounts stated above, any and all expenses (including reasonable counsel
fees and expenses) incurred by the trustee or the holders in enforcing any
rights under such Note Guarantor's Note Guarantee.
The Guaranteed Obligations will rank junior to, and be subordinated in right
of payment to, all existing and future Senior Indebtedness of the Note
Guarantors, pari passu in right of payment with all Senior Subordinated
Indebtedness of the Note Guarantors and senior in right of payment to all
Subordinated Indebtedness of the Note Guarantors. All debt Incurred under the
senior credit facility will be guaranteed by each Note Guarantor on a senior
basis and will be secured by substantially all of the assets of each Note
Guarantor.
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<PAGE>
The Guaranteed Obligations of each Note Guarantor will be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Note Guarantor (including, without limitation, any
guarantees under the senior credit facility and any Senior Indebtedness
Incurred after the Issue Date) and after giving effect to any collections from
or payments made by or on behalf of any other Note Guarantor in respect of the
Guaranteed Obligations of such other Note Guarantor under its Note Guarantee or
pursuant to its contribution obligations under the indenture, result in the
Guaranteed Obligations of such Note Guarantor not constituting a fraudulent
conveyance or fraudulent transfer under federal, state or other applicable law.
Each Note Guarantor that makes a payment or distribution under a Note Guarantee
will be entitled to a contribution from each other Note Guarantor in a pro rata
amount, based on the net assets of each Note Guarantor determined in accordance
with GAAP. For further information, you should review the section "Risk
Factors" under the heading "Issuance of the Old Notes and any Note Guarantee
May be Subject to Fraudulent Conveyance Laws."
In the event (i) there is a Legal Defeasance of the exchange notes as
described under "--Legal Defeasance and Covenant Defeasance," (ii) there is a
sale or other disposition of all or substantially all of the assets of any Note
Guarantor, (iii) there is a sale or other disposition of all of the Capital
Stock of any Note Guarantor or (iv) a Note Guarantor is designated as an
Unrestricted Subsidiary as described under "--Certain Covenants--Designation of
Unrestricted Subsidiaries," such Note Guarantor will be released and relieved
of its obligations under its Note Guarantee; provided, however, in the case of
clauses (ii) or (iii), that such transaction is carried out pursuant to and in
accordance with "--Certain Covenants--Limitation on Asset Sales" and, if
applicable, "--Certain Covenants--Merger, Consolidation and Sale of Assets."
Subordination of the Exchange Notes and the Note Guarantees
The payment of the principal of, premium, if any, and interest on the
exchange notes is subordinated in right of payment, as set forth in the
indenture, to the prior payment in full in cash of all existing and future
Obligations of the Issuers in respect of Senior Indebtedness of the Issuers,
whether outstanding on the Issue Date or thereafter Incurred. In addition, the
payment of the Guaranteed Obligations of each future Note Guarantor, if any,
under its Note Guarantee will be subordinated and junior in right of payment to
the prior payment in full of all Senior Indebtedness of such Note Guarantor to
substantially the same extent as the exchange notes are subordinated to all
existing and future Obligations of the Issuers in respect of Senior
Indebtedness of the Issuers. As a result, the exchange notes will be
effectively subordinated to all Senior Indebtedness of any Note Guarantor and
to all debt of any other Subsidiaries that AGY may have in the future.
Notwithstanding anything to the contrary contained herein, any payment made by
Owens Corning under the Keep-Well Agreement shall not be subject to the
provisions of this paragraph.
Upon any payment or distribution of the assets of the Issuers or a Note
Guarantor upon a total or partial liquidation, dissolution or reorganization
of, or similar proceeding relating to, the Issuers or their property or a Note
Guarantor or its property, the holders of Senior Indebtedness of the Issuers or
such Note Guarantor will be entitled to receive payment in full of all
Obligations due in respect of such Senior Indebtedness before the holders are
entitled to receive any payment, and until all Obligations due in respect of
the Senior Indebtedness is paid in full in cash, any payment or distribution to
which holders would be entitled but for the subordination provisions of the
indenture will be made to holders of such Senior Indebtedness of the Issuers or
such Note Guarantor as their
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<PAGE>
interests may appear. If a distribution is made to holders that, due to the
subordination provisions, should not have been made to them, such holders are
required to hold it in trust for the holders of Senior Indebtedness of the
Issuers or such Note Guarantor and pay it over to them as their interests may
appear.
Notwithstanding anything herein to the contrary, neither the Issuers nor any
Note Guarantor may pay principal of, premium, if any, or interest on the
exchange notes or make any deposit pursuant to the provisions described under
"--Legal Defeasance and Covenant Defeasance" below or repurchase, redeem or
otherwise retire any exchange notes (collectively, "pay the exchange notes") if
(i) any Designated Senior Indebtedness is not paid when due or (ii) any other
default on Designated Senior Indebtedness occurs and the maturity of such
Designated Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Designated Senior Indebtedness has been
paid in full in cash. However, the Issuers and any Note Guarantor may pay the
exchange notes without regard to the foregoing if the Issuers and such Note
Guarantor and the trustee receive written notice approving such payment from
the Representative of the Designated Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of
any default (other than a default described in clause (i) or (ii) of the second
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, neither AGY nor any Note
Guarantors may pay the exchange notes for a period (a "Payment Blockage
Period") commencing upon the receipt by the trustee (with a copy to the Issuers
and each Note Guarantor) of written notice (a "Blockage Notice") of such
default from the Representative of the holders of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the trustee, the Note Guarantors and the
Issuers from the Person or Persons who gave such Blockage Notice, (ii) because
the Representative of the holders of such Designated Senior Indebtedness has
notified the trustee that the default giving rise to such Blockage Notice is no
longer continuing or (iii) because such Designated Senior Indebtedness has been
repaid in full in cash). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the first sentence of this
paragraph), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, the Issuers and any Note Guarantors may resume payments on
the exchange notes after the end of such Payment Blockage Period. The exchange
notes and any Note Guarantees shall not be subject to more than one Payment
Blockage Period in any consecutive 360-day period, irrespective of the number
of defaults with respect to Designated Senior Indebtedness during such period.
If payment of the exchange notes is accelerated because of an Event of
Default, the Issuers or the trustee shall promptly notify the holders of
Designated Senior Indebtedness or the Representative of such holders of the
acceleration.
By reason of the subordination provisions contained in the indenture, in the
event of an insolvency, bankruptcy, reorganization, or liquidation of the
Issuers, or upon the occurrence of a Change of Control or an Asset Sale
requiring repurchase by AGY of any exchange notes or in the event that any Note
Guarantors are required to make payments under their Note Guarantees, there may
not be sufficient assets remaining to satisfy the claims of the holders after
satisfying the claims
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<PAGE>
of creditors of the Issuers and such Note Guarantors who are holders of Senior
Indebtedness and claims of creditors of the Issuers' other Subsidiaries. For
more information, you should review the section "Risk Factors" under the
heading "Your Exchange Notes Will Be Subordinate to Our Senior Debt."
The terms of the subordination provisions described above will not apply to
any payment or distribution of Permitted Junior Securities or to payment from
money or the proceeds of U.S. government obligations held in trust by the
trustee for the payment of principal of, premium, if any, and interest on the
exchange notes pursuant to the provisions described under "--Legal Defeasance
and Covenant Defeasance."
Redemption
Optional Redemption. The exchange notes will be redeemable, at the Issuers'
option, in whole at any time or in part from time to time, on and after January
15, 2004, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on January 15 of the year
set forth below, plus, in each case, accrued interest to the date of redemption
(subject to the right of holders of record on a record date to receive interest
due on the related interest payment date that is on or prior to such date of
redemption):
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004........................................................... 105.063%
2005........................................................... 103.375%
2006........................................................... 101.688%
2007 and thereafter............................................ 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. In addition, at any time,
or from time to time, on or prior to January 15, 2002 the Issuers may, at their
option, use the net cash proceeds of one or more Public Equity Offerings (as
defined below) to redeem in the aggregate up to 35% of the aggregate principal
amount of the exchange notes originally issued at a redemption price equal to
110.125% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of redemption (subject to the right of holders of record on
a record date to receive interest due on the related interest payment date that
is on or prior to such date of redemption); provided, however, that after
giving effect to any such redemption at least 65% of the aggregate principal
amount of the exchange notes originally issued remains outstanding. In order to
effect the foregoing redemption with the proceeds of any Public Equity
Offering, the Issuers shall make such redemption not more than 60 days after
the consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of AGY or Capital
pursuant to a registration statement filed with the Commission in accordance
with the Securities Act, or any successor statute.
In the event that less than all of the exchange notes are to be redeemed at
any time, selection of such exchange notes for redemption will be made by the
trustee in compliance with the requirements of the principal national
securities exchange, if any, on which such exchange notes are listed or, if
such exchange notes are not then listed on a national securities exchange, on a
pro rata basis, by lot or by such method as the trustee shall deem fair and
appropriate; provided, however, that no exchange notes of a principal amount of
$1,000 or less shall be redeemed in part and exchange notes of a principal
amount in excess of $1,000 may be redeemed in part in multiples of $1,000 only;
and
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<PAGE>
provided, further, that if a partial redemption is made with the proceeds of a
Public Equity Offering, selection of the exchange notes or portions thereof for
redemption shall, subject to the preceding proviso, be made by the trustee only
on a pro rata basis or on as nearly a pro rata basis as is practicable (subject
to the procedures of DTC or a successor depositary), unless such method is
otherwise prohibited. Notice of redemption shall be mailed by first-class mail
at least 30 but not more than 60 days before the redemption date to each holder
of exchange notes to be redeemed at its registered address. If any exchange
note is to be redeemed in part only, the notice of redemption that relates to
such exchange note shall state the portion of the principal amount thereof to
be redeemed. A new exchange note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original exchange note. On and after the redemption date,
interest will cease to accrue on exchange notes or portions thereof called for
redemption as long as the Issuers have deposited with the paying agent funds in
satisfaction of the applicable redemption price pursuant to the indenture.
Change of Control
The indenture provides that, upon the occurrence of a Change of Control, each
holder will have the right to require that the Issuers purchase all or a
portion (in integral multiples of $1,000) of such holder's notes pursuant to
the offer described below (the "Change of Control Offer"), at a purchase price
equal to 101% of the principal amount thereof plus accrued and unpaid interest
thereon to the date of purchase (subject to the right of holders of record on a
record date to receive interest due on the related interest payment date that
is on or prior to such date of purchase). Within 30 days following the date
upon which the Change of Control occurred, AGY must send, by first-class mail,
a notice to each holder, with a copy to the trustee, which notice shall govern
the terms of the Change of Control Offer. Such notice shall state, among other
things, the purchase date, which must be no earlier than 30 days nor later than
60 days from the date such notice is mailed, other than as may be required by
law (the "Change of Control Payment Date"). Holders electing to have a note
purchased pursuant to a Change of Control Offer will be required to surrender
the note, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the note completed, to the paying agent at the address specified in
the notice prior to the close of business on the third business day prior to
the Change of Control Payment Date.
The senior credit facility contains, and future Senior Indebtedness of the
Issuers may contain, prohibitions on the occurrence of certain events that
would constitute a Change of Control or require such Senior Indebtedness to be
repaid or repurchased upon a Change of Control. Moreover, the exercise by the
holders of their right to require the Issuers to repurchase the notes would
cause a default under the senior credit facility and could cause a default
under such other Senior Indebtedness even if the Change of Control itself does
not, due to the financial effect of such repurchase on the Issuers. If a Change
of Control Offer is made, there can be no assurance that the Issuers will have
available funds sufficient to pay the Change of Control purchase price for all
the notes that might be delivered by holders seeking to accept the Change of
Control Offer. In the event the Issuers are required to purchase outstanding
notes pursuant to a Change of Control Offer, the Issuers expect that they would
seek third-party financing to the extent they do not have available funds to
meet their purchase obligations and any other obligations in respect of Senior
Indebtedness. However, there can be no assurance that the Issuers would be able
to obtain such financing.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable
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<PAGE>
in connection with the purchase of notes pursuant to a Change of Control Offer.
To the extent that the provisions of any securities laws or regulations
conflict with the "Change of Control" provisions of the indenture, the Issuers
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the "Change of Control"
provisions of the indenture by virtue thereof.
Certain Covenants
The indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. (a) AGY will not, and
will not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness (including Acquired Indebtedness) other than
Permitted Indebtedness; provided, however, that AGY and any Note Guarantor may
Incur Indebtedness if, at the time of and immediately after giving pro forma
effect to the Incurrence thereof and the application of the proceeds therefrom,
the Consolidated Fixed Charge Coverage Ratio is greater than 2.0 to 1.0.
(b) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, the amount of Indebtedness issued at a price
that is less than the principal amount thereof will be equal to the amount of
the liability in respect thereof determined in accordance with GAAP.
Limitation on Restricted Payments. AGY will not, and will not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly, (a) declare or
pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of AGY or in warrants, rights
or options to purchase or acquire shares of Qualified Capital Stock of AGY or
dividends or distributions payable to AGY or a Restricted Subsidiary and pro
rata dividends or distributions to AGY and/or its Restricted Subsidiaries and
to minority holders of Capital Stock of Restricted Subsidiaries) on or in
respect of shares of Capital Stock of AGY or any Restricted Subsidiary to
holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or
retire for value (other than any such purchase, redemption, acquisition or
retirement that constitutes a Permitted Investment) any Capital Stock of AGY or
any Restricted Subsidiary or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock (other than any such Capital
Stock, warrants, rights or options owned by AGY or any Restricted Subsidiary),
(c) make any principal payment on, purchase, defease, redeem, prepay, decrease
or otherwise acquire or retire for value, prior to any scheduled final
maturity, scheduled repayment or scheduled sinking fund payment, as the case
may be, any Subordinated Indebtedness, or (d) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in (but not
excluded from) clauses (a), (b), (c) and (d) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after
giving effect thereto, (i) a Default or an Event of Default shall have occurred
and be continuing or (ii) AGY is not able to Incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
covenant described under "--Limitation on Incurrence of Additional
Indebtedness" or (iii) the aggregate amount of Restricted Payments (including
such proposed Restricted Payment) made subsequent to the Issue Date (the amount
expended for such purposes, if other than in cash, being the Fair Market Value
of such property) shall exceed the sum of: (A) 50% of cumulative Consolidated
Net Income (or if cumulative Consolidated Net Income shall be a loss, minus
100% of such loss) accrued during the period (treated as one accounting period)
beginning on the first day of the fiscal quarter beginning on
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January 1, 1999 to the end of the most recent fiscal quarter for which
consolidated financial information of AGY is available; plus (B) 100% of the
aggregate net cash proceeds received by AGY from any Person (other than a
Restricted Subsidiary of AGY) from any capital contribution to AGY or issuance
and sale (other than to a Restricted Subsidiary) of Qualified Capital Stock of
AGY subsequent to the Issue Date or any warrants, rights or options to
purchase or acquire shares of Capital Stock of AGY or from the issuance and
sale (other than to a Restricted Subsidiary) subsequent to the Issue Date of
any Indebtedness of AGY or any Restricted Subsidiary that has been converted
into or exchanged for Qualified Capital Stock of AGY (excluding any net cash
proceeds applied in accordance with the following paragraph); plus (C) without
duplication of any amounts included in clause (A) above or clause (D) below),
in the case of the disposition or repayment of, or the receipt by AGY or any
Restricted Subsidiary of any dividends or distributions from, any Investment
constituting a Restricted Payment made after the Issue Date, an amount equal
to the lesser of the amount of such Investment and the amount received by AGY
or any Restricted Subsidiary upon such disposition, repayment, dividend or
distribution; plus (D) without duplication of any amounts included in clause
(C) above, in the event AGY or any Restricted Subsidiary makes any Investment
in a Person that, as a result of or in connection with such Investment,
becomes a Restricted Subsidiary, an amount equal to AGY's or any Restricted
Subsidiary's existing Investment in such Person that was previously treated as
a Restricted Payment; plus (E) so long as the Designation thereof was treated
as a Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary
after the Issue Date in accordance with "--Designation of Unrestricted
Subsidiaries," an amount equal to AGY's Investment in such Unrestricted
Subsidiary (provided that such amount shall not in any case exceed the
Designation Amount with respect to such Restricted Subsidiary upon its
Designation; plus (F) $5.0 million; provided; that the amount of Restricted
Payments permitted by this clause (F) will not be reduced by any negative
amount that occurs under clause (A) or clause (H); minus (G) the Designation
Amount (measured as of the date of Designation) with respect to any Subsidiary
of AGY which has been designated as an Unrestricted Subsidiary after the Issue
Date in accordance with "--Designation of Unrestricted Subsidiaries"; and
minus (H) 50% of the distributions made pursuant to clause (5) of the
succeeding paragraph.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any shares
of Capital Stock of AGY or any warrants, rights or options to purchase or
acquire shares of Capital Stock of AGY, (i) in exchange for shares of
Qualified Capital Stock of AGY or any warrants, rights or options to purchase
or acquire shares of Qualified Capital Stock of AGY or (ii) through the
application of the net proceeds of a substantially concurrent sale for cash
(other than to a Restricted Subsidiary of AGY) of shares of Qualified Capital
Stock of AGY or any warrants, rights or options to purchase or acquire shares
of Qualified Capital Stock of AGY; provided, however, that the value of any
such Qualified Capital Stock or warrants, rights and options issued in
exchange for such acquired capital stock, warrants, rights or options and any
such net cash proceeds shall be excluded from clause (iii)(B) of the preceding
paragraph (and were not included therein at any time); (3) if no Default or
Event of Default shall have occurred and be continuing, the voluntary
prepayment, purchase, defeasance, redemption or other acquisition or
retirement for value of any Subordinated Indebtedness (i) in exchange for
shares of Capital Stock of AGY or any warrants, rights or options to purchase
or acquire shares of Capital Stock of AGY; provided, however, that if such
Capital Stock is, or such
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warrants, rights or options to purchase such Capital Stock are convertible into
or exchangeable at the option of the holder thereof for, Disqualified Capital
Stock, then such Disqualified Capital Stock shall not (A) by its terms, or upon
the happening of any event, mature or be mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, or be redeemable at the option of the
holder thereof, in any case, on or prior to the final maturity of the
Indebtedness permitted to be prepaid, purchased, defeased, redeemed or acquired
pursuant to this clause (3) and (B) have a Weighted Average Life to Maturity
less than the Indebtedness permitted to be prepaid, purchased, defeased,
redeemed or acquired pursuant to this clause (3) or (ii) in exchange for
Refinancing Indebtedness or through the application of net proceeds of a
substantially concurrent sale for cash (other than to a Restricted Subsidiary
of AGY) of (A) shares of Qualified Capital Stock of AGY or any warrants, rights
or options to purchase or acquire shares of Qualified Capital Stock of AGY or
(B) Refinancing Indebtedness; and provided, further, that the value of such
Capital Stock or warrants, rights or options issued in exchange for such
Subordinated Indebtedness and any such net cash proceeds shall be excluded from
clause (iii)(B) of the preceding paragraph (and were not included therein at
any time); (4) the making of loans or advances to officers and directors of AGY
or any Restricted Subsidiary entered into in the ordinary course of business in
an amount not to exceed $1.0 million at any one time outstanding; (5) (a) the
making of distributions in cash to JH and AGY Holdings within 75 days after the
end of each taxable year of AGY in an amount equal to the greater of (i) the
product of (A) the sum of (x) the maximum federal corporate income tax rate in
effect during such taxable year and (y) six percent and (B) the sum of the
items of ordinary income and expense and net capital gain allocated to JH or
AGY Holdings, as the case may be, for such taxable year (taking into account
any special allocations resulting from adjustments under section 743 of the
Code) and (ii) actual income taxes then being assessed against JH or AGY
Holdings on items of ordinary income and expense and net capital gain allocated
to JH or AGY Holdings so long as, in each case, immediately both before and
after giving effect to such payments no Event of Default shall then exist; (b)
the making of distributions to JH with respect to the purchase price under the
LLC Sale and Purchase Agreement for net asset value not to exceed $2.5 million
and (6) the repurchase, redemption or other acquisition or retirement for value
of (i) any Capital Stock of AGY held by any member of AGY's management pursuant
to any management equity subscription agreement or stock option agreement in
effect as of the date of the indenture or entered into thereafter with members
of the management of any Person acquired after the Issue Date in connection
with the acquisition of such Person or (ii) Capital Stock of AGY held by
employees, former employees, directors or former directors pursuant to the
terms of agreements (including employment agreements) approved by the Board of
Directors; provided, however, that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Capital Stock set forth in clauses
(i) and (ii) shall not exceed $750,000 in any twelve-month period and no
Default or Event of Default shall have occurred and be continuing immediately
after any such transaction. In determining the aggregate amount of Restricted
Payments made subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts expended pursuant to clauses (1)
(without duplication for the declaration of the relevant dividend) and (4)
shall be included in such calculation and amounts expended pursuant to clauses
(2), (3), (5) and (6) shall not be included in such calculation.
Limitation on Asset Sales. AGY will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) AGY or the
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the
assets sold or otherwise disposed of and (ii) at least 75% of the consideration
received for the assets sold by AGY or the Restricted Subsidiary, as the case
may be, in such Asset
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Sale shall be in the form of (A) cash or Cash Equivalents or (B) (1) long-term
assets (including intellectual property associated with the use of such long-
term assets) to be used by AGY or any Restricted Subsidiary in a Permitted
Business or (2) Capital Stock of a Restricted Subsidiary or a Person engaged
primarily in a Permitted Business that will become, upon such purchase, a
Restricted Subsidiary (collectively, "Replacement Assets"), provided that any
securities, notes or other obligations received by AGY or a Restricted
Subsidiary from such transfers that are converted within 90 days of receipt
thereof by AGY or such Restricted Subsidiary into cash or Cash Equivalents (to
the extent so received), shall be deemed to be cash or Cash Equivalents for
purposes of this provision. The amount of any Indebtedness of AGY or such
Restricted Subsidiary (other than Subordinated Indebtedness) that is actually
assumed by the transferee in such Asset Sale and from which AGY or such
Restricted Subsidiary is fully and unconditionally released shall be deemed to
be cash for purposes of determining the percentage of cash consideration
received by AGY or such Restricted Subsidiary. AGY or such Restricted
Subsidiary, as the case may be, may apply the Net Cash Proceeds of any such
Asset Sale within 270 days of such Asset Sale to (x) repay any Senior
Indebtedness and permanently reduce the commitments, if any, with respect
thereto, (y) to purchase from a Person other than AGY and its Restricted
Subsidiaries Replacement Assets or (z) any combination of (x) and (y);
provided, however, that if AGY or a Restricted Subsidiary makes an investment
in Replacement Assets not earlier than 90 days prior to such Asset Sale (or the
execution by AGY or a Restricted Subsidiary of a binding commitment to
consummate such Asset Sale, which commitment is not subject to any conditions
precedent other than obtaining necessary financing and the closing in respect
of the Asset Sale that is the subject of such binding commitment occurs within
90 days of the date such commitment is executed), then such investment shall
satisfy, to the extent of the amount of such investment, the requirements of
clause (y) above.
To the extent all or a portion of the Net Cash Proceeds of any Asset Sale are
not applied within 270 days of such Asset Sale as described in clause (x), (y)
or (z) of the immediately preceding paragraph (the "Net Proceeds Offer Trigger
Date"), the Issuers will make an offer to purchase (the "Net Proceeds Offer")
on a date (the "Net Proceeds Offer Payment Date") not less than 20 business
days following the date on which such offer is made (or such longer period as
may be required by law) nor more than 60 days following such Net Proceeds Offer
Trigger Date, from all holders on a pro rata basis (and on a pro rata basis
with the holders of any other Senior Subordinated Indebtedness with similar
provisions requiring the Issuers to offer to purchase such Senior Subordinated
Indebtedness with the proceeds of Asset Sales), that principal amount of notes
and such other Indebtedness equal to such unapplied Net Cash Proceeds at a
price, in the case of the notes, equal to 100% of the principal amount of the
notes to be purchased, plus accrued and unpaid interest thereon, to the date of
purchase (subject to the right of holders of record on a record date to receive
interest due on an interest payment date that is on or prior to such date of
purchase). Notwithstanding the forgoing, the Issuers may defer the Net Proceeds
Offer until there is an aggregate amount of unapplied Net Cash Proceeds equal
to or in excess of $5.0 million resulting from one or more Asset Sales (at
which time, the entire amount of unapplied Net Cash Proceeds, and not just the
amount in excess of $5.0 million, shall be applied as required pursuant to this
paragraph).
Each Net Proceeds Offer will be mailed to the record holders as shown on the
register of holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the trustee, and shall comply with the procedures set
forth in the indenture. Upon receiving notice of the Net Proceeds Offer,
holders may elect to tender their notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent holders of notes and
holders of other Senior Subordinated
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Indebtedness, if any, which are or is the subject of a Net Proceeds Offer
properly tender notes or such other Senior Subordinated Indebtedness in an
aggregate amount exceeding the amount of unapplied Net Cash Proceeds, notes of
tendering holders and such other Senior Subordinated Indebtedness of tendering
holders will be purchased on a pro rata basis (based on amounts tendered).
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of notes pursuant to a Net Proceeds Offer. To the extent that the provisions of
any securities laws or regulations conflict with the "Asset Sale" provisions of
the indenture, the Issuers shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached their obligations under
the "Asset Sale" provisions of the indenture by virtue thereof.
Upon completion of a Net Proceeds Offer, the amount of Net Cash Proceeds will
be reset at zero. Accordingly, to the extent that the aggregate amount of notes
and other Senior Subordinated Indebtedness tendered pursuant to a Net Proceeds
Offer is less than the aggregate amount of unapplied Net Cash Proceeds, the
Issuers may use any remaining Net Cash Proceeds for general corporate purposes.
In the event of the transfer of substantially all (but not all) of the
property and assets of AGY and its Restricted Subsidiaries as an entirety to a
Person in a transaction permitted under "--Merger, Consolidation and Sale of
Assets," the Surviving Entity shall be deemed to have sold the properties and
assets of AGY and its Restricted Subsidiaries not so transferred for purposes
of this covenant, and shall comply with the provisions of this covenant with
respect to such deemed sale as if it were an Asset Sale. In addition, the Fair
Market Value of such properties and assets of AGY or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this covenant. If at any time any non-cash consideration received
by AGY or any Restricted Subsidiary, as the case may be, in connection with any
Asset Sale is converted into or sold or otherwise disposed of for cash (other
than interest received with respect to any such non-cash consideration), then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. AGY will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
or in respect of its Capital Stock to AGY or any other Restricted Subsidiary or
pay any Indebtedness owed to AGY or any other Restricted Subsidiary; (b) make
loans or advances to, or guarantee any Indebtedness or other obligations of, or
make any Investment in, AGY or any other Restricted Subsidiary; or (c) transfer
any of its property or assets to AGY or any other Restricted Subsidiary, except
for such encumbrances or restrictions existing under or by reason of: (1)
applicable law; (2) the indenture; (3) the senior credit facility as in effect
on the Issue Date, and any amendments or restatements thereof; provided,
however, that any such amendment or restatement is not materially more
restrictive with respect to such encumbrances or restrictions than those in
existence on the Issue Date; (4) customary non-assignment provisions of any
contract and customary provisions restricting assignment or subletting in any
lease governing a leasehold interest of any Restricted Subsidiary, or any
customary restriction on the ability of a Restricted Subsidiary to
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dividend, distribute or otherwise transfer any asset which secures Purchase
Money Indebtedness of such Restricted Subsidiary; (5) any instrument governing
Acquired Indebtedness, which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person or
the properties or assets of the Person so acquired; (6) restrictions with
respect to a Restricted Subsidiary of AGY imposed pursuant to a binding
agreement which has been entered into for the sale or disposition of Capital
Stock or assets of such Subsidiary; provided however, that such restrictions
apply solely to the Capital Stock or assets of such Restricted Subsidiary which
are being sold; (7) customary restrictions imposed on the transfer of
copyrighted or patented materials; (8) secured Indebtedness otherwise permitted
to be Incurred pursuant to the covenants described under "--Limitation on the
Incurrence of Additional Indebtedness" and "--Limitation on Liens," which
encumbrance or restriction is not applicable to any property or assets other
than the property or assets subject to the Lien securing such Indebtedness; (9)
restrictions with respect to a Restricted Subsidiary that is a Foreign
Subsidiary contained in any instrument governing Indebtedness of any such
Restricted Subsidiary permitted pursuant to clause (xiv) of the definition of
Permitted Indebtedness; or (10) an agreement governing Indebtedness Incurred to
Refinance the Indebtedness issued, assumed or Incurred pursuant to an agreement
referred to in clause (3), (5) or (8) above; provided, however, that such
refinancing agreement is not materially more restrictive with respect to such
encumbrances or restrictions than those contained in the agreement referred to
in such clause (3), (5) or (8), as determined by the Board of Directors in
their reasonable good faith judgment.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. AGY will not sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, and will not cause or permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of
any shares of its Capital Stock, except (i) to AGY or a Wholly Owned Restricted
Subsidiary; (ii) the sale of 100% of the shares of the Capital Stock of any
Restricted Subsidiary owned by AGY or any Restricted Subsidiary effected in
accordance with the covenants described under "--Limitation on Asset Sales" and
"--Merger, Consolidation and Sale of Assets;" (iii) in the case of Restricted
Subsidiaries other than Wholly Owned Restricted Subsidiaries, issuance of
Capital Stock on a pro rata basis to AGY and its Restricted Subsidiaries and
minority shareholders of such Restricted Subsidiary (or on less than a pro rata
basis to any such minority holder if such minority holder does not acquire its
pro rata amount); (iv) the sale of Capital Stock of a Restricted Subsidiary or
issuance by a Restricted Subsidiary of Capital Stock if following such sale or
issuance, (x) such Restricted Subsidiary is no longer a Subsidiary, (y) AGY's
continuing Investment in such former Restricted Subsidiary is in compliance
with "--Limitation on Restricted Payments" and (z) any sale of Capital Stock by
AGY or such Restricted Subsidiary is made in compliance with the covenant
described under "--Limitation on Asset Sales;" provided, that, notwithstanding
the foregoing, Capital shall, at all times prior to the reorganization of AGY
as a corporation, remain a Wholly Owned Restricted Subsidiary of AGY.
Designation of Unrestricted Subsidiaries. AGY may designate any Subsidiary of
AGY (other than Capital) as an "Unrestricted Subsidiary" under the indenture (a
"Designation") only if:
(i) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Designation:
(ii) at the time of and after giving effect to such Designation, the
Issuers could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "--Limitation on
Incurrence of Additional Indebtedness;" and
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(iii) the Issuers would be permitted to make an Investment at the time of
Designation (assuming the effectiveness of such Designation and treating
such Designation as an Investment at such time) pursuant to the first
paragraph of "--Limitation on Restricted Payments" in an amount (the
"Designation Amount") equal to the amount of AGY's Investment in such
Subsidiary on such date.
Neither AGY nor any Restricted Subsidiary shall at any time (x) provide
credit support for, subject any of its property or assets (other than the
Capital Stock of any Unrestricted Subsidiary) to the satisfaction of, or
guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) unless such
credit support or guarantee constitutes an Investment permitted pursuant to the
covenant described under "--Limitation on Restricted Payments," (y) be directly
or indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z)
be directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary, except for any non-recourse
guarantee given solely to support the pledge by AGY or any Restricted
Subsidiary of the Capital Stock of any Unrestricted Subsidiary. For purposes of
the foregoing, the Designation of a Subsidiary of AGY as an Unrestricted
Subsidiary shall be deemed to include the Designation of all of the
Subsidiaries of such Subsidiary.
AGY may revoke any Designation of a Subsidiary as an Unrestricted Subsidiary
(a "Revocation") only if:
(i) No Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
indenture.
All Designations and Revocations must be evidenced by resolutions of the
Board of Directors of AGY, delivered to the trustee certifying compliance with
the foregoing provisions.
Limitation on Layered Indebtedness. AGY shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness that
is subordinate in right of payment to any other Indebtedness, unless such
Indebtedness is subordinate in right of payment to, or ranks pari passu with,
the notes or, in the case of Restricted Subsidiaries that are Note Guarantors,
such Indebtedness is subordinate in right of payment to, or ranks pari passu
with, the Note Guarantees of such Note Guarantors.
No Note Guarantor will, directly or indirectly, Guarantee any Indebtedness of
the Issuers that is subordinate in right of payment to any other Indebtedness
of the Issuers unless such Guarantee is subordinate in right of payment to, or
ranks pari passu with, the Note Guarantee of such Note Guarantor.
Limitation on Liens. AGY will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Liens of any kind
against or upon any of their respective properties or assets, whether owned on
the Issue Date or acquired after the Issue Date, or
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any proceeds therefrom, to secure any Indebtedness unless contemporaneously
therewith effective provision is made, (i) in the case of the Issuers to secure
the notes and all other amounts due under the indenture, and (ii) in the case
of a Note Guarantor, to secure such Note Guarantor's Note Guarantee and all
other amounts due under the indenture, in each case, equally and ratably with
such Indebtedness (or, in the event that such Indebtedness is subordinated in
right of payment to the notes or such Note Guarantee, prior to such
Indebtedness) with a Lien on the same properties and assets securing such
Indebtedness for so long as such Indebtedness is secured by such Lien, except
for (A) Liens securing Senior Indebtedness (including, without limitation,
Indebtedness Incurred under the senior credit facility) and (B) Permitted
Liens.
Merger, Consolidation and Sale of Assets. Neither of the Issuers will, in a
single transaction or series of related transactions, consolidate or merge with
or into any Person (whether or not AGY is the surviving Person), or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of AGY's and its Restricted Subsidiaries'
properties and assets (determined on a consolidated basis for AGY and its
Restricted Subsidiaries) to any Person unless:
(i) either (1) AGY shall be the surviving or continuing entity or (2) the
Person (if other than AGY) formed by such consolidation or into which AGY
is merged or the Person which acquires by sale, assignment, transfer,
lease, conveyance or other disposition the properties and assets of AGY and
of AGY's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity") (x) shall be a corporation organized and validly
existing under the laws of the United States or any State thereof and (y)
shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the trustee), executed and delivered to the trustee, the
due and punctual payment of the principal of, and premium, if any, and
interest on all of the notes and the performance and observance of every
covenant of the notes and the indenture and the Registration Rights
Agreement (defined herein) on the part of AGY to be performed or observed;
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect
on a pro forma basis to any Indebtedness, including any Acquired
Indebtedness, Incurred in connection with or in respect of such
transaction), (A) AGY or such Surviving Entity, as the case may be, shall
be able to Incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the covenant described under "--
Limitation on Incurrence of Additional Indebtedness" or (B) the
Consolidated Fixed Charge Coverage Ratio for AGY or such Surviving Entity,
as the case may be, would be greater than the Consolidated Fixed Charge
Coverage Ratio for AGY immediately prior to such transaction;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect on a pro forma basis to any
Indebtedness, including any Acquired Indebtedness, Incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred or be continuing;
(iv) each Note Guarantor (including Persons which become Note Guarantors
as a result of the transaction) shall have confirmed by supplemental
indenture that its Note Guarantee shall apply for such Person's Obligations
in respect of the indenture and the notes; and
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(v) AGY or the Surviving Entity shall have delivered to the trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture, comply with
the applicable provisions of the indenture and that all conditions
precedent in the indenture relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of AGY, the Capital Stock of which constitutes all or
substantially all of the properties and assets of AGY, shall be deemed to be
the transfer of all or substantially all of the properties and assets of AGY.
The provisions of clause (ii) above shall not apply to (x) any transfer of
the properties or assets of a Restricted Subsidiary of AGY to AGY or to a
Restricted Subsidiary, (y) any merger of a Restricted Subsidiary into AGY or
(z) any merger of AGY into a Restricted Subsidiary.
The indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the properties and assets of AGY
and its Restricted Subsidiaries in accordance with the foregoing, in which AGY
is not the continuing corporation, the successor Person formed by such
consolidation or into which AGY is merged or to which such conveyance, lease or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, AGY under the indenture and the notes with the same
effect as if such surviving entity had been named as such.
Each Note Guarantor (other than any Note Guarantor whose Note Guarantee is to
be released in accordance with the terms described under "Note Guarantees" will
not, and AGY will not cause or permit any Note Guarantor to, consolidate with
or merge into any Person that is not a Note Guarantor unless such Person (if
such Person is the surviving entity) assumes by supplemental indenture all of
the obligations of such Note Guarantor in respect of its Note Guarantee.
Limitations on Transactions with Affiliates. (a) AGY will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), unless: (i) the terms of such Affiliate
Transaction are no less favorable than those that could reasonably be expected
to be obtained in a comparable transaction at such time on an arm's-length
basis from a Person that is not an Affiliate of AGY; (ii) in the event that
such Affiliate Transaction (other than a JV Contract) involves aggregate
payments, or transfers of property or services with a Fair Market Value in
excess of $5.0 million during any twelve-month period, the terms of such
Affiliate Transaction shall be approved by a majority of the members of the
Board of Directors of AGY (including a majority of the disinterested members
thereof), such approval to be evidenced by a Board Resolution stating that such
Board of Directors has determined that such transaction complies with the
foregoing provisions, (iii) in the event that such Affiliate Transaction
constitutes a JV Contract which involves aggregate payments or transfers of
property or services with a Fair Market Value in excess of $5.0 million during
any twelve month period, the terms of which shall be approved by a majority of
the disinterested members of the Board of Directors of AGY, such approval to be
evidenced by a Board Resolution stating that such members of the Board of
Directors
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have determined that such transaction complies with the foregoing provisions
and (iv) in the event that such Affiliate Transaction (other than a JV
Contract) involves aggregate payments, or transfer of property or services with
a Fair Market Value, in excess of $10.0 million during any twelve month period,
AGY shall, prior to the consummation thereof, obtain a favorable opinion as to
the fairness of such transaction or series of related transactions to AGY and
the relevant Restricted Subsidiary (if any) from a financial point of view from
an Independent Financial Advisor and file the same with the trustee. For
purposes hereof, the members of the Board of Directors representing the LLC
Member which is not a party to such Affiliate Transaction shall be deemed to be
disinterested directors.
(b) Notwithstanding the foregoing, the restrictions set forth in paragraph
(a) shall not apply to (i) transactions with or among AGY and any Restricted
Subsidiary or between or among Restricted Subsidiaries; (ii) reasonable fees
and compensation paid to, and any indemnity provided on behalf of, officers,
directors, employees, consultants or agents of AGY or any Restricted Subsidiary
as determined in good faith by AGY's Board of Directors; (iii) any transactions
undertaken pursuant to any contractual obligations or rights in existence on
the Issue Date (as in effect on the Issue Date), including any JV Contracts;
(iv) any Restricted Payments made in compliance with "--Limitation on
Restricted Payments;" (v) loans and advances to officers, directors and
employees of AGY or any Restricted Subsidiary for travel, entertainment, moving
and other relocation expenses, in each case made in the ordinary course of
business; (vi) the entering into by AGY and any of its consolidated Restricted
Subsidiaries of a tax sharing or similar arrangement.
Conduct of Business; Limitation on Activities of Capital. AGY and its
Restricted Subsidiaries will not engage in any businesses other than a
Permitted Business; provided, that, notwithstanding the foregoing, AGY shall
not permit Capital to acquire or hold any significant assets or other
properties or engage in any business activities.
Reports to Holders. Notwithstanding that AGY or Capital may not be subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, so long
as any notes remain outstanding, the Issuers shall (i) provide the trustee, the
holders and the Initial Purchasers with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections within 15 days after the times specified for the filing of such
information, documents and reports under such Sections and (ii) beginning on
the earlier of (x) the effective date of the Exchange Offer Registration
Statement and (y) 150 days following the Issue Date, file with the Commission,
to the extent permitted, the information, documents and reports referred to in
clause (i) within the periods specified under such Sections. In addition, at
any time when either AGY or Capital is subject to or is not current in its
reporting obligations under clause (ii) of the preceding sentence, the Issuers
will make available, upon request, to any holder and any prospective purchaser
of notes the information required pursuant to Rule 144A(d)(4) under the
Securities Act.
Payments for Consent. Neither AGY nor any of its Subsidiaries shall, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any notes for or as an inducement
to any consent, waiver or amendment of any terms or provisions of the notes,
unless such consideration is offered to be paid or agreed to be paid to all
holders of the notes that so consent, waive or agree to amend in the time frame
set forth in the solicitation documents relating to such consent, waiver or
agreement.
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Events of Default
The following events are defined in the indenture as "Events of Default":
(i) the failure to pay the principal of (or premium, if any, on) any note
when due, at Stated Maturity, upon redemption or otherwise (including the
failure to make a required payment to purchase notes tendered pursuant to a
Change of Control Offer or a Net Proceeds Offer) and whether or not
prohibited by the provisions of the indenture described under
"Subordination of the Notes and the Note Guarantees");
(ii) the failure to pay any interest on any notes when due, continued for
30 days or more (whether or not prohibited by the provisions of the
indenture described under "Subordination of the Notes and the Note
Guarantees");
(iii) the failure to perform or comply with any of the provisions
described under "--Certain Covenants--Merger, Consolidation and Sales of
Assets;"
(iv) the failure to perform or comply with any other covenant or
agreement contained in the indenture or in the notes continued for 30 days
or more after written notice to the Issuers from the trustee or the holders
of at least 25% in aggregate principal amount of the outstanding notes;
(v) the failure to pay at final maturity (giving effect to any applicable
grace periods and any extensions thereof) the principal amount of any
Indebtedness of AGY or any Restricted Subsidiary, or the acceleration of
the final stated maturity of any such Indebtedness by reason of a default
or event of default in respect of such Indebtedness, in any case if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been so accelerated,
aggregates $7.5 million or more at any time;
(vi) one or more judgments in an aggregate amount in excess of $7.5
million (to the extent not covered by third-party insurance as to which a
financially sound insurer has not disclaimed coverage) shall have been
rendered against AGY or any of its Restricted Subsidiaries and such
judgment or judgments remain undischarged, unpaid or unstayed for a period
of 60 days after such judgment or judgments become final and non-
appealable;
(vii) certain events of bankruptcy affecting either of the Issuers or any
of AGY's Significant Subsidiaries or group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary; or
(viii) the Note Guarantee of any Note Guarantor is held or declared to be
unenforceable or invalid in a judicial proceeding or ceases for any reason
to be in full force and effect (other than by reason of a release of such
Note Guarantor from its Note Guarantee in accordance with the terms of the
indenture) or any Note Guarantor or any Person acting on behalf of any Note
Guarantor denies or disaffirms such Note Guarantor's obligations under its
Note Guarantee (other than by reason of a release of such Note Guarantor
from its Note Guarantee in accordance with the terms of the indenture).
If an Event of Default (other than an Event of Default relating to either
Issuer specified in clause (vii) above) shall occur and be continuing, the
trustee or the holders of at least 25% in principal amount of outstanding notes
may declare the principal of (and premium, if any) and accrued and unpaid
interest on all the notes to be due and payable by notice in writing to the
Issuers and the trustee specifying the respective Event of Default and that it
is a "notice of acceleration" (the
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"Acceleration Notice"), and the same shall become immediately due and payable.
If an Event of Default specified in clause (vii) relating to either Issuer
above occurs and is continuing, then all unpaid principal of, and premium, if
any, and accrued and unpaid interest on all of the outstanding notes shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the trustee or any holder.
The indenture provides that, at any time after a declaration of acceleration
with respect to the notes as described in the preceding paragraph, the holders
of a majority in principal amount of the notes may rescind and cancel such
declaration and its consequences (i) if all existing Events of Default have
been cured or waived except nonpayment of principal or interest that has become
due solely because of the acceleration, (ii) to the extent the payment of such
interest is lawful, interest on overdue installments of interest and overdue
principal, which has become due otherwise than by such declaration of
acceleration, has been paid and (iii) if the Issuers have paid the trustee its
reasonable compensation and reimbursed the trustee for its reasonable expenses,
disbursements and advances. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
The holders of a majority in principal amount of the notes may waive any
existing Default or Event of Default under the indenture, and its consequences,
except a default in the payment of the principal of, premium, if any, or
interest on any notes.
Subject to the provisions of the indenture relating to the duties of the
trustee, the trustee is under no obligation to exercise any of its rights or
powers under the indenture at the request, order or direction of any of the
holders, unless such holders have offered to the trustee reasonable indemnity.
Subject to all provisions of the indenture and applicable law, the holders of a
majority in aggregate principal amount of the then outstanding notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee.
No holder of any notes will have any right to institute any proceeding with
respect to the indenture or for any remedy thereunder, unless (i) such holder
gives to the trustee written notice of a continuing Event of Default, (ii)
holders of at least 25% in principal amount of the then outstanding notes make
a written request to pursue the remedy, (iii) such holders of the notes provide
to the trustee satisfactory indemnity, (iv) the trustee does not comply within
60 days and (v) during such 60 day period the holders of a majority in
principal amount of the outstanding notes do not give the trustee a written
direction which, in the opinion of the trustee, is inconsistent with the
request. Otherwise, no holder of any note will have any right to institute any
proceeding with respect to the indenture or for any remedy thereunder, except
(i) a holder of a note may institute suit for enforcement of payment of the
principal of and premium, if any, or interest on such note on or after the
respective due dates expressed in such note or (ii) the institution of any
proceeding with respect to the indenture or any remedy thereunder, including,
without limitation, acceleration, by the holders of a majority in principal
amount of the outstanding notes; provided, however, that upon institution of
any proceeding or exercise of any remedy, such holder or holders provide the
trustee with prompt notice thereof.
The Issuers are required to deliver to the trustee written notice of any
event which would constitute certain Defaults, their status and what action the
Issuers are taking or propose to take in respect thereof. In addition, the
Issuers are required to deliver to the trustee, within 120 days after the end
of each fiscal year, a certificate indicating whether the signers thereof know
of any Default that occurred during the previous fiscal year. The indenture
provides that if a Default occurs, is
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continuing and is known to the trustee, the trustee must mail to each holder
notice of the Default within five days after it is known to a trust officer or
written notice of it is received by the trustee. Except in the case of a
Default in the payment of principal of, premium, if any, or interest on any
note, the trustee may withhold notice if and so long as a committee of its
trust officers in good faith determines that withholding notice is not opposed
to the interest of the holders.
Legal Defeasance and Covenant Defeasance
The Issuers may, at their option and at any time, elect to have their
obligations discharged with respect to the outstanding notes ("Legal
Defeasance"). Such Legal Defeasance means that the Issuers shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
notes, except for (i) the rights of holders to receive payments in respect of
the principal of, premium, if any, and interest on the notes when such payments
are due, (ii) the Issuers' obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payments, (iii) the
rights, powers, trust, duties and immunities of the trustee and the Issuers'
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the indenture. In addition, the Issuers may, at their option and at any time,
elect to have the obligations of the Issuers released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the trustee, in trust, for the benefit of
the holders cash in U.S. dollars, certain direct non-callable obligations of,
or guaranteed by, the United States, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the notes on the stated date for payment thereof or on the
applicable redemption date, as the case may be; (ii) in the case of Legal
Defeasance, the Issuers shall have delivered to the trustee an Opinion of
Counsel in the United States reasonably acceptable to the trustee to the effect
that (A) the Issuers have received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the Issue Date, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall state that, the holders
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Issuers shall have delivered to the trustee an Opinion
of Counsel in the United States reasonably acceptable to the trustee to the
effect that the holders will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(iv) the trustee shall have received an Officers' Certificate stating that no
Default or Event of Default shall have occurred and be continuing on the date
of such deposit or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after
the date of deposit; (v) the trustee shall have received an Officers'
Certificate stating that such Legal Defeasance or Covenant
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Defeasance shall not result in a breach or violation of, or constitute a
default under the indenture or any other material agreement or instrument to
which AGY or any of its Subsidiaries is a party or by which AGY or any of its
Subsidiaries is bound (and in that connection, the trustee shall have received
a certificate from the agent under the senior credit facility to that effect
with respect to the senior credit facility then in effect); (vi) the Issuers
shall have delivered to the trustee an Officers' Certificate stating that the
deposit was not made by the Issuers with the intent of preferring the holders
over any other creditors of the Issuers or any Subsidiary of AGY or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Issuers or others; (vii) the Issuers shall have delivered to the trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with; (viii) the Issuers shall have
delivered to the trustee an Opinion of Counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture) as to all outstanding notes
when (i) either (a) all the notes theretofore authenticated and delivered
(except lost, stolen or destroyed notes which have been replaced or paid and
notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuers and thereafter repaid to the
Issuers or discharged from such trust) have been delivered to the trustee for
cancellation or (b) all notes not theretofore delivered to the trustee for
cancellation have become due and payable, or will be due and payable within one
year or are to be called for redemption within one year under arrangements
satisfactory to the trustee for the giving of notice of redemption, and the
Issuers have irrevocably deposited or caused to be deposited with the trustee
funds or certain direct, non-callable obligations of, or guaranteed by, the
United States sufficient to pay and discharge the entire Indebtedness on the
notes not theretofore delivered to the trustee for cancellation, for principal
of, premium, if any, and interest on the notes to the earlier of the Stated
Maturity or the redemption date together with irrevocable instructions from the
Issuers directing the trustee to apply such funds and/or the proceeds of such
direct, non-callable obligations to the payment thereof at maturity or
redemption, as the case may be; (ii) the Issuers have paid all other sums
payable under the indenture by the Issuers; and (iii) the Issuers have
delivered to the trustee an Officers' Certificate stating that all conditions
precedent under the indenture relating to the satisfaction and discharge of the
indenture have been complied with.
Modification of the Indenture
From time to time, the Issuers and the trustee, without the consent of the
holders, may amend the indenture or the notes for certain specified purposes,
including curing ambiguities, defects or inconsistencies, providing for Note
Guarantors and making other changes which do not, in the opinion of the
trustee, adversely affect the rights of any of the holders in any material
respect. In formulating its opinion on such matters, the trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an Opinion of Counsel. Other modifications and amendments
of the indenture or the notes may be made with the consent of the holders of a
majority in principal amount of the then outstanding notes issued under the
indenture,
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except that, without the consent of each holder affected thereby, no amendment
may: (i) reduce the amount of notes whose holders must consent to an amendment
or waiver; (ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any notes; (iii)
reduce the principal of or change or have the effect of changing the fixed
maturity of any notes, or change the date on which any notes may be subject to
redemption, or reduce the redemption price therefor; (iv) make any notes
payable in money other than that stated in the notes; (v) make any change in
provisions of the indenture entitling each holder to receive payment of
principal of, premium, if any, and interest on such note on or after the due
date thereof or to bring suit to enforce such payment, or permitting holders of
a majority in principal amount of notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of AGY to
make and consummate a Change of Control Offer in respect of a Change of Control
that has occurred or make and consummate a Net Proceeds Offer with respect to
any Asset Sale that has been consummated; (vii) modify the subordination
provisions of the indenture with respect to AGY or any Note Guarantor in a
manner that adversely affects the rights of any holder; or (viii) eliminate or
modify in any manner a Note Guarantor's obligations with respect to its Note
Guarantee which adversely affects holders in any material respect. However, no
amendment may be made to the subordination provisions of the indenture that
adversely affects the rights of any holder of Senior Indebtedness of AGY or a
Note Guarantor then outstanding unless the holders of such Senior Indebtedness
(or their representative) consent to such change.
Governing Law
The indenture provides that the indenture and the notes will be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
The Trustee
The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set
forth in the indenture. During the existence of an Event of Default, the
trustee will exercise such rights and powers vested in it by the indenture, and
use the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
The indenture and the provisions of the TIA contain certain limitations on
the rights of the trustee, should it become a creditor of the Issuers, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the trustee will be permitted to engage in other transactions; provided,
however, that if the trustee acquires any conflicting interest as described in
the TIA, it must eliminate such conflict or resign.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
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"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
or at the time it merges or consolidates with AGY or any of its Restricted
Subsidiaries or is assumed in connection with the acquisition of assets from
such Person and in each case not Incurred in connection with, or in
anticipation or contemplation of, such acquisition, merger or consolidation.
Such Indebtedness shall be deemed to have been Incurred at the time such Person
becomes a Restricted Subsidiary or at the time it merges or consolidates with
AGY or a Restricted Subsidiary or at the time such Indebtedness is assumed in
connection with the acquisition of assets from such Person.
"Affiliate" means, with respect to any specified Person, any other Person who
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling", "controlled by" and "under common control with" have
meanings correlative of the foregoing; provided, however, that beneficial
ownership of 10% or more of the Voting Stock of a Person shall be deemed to be
control.
"AGY Holdings" means AGY Holdings, Inc., a Delaware corporation.
"Asset Acquisition" means (a) an Investment by AGY or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary, or shall be merged with or into AGY or any Restricted
Subsidiary, or (b) the acquisition by AGY or any Restricted Subsidiary of the
assets of any Person (other than a Subsidiary of AGY) which constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, assignment or other transfer for value by AGY or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than AGY or a Restricted Subsidiary (including a Person that is or
will become a Restricted Subsidiary immediately after such sale, issuance,
conveyance, transfer, assignment or other transfer for value) of (a) any
Capital Stock of any Restricted Subsidiary; or (b) any other property or assets
(other than cash, Cash Equivalents or Capital Stock) of AGY or any Restricted
Subsidiary other than in the ordinary course of business; provided, however,
that Asset Sale shall not include, (i) the sale, conveyance, disposition or
other transfer of all or substantially all of the assets of AGY and its
Restricted Subsidiaries as permitted under "--Certain Covenants--Merger,
Consolidation and Sale of Assets," (ii) any sale of Capital Stock in, or
Indebtedness or other securities of an Unrestricted Subsidiary, (iii) a
disposition of inventory or leases in the ordinary course of business, (iv)
dispositions of assets in any fiscal year with a Fair Market Value not to
exceed $2.0 million in the aggregate, (v) for purposes of "--Certain
Covenants--Limitation on Asset Sales" only, the making of a Permitted
Investment or Restricted Payment, and (vi) a disposition in the ordinary course
of business of obsolete or worn-out equipment.
"Asset Sale Transaction" means Asset Sales and, whether or not constituting
an Asset Sale, (i) any sale or other disposition of Capital Stock and (ii) any
sale or other disposition excluded from the definition of Asset Sale by clause
(b)(i) or (v) of such definition.
"Blockage Notice" has the meaning set forth under "--Subordination of the
Exchange Notes and the Note Guarantees."
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"Board of Directors" means (i) in the case of a Person that is a corporation,
the board of directors of such Person or any committee authorized to act
therefor and (ii) in the case of any other Person, the board of directors,
management committee or similar governing body or any authorized committee
thereof responsible for the management of the business and affairs of such
Person.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person (or person
performing a similar function) to have been duly adopted by the Board of
Directors of such Person and to be in full force and effect on the date of such
certification, and delivered to the trustee.
"Capitalized Lease Obligations" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all membership, partnership or other
equity or ownership interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than $500.0
million; (v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (iv) above; and
(vi) investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events:
(i) Prior to the first Public Equity Offering, (A) the Permitted Holders
cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, in the aggregate at least
of 51% of the total voting power of the Voting Stock of AGY, (B) any
Permitted Holder ceases to be the "beneficial owner", directly or
indirectly, of at least 10% of the total voting power of the Voting Stock
of AGY or (C) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (except that for purposes of this clause (C)
such
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person shall be deemed to have "beneficial ownership" of all shares that
any such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
a percentage of the total voting power of the Voting Stock of AGY that is
equal to or greater than the percentage of the total voting power of the
Voting Stock of AGY beneficially owned, directly or indirectly, by any one
Permitted Holder, whether, in the case of each of clause (A), (B), or (C),
as a result of the issuance of securities of AGY or any parent company of
AGY, any merger, consolidation, liquidation or dissolution of AGY, any
direct or indirect transfer of securities by AGY or otherwise (for purposes
of this clause (i) and clause (ii) below, the Permitted Holders shall be
deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate at least 51% of the
voting power of the Voting Stock of the parent corporation);
(ii) subsequent to the first Public Equity Offering, (A) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than one or more Permitted Holders, is or becomes the beneficial owner (as
defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that for
purposes of this clause (ii) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of AGY and (B) the Permitted Holders
"beneficially own" (as defined in this clause (ii)), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of AGY than such other person (for the purposes of this
clause (ii)), such other person shall be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if
such other person is the beneficial owner (as defined in this clause (ii)),
directly or indirectly, of more than 35% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders "beneficially
own" (as defined in this clause (ii)), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation);
(iii) during any period of two consecutive years (or, in the case this
event occurs within the first two years after the Issue Date, such shorter
period as shall have begun on the Issue Date), individuals who at the
beginning of such period constituted the Board of Directors of AGY
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of AGY was approved by
a vote of a majority of the directors of AGY then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of AGY then in office;
(iv) AGY consolidates with, or merges with or into, another Person (other
than AGY or a Wholly Owned Restricted Subsidiary) or AGY or any of its
Restricted Subsidiaries sell, conveys, assigns, transfers, leases or
otherwise disposes of all or substantially all of the assets of AGY and its
Restricted Subsidiaries (determined on a consolidated basis for AGY and its
Restricted Subsidiaries) to any Person (other than AGY or any Wholly Owned
Restricted Subsidiary), other than any such transaction where immediately
after such transaction the Person or Persons that "beneficially owned" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all securities
that such Person has the right to acquire, whether such right is
exercisable immediately or only after
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the passage of time) immediately prior to such transaction, directly or
indirectly, a majority of the total voting power of the then outstanding
Voting Stock of AGY "beneficially own" (as so determined), directly or
indirectly, a majority of the total voting power of the then outstanding
Voting Stock of the surviving or transferee Person;
(v) CSG becomes an Affiliate of GHC if such affiliation results in the
termination of the various intellectual property agreements between Owens
Corning and AGY; or
(vi) the Non-Compete Agreement ceases to be in full force and effect at
any time prior to September 30, 2003.
"Change of Control Offer" has the meaning set forth under "Change of
Control."
"Change of Control Payment Date" has the meaning set forth under "Change of
Control."
"Commission" means the Securities and Exchange Commission, or any successor
agency thereto with respect to the regulation or registration of securities.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, for any period, Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;
(ii) Consolidated Interest Expense for such period; and (iii) Consolidated Non-
cash Charges for such period; less (A) all non-cash items increasing
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of the aggregate amount of Consolidated EBITDA for the
four most recent full fiscal quarters for which financial statements are
available ending prior to the date of such determination (the "Four Quarter
Period") to Consolidated Fixed Charges for such Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the Incurrence or repayment of any Indebtedness of AGY or
any of its Restricted Subsidiaries (and the application of the proceeds
thereof), including the Incurrence of any Indebtedness (and the application of
the proceeds thereof) giving rise to the need to make such determination,
occurring during or after such Four Quarter Period and on or prior to such date
of determination, as if such Incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of such
Four Quarter Period and (ii) any Asset Sale Transactions or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need
to make such determination as a result of AGY or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) Incurring Acquired Indebtedness and including,
without limitation, by giving pro forma effect to any Consolidated EBITDA
(provided that such pro forma Consolidated EBITDA shall be calculated in a
manner consistent with the exclusions in the definition of "Consolidated Net
Income" but without giving effect to clause (c) of the definition of
Consolidated Net Income) attributable to the assets
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which are the subject of the Asset Sale Transaction or Asset Acquisition during
the Four Quarter Period) occurring during the Four Quarter Period or at any
time subsequent to the last day of the Four Quarter Period and on or prior to
such date of determination, as if such Asset Sale Transaction or Asset
Acquisition (including the Incurrence of any such Acquired Indebtedness)
occurred on the first day of the Four Quarter Period. If AGY or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the Incurrence of
such guaranteed Indebtedness as if AGY or any of its Restricted Subsidiaries
had directly Incurred such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of
the date of determination and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on such date of
determination; (2) if interest on any Indebtedness actually Incurred on such
date of determination may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered
rate, or other rates, then the interest rate in effect on such date of
determination will be deemed to have been in effect during the Four Quarter
Period; and (3) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
Hedging Obligations, shall be deemed to accrue at the rate per annum resulting
after giving effect to the operation of such agreements. For purposes of
determining the Consolidated Fixed Charges Coverage Ratio at any time prior to
October 1, 1999, Consolidated EBITDA and Consolidated Fixed Charges shall be
calculated as follows: for the fiscal quarter ending December 31, 1998,
Consolidated EBITDA and Consolidated Fixed Charges shall equal Consolidated
EBITDA and Consolidated Fixed Charges, respectively, for such fiscal quarter;
for the fiscal quarter ending March 31, 1999, Consolidated EBITDA and
Consolidated Fixed Charges shall equal Consolidated EBITDA and Consolidated
Fixed Charges, respectively, for the two fiscal quarters then ending; and for
the fiscal quarter ending June 30, 1999, Consolidated EBITDA and Consolidated
Fixed Charges shall equal Consolidated EBITDA and Consolidated Fixed Charges,
respectively, for the three fiscal quarters then ending.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of (i) Consolidated Interest Expense, plus (ii) the product of (x)
the amount of all dividend payments on any series of Preferred Stock of AGY
(other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the sum of
(A) the maximum federal corporate income tax rate in effect during such taxable
year and (B) six percent.
"Consolidated Income Tax Expense" means, with respect to AGY for any period,
the product of (i) the net income of AGY and its Restricted Subsidiaries for
such period as determined on a consolidated basis in accordance with GAAP and
(ii) the sum of (x) the maximum federal corporate income tax rate in effect
during such period and (y) six percent.
"Consolidated Interest Expense" means, for any period, the sum of, without
duplication: (i) the aggregate of cash and non-cash interest expense of AGY and
its Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, and in any event shall include, without limitation
(whether or not interest expense in accordance with GAAP), (a) any amortization
of debt discount and any amortization or write off of deferred financing costs,
(b) the net costs under Hedging Obligations related to Indebtedness (including
amortization of fees), (c) all capitalized
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interest, (d) the interest portion of any deferred payment obligation, (e)
commissions, discounts and other fees and charges Incurred in respect of
letters of credit or bankers' acceptances and (f) any interest expense on
Indebtedness of another Person that is guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on the assets of such Person or
one of its Restricted Subsidiaries (whether or not such guarantee or Lien is
called upon); and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by AGY and its Restricted
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the aggregate net income (or
loss) of AGY and its Restricted Subsidiaries for such period on a consolidated
basis, determined in accordance with GAAP; provided, however, that there shall
be excluded therefrom (a) net after-tax gains and losses (assuming for tax
purposes that no special allocations are made to any member of AGY under
Section 743 of the Code) from Asset Sale Transactions or abandonments of
reserves relating thereto, (b) net after-tax items (assuming for tax purposes
that no special allocations are made to any member of AGY under Section 743 of
the Code) classified as extraordinary or non-recurring gains or losses, (c) the
net income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Restricted Subsidiary or is merged or
consolidated with AGY or any Restricted Subsidiary, (d) the net income (but not
loss) of any Restricted Subsidiary to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is restricted by contract, operation of law or otherwise, (e) the net income of
any Person, other than a Restricted Subsidiary, except to the extent of cash
dividends or distributions paid to AGY or to a Restricted Subsidiary by such
Person, (f) any restoration to income of any contingency reserve, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following the Issue Date and (g) all gains and losses from
the cumulative effect of any change in accounting principles.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of AGY and its
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charge which requires an accrual of or
a reserve for cash charges for any future period).
"Covenant Defeasance" has the meaning set forth under "Legal Defeasance and
Covenant Defeasance."
"CSG" means Compagnie Saint-Gobain, a corporation organized under the laws of
France.
"Currency Agreement" means, in respect of any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party.
"Default" means an event or condition the occurrence of which, with the lapse
of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Indebtedness" means, (a) in respect of AGY, the senior
credit facility and any other Senior Indebtedness of AGY which, at the date of
determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to lend
up to, at least $25.0 million and is specifically designated by AGY in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" and (b) in respect of any Note Guarantor, the senior
credit facility and any guarantee by such Note
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Guarantor of Indebtedness of AGY referred to in clause (a) and (c) any other
Senior Indebtedness of such Note Guarantor which, at the date of determination,
has an aggregate principal amount outstanding of, or under which, at the date
of determination, the holders thereof are committed to lend up to, at least
$25.0 million and is specifically designated by such Note Guarantor in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness."
"Designation" has the meaning set forth under "--Certain Covenants--
Designation of Unrestricted Subsidiaries" above.
"Designation Amount" has the meaning set forth under "--Certain Covenants--
Designation of Unrestricted Subsidiaries" above.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of
the holder thereof, in any case, on or prior to the 91st day after the final
maturity date of the notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"Fair Market Value" means, with respect to any asset, the price (after taking
into account any liabilities relating to such assets) which could be negotiated
in an arm's-length free market transaction, for cash, between a willing seller
and a willing and able buyer, neither of which is under any compulsion to
complete the transaction; provided, however, that the Fair Market Value of any
such asset or assets may be determined conclusively by the Board of Directors
of AGY acting in good faith, and shall be evidenced by a Board Resolution.
"Foreign Subsidiary" means, with respect to any Person, any direct or
indirect Subsidiary of such Person that is organized under the laws of any
jurisdiction outside the United States, any state thereof or the District of
Columbia.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"GHC" means Glass Holdings Corp., a Delaware corporation.
"GPI" means Groupe Porcher Industries, a corporation organized under the laws
of France.
"Guaranteed Obligations" has the meaning set forth under "Note Guarantees."
"Hedging Obligations" means the obligations of any Person pursuant to any
Interest Rate Agreement or Currency Agreement.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise
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become liable in respect of such Indebtedness or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring"
shall have meanings correlative to the foregoing). Indebtedness of any Person
or any of its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary (or is merged into or consolidated with AGY or any
Restricted Subsidiary), whether or not such Indebtedness was Incurred in
connection with, as a result of, or in contemplation of, such Person becoming a
Restricted Subsidiary (or being merged into or consolidated with AGY or any
Restricted Subsidiary), shall be deemed Incurred at the time any such Person
becomes a Restricted Subsidiary or merges into or consolidates with AGY or any
Restricted Subsidiary. Accrual of interest, the accretion of accreted value and
the payment of regularly scheduled interest in the form of additional
Indebtedness of the same instrument will not be deemed to be an Incurrence of
Indebtedness for purposes of the covenant described under "--Certain
Covenants--Limitation on Incurrence of Additional Indebtedness."
"Indebtedness" means with respect to any Person, without duplication, (i) the
principal amount (or, if less, the accreted value) of all obligations of such
Person for borrowed money, (ii) the principal amount (or, if less, the accreted
value) of all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all Capitalized Lease Obligations of such
Person, (iv) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
obligations under any title retention agreement (but excluding trade accounts
payable and other accrued liabilities arising in the ordinary course of
business that are not overdue by 90 days or more or are being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted),
(v) all obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (vi)
guarantees and other contingent obligations of such Person in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Indebtedness of any other Person of the type referred to in
clauses (i) through (vi) which is secured by any Lien on any property or asset
of such Person, the amount of such Indebtedness being deemed to be the lesser
of the Fair Market Value of such property or asset or the amount of the
Indebtedness so secured, (viii) all obligations under Hedging Obligations of
such Person and (ix) all Disqualified Capital Stock issued by such Person with
the amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be the Fair Market Value thereof.
"Independent Financial Advisor" means an accounting firm, appraisal firm,
investment banking firm or consultant to Persons engaged in a Permitted
Business, in each case, of nationally recognized standing that is, in the
judgment of AGY's Board of Directors, qualified to perform the task for which
it has been engaged and which is independent in connection with the relevant
transaction.
"Interest Rate Agreement" of any Person means any interest rate protection
agreement (including, without limitation, interest rate swaps, caps, floors,
collars, derivative instruments and similar agreements) and/or other types of
interest hedging agreements.
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"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude accounts receivable or
deposits arising in the ordinary course of business. For purposes of the "--
Certain Covenants--Limitation on Restricted Payments" covenant, "Investment"
shall include and be valued at the Fair Market Value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation of
such Subsidiary as a Restricted Subsidiary, AGY will be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the total amount of AGY's "Investments" in such
Subsidiary made prior to or at the time of such redesignation less (y) that
portion of the Fair Market Value of the net assets of such Subsidiary at the
time that such Subsidiary is so re-designated a Restricted Subsidiary that is
proportionate to AGY's share of the equity interest in such Subsidiary; and
(ii) any property transferred to or from an Unrestricted Subsidiary will be
valued at its Fair Market Value at the time of such transfer. If AGY or any
Restricted Subsidiary sells or otherwise disposes of any Common Stock of a
Restricted Subsidiary (including any issuance and sale of Capital Stock by a
Restricted Subsidiary) such that, after giving effect to any such sale or
disposition, such Restricted Subsidiary would cease to be a Subsidiary of AGY,
AGY shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the Fair Market Value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.
"Issue Date" means the first date of issuance of old notes under the
indenture.
"JH" means Jefferson Holdings, Inc., a Delaware corporation.
"JV Contract" means all supply, purchase, service and management agreements,
real property and equipment leases, co-location and space-sharing and
allocation agreements and requirements and off-take contracts and agreements
and other like agreements between or among AGY and the LLC Members and their
Affiliates existing on the Issue Date, together with all renewals, extensions
and amendments thereof, provided, that such renewals, extensions or amendments
do not materially change the rights and obligations of AGY or any of its
Restricted Subsidiaries, and all other such agreements entered into after the
Issue Date between or among AGY, any Subsidiary thereof, the LLC Members and
their Affiliates.
"Keep-Well Agreement" means the Keep-Well Agreement dated as of September 30,
1998, between Owens Corning and AGY, as in effect on the Issue Date.
"Legal Defeasance" has the meaning set forth under "Legal Defeasance and
Covenant Defeasance."
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement to
give any security interest).
"LLC Members" means collectively, JH and AGY Holdings and, individually,
either of them.
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"LLC Interest Sale and Purchase Agreement" means the LLC Interest Sale and
Purchase Agreement dated as of July 31, 1998 among Owens Corning, AGY and GHC,
as in effect on the Issue Date.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
received by AGY or any of its Restricted Subsidiaries from such Asset Sale, net
of (a) reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions), (b) the amount of tax distributions reasonably
estimated to be required to be made to JH and AGY Holdings as a result of such
Asset Sale within two years of the date of such Asset Sale, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale,
(d) appropriate amounts to be provided by AGY or any Restricted Subsidiary, as
the case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by AGY or any Restricted
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning set forth under "--Certain Covenants--
Limitation on Asset Sales."
"Net Proceeds Offer Payment Date" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"Net Proceeds Offer Trigger Date" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"Non-Compete Agreement" means the Non-Compete Agreement dated as of September
30, 1998, by and among GPI, GHC, Owens Corning and AGY, as in effect on the
Issue Date.
"Note Guarantee" has the meaning set forth in the third paragraph of the
introduction to this "Description of Exchange Notes."
"Note Guarantor" has the meaning set forth in the third paragraph of the
introduction to this "Description of Exchange Notes."
"Obligations" means, with respect to any Indebtedness, any principal,
interest (including, without limitation, Post-Petition Interest), penalties,
fees, indemnifications, reimbursements, including, in the case of the notes and
the Note Guarantees in respect thereof, damages, and other liabilities payable
under the documentation governing such Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the chief executive officer, the president or any vice president of
such Person and the chief financial officer or any treasurer of such Person,
that shall comply with applicable provisions of the indenture.
"Operating Agreement" means the Amended and Restated Limited Liability
Company Operating Agreement for AGY dated as of September 30, 1998, by and
between JH and AGY Holdings, as amended and in effect on the Issue Date.
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"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the trustee. The counsel may be an employee of or
counsel to AGY or the trustee.
"Payment Blockage Period" has the meaning set forth under "Subordination of
the Notes and the Note Guarantees."
"Permitted Business" means the business or businesses conducted by AGY and
its Restricted Subsidiaries as of the Issue Date and any business ancillary or
complementary or reasonably related thereto.
"Permitted Holders" means any of Owens Corning and its Affiliates and GHC and
GPI and their Affiliates.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness in respect of the old notes and exchange notes and any
replacement notes therefor issued pursuant to the indenture, and the Note
Guarantees in respect thereof;
(ii) guarantees by any Note Guarantor of Indebtedness of AGY other than
the notes; provided, however, that if any such guarantee is of Subordinated
Indebtedness, then the Note Guarantee of such Note Guarantor shall be
senior to such Note Guarantor's guarantee of such Subordinated
Indebtedness;
(iii) Indebtedness Incurred pursuant to the senior credit facility in an
aggregate principal amount at any time outstanding not to exceed $315.0
million (including any amounts Incurred pursuant to clause (xiv) of this
definition) less the amount of any permanent prepayments of Indebtedness
made with the Net Cash Proceeds of an Asset Sale pursuant to the third
sentence under "--Certain Covenants--Limitation on Asset Sales;"
(iv) other Indebtedness of AGY and its Restricted Subsidiaries
outstanding on the Issue Date, reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(v) Hedging Obligations entered into in the ordinary course of business
and not for speculative purposes;
(vi) Indebtedness of any Restricted Subsidiary owed to and held by AGY or
any Note Guarantor for so long as such Indebtedness is held by AGY or such
Note Guarantor, in each case subject to no Lien securing Indebtedness other
than Permitted Liens; provided, however, that if as of any date any Person
other than AGY or any Note Guarantor holds any such Indebtedness or holds a
Lien in respect of such Indebtedness securing Indebtedness other than
Permitted Liens, such date shall be deemed the Incurrence of Indebtedness
not constituting Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of AGY owed to and held by any Note Guarantor that is
unsecured and subordinated in right of payment to the payment and
performance of AGY's obligations under any Senior Indebtedness, the
indenture, the notes and the Note Guarantees and subject to no Lien
securing Indebtedness other than Permitted Liens; provided, however, that
if as of any date any Person other than any Note Guarantor owns or holds
any such Indebtedness or any Person other than any Note Guarantor holds a
Lien in respect of such Indebtedness securing Indebtedness other than
Permitted Liens, such date shall be deemed the Incurrence of Indebtedness
not constituting Permitted Indebtedness by AGY;
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(viii) Indebtedness of AGY or any of its Restricted Subsidiaries arising
from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts) drawn against insufficient funds in the ordinary course of
business; provided, however, that such Indebtedness is extinguished within
two business days of Incurrence;
(ix) Indebtedness of AGY or any of its Restricted Subsidiaries
represented by letters of credit for the account of AGY or any Restricted
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance
or similar requirements in the ordinary course of business;
(x) Refinancing Indebtedness in respect of Indebtedness (other than
Permitted Indebtedness) Incurred pursuant to the covenant described under
"--Certain Covenants--Limitation on Incurrence of Additional Indebtedness"
or Indebtedness Incurred pursuant to clause (i) or (iv) of this definition
of Permitted Indebtedness;
(xi) Capitalized Lease Obligations and Purchase Money Indebtedness of AGY
and its Restricted Subsidiaries that do not exceed $10.0 million in the
aggregate at any one time outstanding;
(xii) Indebtedness arising from agreements of AGY or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred in connection with the
disposition of any business, assets, or Restricted Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the purpose
of financing such acquisition; provided, that the maximum aggregate
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by AGY and the Restricted Subsidiary in
connection with such disposition;
(xiii) Additional Indebtedness of AGY or any Restricted Subsidiary in an
aggregate principal amount not to exceed $10.0 million at any one time
outstanding (which amount may, but need not, be Incurred in whole or in
part under the senior credit facility); provided, that no more than $5.0
million of Indebtedness permitted pursuant to this clause (xiii) may be
Incurred by Restricted Subsidiaries that are not Note Guarantors;
(xiv) Indebtedness of Foreign Subsidiaries which are Restricted
Subsidiaries may Incur Indebtedness in the form of local lines of credit
not to exceed $25.0 million in the aggregate at any one time outstanding so
long as such Indebtedness is secured by a letter of credit issued pursuant
to the senior credit facility; and
(xv) Indebtedness of AGY Incurred pursuant to the Keep-Well Agreement.
"Permitted Investments" means (i) Investments by AGY or any Restricted
Subsidiary in any Person that is, or that result in any Person becoming,
immediately after such Investment, a Restricted Subsidiary or constituting a
merger or consolidation of such Person into AGY or with or into a Restricted
Subsidiary; (ii) Investments by any Restricted Subsidiary in AGY; (iii)
Investments in cash and Cash Equivalents; (iv) any extension, modification or
renewal of any Investments existing as of the Issue Date (but not Investments
involving additional advances, contributions or other investments of cash or
property or other increases thereof, other than as a result of the accrual or
accretion of interest or original issue discount or payment-in-kind pursuant to
the terms of such Investment as of the Issue Date); (v) transactions or
arrangements with officers, directors or
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employees of AGY or any Subsidiary of AGY entered into in the ordinary course
of business (including compensation or employee benefit arrangements with any
officer or director of AGY or any Subsidiary of AGY permitted under the
covenant described under "--Certain Covenants--Transactions with Affiliates");
(vi) Investments received as a result of the bankruptcy or reorganization of
any Person or taken in settlement of or other resolution of claims or disputes,
and, in each case, extensions, modifications and renewals thereof; (vii)
Investments in the form of intercompany Indebtedness permitted to be issued
under the covenant entitled "--Limitation on Incurrence of Additional
Indebtedness"; (viii) Investments made by AGY or its Restricted Subsidiaries as
a result of non-cash consideration permitted to be received in connection with
an Asset Sale made in compliance with the covenant described under "--Certain
Covenants--Limitation on Asset Sales"; and (ix) other Investments not to exceed
$5.0 million at any one time outstanding.
"Permitted Junior Securities" means any securities of AGY or any other Person
that are (i) equity securities without special covenants or (ii) debt
securities expressly subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the notes are subordinated as provided
in the indenture, in any event pursuant to a court order so providing and as to
which (a) the rate of interest on such securities shall not exceed the
effective rate of interest on the notes on the Issue Date, (b) such securities
shall not be entitled to the benefits of covenants or defaults materially more
beneficial to the holders of such securities than those in effect with respect
to the notes on the Issue Date and (c) such securities shall not provide for
amortization (including sinking fund and mandatory prepayment provisions)
commencing prior to the date six months following the final scheduled maturity
date of the Senior Indebtedness (as modified by the plan of reorganization
pursuant to which such securities are issued).
"Permitted Liens" means any of the following:
(i) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(ii) Liens Incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government performance
and return-of-money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(iii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, however, that such Liens do not extend to any
property which is not leased property subject to such Capitalized Lease
Obligation;
(iv) purchase money Liens to finance property of AGY or a Restricted
Subsidiary acquired in the ordinary course of business; provided, however,
that (A) the related purchase money Indebtedness shall not exceed the cost
of such property and shall not be secured by any property of AGY or any
Restricted Subsidiary other than the property so acquired and (B) the Lien
securing such Indebtedness shall be created within 90 days of such
acquisition;
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(v) Liens upon specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(vi) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(vii) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of AGY or a
Restricted Subsidiary, including rights of offset and set-off;
(viii) Liens securing Hedging Obligations that relate to Indebtedness
that is Incurred in accordance with the covenant described under "--Certain
Covenants--Limitation on Incurrence of Additional Indebtedness" and that
are secured by the same assets as secure such Hedging Obligations;
(ix) Liens existing on the Issue Date and Liens to secure any Refinancing
Indebtedness which is Incurred to Refinance any Indebtedness which has been
secured by a Lien permitted under the covenant described under "--Certain
Covenants--Limitation on Liens" and which Indebtedness has been Incurred in
accordance with the covenant described under "--Certain Covenants--
Limitation on Incurrence of Additional Indebtedness"; provided, however,
that such new Liens (A) are not materially less favorable to the holders of
notes and are not materially more favorable to the lienholders with respect
to such Liens than the Liens in respect of the Indebtedness being
Refinanced and (B) do not extend to any property or assets other than the
property or assets securing the Indebtedness Refinanced by such Refinancing
Indebtedness;
(x) Liens securing Acquired Indebtedness Incurred in accordance with the
covenant described under "--Certain Covenants--Limitation on Incurrence of
Additional Indebtedness;" provided, however, that (A) such Liens secured
such Acquired Indebtedness at the time of and prior to the Incurrence of
such Acquired Indebtedness by AGY or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of the Incurrence of such
Acquired Indebtedness by AGY or a Restricted Subsidiary and (B) such Liens
do not extend to or cover any property of AGY or any Restricted Subsidiary
other than the property that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of AGY or a Restricted
Subsidiary and are no more favorable to the lienholders than the Liens
securing the Acquired Indebtedness prior to the Incurrence of such Acquired
Indebtedness by AGY or a Restricted Subsidiary; and
(xi) Liens securing other Indebtedness not in excess of $5.0 million at
any one time outstanding.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Post-Petition Interest" means all interest accrued or accruing after the
commencement of any insolvency or liquidation proceeding (and interest that
would accrue but for the commencement of any insolvency or liquidation
proceeding) in accordance with and at the contract rate (including,
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without limitation, any rate applicable upon default) specified in the
agreement or instrument creating, evidencing or governing any Indebtedness,
whether or not, pursuant to applicable law or otherwise, the claim for such
interest is allowed as a claim in such insolvency or liquidation proceeding.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights over any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Public Equity Offering" has the meaning set forth under "Redemption."
"Purchase Money Indebtedness" means Indebtedness of AGY or any Restricted
Subsidiary Incurred for the purpose of financing all or any part of the
purchase price, or other cost of construction or improvement of any property;
provided, however, that the aggregate principal amount of such Indebtedness
does not exceed the lesser of the Fair Market Value of such property or such
purchase price or cost, including any Refinancing of such Indebtedness that
does not increase the aggregate principal amount (or accreted amount, if less)
thereof as of the date of Refinancing.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by AGY or any Restricted
Subsidiary, to the extent that such Refinancing does not (i) result in an
increase in the aggregate principal amount of the Indebtedness of such Person
as of the date of such proposed Refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by AGY in
connection with such Refinancing) or (ii) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life
to Maturity of the Indebtedness being Refinanced or (B) a final maturity
earlier than the final maturity of the Indebtedness being Refinanced; provided,
however, that (x) if such Indebtedness being Refinanced is Indebtedness of AGY,
then such Refinancing Indebtedness shall be Indebtedness of AGY, (y) if such
Indebtedness being Refinanced is Indebtedness of a Note Guarantor, then such
Indebtedness shall be Indebtedness of AGY and/or such Note Guarantor and (z) if
such Indebtedness being Refinanced is subordinate or junior to the notes or any
Note Guarantee, then such Refinancing Indebtedness shall be subordinate to the
notes or such Note Guarantee at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Replacement Assets" has the meaning set forth under "--Certain Covenants--
Limitation on Asset Sales."
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of AGY.
"Restricted Payment" has the meaning set forth under "--Certain Covenants--
Limitation on Restricted Payments."
"Restricted Subsidiary" of AGY means any Subsidiary of AGY which at the time
of determination is not an Unrestricted Subsidiary.
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"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the
leasing to AGY or a Restricted Subsidiary of any property, whether owned by AGY
or any Restricted Subsidiary at the Issue Date or later acquired, which has
been or is to be sold or transferred by AGY or such Restricted Subsidiary to
such Person or to any other Person by whom funds have been or are to be
advanced on the security of such Property.
"Senior credit facility" means that certain Credit Agreement dated as of
September 30, 1998, by and between AGY, the guarantors from time to time a
party thereto, the lenders from time to time a party thereto and First Union
National Bank, as agent, pursuant to which AGY may, as of the Issue Date,
borrow up to $315.0 million in the aggregate at any one time outstanding
together with the documents related thereto (including, without limitation, any
guarantee agreements and security documents), as such agreements may be amended
(including any amendment and restatement thereof), supplemented or otherwise
modified from time to time, including any agreement extending the maturity of,
refinancing, replacing or otherwise restructuring (including adding
Subsidiaries of AGY as additional borrowers or guarantors thereunder or
increasing the principal amount available thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Senior Indebtedness" means, at any date, with respect to any Person (a) all
Obligations of such Person under the senior credit facility; (b) all Hedging
Obligations of such Person; (c) all Obligations of such Person under letters of
credit; and (d) all other Indebtedness of such Person permitted under the
indenture, including principal, premium, if any, and interest (including Post-
Petition Interest) on such Indebtedness, unless the instrument under which such
Indebtedness is Incurred expressly provides that such Indebtedness is not
senior or superior in right of payment to the notes in the case of AGY or a
Note Guarantee in the case of a Note Guarantor, and all renewals, extensions,
modifications, amendments or refinancings thereof in whole or in part.
Notwithstanding the foregoing, Senior Indebtedness shall not include (a) to the
extent that it may constitute Indebtedness, any Obligation for Federal, state,
local or other taxes; (b) any Indebtedness among or between AGY and any
Subsidiary of AGY or any Affiliate of AGY or any of such Affiliate's
Subsidiaries (other than Indebtedness created by AGY in connection with the
guarantee of Indebtedness of a Subsidiary); unless and for so long as such
Indebtedness has been pledged to secure obligations under or in respect of
Senior Indebtedness; (c) to the extent that it may constitute Indebtedness, any
Obligation in respect of any trade payable Incurred for the purchase of goods
or materials, or for services obtained, in the ordinary course of business; (d)
that portion of any Indebtedness that is Incurred in violation of the
indenture; (e) Indebtedness evidenced by the notes or the Note Guarantees; (f)
Indebtedness of AGY or a Note Guarantor that is expressly subordinate or junior
in right of payment to any other Indebtedness of AGY or a Note Guarantor; (g)
to the extent that it may constitute Indebtedness, any obligation owing under
leases (other than Capitalized Lease Obligations) or management agreements; (h)
any obligation that by operation of law is subordinate to any general unsecured
obligations of such Person; and (i) Indebtedness of AGY to the extent such
Indebtedness is owed to and held by any Federal, state, local or other
governmental authority (excluding Indebtedness owing to state or local
governmental authorities in the form of industrial revenue bonds or other state
or local bond financings).
"Senior Subordinated Indebtedness" means, with respect to AGY, the notes and,
with respect to any Note Guarantor, such Note Guarantor's Note Guarantee and
any other Indebtedness of AGY
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or such Note Guarantor that specifically provides that such Indebtedness is to
rank pari passu in right of payment with the notes or such Note Guarantee, as
the case may be, and is not subordinated by its terms in right of payment to
any Indebtedness or other obligation of AGY or such Note Guarantor which is not
Senior Indebtedness.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02(w) of
Regulation S-X under the Securities Act.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Indebtedness" means, with respect to AGY or any Note Guarantor,
any Indebtedness of AGY or such Note Guarantor, as the case may be, which is
expressly subordinated in right of payment to the notes or such Note
Guarantor's Note Guarantee, as the case may be.
"Subsidiary," with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person; or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" has the meaning set forth under "--Certain Covenants--
Merger, Consolidation and Sale of Assets."
"Unrestricted Subsidiary" means any Subsidiary of AGY (other than Capital)
designated as such pursuant to "--Certain Covenants--Designation of
Unrestricted Subsidiaries." Any such designation may be revoked by a Board
Resolution of AGY, subject to the provisions of such covenant.
"Voting Stock" with respect to any Person, means securities of any class of
Capital Stock of such Person entitling the holders thereof (whether at all
times or only so long as no senior class of stock has voting power by reason of
any contingency) to vote in the election of members of the Board of Directors
(or equivalent governing body) of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
(including any Disqualified Capital Stock) at any date, the number of years
obtained by dividing (a) the sum of the products obtained by multiplying (x)
the amount of each then remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final maturity, in
respect thereof, by (y) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment, by
(b) the then outstanding principal amount or liquidation preference, as
applicable, of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of AGY means any Restricted Subsidiary
of which all the outstanding Capital Stock (other than in the case of a foreign
Restricted Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable law) are
owned by AGY or any Wholly Owned Restricted Subsidiary.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material federal income tax
consequences expected to result to holders whose old notes are exchanged for
exchange notes in the exchange offer. The following discussion is based upon
current provisions of the Internal Revenue Code of 1986, as amended, applicable
Treasury regulations, judicial authority and administrative rulings and
practice. There can be no assurance that the IRS will not take a contrary view,
and no ruling from the IRS has been or will be sought with respect to the
exchange offer. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or
may not be retroactive and could affect the tax consequences to holders.
Certain holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations, and persons who
are not citizens or residents of the United States) may be subject to special
rules not discussed below.
Each holder of old notes should consult its own tax advisor as to the
particular tax consequences of exchanging old notes for exchange notes,
including the applicability and effect of any state, local or foreign laws.
The exchange of old notes for exchange notes pursuant to the exchange offer
should not be considered a taxable exchange for United States federal income
tax purposes because the exchange notes should not be considered to differ
materially in kind or extent from the old notes. Exchange notes received by a
holder of old notes should be treated as a continuation of the old notes.
Accordingly, there should not be any United States federal income tax
consequences to holders exchanging old notes for exchange notes in the exchange
offer.
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The old notes were originally sold by AGY to First Union Capital Markets and
Warburg Dillon Read LLC (the "Initial Purchasers") pursuant to the note
purchase agreement between AGY and the Initial Purchasers dated January 15,
1999. The Initial Purchasers subsequently placed the old notes with qualified
institutional buyers in reliance upon Rule 144A under the Securities Act. In
accordance with a condition set forth in the purchase agreement, AGY and the
Initial Purchasers entered into a registration rights agreement on the Issue
Date pursuant to which AGY agreed, for the benefit of the holders of the old
notes, that it will, at its cost
. use its best efforts to file, within 60 days after the Issue Date, a
registration statement (the "Exchange Offer Registration Statement") with
the SEC with respect to the exchange offer; and
. use its best efforts to cause the Exchange Offer Registration Statement
to be declared effective within 150 days from the Issue Date.
Promptly after the Exchange Offer Registration Statement has been declared
effective, AGY will offer the exchange notes in exchange for surrender of the
old notes. AGY will keep the exchange offer open for not less than 20 business
days (or longer if required by applicable law) after the date on which notice
of the exchange offer is mailed to the holders of the old notes. For each old
note validly tendered to AGY pursuant to the exchange offer and not withdrawn
by the holder thereof, the holder of such old note will receive an exchange
note having a principal amount equal to the principal amount of such
surrendered old note. Interest on each exchange note will accrue from the last
interest payment date on which interest was paid on the old note surrendered in
exchange therefor or, if no interest has been paid on such exchange note, from
the Issue Date.
Under existing SEC interpretations set forth in several no-action letters to
third parties and unrelated to AGY and the exchange offer, AGY believes that
the exchange notes issued pursuant to the exchange offer in exchange for old
notes may be offered for resale, resold and otherwise transferred by the
holders thereof (other than any such holder which is an "affiliate" of AGY
within the meaning of Rule 405 under the Securities Act) without further
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such exchange notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of such exchange notes. Any holder who is an
affiliate of AGY or who intends to participate in the exchange offer for the
purpose of distributing the exchange notes
. will not be able to rely on the SEC's interpretation set forth in the
above-mentioned no-action letters;
. will not be able to tender its old notes in the exchange offer; and
. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer transaction
unless such sale or transfer is made pursuant to an exemption from such
requirements.
Failure to comply with such requirements may result in such holder incurring
liability under the Securities Act for which the holder is not indemnified by
AGY.
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A participating broker-dealer holding old notes may participate in the
exchange offer provided that it acquired the old notes for its own account as a
result of market-making or other trading activities. In connection with any
resales of exchange notes, any participating broker-dealer who receives
exchange notes for old notes pursuant to the exchange offer may be an
"underwriter" (within the meaning of the Securities Act) and must deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of the exchange notes. The accompanying letter of transmittal states
that any acknowledgment by a participating broker-dealer that it will deliver a
prospectus in connection with any resale of exchange notes, and any such
delivery of a prospectus, shall not be deemed an admission by such
participating broker-dealer that it is an underwriter. The SEC has taken the
position that participating broker-dealers may fulfill their prospectus
delivery requirements with respect to the exchange notes (other than a resale
of an unsold allotment from the original sale of the old notes) with this
prospectus, as it may be amended or supplemented from time to time. Under the
registration rights agreement, AGY is required to allow participating broker-
dealers and other persons, if any, subject to similar prospectus delivery
requirements, to use this prospectus, as it may be amended or supplemented from
time to time, in connection with the resale of such exchange notes for a period
of 180 days.
Each holder of old notes wishing to accept the exchange offer must represent
to AGY
. that any exchange notes to be received by it will be acquired in the
ordinary course of such holder's business;
. that it is not an "affiliate" of AGY within the meaning of Rule 405 under
the Securities Act;
. that it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the exchange
notes; and
. if such holder is a participating broker-dealer that will receive
exchange notes for its own account in exchange for old notes that were
acquired as a result of market-making or other trading activities, that
it will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such exchange notes.
By executing the letter of transmittal or an agent's message, each holder will
make the foregoing representations.
In the event that:
. applicable interpretations of the SEC do not permit AGY to effect the
exchange offer;
. for any other reason the exchange offer is not consummated within 30
business days of the date the Exchange Offer Registration Statement has
become effective;
. an Initial Purchaser so requests with respect to old notes it acquired
directly from AGY on or prior to the 20th business day following the
consummation of the exchange offer;
. any holder notifies AGY on or prior to the 20th business day following
the consummation of the exchange offer that such holder is not eligible
to participate in the exchange offer or the exchange notes such holder
would receive would not be freely tradable; or
. an Initial Purchaser participates in the exchange offer and does not
receive freely tradable exchange notes in exchange for old notes
constituting any portion of an unsold allotment and such Initial
Purchaser notifies AGY on or prior to the 20th business day following the
consummation of the exchange offer,
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AGY will, at its expense:
. on or prior to 75 days after such filing obligation arises, file a
registration statement (a "Shelf Registration Statement") covering
resales of the old notes or the exchange notes, as the case may be;
. use its reasonable efforts to cause the Shelf Registration Statement to
be declared effective under the Securities Act on or prior to 135 days
after such filing obligation arises; and
. keep the Shelf Registration Statement effective until the earlier of (i)
the time when the old notes or the exchange notes covered by the Shelf
Registration Statement can be sold pursuant to Rule 144 without any
limitations under clauses (c), (e), (f) and (h) of Rule 144, (ii) two
years from the date on which the Shelf Registration Statement was filed
and (iii) such date as of which all old notes and exchange notes covered
by the Shelf Registration Statement have been sold.
AGY will, in the event a Shelf Registration Statement is filed, among other
things, provide to each holder for whom such Shelf Registration Statement was
filed copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement has
become effective and take certain other actions as are required to permit
unrestricted resales of the old notes or the exchange notes, as the case may
be. A holder selling such old notes or exchange notes pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement which are applicable to such
holder (including certain indemnification obligations).
In the event that any of the following "registration defaults" shall have
occurred:
. AGY fails to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing;
. any of such registration statements is not declared effective by the SEC
on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date");
. AGY fails to consummate the exchange offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement;
. the Shelf Registration Statement or the Exchange Offer Registration
Statement is declared effective but the SEC shall have issued a stop
order suspending such effectiveness or proceedings have been initiated
under Sections 8(d) or 8(e) of the Securities Act with respect to the
Exchange Offer Registration Statement or Shelf Registration Statement;
. the aggregate number of days in any such suspension period referred to in
the preceding bullet point exceeds the number permitted in the
registration rights agreement; or
. the number of suspension periods referred to in the second preceding
bullet point exceeds the number permitted in the registration rights
agreement,
then AGY will pay liquidated damages to each holder of old notes, with respect
to the first 90-day period immediately following the occurrence of such
registration default in an amount equal to $0.05 per week per $1,000 principal
amount of old notes held by such holder. The amount of the liquidated
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damages for such registration default will increase by an additional $0.05 per
week per $1,000 principal amount of old notes for each subsequent 90-day period
until such registration default has been cured, up to an aggregate maximum
amount of liquidated damages of $0.30 per week per $1,000 principal amount of
old notes for all registration defaults. All accrued liquidated damages will be
paid by AGY on each date that interest must be paid on the old notes. Following
the cure of all registration defaults, the accrual of liquidated damages will
cease and all accrued and unpaid liquidated damages shall be paid promptly
thereafter. At all other times, the old notes will bear interest at the
original interest rate thereof.
The summary herein of certain provisions of the registration rights agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the registration rights
agreement, which is filed as an exhibit to the registration statement of which
this prospectus is a part.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus and
in the letter of transmittal, AGY will accept any and all old notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date. AGY will issue $1,000 principal amount of exchange notes in
exchange for each $1,000 principal amount of outstanding old notes accepted in
the exchange offer. Holders may tender some or all of their old notes pursuant
to the exchange offer. However, tenders of old notes must be in a minimum
principal amount of $1,000 or an integral multiple of $1,000 in excess thereof.
The form and terms of the exchange notes will be identical in all material
respects to the form and terms of the old notes, except that:
. the exchange notes will bear a different CUSIP number from the old notes;
. the issuance of the exchange notes will be registered under the
Securities Act and, therefore, the exchange notes will not bear legends
restricting the transfer thereof; and
. the holders of the exchange notes will not be entitled to certain rights
under the registration rights agreement, including the provisions thereof
which provide for liquidated damages payable to the holders of the old
notes in certain circumstances relating to the timing of the exchange
offer, which rights will terminate when the exchange offer is
consummated.
The exchange notes will evidence the same debt as the old notes (which they
replace) and will be issued under and be entitled to the benefits of the
indenture. See "Description of Exchange Notes."
As of the date of this prospectus, $150,000,000 aggregate principal amount of
old notes were outstanding. This prospectus and the letter of transmittal are
being mailed to persons who were holders of old notes on the close of business
on the date of this prospectus. Holders of old notes do not have any appraisal
or dissenters' rights under the Delaware Limited Liability Company Act or the
Delaware General Corporation Law or the indenture in connection with the
exchange offer. AGY intends to conduct the exchange offer in accordance with
the applicable requirements of the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder.
AGY shall be deemed to have accepted validly tendered old notes when, as and
if AGY has given written notice thereof to The Bank of New York, as exchange
agent. The exchange agent will act as agent for the tendering holders for the
purpose of receiving the exchange notes from AGY.
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If any tendered old notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted old notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
expiration date.
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes for
exchange notes pursuant to the exchange offer. AGY will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the exchange offer. See "--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 1999, unless AGY in its sole discretion, extends the exchange offer, in
which case the term "expiration date" means the latest date and time to which
the exchange offer is extended.
In order to extend the exchange offer, AGY will notify the exchange agent
thereof by written notice and will make a public announcement of such
extension, each prior to 9:00 a.m., New York City time, on the next business
day after the previously scheduled expiration date.
AGY reserves the right, in its sole discretion:
. to delay accepting any old notes, to extend the exchange offer or to
terminate the exchange offer if any of the conditions set forth below
under "--Conditions" shall not have been satisfied, by giving written
notice of such delay, extension or termination to the exchange agent; or
. to amend the terms of the exchange offer in any manner, whether before or
after any tender of the old notes.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders.
Interest on Exchange Notes
Interest on each exchange note will accrue from the Issue Date, i.e., January
21, 1999, and be payable semiannually in arrears on January 15 and July 15 of
each year, commencing July 15, 1999, at the rate of 9 7/8 percent per annum.
Holders whose old notes are accepted for exchange will be deemed to have waived
the right to receive any interest accrued on the old notes.
Procedures for Tendering Old Notes
Only a holder of old notes may tender such old notes in the exchange offer.
Each such holder wishing to accept the exchange offer must complete, sign and
date the accompanying letter of transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and therein, have the
signatures thereon guaranteed if required by the letter of transmittal or
transmit an agent's message in connection with a book-entry transfer, and mail
or otherwise deliver such letter of transmittal or such facsimile or agent's
message, together with the old notes and any other required documents, to the
exchange agent prior to 5:00 p.m., New York City time, on the expiration date.
To be tendered effectively, the old notes, the letter of transmittal or agent's
message and all other required documents must be properly completed and
received by the exchange agent at the address set forth below under "Exchange
Agent" prior to 5:00 p.m., New York City time, on the expiration
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date. Delivery of the old notes may be made by book-entry transfer in
accordance with the procedures described below. Confirmation of such book-entry
transfer must be received by the exchange agent prior to the expiration date.
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the old notes that such participant has
received and agrees: (i) to participate in the Automated Tender Option Program
("ATOP"); (ii) to be bound by the terms of the letter of transmittal; and (iii)
that AGY may enforce such agreement against such participant.
By executing the letter of transmittal or an agent's message, each holder
will make the representations set forth above in the second paragraph under the
heading "--Purpose and Effect of the Exchange Offer" to AGY. The tender by a
holder and the acceptance thereof by AGY will constitute an agreement between
such holder and AGY that such holder will participate in the exchange offer in
accordance with the terms and subject to the conditions set forth herein and in
the letter of transmittal.
The method of delivery of the old notes and the letter of transmittal or an
agent's message and all other required documents to the exchange agent is at
the election and sole risk of the holder. As an alternative to delivery by
mail, holders may wish to consider overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure delivery to the exchange
agent before the expiration date. Holders may request their respective brokers,
dealers, commercial banks, trust companies or nominees to effect the above
transactions for such holders.
Any beneficial owner whose old notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a savings institution, commercial bank or trust company having an office
or correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act, and
which is, in each case, a member of a recognized signature guarantee program
(i.e., Securities Transfer Agents Medallion Program, Stock Exchange Medallion
Program or New York Stock Exchange Medallion Signature Program) (an "Eligible
Institution"), unless the old notes tendered pursuant thereto are tendered (i)
by a registered holder who has not completed the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" on the letter
of transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by an
Eligible Institution.
If the letter of transmittal is signed by a person other than the registered
holder of any old notes listed therein, such old notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such old notes with the
signature thereon guaranteed by an Eligible Institution.
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If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to AGY of
their authority to so act must be submitted with the letter of transmittal.
AGY understands that the exchange agent will make a request promptly after
the date of this prospectus to establish an account through the facilities of
The Depository Trust Company ("DTC") for receipt of the tender of old notes
through book-entry delivery thereof. For the purpose of facilitating the
exchange offer, any financial institution that is a DTC participant may
participate in the exchange offer through book-entry delivery of old notes by
causing DTC to transfer such old notes into the exchange agent's account for
the old notes. Although delivery of the old notes may be effected through book-
entry transfer into the exchange agent's account at DTC, unless an agent's
message is received by the exchange agent in compliance with ATOP, an
appropriate letter of transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the exchange agent at its
address and in the manner set forth below under "--Exchange Agent" on or prior
to the expiration date, or, if the guaranteed delivery procedures described
below are complied with, within the time period provided under such procedures.
Delivery of documents to DTC does not constitute delivery to the exchange
agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered old notes and withdrawal of tendered old notes
will be determined by AGY in its sole discretion, which determination will be
final and binding. AGY reserves the absolute right to reject any and all old
notes not properly tendered or any old notes AGY's acceptance of which would,
in the opinion of counsel for AGY, be unlawful. AGY also reserves the right in
its sole discretion to waive any defects, irregularities or conditions of
tender as to particular old notes. AGY's interpretation of the terms and
conditions of the exchange offer (including the instructions in the letter of
transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of old notes must be cured
within such time as AGY shall determine. Although AGY intends to notify holders
of defects or irregularities with respect to tenders of old notes, neither AGY,
the exchange agent nor any other person shall incur any liability for failure
to give such notification. Tenders of old notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any old
notes received by the exchange agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the exchange agent to the tendering holders, unless otherwise
provided in the letter of transmittal, as promptly as practicable following the
expiration date.
No letter of transmittal, old notes, notice of guaranteed delivery or other
documents should be sent to AGY or DTC. Delivery thereof to AGY or DTC will not
constitute valid delivery.
Guaranteed Delivery Procedures
Holders of old notes who wish to tender their old notes but who cannot, prior
to 5:00 p.m., New York City time, on the expiration date (i) deliver their old
notes, the letter of transmittal or any other documents required by the letter
of transmittal to the exchange agent or (ii) deliver a confirmation of the
book-entry tender of their old notes into the exchange agent's account at DTC
and otherwise complete the procedures for book-entry transfer, may effect a
tender of old notes if:
. the tender is made through an Eligible Institution;
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. prior to 5:00 p.m., New York City time, on the expiration date, the
exchange agent receives from such Eligible Institution a properly
completed and duly executed notice of guaranteed delivery (a form of
which accompanies this prospectus) (by facsimile transmission, registered
or certified mail or hand delivery) setting forth the name and address of
the holder, the certificate number(s) of such old notes and the principal
amount of old notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the letter of transmittal (or
facsimile thereof) together with the certificate(s) representing the old
notes (or a confirmation of book-entry transfer of such old notes into
the exchange agent's account at DTC), and any other documents required by
the letter of transmittal will be deposited by the Eligible Institution
with the exchange agent; and
. such properly completed and duly executed letter of transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered old notes in proper form for transfer (or a confirmation of
book-entry transfer of such old notes into the exchange agent's account
at DTC), and all other documents required by the letter of transmittal
are received by the exchange agent within three New York Stock Exchange
trading days after the expiration date.
Upon request to the exchange agent, additional copies of the notice of
guaranteed delivery will be sent to holders.
Acceptance of Old Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
AGY will accept, promptly after the expiration date, all old notes properly
tendered and will issue the exchange notes promptly after acceptance of the old
notes. For a description of certain conditions to the exchange offer, see "--
Conditions" below. For purposes of the exchange offer, AGY will be deemed to
have accepted properly tendered old notes for exchange when, as and if AGY has
given written notice thereof to the exchange agent. For each old note accepted
for exchange, the holder of such old note will receive an exchange note having
a principal amount equal to that of the surrendered old note.
In all cases, issuance of exchange notes for old notes that are accepted for
exchange pursuant to the exchange offer will be made only after timely receipt
by the exchange agent of certificates for such old notes (or a timely
confirmation that such old notes have been transferred into the exchange
agent's account at DTC), a properly completed and duly executed letter of
transmittal and all other required documents. If any tendered old notes are not
accepted for any reason set forth in the terms and conditions of the exchange
offer or if old notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged old notes will be
returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the exchange offer.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of old notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the expiration date.
To withdraw a tender of old notes in the exchange offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
exchange agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the expiration date. Any such notice of withdrawal must:
. specify the name of the person having deposited the old notes to be
withdrawn (the "Depositor");
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. identify the old notes to be withdrawn (including the certificate
number(s) and principal amount of such old notes, or, in the case of old
notes tendered by book-entry transfer into the exchange agent's account
at DTC pursuant to the applicable book-entry procedures, the name and
number of the account at DTC to be credited);
. be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such old notes were tendered
(including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the trustee register the
transfer of such old notes into the name of the person withdrawing the
tender; and
. specify the name in which any such old notes are to be registered, if
different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by AGY in its sole discretion,
which determination shall be final and binding. Any old notes so withdrawn will
be deemed not to have been validly tendered for purposes of the exchange offer
and no exchange notes will be issued with respect thereto unless the old notes
so withdrawn are validly retendered. Any old notes which have been tendered but
which are not accepted for exchange will be returned, without expense, to the
holder thereof as promptly as practicable after withdrawal, rejection of tender
or termination of the exchange offer. Properly withdrawn old notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering Old Notes" at any time prior to the expiration date.
Conditions
Notwithstanding any other term of the exchange offer, AGY shall not be
required to accept for exchange, or exchange exchange notes for, any old notes,
and may terminate or amend the exchange offer as provided herein before the
acceptance of such old notes, if:
. any action or proceeding is instituted or threatened in any court or by
any governmental or quasi-governmental agency which might materially
impair the ability of AGY to proceed with the exchange offer or any
material adverse development has occurred in any existing action or
proceeding with respect to AGY;
. the exchange offer violates applicable law or any applicable SEC
interpretation; or
. any governmental or quasi-governmental approval has not been obtained,
which approval AGY shall deem necessary for the consummation of the
exchange offer as contemplated hereby.
If AGY determines in its sole discretion that any of the foregoing conditions
are not satisfied, AGY may:
. refuse to accept any old notes and return all tendered old notes to the
tendering holders;
. extend the exchange offer and retain all old notes tendered prior to the
expiration of the exchange offer, subject, however, to the rights of
holders to withdraw such old notes (see "--Withdrawal of Tenders"); or
. waive such unsatisfied conditions and accept all properly tendered old
notes which have not been withdrawn.
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In addition, AGY has reserved the right, notwithstanding the satisfaction or
failure of any or all of the foregoing conditions, to terminate or amend the
exchange offer in any manner it shall determine in its sole discretion, which
determination shall be binding.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered or accepted for exchange.
Exchange Agent
The Bank of New York, which also acts as trustee under the indenture, has
been appointed as exchange agent for the exchange offer. Each holder wishing to
accept the exchange offer must deliver (i) a letter of transmittal, such
holder's tendered old notes and all other required documents or (ii) a notice
of guaranteed delivery and all other documents described under "--Guaranteed
Delivery Procedures," to the exchange agent as follows:
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section 7-E
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-
Delivery to an address other than as set forth above will not constitute
valid delivery.
Questions and requests for assistance, and requests for additional copies of
this prospectus, the letter of transmittal or the notice of guaranteed
delivery, should be directed to the exchange agent at the address and telephone
number set forth in the letter of transmittal.
Fees and Expenses
The expenses of soliciting tenders will be borne by AGY. The principal
solicitation is being made by mail; however, additional solicitation may be
made by telegraph, telecopy, telephone or in person by officers, employees or
agents of AGY and its affiliates. AGY has not retained any dealer-manager in
connection with the exchange offer and will not make any payments to brokers,
dealers or others to solicit acceptances of the exchange offer. AGY, however,
will pay the exchange agent reasonable and customary fees for its services and
will reimburse it for its reasonable out-of-pocket expenses in connection with
the exchange offer. All other expenses to be incurred in connection with the
exchange offer will be paid by AGY. Such expenses include fees and expenses of
the trustee, accounting and legal fees and printing costs, among others.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the old
notes, which is face value, as reflected in AGY's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by AGY in connection with the exchange offer. The expenses of the
exchange offer will be amortized over the term of the exchange notes.
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Consequences of Failure to Exchange
The old notes that are not exchanged for exchange notes pursuant to the
exchange offer will remain restricted securities. Accordingly, such old notes
may not be reoffered, resold, pledged or otherwise transferred except in
accordance with applicable state securities laws and
. to a person whom the transferor reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A;
. in an offshore transaction meeting the requirements of Rule 903 or Rule
904 of Regulation S;
. to an institution that is an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act
in a transaction exempt from the registration requirements of the
Securities Act (if available);
. pursuant to an exemption from registration under the Securities Act
provided by Rule 144 thereunder (if available); or
. pursuant to an effective registration statement under the Securities Act.
Following consummation of the exchange offer, holders of the old notes who
were eligible to participate in the exchange offer but who did not tender their
old notes will generally not have any further registration rights under the
registration rights agreement, and such old notes will continue to be subject
to restrictions on transfer. Accordingly, the liquidity of the market for such
old notes could be adversely affected. See "Risk Factors--Old Notes Outstanding
After the Exchange Offer Will Not Have Registration Rights and We Expect the
Market for the Old Notes To Be Illiquid."
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PLAN OF DISTRIBUTION
Except as provided herein, this prospectus may not be used for an offer to
resell, a resale or other transfer of exchange notes. Based on existing
interpretations of the Securities Act by the SEC set forth in several no-action
letters to third parties and unrelated to AGY and the exchange offer, AGY
believes that the exchange notes issued pursuant to the exchange offer in
exchange for old notes may be offered for resale, resold and otherwise
transferred by the holders thereof (other than any such holder which is an
"affiliate" of AGY within the meaning of Rule 405 under the Securities Act)
without further compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such exchange notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of such exchange notes.
Any holder who is an affiliate of AGY or who intends to participate in the
exchange offer for the purpose of distributing the exchange notes:
. will not be able to rely on the SEC interpretations set forth in the
above-mentioned no-action letters;
. will not be able to tender its old notes in the exchange offer; and
. must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer transaction
unless such sale or transfer is made pursuant to an exemption from such
requirements.
A participating broker-dealer holding old notes may participate in the
exchange offer provided that it acquired the old notes for its own account as a
result of market-making or other trading activities. In connection with any
resales of exchange notes, any participating broker-dealer who receives
exchange notes for old notes pursuant to the exchange offer may be an
"underwriter" (within the meaning of the Securities Act) and must deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of the exchange notes. The SEC has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the exchange notes (other than a resale of an unsold allotment
from the original sale of the old notes) with this prospectus, as it may be
amended or supplemented from time to time. Under the registration rights
agreement, AGY is required to allow participating broker-dealers and other
persons, if any, subject to similar prospectus delivery requirements, to use
this prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of such exchange notes for a period of 180 days.
Each participating broker-dealer wishing to accept the exchange offer must
represent to AGY that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of exchange notes.
The exchange offer is intended to satisfy certain of AGY's obligations under
the registration rights agreement. AGY will not receive any cash proceeds from
the issuance of the exchange notes offered hereby. In consideration for issuing
the exchange notes as contemplated in this prospectus, AGY will receive a like
principal amount of old notes. The form and terms of the exchange notes will be
identical in all material respects to the form and terms of the old notes,
except as described herein.
Exchange notes received by broker-dealers for their own account pursuant to
the exchange offer may be sold from time to time in one or more transactions in
the over-the-counter market, in
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negotiated transactions, through the writing of options on the exchange notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, or at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through broker-dealers who may receive compensation in the form of commissions
or concessions from any such broker-dealer and/or the purchasers of any such
exchange notes. Any broker-dealer that resells exchange notes that were
received by it for its own account pursuant to the exchange offer and any
person that participates in the distribution of such exchange notes may be
deemed an "underwriter" (within the meaning of the Securities Act) and any
profit on any such resale of exchange notes and any commissions or concessions
received by any such broker-dealers may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal states that
any acknowledgment by a participating broker-dealer that it will deliver a
prospectus in connection with any resale of exchange notes, and any such
delivery of a prospectus, shall not be deemed an admission by such
participating broker-dealer that it is an underwriter.
For a period of 180 days after the expiration date, AGY will send additional
copies of this prospectus and any amendment or supplement to this prospectus to
any participating broker-dealer that requests such documents in such
participating broker-dealer's letter of transmittal. By acceptance of the
exchange offer, each broker-dealer that receives exchange notes for old notes
pursuant thereto agrees that, upon receipt of notice from AGY of the happening
of any event which makes any statement in this prospectus untrue in any
material respect or which requires the making of any changes in this prospectus
in order to make the statements herein not materially misleading (which notice
AGY has agreed to deliver to such broker-dealer), such broker-dealer will
suspend the use of this prospectus until AGY has amended or supplemented this
prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented prospectus to such broker-dealer.
AGY has agreed, pursuant to the registration rights agreement, to pay all
expenses incident to AGY's performance of and compliance with the exchange
offer and the registration rights agreement (other than agency fees and
commissions, underwriting discounts and commissions and the fees and
disbursements of counsel and other advisors and experts retained by the
holders). In addition, AGY has agreed to indemnify the holders of the exchange
notes against certain liabilities, including liabilities under the Securities
Act.
The exchange notes are a new issuance of securities for which there is
currently no trading market. The exchange notes will not be listed on any
national securities exchange or Nasdaq. AGY has been advised by the Initial
Purchasers that they intend to make a market in the exchange notes; however,
the Initial Purchasers are not obligated to do so, and any such market making
activities may be discontinued at any time without notice. Accordingly, there
can be no assurance that an active trading market for the exchange notes will
develop or as to the liquidity of any such market. In addition, if the exchange
notes are traded after their initial issuance, they may trade at a discount
from their initial offering price, depending upon prevailing interest rates,
the market for similar securities, the performance of AGY and other factors.
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LEGAL MATTERS
The validity of the exchange notes offered hereby will be passed upon for AGY
by Alston & Bird LLP, Atlanta, Georgia.
EXPERTS
The audited statements of net assets of the Business as of December 31, 1997
and 1996 and the related statements of operations, changes in net assets and
cash flows for each of the three years in the period ended December 31, 1997
included in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
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INDEX TO FINANCIAL STATEMENTS
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................. F-2
Statements of Net Assets as of December 31, 1997 and 1996................ F-3
Statements of Operations for the Years Ended December 31, 1997, 1996 and
1995.................................................................... F-4
Statements of Changes in Net Assets for the Years Ended December 31,
1997, 1996 and 1995..................................................... F-5
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and
1995.................................................................... F-6
Notes to Financial Statements............................................ F-7
ADVANCED GLASSFIBER YARNS LLC
(a Subsidiary of Owens Corning)
Balance Sheets as of September 30, 1998 (unaudited) and December 31,
1997.................................................................... F-17
Statements of Operations for the Nine Months Ended September 30, 1998 and
1997 (unaudited)........................................................ F-18
Statements of Cash Flows for the Nine Months Ended September 30, 1998 and
1997 (unaudited)........................................................ F-19
Notes to Condensed Financial Statements.................................. F-20
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Owens Corning:
We have audited the accompanying statements of net assets of the GLASS YARNS
AND SPECIALTY MATERIALS BUSINESS (the "Business"), a business unit of OWENS
CORNING, a Delaware corporation (the "Company") as described in Note 1, as of
December 31, 1997 and 1996 and the related statements of operations, changes in
net assets and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of
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 net assets of the GLASS YARNS AND SPECIALTY
MATERIALS BUSINESS as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Toledo, Ohio,
August 14, 1998.
F-2
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
STATEMENTS OF NET ASSETS
AS OF DECEMBER 31, 1997 and 1996
(Note 1)
(In Thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Receivables, less allowances of $1,419 in 1997 and $1,490
in 1996................................................... $ 19,272 $ 23,308
Inventories (Note 3)....................................... 19,168 21,246
Deferred income taxes (Note 9)............................. 4,396 4,438
Other current assets....................................... 291 --
-------- --------
Total current assets..................................... 43,127 48,992
-------- --------
Deferred income taxes (Note 9)............................... 5,276 7,537
Net property, plant and equipment (Note 4)................... 105,558 107,310
-------- --------
Total assets............................................. 153,961 163,839
-------- --------
CURRENT LIABILITIES:
Accounts payable........................................... 11,288 7,914
Accrued liabilities (Note 7)............................... 8,398 9,481
Income taxes payable (Note 9).............................. 30,237 31,775
Other current liabilities (Note 6)......................... 5,076 4,766
-------- --------
Total current liabilities................................ 54,999 53,936
-------- --------
PENSION AND OTHER EMPLOYEE BENEFIT PLANS (Note 6)............ 68,022 73,053
-------- --------
NET ASSETS................................................... $ 30,940 $ 36,850
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Note 1)
(In Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
NET SALES......................................... $277,357 $274,979 $272,395
COST OF SALES..................................... 182,366 180,343 187,153
-------- -------- --------
Gross margin.................................... 94,991 94,636 85,242
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(Note 1)......................................... 14,813 14,345 13,748
-------- -------- --------
Income from operations.......................... 80,178 80,291 71,494
OTHER INCOME, NET (Note 8)........................ (2,688) (3,003) (3,041)
-------- -------- --------
Income before provision for income taxes........ 82,866 83,294 74,535
PROVISION FOR INCOME TAXES (Note 9)............... 32,540 33,051 29,594
-------- -------- --------
NET INCOME........................................ $ 50,326 $ 50,243 $ 44,941
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Note 1)
(In Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net assets at beginning of year................... $ 36,850 $ 31,899 $ 25,439
Net income........................................ 50,326 50,243 44,941
Net transfers to Owens Corning.................... (60,916) (44,030) (48,163)
Other net......................................... 4,680 (1,262) 9,682
-------- -------- --------
Net assets at end of year......................... $ 30,940 $ 36,850 $ 31,899
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Note 1)
(In Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 50,326 $ 50,243 $ 44,941
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................... 8,305 8,233 8,604
Deferred income tax provision.................. 2,303 1,276 1,935
Loss on disposal of property, plant and equip-
ment.......................................... 192 419 661
Changes in current assets and liabilities:
Receivables, net............................. 4,036 2,834 (3,757)
Inventories.................................. 2,078 (3,149) 3,010
Other current assets......................... (291) -- --
Accounts payable............................. 3,374 (1,378) 816
Accrued liabilities.......................... (1,083) 866 411
-------- -------- --------
Net cash provided by operating activities.... 69,240 59,344 56,621
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment..... (8,324) (15,314) (8,458)
-------- -------- --------
Net cash used in investing activities........ (8,324) (15,314) (8,458)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net transfers to Owens Corning................. (60,916) (44,030) (48,163)
-------- -------- --------
Net cash used in financing activities........ (60,916) (44,030) (48,163)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH.................. -- -- --
CASH, beginning of year.......................... -- -- --
-------- -------- --------
CASH, end of year................................ $ -- $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying financial statements of the Owens Corning (the "Company")
Glass Yarns and Specialty Materials Business (the "Business") have been
prepared in conjunction with the Company's sale of a 51% interest in the
Business.
The Business is an operating unit of the Company's Composites Systems
Business and is operated from the following locations: Aiken, South Carolina;
Huntingdon, Pennsylvania; Battice, Belgium and Guelph, Ontario. The Business is
a global supplier of glass fiber yarns and specialty materials that are used in
a variety of industrial and commercial applications, including laminates for
printed circuit boards, reinforcing scrims, filtration and window screening and
reinforcement for roofing and facade cladding. The fiberglass yarns products
are typically sold to weavers who produce intermediary products known as
fabrics for use in the manufacture of end-products.
The Business employs approximately 1,500 hourly employees. The hourly
employees are organized under the Teamsters Local Union Number 86 the Aiken
plant and the Union of Needletrades, Industrial and Textiles Employees at the
Huntingdon plant. The collective bargaining agreements for the Aiken and
Huntingdon workforces expire in May of 1999 and October of 1999, respectively.
The accompanying financial statements have been derived from the historical
financial statements of the Company and do not reflect adjustments which may
arise related to the transaction and events described in Note 11.
The Business has been managed as an operating unit of the Composites Systems
Business of the Company, which has provided it with certain administrative and
operational support. The accompanying financial statements include the cost of
the Business' employees and estimates of certain corporate services provided by
the Company. Management, using its experience with the Business and its
judgment, has estimated the cost of such corporate services and other support.
Management believes that its methodology is reasonable and that the costs of
the operational and administrative support included in the accompanying
financial statements are comparable to those that the Business would have
incurred had it operated as a separate entity. The financial information
presented herein may not necessarily reflect the financial position and results
of operations of the Business in the future.
Two customers accounted for approximately 21% and 11% of the Business' net
sales for the year ended December 31, 1997, 21% and 10% in 1996, and 19% and
12% in 1995. Two customers accounted for approximately 17% and 11% at December
31, 1997, and 3% and 15% at December 31, 1996 of gross accounts receivable.
(2) Accounting Policies
Principles of Consolidation
The Business is conducted through the Company and two wholly-owned
subsidiaries of the Company. Significant intercompany accounts and transactions
have been eliminated.
F-7
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(2) Accounting Policies--(Continued)
Inventory Valuation
Inventories are stated at cost, which is less than market value, and include
material, labor and manufacturing overhead. Inventories are valued using the
first-in, first-out (FIFO) method.
Rebuild of Glass Melting Furnaces
Glass melting furnaces periodically require substantial rebuilding. The time
period between rebuilds varies depending upon the utilization of the furnace.
The Company applies the capital method of accounting for the cost to rebuild
glass melting furnaces. Under this method, costs are capitalized when incurred
and depreciated over the estimated useful lives of the rebuilt furnaces.
Depreciation
For assets placed in service prior to January 1, 1992, the Business' plant
and equipment is depreciated primarily using the double-declining balance
method for the first half of an asset's estimated useful life and the straight-
line method is used thereafter. For assets placed in service after December 31,
1991, the Business' plant and equipment is depreciated using the straight-line
method.
Revenue Recognition
Revenues are recognized upon shipment of products.
Foreign Currency Translation
The assets and liabilities of the Business' non-U.S. operations are
translated at the year-end exchange rates and income and expenses are
translated at the average exchange rates prevailing during the period.
Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of net revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The fair value of financial instruments in the accompanying financial
statements approximates the carrying value.
F-8
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(3) Inventories
Inventories consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Finished goods............................................... $14,431 $17,597
Materials and supplies....................................... 4,737 3,649
------- -------
Total inventories......................................... $19,168 $21,246
======= =======
</TABLE>
(4) Net Property, Plant and Equipment
Net property, plant and equipment consisted of the following at December 31
(in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land..................................................... $ 1,057 $ 1,057
Building and leasehold improvements...................... 28,918 28,209
Machinery and equipment.................................. 189,244 190,385
Alloy metals............................................. 22,988 24,567
Construction in progress................................. 6,330 2,538
-------- --------
Gross property, plant and equipment.................... 248,537 246,756
Less--Accumulated depreciation........................... (142,979) (139,446)
-------- --------
Net property, plant and equipment.................... $105,558 $107,310
======== ========
</TABLE>
(5) Transactions with Related Parties
The Business engages in several transactions with other manufacturing
facilities, divisions or legal entities of the Company that are not included in
the Business. The following is a description of these transactions:
Purchases of Materials
The Business purchases glass marbles, which are used as an input material to
the production of certain glass yarns, from another Company manufacturing
facility. The transfer price of the glass marbles is based on the actual
manufacturing cost of the producing facility. Glass marble purchases were
$3,047,000, $2,889,000 and $3,064,000 in 1997, 1996 and 1995, respectively.
Glass Forming Bushing Fabrication Services and Alloy Metal Loss
The glass forming bushings used in the Business' glass melting furnaces
require periodic refurbishing. Refurbishing and fabrication services are
provided to the Business by the Company's central alloy operations. Such
services and alloy metals physically consumed in the manufacturing process are
charged to the Business at actual cost and were $3,200,000, $3,400,000 and
$3,600,000 in 1997, 1996 and 1995, respectively.
Lease Transactions
The Company has entered into master lease arrangements, which are operating
leases for accounting purposes, for manufacturing equipment used by the
Business. The rental expense included in the accompanying statements of
operations associated with these leases was $1,928,000 and $418,000 in 1997 and
1996, respectively.
F-9
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The minimum future rental commitments associated with these leases are as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998.................................................................. $2,246
1999.................................................................. 2,263
2000.................................................................. 2,263
2001.................................................................. 1,776
2002 through 2003..................................................... 549
------
$9,097
======
</TABLE>
Cross Charges
Certain employees of the Aiken glass yarns facility perform maintenance,
administrative support, customer support, environmental, safety, warehousing
and other services for the Aiken mat plant and for the Company's centralized
production support organization. The cost of such services has been cross
charged (removed from cost of sales in the accompanying statement of
operations) to the plant or organization receiving the service. The amount of
cost charged to other Owens Corning facilities was $2,900,000, $3,000,000 and
$3,400,000 in 1997, 1996 and 1995, respectively.
(6) Employee Benefit Plans
Pension Plans
The hourly and salaried employees of the Business participate in Company
wide defined benefit plans maintained by the Company. Under the plans, pension
benefits are generally based on an employee's pay and number of years of
service. Company contributions to these pension plans are based on the
calculations of independent actuaries using the projected unit credit method.
Plan assets consist primarily of equity securities with the balance in fixed
income investments. The unrecognized cost of retroactive amendments and
actuarial gains and losses are amortized over the average future service period
of plan participants expected to receive benefits.
Pension expense attributed to the Business from the Company's defined benefit
pension plans includes the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost................................. $ 2,000 $ 1,800 $ 3,000
Interest cost on projected benefit
obligation.................................. 7,777 7,833 8,133
Actual return on plan assets................. (20,374) (13,152) (16,071)
Net amortization and deferral................ 10,653 3,019 5,434
-------- -------- --------
Net pension expense (credit)................. $ 56 $ (500) $ 496
======== ======== ========
</TABLE>
F-10
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table reconciles the funded status of the accrued pension
benefit cost at October 31, 1997 and 1996, as reflected on the statements of
net assets at December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Vested benefit obligation.............................. $103,344 $ 89,510
======== ========
Accumulated benefit obligation......................... $112,199 $102,226
======== ========
Plan assets at fair value.............................. $110,924 $103,088
Projected benefit obligation........................... 112,580 106,681
-------- --------
Plan assets in excess of (less than) projected benefit
obligation............................................ (1,656) (3,593)
Unrecognized loss...................................... 5,467 8,746
Unrecognized prior service cost........................ (8,201) (9,315)
Unrecognized transition amount......................... (3,631) (4,244)
-------- --------
Net pension liability.................................. $ (8,021) $ (8,406)
======== ========
</TABLE>
The 1997, 1996 and 1995 primary actuarial assumptions used for the pension
plans were:
<TABLE>
<CAPTION>
1997 1996 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate.............................................. 7.25% 7.75% 7.50%
Expected long-term rate of return on plan assets........... 9.00% 9.00% 9.00%
Rate of compensation increase.............................. 5.00% 5.10% 5.10%
</TABLE>
Postemployment and Postretirement Benefits Other Than Pensions
The employees of the Business participate in Company wide health care and
life insurance benefit plans for certain retired employees and their
dependents. The health care plans in the U.S. are unfunded and pay either 1)
stated percentages of covered medically necessary expenses, after subtracting
payments by Medicare or other providers and after stated deductibles have been
met, or, 2) fixed amounts of medical expense reimbursement.
Employees become eligible to participate in the health care plans upon
retirement under the Company's pension plans if they have accumulated 10 years
of service after age 45. Some of the plans are contributory, with some retiree
contributions adjusted annually. The Company has reserved the right to change
or eliminate these benefit plans subject to the terms of collective bargaining
agreements.
F-11
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table reconciles the status of the accrued postretirement
benefits cost liability at October 31, 1997 and 1996, as reflected on the
statements of net assets at December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Accumulated Postretirement Benefits Obligation:
Retirees.............................................. $(40,068) $(33,831)
Fully eligible active plan participants............... (7,560) (5,292)
Other active plan participants........................ (9,072) (10,962)
-------- --------
Funded status....................................... (56,700) (50,085)
Unrecognized net (gain) loss............................ 3,780 (2,079)
Unrecognized net reduction in prior service cost........ (6,048) (9,828)
Benefit payments subsequent to the valuation date....... 756 --
-------- --------
Accrued postretirement benefits cost liability
(including current liabilities of $4,226 and $4,011 in
1997 and 1996, respectively)........................... $(58,212) $(61,992)
======== ========
</TABLE>
The amount of net postretirement benefits cost attributed to the Business for
1997, 1996 and 1995 included the following components (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost.................................... $ 900 $ 1,100 $ 900
Interest cost on accumulated Postretirement
benefits Obligation............................ 3,780 3,591 3,591
Net amortization and deferral................... (3,780) (3,780) (4,158)
------- ------- -------
Net postretirement benefits cost................ $ 900 $ 911 $ 333
======= ======= =======
</TABLE>
For measurement purposes, an 8% annual rate of increase in the per capita
cost of covered health care claims was assumed for 1998. The rate was assumed
to decrease to 7% for 1999, then decrease to 6% by 2000. The health care cost
trend rate assumption has a significant effect on the amounts reported. To
illustrate, increasing the assumed health care cost trend rate by one
percentage point in each year would increase the accumulated postretirement
benefits obligation as of October 31, 1997 by $7,779,000 and the aggregate of
the service and interest cost components of net postretirement benefits cost
for the year then ended by $867,000. The discount rate used in determining the
accumulated postretirement benefits obligation was 7.25% in 1997, 7.75% in 1996
and 7.50% in 1995.
Employees of the Business also participate in plans that provide benefits to
former or inactive employees after employment but before retirement under
certain conditions. These benefits include, but are not limited to, salary
continuation, supplemental unemployment benefits, severance benefits,
disability-related benefits (including workers' compensation), job training and
counseling, and continuation of benefits such as health care and life insurance
coverage. The accrued postemployment benefits cost liability attributed to the
Business at October 31, 1997 and 1996, as reflected in the statement of net
assets at December 31, 1997 and 1996 was $6,865,000 and $7,421,000,
respectively, including current liabilities of $850,000 and $755,000 at
December 31, 1997 and 1996, respectively.
F-12
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(7) Accrued Liabilities
Accrued liabilities consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Vacation...................................................... $3,180 $3,631
Real and personal property taxes.............................. 1,904 2,265
Health benefits............................................... 1,205 1,127
Other......................................................... 1,778 1,427
Incentive compensation........................................ 331 1,031
------ ------
$8,398 $9,481
====== ======
</TABLE>
(8) Other Income, Net
Other income includes royalties and technical service fees earned in
connection with a non-exclusive license granted to Taiwan Glass Industrial
Corporation (TGIC) which entitles TGIC to make products using certain of the
Business' technology. The Business also provides technical services to TGIC
under a separate agreement. The financial statements include royalties
attributable to the manufacture and sale of glass yarns products by TGIC.
Also included in other income is the net revenue associated with sales of
certain scrap materials generated in the manufacturing process.
The components of other income are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Royalties and technical service fees................ $ 1,237 $2,100 $1,687
Sales proceeds from scrap material.................. 2,900 1,806 2,707
Cost of scrap material sold......................... (1,449) (903) (1,353)
------- ------ ------
$ 2,688 $3,003 $3,041
======= ====== ======
</TABLE>
(9) Income Taxes
The provision for income taxes, income taxes payable and deferred income
taxes included in the accompanying financial statements have been calculated as
if the Business operated as a stand alone entity.
Income before provision for income taxes (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S.................................................. $81,129 $77,079 $65,492
Foreign.............................................. 1,737 6,215 9,043
------- ------- -------
Total................................................ $82,866 $83,294 $74,535
======= ======= =======
</TABLE>
F-13
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Currently payable:
U.S. state and federal............................ $29,539 $29,278 $24,026
Foreign........................................... 698 2,497 3,633
Deferred:
U.S. state and federal............................ 2,303 1,276 1,935
------- ------- -------
Total provision for income taxes.................. $32,540 $33,051 $29,594
======= ======= =======
</TABLE>
The reconciliation between the U.S. Federal statutory rate and the Business'
effective income tax rate is:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory rate................................. 35% 35% 35%
State and local income taxes.............................. 4 4 4
Foreign tax rates greater than U.S. Federal statutory
rate..................................................... -- 1 1
--- --- ---
39% 40% 40%
=== === ===
</TABLE>
Deferred income taxes are determined based on the estimated future tax
effects of temporary differences between the financial reporting and tax bases
of assets and liabilities, given the provisions of the enacted tax laws.
Deferred tax consequences of significant temporary differences existing as of
December 31, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Pension and other employee benefit plans.............. $ 29,692 $ 31,543
Other................................................. 1,668 1,853
-------- --------
$ 31,360 $ 33,396
======== ========
Deferred tax liabilities:
Fixed Assets.......................................... $(21,688) $(21,421)
======== ========
</TABLE>
F-14
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(10) Segment Information
The Business operates in one business segment that manufactures glass fiber
yarns and specialty materials that are used in a variety of industrial and
commercial applications. The Business operates in various geographical
locations, as indicated below (in thousands).
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net Sales
North America................................ $202,666 $196,440 $186,411
Europe and other............................. 74,691 78,539 85,984
-------- -------- --------
277,357 274,979 272,395
-------- -------- --------
Inter Segment Sales
North America................................ 38,714 39,341 32,262
Eliminations................................. (38,714) (39,341) (32,262)
-------- -------- --------
$277,357 $274,979 $272,395
======== ======== ========
Income from Operations
North America................................ $ 78,441 $ 74,076 $ 62,451
Europe and other............................. 1,737 6,215 9,043
-------- -------- --------
$ 80,178 $ 80,291 $ 71,494
======== ======== ========
</TABLE>
(11) Subsequent Event (Unaudited)
On July 1, 1998, the Company contributed certain assets and liabilities of
the Business to Advanced Glassfiber Yarns LLC (formerly known as Lincoln Yarns
LLC), a wholly owned Delaware limited liability company. On July 30, 1998, the
Company transferred 49% of its interest in Advanced Glassfiber Yarns LLC to
Jefferson Holdings, Inc., a wholly owned subsidiary of the Company. On July 31,
1998, the Company and Advanced Glassfiber Yarns LLC entered into an LLC
Interest Sale and Purchase Agreement (the "Agreement") with Glass Holdings
Corp., ("Glass Holdings") a U.S. subsidiary of Porcher Industries, S.A., of
Badinieres, France. Pursuant to the Agreement, OC sold its 51% interest in
Advanced Glassfiber Yarns LLC to a wholly owned subsidiary of Glass Holdings
for approximately $336 million. In addition, the Company received a
distribution of approximately $193 million at the time of the closing, which
was on September 30, 1998. Porcher Industries, S.A. and affiliates represent
21%, 21%, and 19% of the Business' sales for the years ended December 31, 1997,
1996 and 1995, respectively. Certain assets and liabilities presented in the
December 31, 1997 and 1996 statements of net assets were excluded from the
contribution to Advanced Glassfiber Yarns LLC and the sale and will therefore
be retained by the Company.
F-15
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business Unit of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
(12) Quarterly Financial Information (Unaudited)(in thousands)
<TABLE>
<CAPTION>
Quarter
-------------------------------
1997 First Second Third Fourth
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales.................................... $67,653 $70,152 $71,815 $67,737
Cost of sales................................ 46,275 43,825 48,122 44,144
------- ------- ------- -------
Gross margin.............................. $21,378 $26,327 $23,693 $23,593
======= ======= ======= =======
Net income................................... $11,152 $14,138 $12,549 $12,487
======= ======= ======= =======
<CAPTION>
Quarter
-------------------------------
1996 First Second Third Fourth
---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales.................................... $66,484 $72,508 $65,089 $70,898
Cost of sales................................ 45,316 48,277 41,675 45,075
------- ------- ------- -------
Gross margin.............................. $21,168 $24,231 $23,414 $25,823
======= ======= ======= =======
Net income................................... $11,058 $12,905 $12,413 $13,867
======= ======= ======= =======
</TABLE>
F-16
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
(a Subsidiary of Owens Corning)
BALANCE SHEETS
(In Thousands)
(See Notes 1 and 4)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Receivables, net.............................. $ 33,393 $ 19,272
Inventories (Note 2).......................... 24,378 19,168
Deferred income taxes......................... -- 4,396
Other current assets.......................... 1,457 291
-------- --------
Total current assets........................ 59,228 43,127
-------- --------
Deferred income taxes......................... -- 5,276
NET PROPERTY, PLANT AND EQUIPMENT............... 149,458 105,558
-------- --------
INTANGIBLE ASSETS............................... 227,678 --
OTHER ASSETS.................................... 9,112 --
-------- --------
Total assets................................ $445,476 $153,961
======== ========
LIABILITIES AND MEMBERS' INTEREST
CURRENT LIABILITIES:
Current portion of long-term debt (Note 4).... $ 12,750 $ --
Accounts payable.............................. -- 11,288
Accrued liabilities (Note 3).................. 7,732 8,398
Due to parent/affiliates...................... 3,012 --
Income taxes payable.......................... -- 30,237
Other current liabilities..................... -- 5,076
-------- --------
Total current liabilities................... 23,494 54,999
-------- --------
PENSION AND OTHER EMPLOYEE BENEFIT PLANS........ 14,800 68,022
-------- --------
LONG-TERM DEBT, less current portion above (Note
4)............................................. 391,250 --
-------- --------
Total liabilities........................... 429,544 123,021
-------- --------
MEMBERS' INTEREST............................... 15,932 30,940
-------- --------
Total liabilities and members' interest..... $445,476 $153,961
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-17
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
(a Subsidiary of Owens Corning)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(In Thousands)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
NET SALES............................................ $205,248 $209,580
COST OF SALES........................................ 134,820 138,045
-------- --------
Gross margin....................................... 70,428 71,535
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......... 11,487 11,110
RESTRUCTURING COSTS (Note 5)......................... 2,034 --
-------- --------
Income from operations............................. 56,907 60,425
OTHER INCOME, NET.................................... (2,328) (2,026)
-------- --------
Income before provision for income taxes........... 59,235 62,451
PROVISION FOR INCOME TAXES (Note 6).................. 16,226 24,481
-------- --------
NET INCOME........................................... $ 43,009 $ 37,970
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-18
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
(a Subsidiary of Owens Corning)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(In Thousands)
(See Notes 1 & 4)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 43,009 $37,970
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 6,394 6,128
Deferred income tax (credit) provision.............. (841) 1,443
Changes in current assets and liabilities:
Receivables, net................................... (14,121) (11,075)
Inventories........................................ (3,786) (2,892)
Other current assets............................... (278) (200)
Accounts payable................................... (468) 304
Accrued liabilities................................ 1,052 (1,731)
-------- -------
Net cash provided by operating activities.......... 30,961 29,947
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment........... (13,509) (5,744)
-------- -------
Net cash used in investing activities.............. (13,509) (5,744)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving loan......................... 14,000 --
Proceeds from bridge facility........................ 150,000 --
Proceeds from term loans............................. 240,000 --
Distribution to Porcher Industries (Note 1).......... (203,624) --
Distribution to Owens Corning........................ (193,388) --
Net transfers to Owens Corning....................... (17,452) (24,203)
Payment of financing costs........................... (6,988) --
-------- -------
Net cash used in financing activities.............. (17,452) (24,203)
-------- -------
NET INCREASE (DECREASE) IN CASH........................ -- --
CASH, beginning of period.............................. -- --
-------- -------
CASH, end of period.................................... $ -- $ --
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-19
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
(a Subsidiary of Owens Corning)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) Basis of Presentation
The interim financial statements are unaudited and reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of
the results for the interim periods. The results of operations for the current
interim period are not necessarily indicative of results to be expected for
the current year or any other period.
These financial statements should be read in conjunction with the Business'
financial statements for the year ended December 31, 1997.
Advanced Glassfiber Yarns LLC ("AGY") was formed by Owens Corning to own and
operate Owens Corning's glass yarns and specialty materials business (the
"Business"), which was contributed to AGY on July 1, 1998 then, a wholly-owned
subsidiary of Owens Corning (the "Contribution"). On September 30, 1998, Owens
Corning sold a 51% interest in AGY to a wholly owned subsidiary of Porcher
Industries, S.A. ("Porcher Industries") for aggregate consideration of $336.2
million (the "Majority Purchase"). In addition, Porcher Industries paid fees
and expenses of approximately $3.2 million in connection with the Majority
Purchase. Subsequent to September 30, Owens Corning and Porcher Industries
reached agreement on the amount of a purchase price adjustment to be made
pursuant to the purchase contract. Porcher Industries agreed to pay an
additional $2.7 million to Owens Corning in connection with the purchase
contract. Owens Corning retained a 49% interest in AGY.
Concurrently with the Majority Purchase, AGY was recapitalized. AGY borrowed
an aggregate of $404.0 million through a combination of $254.0 million under a
Senior Credit Facility (see Note 4) and the issuance of $150.0 million
principal amount of senior subordinated bridge notes under a Senior
Subordinated Credit Facility (the "Subordinated Facility") (see Note 4). AGY
used the proceeds from the initial borrowing under the Senior Credit Facility
and the Subordinated Facility to pay (i) an aggregate cash distribution of
$397.0 million (the "Distribution") to Owens Corning and Porcher Industries in
the amounts of $193.4 million and $203.6 million, respectively, and
(ii) approximately $7.0 million in fees and expenses. The initial borrowings
under the Senior Credit Facility and the Subordinated Facility, and the
application of the net proceeds therefrom are collectively referred to as the
"Financings." The Financings, together with the Contribution and the Majority
Purchase are collectively referred to as the "Formation Transactions."
In connection with the Formation Transactions, the net cash outlay by
Porcher Industries was $135.8 million, represented by the $336.2 million paid
for the Majority Purchase plus fees and expenses of $3.2 million less the
$203.6 million cash distribution Porcher Industries received from AGY. The
total cash consideration received by Owens Corning before the additional
purchase price of $2.7 million referred to above was $529.6 million, comprised
of the $336.2 million paid by Porcher Industries and the $193.4 million cash
distribution received from AGY.
The acquisition of the 51% interest in AGY by a wholly owned subsidiary of
Porcher Industries was accounted for as a partial purchase business
combination in accordance with the provisions of APB No. 16 "Business
Combinations" and EITF Issue No. 88-16, "Basis in Leveraged Buyout
Transactions." The final allocation of the purchase price is subject to
further review by management and is therefore subject to change. However, that
allocation is not expected to differ materially from the initial allocation.
F-20
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
(a Subsidiary of Owens Corning)
NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)
Porcher Industries, S.A. and affiliates represent approximately 21%, 21% and
19% of AGY's net sales for the years ended December 31, 1997, 1996 and 1995,
respectively, and approximately 19% of AGY's sales for the nine months ended
September 30, 1998.
Certain assets and liabilities presented in the December 31, 1997 and 1996
statements of net assets were excluded from the Contribution to AGY and will
be retained by Owens Corning. Thus, the accompanying balance sheet as of
September 30, 1998 reflects only those assets and liabilities contributed to
AGY. The following table reconciles the September 30, 1998 historical balance
sheet of the Business including those assets and liabilities not part of the
Contribution to the balance sheet of AGY included herein. The adjustments
include (a) the elimination of certain assets and liabilities not contributed
or assumed (b) the allocation of the purchase price and (c) the effect of the
Distributions and the Financings.
<TABLE>
<CAPTION>
Glass Yarns Elimination of
and Specialty amounts Allocation of Distribution
Materials not contributed purchase and Financing
Business or assumed price Transactions AGY
------------- --------------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents........... $ -- 404,000 $ --
(399,262)
2,250
(6,988)
Account receivables,
net................... 33,393 33,393
Inventories............ 22,954 (130) 1,554 24,378
Deferred income taxes.. 4,865 (4,865) --
Other current assets... 569 888 1,457
-------- --------
Total Current
Assets.............. 61,781 59,228
-------- --------
Net property, plant and
equipment.............. 115,697 33,761 149,458
-------- --------
Intangible assets....... -- 227,678 227,678
Deferred income taxes... 5,648 (5,648) --
Other assets............ -- 9,112 9,112
-------- --------
Total Assets......... $183,126 $445,476
======== ========
Current Liabilities:
Accounts payable....... $ 10,820 (10,820) $ --
Income taxes payable... 23,125 (23,125) --
Accrued Liabilities.... 9,450 (1,718) 7,732
Current portion of long
term debt............. -- 12,750 12,750
Due to affiliate....... -- 3,012 3,012
Other current
liabilities........... 5,635 (5,635) --
-------- --------
Total Current
Liabilities......... 49,030 23,494
Pension and Other
Employee Benefits...... 69,025 (54,225) 14,800
Long term debt.......... -- 391,250 391,250
-------- --------
Total Liabilities.... 118,055 429,544
-------- --------
Member's interest....... 65,071 84,880 262,993 (397,012) 15,932
-------- --------
Total Liabilities &
Members' Interest... $183,126 $445,476
======== ========
</TABLE>
F-21
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
(a Subsidiary of Owens Corning)
NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)
Membership Interest and Put Rights
The following table sets forth each member's membership interest (deficit)
in AGY at September 30, 1998:
<TABLE>
<S> <C>
Owens Corning (held by Jefferson Holdings, Inc. a
wholly owned subsidiary)......................................... $(119,912)
Porcher Industries (held by Glass Holdings Corp. a
wholly owned subsidiary)......................................... 135,844
---------
Total Membership Interest..................................... $ 15,932
=========
</TABLE>
At any time beginning on September 30, 2003, each of Owens Corning and
Porcher Industries (the "Members") have the right to sell not less than all of
their ownership interest to AGY (a "Put Right") in the event certain
conditions described below are satisfied. If either of the Members exercises
its Put Right, the value of the ownership interest will be determined by a
third party according to the procedures set forth in the operating agreement.
AGY's obligation to purchase a member's ownership interest is conditioned upon
AGY financing the purchase with a third party lender while maintaining or
obtaining not less than a B rating on its then outstanding unsecured debt
after giving effect to the purchase. In addition, AGY's ability to fund the
Put Right will be conditioned upon maintaining compliance with the covenants
under the Senior Credit Facility and the Senior Subordinated Credit Facility.
As of September 30, 1998, AGY could not finance the purchase of all or any
portion of either Members' ownership interest and maintain a credit rating of
at least B on its existing unsecured debt.
In the event that AGY is unable to purchase all of a member's ownership
interest upon the exercise of the Put Right, the member may request that AGY
file and use its reasonable best efforts to cause to become effective a
registration statement under the Securities Act of 1933 covering the
registration of its ownership interest (or a portion thereof).
Management's estimate of the aggregate value of the Members' ownership
interests using the measurement procedures specified in the Operating
Agreement is approximately $250 million.
(2) Inventories
Inventories consist of the following at (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Finished goods.................................... $20,074 $14,431
Materials and supplies............................ 4,304 4,737
------- -------
Total inventories............................... $24,378 $19,168
======= =======
</TABLE>
(3) Accrued Liabilities
Accrued liabilities consist of the following at (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Vacation.......................................... $3,180 $3,180
Real and personal property taxes.................. 2,689 1,904
Health benefits (Note 1).......................... -- 1,205
Incentive Compensation............................ 1,537 331
Other............................................. 326 1,778
------ ------
$7,732 $8,398
====== ======
</TABLE>
F-22
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
(a Subsidiary of Owens Corning)
NOTES TO CONDENSED FINANCIAL STATEMENTS--(Continued)
(4) Long-Term Debt
Long-term debt consisted of the following as of September 30, 1998:
<TABLE>
<S> <C>
Senior Credit Facility
Five year revolving credit facility............................... $ 14,000
Term loans........................................................ 240,000
Senior Subordinated Credit Facility................................ 150,000
--------
404,000
Less current portion.............................................. 12,750
--------
Long-term debt................................................... $391,250
========
</TABLE>
Senior Credit Facility
In connection with the Formation Transactions, AGY entered into a senior
secured credit agreement, pursuant to which the lenders committed to lend to
AGY up to $315.0 million (the "Senior Credit Facility"), such amount to be
allocated among: (i) a five-year revolving credit facility in an aggregate
principal amount of up to $75.0 million (the "Revolver"); (ii) a six-year term
loan in an aggregate principal amount of $115.0 million ("Term Loan A"); (iii)
a seven-year term loan in an aggregate principal amount of $125.0 million
("Term Loan B" and together with Term Loan A, the "Term Loans").
The Term Loans will be amortized on a quarterly basis commencing December 31,
1998 based on the following schedule:
<TABLE>
<CAPTION>
Twelve Months Ending
September 30, Term Loan A Term Loan B
-------------------- ------------ ------------
<S> <C> <C>
1999 $ 11,500,000 $ 1,250,000
2000 17,250,000 1,250,000
2001 17,250,000 1,250,000
2002 23,000,000 1,250,000
2003 23,000,000 1,250,000
2004 23,000,000 118,750,000
------------ ------------
$115,000,000 $125,000,000
============ ============
</TABLE>
The Senior Credit Facility is secured by a first priority lien in
substantially all of the properties and assets of AGY and its respective
domestic subsidiaries, now owned or acquired thereafter and a pledge of Porcher
Industries' membership interest in AGY. The Senior Credit Facility will be
guaranteed by all of AGY's future domestic subsidiaries.
At AGY's option, the interest rates per annum applicable to the Revolver and
the Term Loan A is a fluctuating rate of interest measured by reference either
to: (i) LIBOR plus a borrowing margin or (ii) the bank's base rate, which is
the greater of the published prime rate or the overnight federal funds rate
plus 0.5% (the "ABR") plus a borrowing margin. The applicable borrowing margin
for the Revolver and Term Loan A ranges from 1.75% to 3.0% for LIBOR based
borrowings and 1.50% to 1.75% for ABR based borrowings. The applicable
borrowing margin for the Term Loan B ranges from 3.50% to 3.75% for LIBOR based
borrowings and 2.25% to 2.5% for ABR based borrowings.
F-23
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company has entered into interest rate swap agreements which convert the
rates of interest on Term Loan A and Term Loan B to 4.92% and 5.04% per annum,
respectively, plus the applicable borrowing margin. These swap agreements
remain in effect through the six-year and seven-year terms of Term Loan A and
Term Loan B, respectively. The notional amount of these swaps is the entire
balance of the outstanding loans on a declining basis over the term of the
debt. The interest rate on borrowings outstanding under the Revolver, Term Loan
A and Term Loan B as of September 30, 1998 was 8.1%, 7.7% and 8.5%,
respectively.
The Senior Credit Facility contains affirmative and negative covenants for
agreements of this type, including, among others, covenants restricting AGY and
its subsidiaries with respect to the incurrence of debt (including guarantees);
the creation of liens; substantially changing the nature of AGY's or its
subsidiaries' businesses; the consummation of certain transactions such as
dispositions of substantial assets, mergers, acquisitions, reorganizations and
recapitalizations; the making of certain investments and loans, non-ordinary
course asset sales and capital expenditures; the making of dividends and other
distributions; transactions with affiliates and AGY's ability to prepay certain
debt. AGY also is required to comply with certain financial tests and maintain
certain financial ratios. Certain of these financial tests and ratios include:
(i) maintaining a maximum Leverage Ratio; (ii) maintaining a minimum
Consolidated Net Worth (as defined in the Senior Credit Facility);
(iii) maintaining a minimum Interest Coverage Ratio (as defined in the Senior
Credit Facility); and (iv) maintaining a minimum Fixed Charge Coverage Ratio
(as defined in the Senior Credit Facility).
The Senior Credit Facility also contains customary Events of Default. An
Event of Default under the Senior Credit Facility will allow the lenders
thereunder to accelerate or, in certain cases, will automatically cause the
acceleration of, the maturity of the debt under the Senior Credit Facility.
Senior Subordinated Credit Facility
In connection with the Formation Transactions, AGY entered into an unsecured
senior subordinated credit facility (the "Facility"). This Facility, which
matures on September 30, 2008, provided for aggregate borrowings in an amount
of $150 million and was fully drawn by AGY as of September 30, 1998.
Amounts outstanding under this Facility accrue interest at a rate equal to
the sum (a) of the greater of (i) the three month LIBOR rate or (ii) a Treasury
based rate (based on a Treasury securities of the same principle amount as the
Facility), plus (b) a margin of 4.25%. The 4.25% margin increases by .25% per
annum at the end of each three-month period during the term of the Facility.
The maximum annual interest rate on the Facility is 18%. The rate of interest
on the amounts outstanding under this Facility was 9.56% at September 30, 1998.
In the event that the Facility has not been repaid in full immediately prior
to the first anniversary of its issuance, an extension fee equal to 3% of the
amount outstanding immediately prior to the first anniversary of the Facility
is due and payable.
F-24
<PAGE>
GLASS YARNS AND SPECIALTY MATERIALS BUSINESS
(a Business of Owens Corning)
NOTES TO FINANCIAL STATEMENTS--(Continued)
Keepwell Agreement
In connection with the Formation Transactions, Owens Corning entered into a
Keepwell Agreement to support the liquidity of AGY. In the event that AGY does
not have the liquidity to pay the interest on the Senior Credit Facility or the
Subordinated Facility when due, Owens Corning will loan AGY an amount equal to
the aggregate deficiency. Owens Corning's obligations to make such loans is
limited to a maximum aggregate amount of $65 million, and a maximum annual
amount of $20 million. The annual amount is reduced by $5 million after each
interest payment date with respect to the Subordinated Facility. This Agreement
terminates in January 2002.
(5) Restructuring Costs
During the first quarter of 1998, the Business recorded a $2 million
restructuring charge relating to personnel reductions at the Aiken and
Huntingdon plant locations. The charge represents severance costs associated
with the elimination of approximately 100 positions.
(6) Income Taxes
AGY was established as a limited liability company on July 1, 1998, and is
not subject to income tax, and therefore the statement of operations included
herein does not reflect income tax expense for any period subsequent to July 1,
1998. Income tax expense reflected in the statement of operations for the nine
months ended September 30, 1998 represents the estimated income tax expense
attributable to the results of operations of the Business through June 30,
1998. Income tax for the periods subsequent to the Contribution is the
responsibility of the members based on their respective interest in AGY.
(7) Segment Information
The Business operates in one business segment that manufactures glass fiber
yarns and specialty materials that are used in a variety of industrial and
commercial applications. The Business operates in various geographical
locations, as indicated below (in thousands).
<TABLE>
<CAPTION>
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Net Sales
North America........................ $149,801 $153,167
Europe and other..................... 55,447 56,413
-------- --------
205,248 209,580
======== ========
Inter Segment Sales
North America........................ 30,527 28,694
Eliminations......................... (30,527) (28,694)
-------- --------
$205,248 $209,580
======== ========
Income from Operations
North America........................ $ 54,811 $ 59,119
Europe and other..................... 2,096 1,306
-------- --------
$ 56,907 $ 60,425
======== ========
</TABLE>
F-25
<PAGE>
$150,000,000
ADVANCED GLASSFIBER YARNS LLC
AGY CAPITAL CORP.
Offer to Exchange their 9 7/8% Series B Senior Subordinated Notes due 2009
which have been registered under the Securities Act
for up to $150,000,000 aggregate principal amount
of their outstanding 9 7/8% Senior Subordinated Notes due 2009
, 1999
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
(a) Advanced Glassfiber Yarns LLC
Section 18-108 of the Delaware Limited Liability Company Act (the "Act")
empowers a limited liability company to indemnify and hold harmless any member
or manager or other person from and against any and all claims and demands
whatsoever; subject to such standards and restrictions, if any, set forth in
the operating agreement.
Section 11 of the operating agreement of Advanced Glassfiber Yarns LLC (the
"Company") provides in pertinent part as follows:
(a) Except as otherwise prohibited by the Act, the Company shall
indemnify and hold each owner and its affiliates and its officers,
employees, directors, members, stockholders, managers, agents and
representatives, and their successors and assigns, and each of the members
of the Board of Directors and each officer (collectively, the
"Indemnitees"), harmless from and against any and all losses, claims,
damages, costs, liabilities and expenses (including without limitation
costs of investigation and reasonable attorneys' fees) ("Losses") suffered
or incurred by any and/or all of the Indemnitees (or to which any and/or
all of the Indemnitees may become subject) arising out of, resulting from,
based upon or in connection with the management or conduct of the business
or affairs of the Company or the activities of each such Indemnitee with
respect thereto, other than those which are the result of willful
misconduct or gross negligence by such Indemnitee (the "Indemnified
Damages").
(b) Any payment by the Company to an Indemnitee hereunder shall be
increased by an additional amount sufficient to pay all applicable income
taxes (if any) of any jurisdiction with respect to the total amount
(including both the initial amount and such additional amount) paid to such
Indemnitee hereunder.
(c) To the extent that insurance form third parties has been obtained and
is available in respect of any Indemnified Damages, the amount of any
Indemnified Damages shall be reduced by any amount actually recovered by
the Indemnitee from such third parties (to the extent such reimbursement
was not taken into account in assessing the amount of Indemnified Damages
incurred by the Indemnitee) rather than having the Company make any
payments pursuant to the indemnification obligations contained herein;
provided that if such proceeds are not readily available, the Board of
Directors will cause the Company to pay such Indemnified Damages, in which
event the Company shall be entitled to reimbursement therefor out of the
proceeds of insurance when and if obtained. The Board of Directors may (but
shall not be obligated to) obtain, at the expense of the Company, insurance
against any Indemnified Damages whether or not the Company would, pursuant
to this Section 11.1, be required to indemnify any Indemnitee in respect
thereof.
(d) The Company shall, at its sole cost and expense, (i) maintain, with
insurers or underwriters of national standing, in the name of the Company,
(x) liability insurance to protect members of the Board of Directors and
the officers, and (y) employee fidelity and other insurance consistent with
industry practice, in the case of (x) and (y), in at least such amounts as
are sufficient to cover reasonable risks of loss and are consistent with
industry practice, and (ii) pay all premiums and other sums payable in
respect of maintaining such insurance.
(b) AGY Capital Corp.
Under Section 145 of the General Corporation Law of the State of Delaware, a
corporation may indemnify its directors, officers, employees and agents and
its former directors, officers, employees and agents and those who serve, at
the corporation's request in such capacities with another enterprise,
II-1
<PAGE>
against expenses (including attorney's fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. Delaware law
provides, however, that such person must have acted in good faith and in a
manner he or she reasonably believed to be in (or not opposed to) the best
interests of the corporation and, in the case of a criminal action, such person
must have had no reasonable cause to believe his or her conduct was unlawful.
In addition, Delaware law does not permit indemnification of any action or suit
by or in the right of the corporation, where such person has been adjudged
liable to the corporation, unless, and only to the extent that, a court
determines that such person fairly and reasonably is entitled to indemnity for
costs the court deems proper in light of liability adjudication. Indemnity is
mandatory to the extent a claim, issue or matter involving a present or former
director or officer has been successfully defended.
AGY Capital Corp.'s certificate of incorporation and bylaws provide, under
certain circumstances, for the indemnification of AGY Capital Corp.'s present
or former directors, officers, employees, agents and persons who, at the
request of AGY Capital Corp., are or were serving in a similar capacity for
another corporation or entity. These provisions also allow the Board of
Directors to purchase and maintain insurance on behalf of AGY Capital Corp.'s
present or former directors, officers or persons who are or were serving at the
request of AGY Capital Corp. as a director or officer of another corporation or
entity.
Item 21. Exhibits and Financial Statement Schedules
(a) The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
Ex. Description
--- -----------
<C> <S>
2.1 Amended and Restated Asset Contribution Agreement dated as of July 31,
1998 between Owens Corning and Lincoln Yarns LLC
2.2 LLC Interest Sale and Purchase Agreement dated as of July 31, 1998 among
Owens Corning, Lincoln Yarns LLC and Glass Holdings Corp.
2.3 Amendment No. 1 to LLC Interest Sale and Purchase Agreement dated as of
September 30, 1998 among Owens Corning, Advanced Glassfiber Yarns LLC and
AGY Holdings, Inc.
3.1 Certificate of Formation of Advanced Glassfiber Yarns LLC
3.2 Advanced Glassfiber Yarns LLC Amended and Restated Limited Liability
Company Operating Agreement between Jefferson Holdings, Inc. and AGY
Holdings, Inc. dated as of September 30, 1998
3.3 Certificate of Incorporation of AGY Capital Corp.
3.4 Bylaws of AGY Capital Corp.
4.1 Indenture, dated as of January 21, 1999, among Advanced Glassfiber Yarns
LLC, AGY Capital Corp., the Guarantors and Bank of New York, as trustee,
relating to $150 million principal amount of 9 7/8% Senior Subordinated
Notes due 2009.
4.2 Form of 9 7/8% Series A and Series B Senior Subordinated Notes due 2009
(included in Exhibit 4.1)
4.3 Registration Rights Agreement dated as of January 21, 1999 among Advanced
Glassfiber Yarns LLC, AGY Capital Corp. and the Initial Purchasers
5 Opinion of Alston & Bird LLP re legality*
10.1 Patent and Know How License Agreement dated as of September 30, 1998
among Owens Corning Fiberglas Technology, Inc., Owens Corning and
Advanced Glassfiber Yarns LLC
10.2 Glass Marbles Supply Agreement dated as of September 30, 1998 between
Owens Corning and Advanced Glassfiber Yarns LLC
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Ex. Description
--- -----------
<C> <S>
10.3 Alloy Services Agreement dated as of September 30, 1998 between Advanced
Glassfiber Yarns LLC and Owens Corning
10.4 Non-Compete Agreement dated as of September 30, 1998 among Owens
Corning, AGY Holdings Corp., Porcher Industries, S.A. and Advanced
Glassfiber Yarns LLC
10.5 Manufacturing Services Agreement dated as of September 30, 1998 between
Owens Corning and Advanced Glassfiber Yarns LLC
10.6 Trademark Assignment Agreement dated as of September 30, 1998 by Owens
Corning Fiberglas Technology, Inc. and Owens Corning in favor of
Advanced Glassfiber Yarns LLC
10.7 Master Patent and Know How Assignment Agreement dated as of September
30, 1998 by Owens Corning Fiberglas Technology, Inc., Owens Corning and
Advanced Glassfiber Yarns LLC
10.8 Borates Supply Agreement dated as of September 30, 1998 between Owens
Corning and Advanced Glassfiber Yarns LLC**
10.9 Transitional Services Agreement dated as of September 30, 1998 by and
among Owens Corning and Advanced Glassfiber Yarns LLC
10.10 Support Services Agreement dated as of September 30, 1998 between
Advanced Glassfiber Yarns LLC and Owens Corning
10.11 Software License Agreement dated as of September 30, 1998 between Owens
Corning and Advanced Glassfiber Yarns LLC
10.12 Keep-Well Agreement dated as of September 30, 1998 between Owens Corning
and Advanced Glassfiber Yarns LLC
10.13 Senior Credit Agreement dated as of September 30, 1998 among Advanced
Glassfiber Yarns LLC, the Guarantors, First Union National Bank, as
agent and lender, and certain other lenders
10.14 Senior Subordinated Credit Agreement dated as of September 30, 1998
among Advanced Glassfiber Yarns LLC, the Guarantors, First Union
Investors, Inc., as co-agent and lender, and Warburg Dillon Read LLC, as
co-agent and lender
10.15 Note Purchase Agreement dated January 15, 1999 among Advanced Glassfiber
Yarns LLC, AGY Capital Corp. and the Initial Purchasers
12 Statement re Computation of Ratios
21 Subsidiaries of the Registrant
23.1 Consent of Alston & Bird LLP (included in Exhibit 5)*
23.2 Consent of Arthur Andersen LLP
24 Power of Attorney (included on signature page)
25 Statement of Eligibility (Form T-1) of The Bank of New York, as Trustee
27 Financial Data Schedule
99 Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer
</TABLE>
- --------
* To be filed by amendment
** Portions of exhibit have been omitted pursuant to a request for
confidential treatment
(b) Financial Statement Schedules--None
Item 22. Undertakings
(a) Each of the undersigned Registrants hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which,
II-3
<PAGE>
individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liability arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, each of the
Registrants 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
a Registrant of expenses incurred or paid by a director, officer or
controlling person of such Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrants
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) Each of the undersigned Registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(d) Each of the undersigned Registrants hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Aiken, State of South
Carolina, on February 12, 1999.
Advanced Glassfiber Yarns LLC
/s/ Robert B. Fisher
By: ____________________________________________
Robert B. Fisher President
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Advanced Glassfiber Yarns LLC hereby severally constitute Robert
B. Fisher and Catherine Cuisson, and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement
filed herewith and any and all amendments to said Registration Statement,
including any registration statement filed pursuant to Rule 462(b), and
generally to do all such things in our names and in our capacities as officers
and directors to enable Advanced Glassfiber Yarns LLC to comply with the
provisions of the Securities Act of 1933, and all requirements of the
Securities and Exchange Commission, hereby ratifying and confirming our
signature as they may be signed by our said attorneys, or any of them, to said
Registration Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
Signature Title Date
/s/ Robert Porcher Chairman of the February 12,
- ------------------------------------- Board of Directors 1999
Robert Porcher
/s/ Heinz J. Otto Director February 12,
- ------------------------------------- 1999
Heinz J. Otto
/s/ Serge Piolat Director February 12,
- ------------------------------------- 1999
Serge Piolat
/s/ Philippe Porcher Director February 12,
- ------------------------------------- 1999
Philippe Porcher
/s/ Thurston Roach Director February 12,
- ------------------------------------- 1999
Thurston Roach
/s/ Robert B. Fisher President February 12,
- ------------------------------------- 1999
Robert B. Fisher
/s/ Catherine Cuisson Chief Financial February 12,
- ------------------------------------- Officer (Principal 1999
Catherine Cuisson Accounting Officer)
II-5
<PAGE>
SIGNATURES
Pursuant to Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Aiken,
State of South Carolina, on February 12, 1999.
Agy Capital Corp.
/s/ Robert B. Fisher
By: _________________________________
Robert B. Fisher
President
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of AGY Capital Corp. hereby severally constitute Robert B. Fisher
and Catherine Cuisson, and each of them singly, our true and lawful attorneys
with full power to them, and each of them singly, to sign for us and in our
names in the capacities indicated below, the Registration Statement filed
herewith and any and all amendments to said Registration Statement, including
any registration statement filed pursuant to Rule 462(b), and generally to do
all such things in our names and in our capacities as officers and directors
to enable AGY Capital Corp. to comply with the provisions of the Securities
Act of 1933, and all requirements of the Securities and Exchange Commission,
hereby ratifying and confirming our signature as they may be signed by our
said attorneys, or any of them, to said Registration Statement and any and all
amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Name Title Date
/s/ Robert Porcher Chairman of the February 12,
- ------------------------------------- Board of Directors 1999
Robert Porcher
/s/ Heinz J. Otto Director February 12,
- ------------------------------------- 1999
Heinz J. Otto
/s/ Serge Piolat Director February 12,
- ------------------------------------- 1999
Serge Piolat
/s/ Philippe Porcher Director February 12,
- ------------------------------------- 1999
Philippe Porcher
/s/ Thurston Roach Director February 12,
- ------------------------------------- 1999
Thurston Roach
/s/ Robert B. Fisher President February 12,
- ------------------------------------- 1999
Robert B. Fisher
/s/ Catherine Cuisson Chief Financial February 12,
- ------------------------------------- Officer (Principal 1999
Catherine Cuisson Accounting Officer)
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Ex. Description
--- -----------
<C> <S>
2.1 Amended and Restated Asset Contribution Agreement dated as of July 31,
1998 between Owens Corning and Lincoln Yarns LLC
2.2 LLC Interest Sale and Purchase Agreement dated as of July 31, 1998 among
Owens Corning, Lincoln Yarns LLC and Glass Holdings Corp.
2.3 Amendment No. 1 to LLC Interest Sale and Purchase Agreement dated as of
September 30, 1998 among Owens Corning, Advanced Glassfiber Yarns LLC
and AGY Holdings, Inc.
3.1 Certificate of Formation of Advanced Glassfiber Yarns LLC
3.2 Advanced Glassfiber Yarns LLC Amended and Restated Limited Liability
Company Operating Agreement between Jefferson Holdings, Inc. and AGY
Holdings, Inc. dated as of September 30, 1998
3.3 Certificate of Incorporation of AGY Capital Corp.
3.4 Bylaws of AGY Capital Corp.
4.1 Indenture, dated as of January 21, 1999, among Advanced Glassfiber Yarns
LLC, AGY Capital Corp., the Guarantors and Bank of New York, as trustee,
relating to $150 million principal amount of 9 7/8% Senior Subordinated
Notes due 2009.
4.2 Form of 9 7/8% Series A and Series B Senior Subordinated Notes due 2009
(included in Exhibit 4.1)
4.3 Registration Rights Agreement dated as of January 21, 1999 among
Advanced Glassfiber Yarns LLC, AGY Capital Corp. and the Initial
Purchasers
5 Opinion of Alston & Bird LLP re legality*
10.1 Patent and Know How License Agreement dated as of September 30, 1998
among Owens Corning Fiberglas Technology, Inc., Owens Corning and
Advanced Glassfiber Yarns LLC
10.2 Glass Marbles Supply Agreement dated as of September 30, 1998 between
Owens Corning and Advanced Glassfiber Yarns LLC
10.3 Alloy Services Agreement dated as of September 30, 1998 between Advanced
Glassfiber Yarns LLC and Owens Corning
10.4 Non-Compete Agreement dated as of September 30, 1998 among Owens
Corning, AGY Holdings Corp., Porcher Industries, S.A. and Advanced
Glassfiber Yarns LLC
10.5 Manufacturing Services Agreement dated as of September 30, 1998 between
Owens Corning and Advanced Glassfiber Yarns LLC
10.6 Trademark Assignment Agreement dated as of September 30, 1998 by Owens
Corning Fiberglas Technology, Inc. and Owens Corning in favor of
Advanced Glassfiber Yarns LLC
10.7 Master Patent and Know How Assignment Agreement dated as of September
30, 1998 by Owens Corning Fiberglas Technology, Inc., Owens Corning and
Advanced Glassfiber Yarns LLC
10.8 Borates Supply Agreement dated as of September 30, 1998 between Owens
Corning and Advanced Glassfiber Yarns LLC**
10.9 Transitional Services Agreement dated as of September 30, 1998 by and
among Owens Corning and Advanced Glassfiber Yarns LLC
10.10 Support Services Agreement dated as of September 30, 1998 between
Advanced Glassfiber Yarns LLC and Owens Corning
10.11 Software License Agreement dated as of September 30, 1998 between Owens
Corning and Advanced Glassfiber Yarns LLC
10.12 Keep-Well Agreement dated as of September 30, 1998 between Owens Corning
and Advanced Glassfiber Yarns LLC
10.13 Senior Credit Agreement dated as of September 30, 1998 among Advanced
Glassfiber Yarns LLC, the Guarantors, First Union National Bank, as
agent and lender, and certain other lenders
10.14 Senior Subordinated Credit Agreement dated as of September 30, 1998
among Advanced Glassfiber Yarns LLC, the Guarantors, First Union
Investors, Inc., as co-agent and lender, and Warburg Dillon Read LLC, as
co-agent and lender
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ex. Description
--- -----------
<C> <S>
10.15 Note Purchase Agreement dated January 15, 1999 among Advanced Glassfiber
Yarns LLC, AGY Capital Corp. and the Initial Purchasers
12 Statement re Computation of Ratios
21 Subsidiaries of the Registrant
23.1 Consent of Alston & Bird LLP (included in Exhibit 5)*
23.2 Consent of Arthur Andersen LLP
24 Power of Attorney (included on signature page)
25 Statement of Eligibility (Form T-1) of The Bank of New York, as Trustee
27 Financial Data Schedule
99 Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer
</TABLE>
- --------
* To be filed by amendment
** Portions of exhibit have been omitted pursuant to a request for confidential
treatment
<PAGE>
EXHIBIT 2.1
AMENDED AND RESTATED
ASSET CONTRIBUTION AGREEMENT
AMENDED AND RESTATED ASSET CONTRIBUTION AGREEMENT, dated as of July
31, 1998, between OWENS CORNING, a Delaware corporation ("OC"), and Lincoln
--
Yarns, LLC, a Delaware limited liability company (the "Company").
-------
RECITALS
WHEREAS, pursuant to an Asset Contribution Agreement dated as of July
1, 1998 (the "Original ACA"), OC contributed to the Company its business of
------------
manufacturing and selling glass fiber yarns and specialty materials operated
through manufacturing facilities in Aiken, South Carolina, Huntingdon,
Pennsylvania and South Hill, Virginia (the "Business") in exchange for a 100%
--------
membership interest in the Company (the "Company Interest"); and
----------------
WHEREAS, the parties wish to amend and restate the Original ACA ; and
WHEREAS, OC intends to transfer a 49% membership interest in the
Company to Jefferson Holdings, Inc., a Delaware corporation and a wholly-owned
subsidiary of OC immediately following the execution hereof;
WHEREAS, capitalized terms used in this Agreement shall have the
meaning ascribed to them in Section 9.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Contribution; Assumption of Liabilities.
---------------------------------------
1.1 Contribution of Assets. OC hereby assigns, conveys, transfers
----------------------
and delivers, as a capital contribution to the Company, all of its right, title
and interest in and to, free of all Encumbrances other than Permitted Liens, all
of the assets, rights, properties, claims, contracts and business of OC which,
except as expressly provided below, are principally related to the Business (the
"Assets"), other than the Excluded Assets described in Section 1.3 hereof,
------
including, without limitation, the following:
(a) Owned Real Property. Subject to Section 8.3, all of the
-------------------
real property set forth on Schedule 1.1(a) (the "Owned Real Property") and all
--------------- -------------------
of the rights arising out of the ownership thereof or appurtenant thereto
(including the right to receive associated condemnation proceeds), together with
all buildings, structures, facilities, fixtures and other improvements thereto
(the "Improvements").
------------
<PAGE>
(b) Real Property Leases. Subject to Section 8.4, the leases
--------------------
and subleases of real property described on Schedule 1.1(b) as to which OC is
---------------
the lessee or sublessee, together with any options to purchase the underlying
property and leasehold improvements thereon, and in each case all other rights,
subleases, licenses, permits, deposits and profits appurtenant to, covered by,
or related to such leases and subleases (the "Real Property Leases").
--------------------
(c) Machinery and Equipment. The machinery, equipment and other
-----------------------
items of personal property owned or leased by OC for use in the Business,
including, without limitation, all manufacturing, production, maintenance,
packaging, testing and other machinery, tooling and equipment, rolling stock,
spare or replacement parts, computer equipment, furniture, fixtures, plant and
office equipment, supplies and other tangible personal property.
(d) Vehicles. All motor vehicles owned or leased by OC and used
--------
or held for use in the Business; including but not limited to those as set forth
on Schedule 1.1(d).
---------------
(e) Intangible Property.
-------------------
(i) All right, title and interest of OC in and to the
copyrights, patents, trademarks, know how, design marks, service marks, logos
and trade names and other intangible property, including any and all related
goodwill, and foreign and domestic registrations and applications, in each case
currently used by OC and relating exclusively to the operation of the Business
("Proprietary Rights"), which are set forth on Schedule 1.1(e); and
------------------ ---------------
(ii) All business information, management systems (to the
extent transferable) and related books and records and lists, including but not
limited to advertising, marketing and sales programs, business, marketing and
strategic plans and customer and supplier lists and all related files, reports,
plans, drawings and operating records of every kind.
(f) Contracts. Subject to Section 8.4, all commitments,
---------
contracts, arrangements and agreements, written or oral, to which OC is a party
or by which OC is bound, including, without limitation, personal property
leases, purchase orders for inventory, service or maintenance agreements, supply
agreements, broker agreements, sales representative agreements, license
agreements, joint venture agreements, teaming agreements and joint venture
product development agreements (hereinafter "Contracts"); including but not
---------
limited to those Contracts set forth on Schedule 1.1(f).
---------------
(g) Licenses and Permits. Subject to Section 8.4, the licenses,
--------------------
permits, certificates of authority, authorizations, approvals, registrations,
franchises and similar consents granted or issued by any Governmental or
Regulatory Authority ("Licenses and Permits"); including but not limited to
--------------------
those set forth on Schedule 1.1(g).
---------------
(h) Inventory. All inventories of the Business and all work-in-
---------
process, raw materials, stores and spares and packaging and shipping materials
used in connection therewith
2
<PAGE>
located at the Business' facilities at Aiken, South Carolina; Huntingdon,
Pennsylvania and South Hill, Virginia and promotional materials and goods-in-
transit from suppliers or manufacturers wherever located, in each case owned by
OC (the "Inventory"), but excluding Inventory on consignment from OC and
---------
returnable containers.
(i) Accounts Receivable. All Accounts Receivable arising from
-------------------
the operation of the Business and owned by OC.
(j) Prepaid Items. Prepaid items (or portions thereof) relating
-------------
exclusively to the Business.
(k) Security Deposits. All security deposits deposited by or on
-----------------
behalf of OC as lessee or sublessee under any Real Property Lease.
(l) Software. Computer software used exclusively in connection
--------
with the Business.
(m) Warranties. Rights under or pursuant to all warranties,
----------
representations and guarantees made by suppliers in connection with the Assets
or services furnished to OC in connection with the Business.
(n) Telephone Listings. All telephone, facsimile and pager
------------------
numbers, and all listings in all telephone books and directories (in any form or
medium) exclusively used by the Business.
(o) Metal Assets. The Metal Assets.
------------
(p) Other Assets. All other assets of OC principally related to
------------
the Business and included on the Closing Statement including, in each case, the
notes thereto, but excluding the Excluded Assets.
1.2 Excluded Assets. Notwithstanding any other provision hereof, it
---------------
is expressly agreed that OC will retain and the Company will not acquire the
following assets (the "Excluded Assets"):
---------------
(a) Cash and Cash Equivalents. Cash and cash equivalents,
-------------------------
including, without limitation, bank deposits, investments in so-called "money
market" funds, commercial paper funds, certificates of deposit, Treasury bills
and accrued interest thereon.
(b) Tax Refunds. Any refunds, credits or other assets or rights
-----------
(including interest thereon or claims therefor) with respect to any Taxes.
3
<PAGE>
(c) Insurance Contracts. Any contracts of insurance in respect
-------------------
of the Business; and any reimbursement for, or other benefit associated with,
prepaid insurance, including without limitation, any insurance proceeds with
respect to events occurring prior to the date hereof.
(d) Transferred or Disposed Assets. Any asset transferred or
------------------------------
otherwise disposed of by OC in the ordinary course of the Business prior to the
date hereof.
(e) Litigation Claims. Any rights, claims and recoveries (other
-----------------
than those enumerated in Sections 1.1 (i) and (m) including related rights to
indemnification and any policy of insurance) under litigation of OC against
third parties arising out of or relating to events occurring prior to the
Closing Date.
(f) Other Excluded Assets. Such other specific assets used in
---------------------
the Business as are listed on Schedule 1.2(f).
---------------
1.3 Assumption of Liabilities. Subject to the terms and conditions
-------------------------
of this Agreement, as of the Closing Date, the Company hereby agrees to assume
and pay, perform and discharge, when due, the following debts, liabilities and
obligations of OC which shall not include any Excluded Liabilities, (the Assumed
-------
Liabilities"):
- -----------
(a) all obligations and liabilities under the Contracts, the
Real Property Leases and the Licenses and Permits (to the extent assigned to the
Company hereunder or as otherwise provided in Section 8.4);
(b) all obligations of OC relating to the Business for the sale
and delivery of goods made in the ordinary course of business consistent with
the past practices of OC, which are not supplied on or prior to the Closing
Date, provided that such obligations do not require any such sales or deliveries
following the first anniversary of the Closing Date; and
(c) all categories of liabilities reflected on the Closing
Statement (whether or not reflected in the computation of the Closing NAV),
including, without limitation, OPEB and retiree health, which shall be prepared
using the same assumptions reflected in the 12/31/97 Historical Financial
Statements.
1.4 Excluded Liabilities. It is expressly agreed that OC shall
--------------------
retain and the Company shall not assume all liabilities other than the Assumed
Liabilities, including, without limitation, any of the following liabilities
(the "Excluded Liabilities"):
--------------------
(a) all obligations and liabilities principally arising out of
or relating to the Excluded Assets;
(b) all debts, liabilities or obligations of OC or its
Affiliates that do not arise out of or are not principally related to the
Business;
4
<PAGE>
(c) all Trade Payables arising out of the operation of the
Business prior to the date hereof;
(d) all liabilities resulting from the presence of Hazardous
Substances at, under or migrating from the Facilities or the transportation or
arrangement for treatment, storage or disposal of any Hazardous Substance to any
off-site location prior to the Closing Date;
(e) all liabilities with respect to all actions, suits,
proceedings, disputes, claims or investigations against OC which arise out of
events or occurrences which have happened prior to the Closing Date;
(f) any other obligations and liabilities for which OC has
expressly assumed responsibility pursuant to this Agreement;
(g) all obligations and liabilities to OC or its Affiliates
other than liabilities under the Contracts;
(h) all obligations and liabilities for attorney's, accountant's
and other advisor fees and expenses and other costs and expenses incurred by or
on behalf of OC in connection with the transactions contemplated under this
Agreement;
(i) all obligations and liabilities of OC relating to operations
of the Business discontinued prior to the Closing Date;
(j) all obligations and liabilities of OC for or on account of
Income Tax; and
(k) any Indebtedness in existence on the Closing Date.
2. Issuance of Company Interest. In consideration of the Contribution as
----------------------------
provided in Section 1.1 and in addition to the assumption of the Assumed
Liabilities as provided in Section 1.3, the Company hereby issues to OC, free
and clear of all liens and encumbrances, the Company Interest.
3. Deliveries.
----------
3.1 Deliveries by OC. At the Company's request, OC shall deliver to
----------------
the Company, and the Company shall acknowledge receipt of such additional
endorsements, assurances, conveyances, releases, discharges, consents,
assignments, certificates or other instruments of transfer and conveyance,
executed by a duly authorized officer of OC, as are necessary to vest in the
Company good and marketable title to the Assets.
5
<PAGE>
3.2 Deliveries by the Company. Simultaneously herewith, the Company
-------------------------
shall deliver to OC an Assumption Agreement in the form attached hereto as
Exhibit 1 duly executed and delivered by a duly authorized officer of the
- ---------
Company.
4. Further Assurances. Each party hereto shall execute, deliver, file
------------------
and record, or cause to be executed, delivered, filed and recorded, such further
agreements, instruments and other documents, (including without limitation any
trademark assignment agreements), and take, or cause to be taken, such further
actions, as the other party hereto may reasonably request as being necessary or
advisable to effect or evidence the transactions contemplated by this Agreement.
5. Book and Records and Personnel.
------------------------------
5.1 Retention of Records. The parties shall retain the books, files,
--------------------
reports, drawings, product and marketing plans, records, documents, instruments,
accounts, correspondence, writings, evidences of title, insurance appraisals and
other papers relating to the Business and the Assets in their possession (the
"Books and Records") for the period of time set forth in their respective
-----------------
records retention policies or for such longer period as may be required by law
or any applicable court order and in no event less than 6 years.
5.2 Access. The parties will allow each other reasonable access to
------
the Books and Records, and to personnel having knowledge of the whereabouts
and/or contents of the Books and Records, for legitimate business reasons, such
as the preparation of Tax Returns or the defense of litigation. The requesting
party will hold in confidence all confidential information identified as such
by, and obtained from, the disclosing party or any of its officers, agents,
representatives or employees; provided, however, that information which (i) was
-------- -------
in the public domain, (ii) was in fact known to the requesting party prior to
disclosure by the disclosing party, its officers, agents, representatives or
employees, or (iii) becomes known to the requesting party from or through a
third party not under an obligation of non-disclosure to the disclosing party
shall not be deemed to be confidential information.
6. Certain Agreements.
------------------
For so long as OC (directly or indirectly) owns the Company Interest
(i.e., a 100% membership interest in the Company), OC agrees to provide the
following services to the Company and the Company agrees to reimburse OC for all
of its direct and indirect costs incurred in providing such services:
6.1 Employees. OC shall make available to the Company those OC
---------
employees who are engaged in the Business (whether salaried or hourly, union or
non-union and full time or part time) so long as such employees are employed by
OC. Such employees shall not be considered employees of the Company and OC shall
continue to provide salaries and benefits to such employees.
6
<PAGE>
6.2 Insurance. OC shall maintain its current levels of liability,
---------
hazard, property and casualty insurance (including deductibles and self
retention amounts for which the Company shall be solely responsible) in respect
of the operation of the Business and the Assets.
6.3 No Third-Party Beneficiary. Nothing herein, expressed or
--------------------------
implied, shall confer upon any employee or former employee of OC or the Company
or any of their Affiliates (including, without limitation, the employees of the
Business), any rights or remedies including, without limitation, any right to
employment or continued employment for any specified period) of any nature or
kind whatsoever, under or by reason of this Agreement.
7. Indemnification.
---------------
7.1 Indemnification by OC. (a) OC shall defend, indemnify and hold
---------------------
the Company and its members harmless from and against and in respect of any and
all losses, liabilities, damages, claims, suits, Taxes, demands, proceedings,
judgments, settlements and expenses (whether or not arising out of third party
claims), including reasonable attorneys' fees, incurred directly by the Company
arising out of (i) the ownership, operation or use of any of the Excluded
Assets, (ii) the Excluded Liabilities or (iii) any failure of the Metal Assets
to meet the quantity or purity specifications set forth in the definition
thereof. The Company shall give OC prompt written notice of any third party
claim which may give rise to any indemnity obligation under this Section,
together with the estimated amount of such claim, and OC shall have the right to
assume the defense of any such claim through counsel of its own choosing, by so
notifying the Company within thirty (30) days of receipt of the Company's
written notice; provided, however, that OC's counsel shall be reasonably
-------- -------
satisfactory to the Company. Failure to give prompt notice shall not affect the
indemnification obligations hereunder in the absence of actual prejudice. If the
Company desires to participate in any such defense assumed by OC, it may do so
at its sole cost and expense. If OC declines to assume any such defense, the
Company shall have the right to undertake the defense, compromise or settlement
of such claim and OC shall be liable for all reasonable costs and expenses of
defending such claim incurred by the Company, including reasonable fees and
disbursements of counsel. Neither party shall, without the prior written consent
of the other party, which shall not be unreasonably withheld, settle, compromise
or offer to settle or compromise any such claim or demand on a basis which would
result in the imposition of a consent order, injunction or decree which would
restrict the future activity or conduct of the other party or any subsidiary or
Affiliate thereof or if such settlement or compromise does not include an
unconditional release of the other party for any liability arising out of such
claim or demand or any related claim or demand. The indemnity provided in this
Section 7.1 shall be the sole and exclusive remedy of the Company against OC at
law or equity; provided that nothing in this Section 7.1 shall otherwise limit
either party from seeking temporary or permanent injunctive relief for any
breach of Sections 3, 4 or 5 of this Agreement. In no event shall OC be liable
to the Company for special, indirect, incidental, consequential or punitive
damages, but, to the extent the Company is required to pay punitive damages to a
third party, such payment shall constitute an indemnifiable expense.
7
<PAGE>
(b) The foregoing obligation to indemnify the Company set forth
in Section 7.1(a) shall be subject to each of the following limitations:
(i) OC's indemnification obligation for such Excluded
Liabilities with respect to matters relating to the investigation, remediation,
cleanup, removal or monitoring of Hazardous Substances at or migrating from the
Real Property ("Remedial Action") shall be limited to compliance with standards
established under applicable Environmental Laws (including, without limitation,
the imposition of institutional or engineering controls, deed restrictions,
natural attenuation, capping and site-specific risk-based standards), based on
the existing use of the relevant Real Property as of the Closing Date.
(ii) Notwithstanding anything to the contrary in this
Agreement, Seller shall have satisfied its indemnification obligation and shall
be released from any further indemnification obligation or liability for any
Remedial Action in the event and to the extent it receives a notice of final
approval (including, without limitation, a no further action letter, certificate
of completion, or release-and-covenant-not-to-sue) from a state or federal
Governmental or Regulatory Authority with jurisdiction over the relevant Real
Property pursuant to a clean-up program, voluntary or otherwise.
7.2 Indemnification by the Company. The Company shall defend,
------------------------------
indemnify and hold OC and its Affiliates harmless from and against and in
respect of any and all losses, liabilities, damages, claims, suits, Taxes,
demands, proceedings, judgments, settlements and expenses (whether or not
arising out of third party claims), including reasonable attorney's fees,
incurred directly by OC and its Affiliates arising out of (i) the ownership,
operation or use of the Business or the Assets on or after the date hereof or
(ii) the Assumed Liabilities. OC shall give the Company prompt written notice of
any third party claim which may give rise to any indemnity obligation under this
Section, together with the estimated amount of such claim, and the Company shall
have the right to assume the defense of any such claim through counsel of its
own choosing, by so notifying OC within thirty (30) days of receipt of OC's
written notice; provided, however, that the Company's counsel shall be
-------- -------
reasonably satisfactory to OC. Failure to give prompt notice shall not affect
the indemnification obligations hereunder in the absence of actual prejudice. If
OC desires to participate in any such defense assumed by the Company, it may do
so at its sole cost and expense. If the Company declines to assume any such
defense, OC shall have the right to undertake the defense, compromise or
settlement of such claim and the Company shall be liable for all costs and
expenses of defending such claim incurred by OC, including reasonable fees and
disbursements of counsel. Neither party shall, without the prior written consent
of the other party, which shall not be unreasonably withheld, settle, compromise
or offer to settle or compromise any such claim or demand on a basis which would
result in the imposition of a consent order, injunction or decree which would
restrict the future activity or conduct of the other party or any subsidiary or
Affiliate thereof or if such settlement or compromise does not include an
unconditional release of the other party for any liability arising out of such
claim or demand. The indemnity provided in this Section 7.2 shall be the sole
and exclusive remedy of OC against the Company at law or equity for the matters
described in this Section 7.2. In no event shall the Company be liable to OC for
special,
8
<PAGE>
indirect, incidental, consequential or punitive damages, but, to the extent OC
is required to pay punitive damages to a third party, such payment shall
constitute an indemnifiable expense.
7.3 Indemnification Calculations. The amount of any losses for which
----------------------------
indemnification is provided under this Section 7 shall be computed net of any
insurance proceeds received by the indemnified party in connection with such
losses. Any indemnification payments made pursuant to this Agreement shall be
treated for Tax purposes as an adjustment to the consideration received by OC
pursuant to Section 2 in exchange for the Contribution. Any such payments shall
be made in an amount sufficient to indemnify the relevant party on a net after-
Tax basis.
8. Miscellaneous.
-------------
8.1 As Is Condition.
---------------
Notwithstanding anything herein to the contrary, the Company agrees
that it shall accept all Assets in an "As Is" "Where Is" condition as of the
date hereof. OC MAKES NO WARRANTY WITH RESPECT TO THE VALUE, CONDITION OR USE
OF THE ASSETS, WHETHER EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
8.2 In General. The provisions of this Agreement shall be binding
----------
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof, except that matters herein strictly within the purview
of the matters covered by the General Corporation Law and the Limited Liability
Company Act of the State of Delaware shall be governed by such General
Corporation Law and Limited Liability Company Act. This Agreement may be
executed in any number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same instrument.
8.3 Aiken Subdivision. The Company acknowledges that OC is in the
-----------------
process of subdividing the Owned Real Property located in Aiken, South Carolina
(the "Aiken Property") substantially as shown on Schedule 8.3 and that as of the
--------------
date hereof it is impossible to determine the exact location of the boundaries
of the subdivision of the Aiken property. Notwithstanding anything contained
herein to the contrary, the Owned Real Property with respect to Aiken, as used
elsewhere in this Agreement, shall mean the real property in Aiken allocated to
the Business after completion of the subdivision and shall exclude the real
property used by OC's glass fiber wet mat line business.
9
<PAGE>
8.4 Other Covenants. To the extent that any consents needed to
---------------
assign to the Company any of the Assets have not been obtained on or prior to
the date hereof, this Agreement shall not constitute an assignment or attempted
assignment thereof if such assignment or attempted assignment would constitute a
breach thereof. If any such consent shall not be obtained on or prior to the
date hereof, then (i) each of OC and the Company, if required under applicable
law, shall use their reasonable best efforts in good faith to obtain such
consent as promptly as practicable thereafter (provided that reasonable best
efforts shall not include the payment of monies to any third party) and (ii)
until such consent is obtained, the parties shall use reasonable efforts in good
faith to cooperate, and to cause each of their respective Affiliates to
cooperate, in any lawful arrangement (including subleasing or subcontracting if
permitted) designed to provide for the Company the operational and economic
benefits under any such Assets.
8.5 Transaction Taxes. The Company shall be responsible for the
-----------------
payment of all sales, use, transfer, vehicle transfer, real property transfer
(including any deed recording fee), recording, gains and other similar taxes, if
any, which may be payable with respect to the consummation of the transactions
contemplated by this Agreement and shall file all necessary documentation and
Tax Returns with respect to such taxes and, to the extent any exemptions from
such taxes are available, the Company and OC shall cooperate to prepare any
certificates or other documents necessary to claim such exemptions.
8.6 Aiken County Tax Abatement. OC and the Company acknowledge that
--------------------------
certain of the Assets at the Aiken facility (along with other assets of OC in
Aiken County) have been subject to a property tax abatement obtained by OC
pursuant to certain agreements entered into with Aiken County, South Carolina as
of December 1, 1996 (the "Aiken County Abatement"), which agreements have been
----------------------
furnished to the Company. The parties further acknowledge that the benefit of
Aiken County Abatement may be not be available to the Company subsequent to the
date hereof. The parties agree, however, to cooperate in good faith (and
negotiate with Aiken County) to have the Aiken County Abatement amended, or to
obtain a similar agreement, to provide for a continuing property tax abatement
for the Assets (and future additions thereto), as well as the remaining assets
of OC in Aiken County (and future additions thereto). The parties agree to share
the cost of obtaining any new agreement in a manner commensurate with the
benefits each party anticipates obtaining from such agreement.
8.7 Huntington Property Tax Credits. OC and the Company acknowledge
-------------------------------
that pursuant to a settlement OC obtained from taxing authorities in Huntington
County, Pennsylvania, OC became entitled to property tax credits of
approximately $102,000, which credits shall be available to offset property
taxes on the Assets at Huntington in the years 1998, 1999 and 2000. The parties
further acknowledge that the law firm of Garippa & Davenport shall be entitled
to payment of one third of the amount of such credits upon their realization. OC
and the Company agree that upon the realization of such credits, the Company
shall make such payments to legal fees to the firm of Garippa & Davenport, and
such obligation shall be considered an "Assumed Liability" pursuant to this
Agreement. The parties acknowledge that such property tax credits are reflected
as an asset on the balance sheet of the Company, and that such legal fees are
reflected as a liability.
10
<PAGE>
9. Definitions.
-----------
"Accounting Principles" has the meaning set forth in Schedule 9.1.
--------------------- ------------
"Accounts Receivables" means all trade accounts receivable and all
--------------------
notes, bonds and other evidence of Indebtedness and rights to receive payments
arising out of sales.
"Affiliate" means any Person that, directly or indirectly through one
---------
or more intermediaries, controls or is controlled by or is under common control
with the Person specified.
"Assets" shall have the meaning set forth in Section 1.1.
------
"Assumed Liabilities" shall have the meaning set forth in Section 1.3.
-------------------
"Books and Records" shall have the meaning set forth in Section 6.
-----------------
"Business" shall have the meaning set forth in the recitals.
--------
"Closing Date" means the Closing Date under the SPA.
------------
"Closing Statement" has the meaning ascribed to it in the SPA.
-----------------
"Code" means the United States Internal Revenue Code of 1986, as
----
amended.
"Company" shall have the meaning set forth in the forepart of this
-------
Agreement.
"Company Interest" shall have the meaning set forth in the recitals.
----------------
"Contracts" shall have the meaning set forth in Section 1.1(f).
---------
"Contribution" shall have the meaning set forth in the recitals.
------------
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
-----------
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Environmental Law" means any applicable law, order, regulation,
-----------------
decree, permit, license, ordinance, or other federal, state or local
governmental requirements relating to pollution, the protection of human health
and the environment, the discharge or release of Hazardous
11
<PAGE>
Substances into the environment, or the exposure to Hazardous Substances
(including odors) in the work place.
"Excluded Assets" shall have the meaning set forth in Section 1.2.
---------------
"Excluded Liabilities" shall have the meaning set forth in Section
--------------------
1.4.
"Facilities" means all buildings, structures and other improvements
----------
situated thereon.
"Financial Statements" has the meaning ascribed to it in the SPA.
--------------------
"Hazardous Substance" means petroleum, petroleum by-products,
-------------------
polychlorinated biphenyls and any other chemicals, materials, substances or
wastes which are currently defined as or regulated "hazardous substances,"
--------------------
"hazardous materials," "hazardous wastes," "extremely hazardous wastes,"
- -------------------- ---------------- ---------------------------
"restricted hazardous wastes," "toxic substances," "toxic pollutants," "toxic
- ---------------------------- ---------------- ---------------- -----
air pollutants," "pollutants," or "contaminants" under any Environmental Law.
- -------------- ---------- ------------
"Licenses and Permits" shall have the meaning set forth in Section
--------------------
1.1(g).
"Material Adverse Effect" means a material adverse effect upon the
-----------------------
Assets or the Assumed Liabilities or the results of operations, business or
condition (financial or otherwise) of the Business, taken as a whole, or upon
the ability of OC or its Affiliates to consummate the transactions contemplated
hereby or perform their obligations under this Agreement or any of the
Ancillary Agreements.
"Machinery" shall have the meaning set forth in Section 1.1(c).
---------
"Metal Assets" means 87,468, troy ounces of platinum and 23,532 troy
------------
ounces of rhodium for a total of 111,000 ounces. The Metal Assets are in the
form of J alloy, H alloy and TC alloy in the following amounts (as fabricated
bushings or in other form):
J alloy 2,573,173 grams
H alloy 838,571 grams
TC alloy 40,743 grams
The alloys are in a state of purity to at least 99.7%.
"OC" shall have the meaning set forth in the forepart of this
--
Agreement.
12
<PAGE>
"Permitted Liens" means liens, charges and other encumbrances (i) as
---------------
set forth on Schedule 10-2; (ii) as disclosed in the Financial Statements; (iii)
-------------
liens for Taxes not yet due and payable or, if due, (A) not delinquent or (B)
being contested in good faith by appropriate proceedings during which collection
or enforcement against the property is stayed; (iv) mechanics', workmen's,
repairmen's, warehousemen's, carriers' or other like liens arising or incurred
in the ordinary course of business if the underlying obligations are not past
due, original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business; (v) with
respect to real property, (A) easements, licenses, covenants, rights-of-way and
other similar restrictions, including, without limitation, any other agreements
or restrictions, in each case not otherwise referred to herein, (B) any
conditions that may be shown by a survey, other than the survey described on
Schedule 10-2 or physical inspection and (C) zoning, building and other similar
- -------------
restrictions, so long as none of (A), (B) or (C) renders the title of such real
property unmarketable or materially and adversely interferes with the use or
materially and adversely reduces the value of such real property substantially
as currently used; and (vi) other liens, charges or other encumbrances which
would not have a Material Adverse Effect.
"Proprietary Rights" shall have the meaning set forth in Section
------------------
1.1(e).
"Real Property Leases" shall have the meaning set forth in Section
--------------------
1.1(b).
"SPA" means the LLC Interest Sale and Purchase Agreement dated as of
---
July 31, 1998 by and among OC, the Company and Glass Holdings Corp.
"Taxes" means all federal, state, local or foreign net or gross
-----
income, gross, receipts, net proceeds, sales, use, ad valorem, value added,
----------
franchise, bank shares, withholding, payroll, employment, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Returns" means any returns, reports, schedules, documents or
-----------
statements (including any information returns) required to be filed for purposes
of a particular Tax.
"Trade Payables" means the obligations of the Business recorded in
--------------
accordance with the Accounting Principles in the captions "Accounts Payable-
Trade and Accounts Payable-Marbles" in the Pro Forma Statement of Net Assets to
be Sold of the Business which form a part of the Financial Statements.
13
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by a duly authorized officer of each party hereto as of the date first
above written.
OWENS CORNING
By: /s/ John W. Christy
-------------------------
Name: John W. Christy
Title: Assistant Secretary
LINCOLN YARNS, LLC
By: OWENS CORNING, MEMBER
By: /s/ John W. Christy
-------------------------
Name: John W. Christy
Title: Assistant Secretary
14
<PAGE>
EXHIBIT 2.2
- --------------------------------------------------------------------------------
LLC INTEREST SALE AND PURCHASE AGREEMENT
among
OWENS CORNING;
LINCOLN YARNS, LLC; and
GLASS HOLDINGS, CORP;
Dated as of July 31, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1 SALE OF INTEREST; PURCHASE PRICE AND ADJUSTMENTS............................. 2
1.1 Sale of Interest............................................................. 2
1.2 Purchase Price............................................................... 2
1.3 Payment of Purchase Price.................................................... 2
1.4 Purchase Price Adjustment.................................................... 2
2 REPRESENTATIONS AND WARRANTIES OF SELLER..................................... 6
2.1 Corporate Existence.......................................................... 6
2.2 LLC Organization and Qualification........................................... 6
2.3 Capitalization of the LLC.................................................... 7
2.4 Corporate Authority.......................................................... 7
2.5 No Conflicts................................................................. 8
2.6 Governmental Approvals; Consents............................................. 9
2.7 Financial Statements......................................................... 10
2.8 Absence of Changes........................................................... 12
2.9 Real and Personal Properties................................................. 13
2.10 Contracts.................................................................... 16
2.11 Litigation................................................................... 18
2.12 Intangible Property Rights................................................... 19
2.13 Insurance.................................................................... 20
2.14 Tax Matters.................................................................. 20
2.15 Employment and Benefits...................................................... 21
2.16 Compliance with Laws......................................................... 23
2.17 Finders; Brokers............................................................. 23
2.18 Environmental Matters........................................................ 23
2.19 Entire Business.............................................................. 25
2.20 Disclaimer of Warranty....................................................... 25
2.21 Inventory.................................................................... 25
2.22 Accounts Receivable.......................................................... 25
2.23 No Other Representations or Warranties....................................... 26
3 REPRESENTATIONS OF BUYER..................................................... 26
3.1 Corporate Existence.......................................................... 26
3.2 Corporate Authority.......................................................... 26
3.3 No Conflicts................................................................. 27
3.4 Governmental Approvals; Consents............................................. 27
3.5 Finders; Brokers............................................................. 28
3.6 Financial Capacity........................................................... 28
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.7 Knowledge of Buyer........................................................... 28
3.8 No Other Representations or Warranties....................................... 29
4 AGREEMENTS OF BUYER AND SELLER............................................... 29
4.1 Operation of the Business.................................................... 29
4.2 Investigation of the Business; Confidentiality............................... 31
4.3 Mutual Cooperation; No Inconsistent Action................................... 34
4.4 Public Disclosures........................................................... 36
4.5 Patent and Know How.......................................................... 36
4.6 Non-Solicitation............................................................. 37
4.7 Financing.................................................................... 37
4.8 Services Agreement........................................................... 37
4.9 Glass Marbles Supply Agreement............................................... 37
4.10 Alloy Services Agreement..................................................... 38
4.11 Huntingdon Lease Agreement................................................... 38
4.12 Battice Facility Supply Agreement............................................ 38
4.13 Guelph Facility Supply Agreement............................................. 39
4.14 Sanitary Sewer and Stormwater Agreements..................................... 39
4.15 Non-Compete Agreement........................................................ 39
4.16 Manufacturing Services Agreement............................................. 39
4.17 Intentionally Omitted........................................................ 39
4.18 Air Modelling Agreements..................................................... 40
4.19 Wastewater Treatment Agreement............................................... 40
4.20 Operating Agreement.......................................................... 40
4.21 Trademark Assignment/Master Patent and Know How Assignment................... 40
4.22 Use of Packaging............................................................. 41
4.23 Sliver Supply Agreement...................................................... 41
4.24 Borates Supply Agreement..................................................... 41
4.25 Carly Sublease............................................................... 42
4.26 Pitney Bowes 1997 Sublease................................................... 42
4.27 Pitney Bowes 1996 Sublease................................................... 42
4.28 Landfill Agreement........................................................... 42
4.29 NVOC and OCC Assets.......................................................... 43
4.30 "GLAS Marks"................................................................. 43
4.31 No Solicitation.............................................................. 44
4.32 Casualty to Assets; Eminent Domain........................................... 45
4.33 Intentionally Omitted........................................................ 46
4.34 Employees and Employee Benefits.............................................. 46
4.35 Forward-Underwriting Commitment.............................................. 54
4.36 Cash Assets.................................................................. 55
4.37 Contribution of Assets of the Company........................................ 55
4.38 Post-Closing Distributions by the Company.................................... 55
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
5 CONDITIONS................................................................... 56
5.1 Conditions Precedent to the Obligations of Buyer and Seller.................. 56
5.2 Conditions Precedent to the Obligation of Seller............................. 56
5.3 Conditions Precedent to the Obligation of Buyer.............................. 57
6 CLOSING...................................................................... 58
6.1 Closing Date................................................................. 58
6.2 Buyer Deliveries............................................................. 59
6.3 Seller Deliveries............................................................ 59
7 TAX MATTERS.................................................................. 59
7.1 Asset Allocation............................................................. 59
8 INDEMNIFICATION.............................................................. 60
8.1 Survival of Representations and Warranties; Time for Assertion of Claims..... 60
8.2 Indemnification by Seller.................................................... 60
8.3 Indemnification by Buyer..................................................... 63
8.4 Indemnification Calculations................................................. 65
8.5 Cooperation.................................................................. 67
9 TERMINATION.................................................................. 67
9.1 Termination Events........................................................... 67
9.2 Effect of Termination........................................................ 68
10 MISCELLANEOUS AGREEMENTS OF THE PARTIES...................................... 68
10.1 Notices...................................................................... 68
10.2 Transaction Taxes............................................................ 69
10.3 Expenses..................................................................... 70
10.4 Non-Assignability............................................................ 70
10.5 Amendment; Waiver............................................................ 71
10.6 Schedules and Exhibits....................................................... 71
10.7 Third Parties................................................................ 72
10.8 Governing Law................................................................ 72
10.9 Consent to Jurisdiction...................................................... 72
10.10 Definitions.................................................................. 73
10.11 Entire Agreement............................................................. 84
10.12 Section Headings; Table of Contents.......................................... 84
10.13 Severability................................................................. 84
10.14 Counterparts................................................................. 84
</TABLE>
iii
<PAGE>
Exhibits
EXHIBIT A - Form of Patent and Know How License Agreements
EXHIBIT B - Intentionally Omitted
EXHIBIT C - Form of Glass Marble Supply Agreement
EXHIBIT D - Form of Alloy Services Agreement
EXHIBIT E - Form of Huntingdon Lease Agreement
EXHIBIT F - Form of Battice Facility Supply Agreement
EXHIBIT G - Form of Guelph Facility Supply Agreement
EXHIBIT H-1 - Form of Sanitary Sewer Agreement
EXHIBIT H-2 - Form of Stormwater Agreement
EXHIBIT I - Form of Non-Compete Agreement
EXHIBIT J - Form of Manufacturing Services Agreement
EXHIBIT K - Intentionally Omitted
EXHIBIT L-1 - Form of Aiken Air Modeling Agreement
EXHIBIT L-2 - Form of Huntington Air Modeling Agreement
EXHIBIT M - Form of Wastewater Treatment Agreement
EXHIBIT N - Form of Amended and Restated Limited Liability Operating
Agreement
EXHIBIT O-1 - Form of Trademark Assignment
EXHIBIT O-2 - Form of Master Patent and Know How Assignment
EXHIBIT P - Form of Sliver Supply Agreement
EXHIBIT Q - Form of Borates Supply Agreement
iv
<PAGE>
EXHIBIT R - Form of Carly Sublease
EXHIBIT S - Form of Pitney Bowes 1997 Sublease
EXHIBIT T - Form of Pitney Bowes 1996 Sublease
EXHIBIT U - Form of Landfill Agreement
EXHIBIT V - Form of NVOC Asset Purchase Agreement
EXHIBIT W - Form of OCC Asset Purchase Agreement
v
<PAGE>
LLC INTEREST SALE AND PURCHASE AGREEMENT
This LLC Interest Sale and Purchase Agreement, dated as of July 31, 1998,
among OWENS CORNING, a Delaware corporation ("Seller"); LINCOLN YARNS, LLC, a
------
Delaware limited liability Company (the "Company") and GLASS HOLDINGS, CORP., a
Delaware corporation ("Buyer").
-----
WITNESSETH:
WHEREAS, the Company is engaged in the business of manufacturing and
selling glass fiber yarns and specialty materials (the "Business");
--------
WHEREAS, Seller owns a 51% membership interest in the Company (the "Buyer
-----
Interest").
- --------
WHEREAS, Buyer desires to purchase from Seller and Seller desires to sell
to Buyer, on the terms and subject to the conditions of this Agreement, the
Buyer Interest;
WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in Section 10.10 and all monetary amounts specified in this
Agreement are in United States Dollars.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
<PAGE>
1 SALE OF INTEREST; PURCHASE PRICE AND ADJUSTMENTS
------------------------------------------------
1.1 Sale of Interest.
----------------
Subject to the satisfaction or waiver of the conditions set forth in
this Agreement, at the Closing and as of the Closing Date, Seller shall sell,
assign, transfer, convey and deliver to Buyer, free of all liens and
encumbrances, and Buyer shall purchase, the Buyer Interest.
1.2 Purchase Price.
--------------
The aggregate purchase price for the Buyer Interest shall be three
hundred fifty-seven million Dollars ($357,000,000) in the aggregate, subject to
adjustment as provided in Section 1.4 (the "Purchase Price").
--------------
1.3 Payment of Purchase Price.
-------------------------
The Purchase Price shall be payable on the Closing Date by wire
transfer of immediately available federal funds to such bank account or accounts
as shall be designated by Seller to Buyer prior to the Closing.
1.4 Purchase Price Adjustment.
-------------------------
(a) Calculation of the Purchase Price Adjustment. The Purchase Price
--------------------------------------------
shall be increased or decreased, on a dollar-for-dollar basis, by 51% of the
amount by which the Net Asset Value of the Company as of the Closing Date (the
"Closing NAV"), as finally determined pursuant to Section 1.4(d) below, is
- ------------
greater or less than twenty nine million two hundred seventy thousand dollars
($29,270,000) (the "Base NAV"). The calculation of the Base NAV is set forth on
--------
Schedule 1.4(a). If the Closing NAV is greater than the Base NAV, then Buyer
- ---------------
shall pay to Seller 51% of the amount of such excess. If the Closing NAV is
less than the Base NAV, then
2
<PAGE>
Seller shall pay to Buyer 51% of the amount of such deficiency. Such Purchase
Price adjustment shall be paid as set forth in Sections 1.4(b) and (e) below.
(b) Estimated Adjustment. On the Closing Date, Seller shall deliver
--------------------
to Buyer a statement (the "Estimated Closing Statement") prepared in accordance
---------------------------
with GAAP setting forth a calculation of Seller's good faith estimate of the
Closing NAV (the "Estimated Closing NAV"). If the Estimated Closing NAV as set
---------------------
forth on the Estimated Closing Statement is in excess of the Base NAV, the
Purchase Price payable at the Closing shall be increased by an amount equal to
51% of such excess. If the Estimated Closing NAV as set forth on the Estimated
Closing Statement is less than the Base NAV, then the Purchase Price payable at
the Closing shall be decreased by an amount equal to 51% of such deficiency.
(c) Closing NAV. Within ninety (90) days after the Closing,
-----------
Seller will prepare and deliver to Buyer a balance sheet of the Company as of
the Closing Date prepared in accordance with GAAP together with a statement
setting forth a calculation of the Closing NAV (the "Closing Statement"). At
-----------------
the option of the Buyer, exercisable in writing on or before the Closing Date,
the Closing Statement shall be audited by PricewaterhouseCoopers LLP, the cost
of such audit shall be borne by the Company. Buyer shall cooperate fully and
shall cause the Company to provide Seller with all assistance and access to
books and records necessary for Seller to prepare the Closing Statement. In
connection therewith, Buyer and Seller will jointly conduct a physical inventory
of the Inventory as of the Closing Date in accordance with the procedures to be
mutually agreed by Buyer and Seller acting reasonably and in good faith] and, at
Buyer's option, such physical inventory will be observed by Buyer's auditors,
3
<PAGE>
PricewaterhouseCoopers LLP, and at Seller's option, such physical inventory will
be observed by Seller's auditors, Arthur Andersen LLP.
(d) Closing Calculation.
-------------------
(i) Buyer shall be entitled to full access to the relevant
records and working papers prepared by or for Seller, and to Seller's employees
involved in such preparation, to aid in its review of the calculation of the
Closing NAV set forth on the Closing Statement. If Buyer believes that the
Closing NAV calculation (hereinafter the "Closing Calculation") has not been
-------------------
properly calculated in accordance with the calculation methodologies set forth
in this Section 1.4, it shall, within thirty (30) days after receipt of the
Closing Calculation, give written notice (the "Buyer's Objection") to Seller,
-----------------
setting forth the basis of the Buyer's Objection in reasonable detail and, to
the extent practicable, the adjustments to the Closing Calculation which Buyer
believes should be made. Failure to so notify Seller within such thirty (30) day
period shall constitute acceptance and approval of the Closing Calculation.
There shall be no adjustment to the Closing Calculation unless the cumulative
amount of Buyer's Objection equals or exceeds one million dollars
($1,000,000.00) and provided that any individual item of adjustment contained in
Buyer's Objection which is less than fifty thousand dollars ($50,000.00) shall
be excluded in its entirety. If Seller agrees that any change proposed by Buyer
is appropriate, the change shall be made to the Closing Calculation, whereupon
Buyer shall be deemed to have accepted and approved the Closing Calculation with
respect to such change and any other non-disputed item of the Closing
Calculation. If the proposed change is disputed by Seller, then Seller and Buyer
shall negotiate in good faith to resolve such dispute as expeditiously as
possible. If, after a period of thirty (30) days following the date on which
Buyer
4
<PAGE>
gives Seller notice of any such proposed change, any such proposed change still
remains disputed, then:
(ii) KPMG Peat Marwick LLP (the "Neutral Accounting Firm") shall
-----------------------
be engaged to resolve any remaining disputes. The Neutral Accounting Firm shall
act as an arbitrator to determine, based solely on presentations submitted by
Seller and Buyer, and not by independent review, only those issues still in
dispute. Each of Buyer and Seller shall have made its complete submission to
the Neutral Accounting Firm within ten (10) days following the expiration of the
thirty (30) day negotiation period described in Section 1.4(d)(i). The failure
by either party to make a complete submission prior to the expiration of such
ten (10) day period shall be deemed a waiver of such party's right to make a
submission or a further submission to the Neutral Accounting Firm. The Neutral
Accounting Firm's determination, based upon the calculation methodologies set
forth in this Section 1.4, shall be made within thirty (30) days following the
date on which the dispute is submitted, shall be set forth in a written
statement delivered to Seller and Buyer, and shall be final, binding and
conclusive. The fees and any expenses of the Neutral Accounting Firm shall be
shared equally by Seller and Buyer. In the event a party does not comply with
the procedure and time requirements contained herein, the Neutral Accounting
Firm shall render a decision based solely on the evidence it has which was
timely filed by either of the parties.
(e) Payment of Cash Purchase Price Adjustment. If the
-----------------------------------------
Closing NAV shown on the Closing Statement exceeds the Estimated Closing NAV,
then the Purchase Price shall be increased by an amount equal to 51% of such
excess and if the Closing NAV shown on the Closing Statement is less than the
Estimated Closing NAV, then the Purchase Price shall be
5
<PAGE>
decreased by an amount equal to 51% of such deficiency. Payment of any
adjustment in the Purchase Price pursuant to this Section 1.4(e) shall be made
by wire transfer to an account designated by Seller or Buyer, as the case may
be, in United States Dollars, in immediately available federal funds within
three (3) business days after the Closing Calculation has been finally
determined together with interest from the Closing Date to the date of payment
at the "base rate" of Citibank, N.A. or any successor thereto in New York, New
York in effect on the Closing Date, based on a 360-day year.
2 REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Buyer that:
(2.1) Corporate Existence.
-------------------
Seller is a Delaware corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
(2.2) LLC Organization and Qualification.
----------------------------------
The Company is a limited liability company duly formed, validly
existing and in good standing under the laws of Delaware and the Company has the
requisite power and authority to own, lease and operate the Assets and to carry
on the Business as the same is now being conducted, except where the failure to
do so would not have a material adverse effect on the results of operations,
financial condition or business of the Business, taken as a whole, or upon the
ability of Seller or its Affiliates to consummate the transaction contemplated
hereby or perform their obligations under the Agreement or the Ancillary
Agreements (a "Material Adverse Effect"). The Company is duly authorized,
qualified or licensed to do business as a foreign limited liability company and
in good standing in every jurisdiction wherein, by reason of the
6
<PAGE>
nature of the Business or the character of the Assets, the failure to be so
qualified would have a Material Adverse Effect. Seller has delivered to Buyer
complete, true and correct copies of the Company's Certificate of Formation and
its Operating Agreement. The Company has no assets other than those related to
the Business and conducts no business other than the Business. Except as may be
contemplated by Section 4.29, the Company has no subsidiaries and on the Closing
Date will have no subsidiaries.
2.3 Capitalization of the LLC.
-------------------------
The Company has authorized capitalization consisting solely of
ownership interests as described in the Operating Agreement (the "Interests").
---------
Seller is the owner of the Buyer Interest and Jefferson Holdings Inc., a
Delaware corporation and a wholly-owned subsidiary of Seller, owns the remaining
49% ownership interest of the Company. All of the Interests have been duly
authorized, validly issued and are fully paid. None of the Interests has been
issued in violation of any preemptive right. The Company has no other equity
securities or other evidences of ownership outstanding other than the Interests.
Except as contemplated by this Agreement, there are no outstanding
subscriptions, options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements of any character providing for the
purchase, issuance, transfer or sale of any of the Interests or any other equity
securities of the Company or other evidence of ownership in the Company. There
are no voting trusts, proxies or other agreements or understandings with respect
to the Interests.
2.4 Corporate Authority.
-------------------
The execution and delivery of this Agreement, the Ancillary Agreements
to which Seller, NVOC and OCC are parties and the consummation of all of the
transactions provided for
7
<PAGE>
herein and therein have been or, in the case of NVOC and OCC, will be duly
authorized by the Board of Directors of each of Seller, NVOC and OCC and no
other corporate or stockholder approval is required to be obtained prior to the
Closing. The execution and delivery of this Agreement has been duly authorized
by the Company. Each of Seller, NVOC and OCC has the corporate power and
authority to execute and deliver this Agreement and/or the Ancillary Agreements
(as applicable) and to perform its obligations hereunder and thereunder. The
Company has the power and authority to execute and deliver this Agreement. This
Agreement has been and the Ancillary Agreements will be duly executed and
delivered by each of Seller and, to the extent they are parties thereto, NVOC
and OCC, and constitutes or will constitute a valid and legally binding
obligation of Seller, NVOC and OCC (as applicable) enforceable in accordance
with its terms, except as enforceability may be (i) limited by bankruptcy,
insolvency, fraudulent conveyance or other similar laws affecting the
enforcement of creditor's rights, or (ii) subject to general principles of
equity. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and legally binding obligation of the Company enforceable in
accordance with its terms, except as enforceability may be (i) limited by
bankruptcy, insolvency, fraudulent conveyance or other similar laws affecting
the enforcement of creditor's rights, or (ii) subject to general principles of
equity.
2.5 No Conflicts.
------------
The execution and delivery of this Agreement and the Ancillary
Agreements do not and the performance by Seller of its obligations under this
Agreement and the consummation of the transactions contemplated hereby and
thereby will not (a) conflict with or result in a violation or breach of any
provision of the Certificate of Incorporation or By-Laws or any similar
8
<PAGE>
documents of Seller, NVOC or OCC and, in the case of the Company, conflict with
or breach any provision of the Certificate of Formation of the Company or its
Operating Agreement; (b) assuming receipt of the Required Consents, violate any
provisions of Law to which Seller or the Company, NVOC or OCC are subject, or by
which the Assets are bound, except for any such violation which would not have a
Material Adverse Effect; or (c) except as disclosed on Schedule 2.5, conflict
------------
with, result in a violation or breach of or constitute a default or result in
the creation of any material Encumbrance upon any of the Assets under the terms
of any Material Contract to which Seller, the Company, NVOC or OCC is a party or
is otherwise subject or by which the Assets are bound, or violate any material
statute, rule, regulation, ordinance, code, order, judgment, ruling, writ,
injunction, decree or award to which Seller, the Company, NVOC, OCC or the
Assets are subject, except for any such violations, breaches or defaults which
individually or in the aggregate would not have a Material Adverse Effect.
2.6 Governmental Approvals; Consents.
--------------------------------
Neither Seller nor the Company, NVOC or OCC is subject to any order,
judgment or decree which would prevent the consummation of the transactions
contemplated hereby. No claim, legal action, suit, arbitration, governmental
investigation, action or other legal or administrative proceeding is pending or,
to the knowledge of Seller, threatened against Seller, the Company, NVOC or OCC
which would enjoin or delay the transactions contemplated hereby. Except as set
forth on Schedule 2.6 hereto, no consent, approval, order or authorization of,
------------
license or permit from, notice to or registration, declaration or filing with,
any governmental authority or entity, domestic or foreign, or any third party
under any Material Agreement is or has been required on the part of Seller, the
Company, NVOC or OCC in connection with the
9
<PAGE>
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for such consents, approvals, orders or
authorizations of, licenses or permits, notices, registrations, declarations or
filings which have already been obtained or made or the failure to obtain or
make would not have a Material Adverse Effect.
2.7 Financial Statements.
--------------------
Schedule 2.7 contains a copy of (i) the audited Statement of Net
------------
Assets of the Aiken and Huntingdon Manufacturing Facilities (including the OCC
Assets) as of December 31, 1996 and 1997 and the related Statements of Revenues
and Certain Expenses for the three years ended December 31, 1997 (the
"Historical Annual Financial Statements"), (ii) the unaudited statement of Net
--------------------------------------
Assets of the Aiken and Huntingdon Manufacturing Facilities (including the OCC
Assets) as of March 31, 1998 and the related Statement of Revenues and Certain
Expenses for the three-month period ended March 31, 1998 (the "Historical
----------
Interim Financial Statements" and, together with the Historical Annual Financial
- ----------------------------
Statements, the "Historical Financial Statements") (iii) the Pro Forma
-------------------------------
Statements of Net Assets To Be Sold of the Business, NVOC and OCC as of December
31, 1997 and the related Pro Forma Statements of Revenues and Certain Expenses
for the year ended December 31, 1997 and (iv) the Interim Pro Forma Statement of
Net Assets to be sold of the Business, NVOC and OCC as of March 31, 1998 and the
related Interim Pro Forma Statement of Revenues and certain expenses for the
three month period ended March 31, 1998 (the "Pro Forma Information" and
---------------------
together with the Historical Financial Statements, the "Financial Statements").
--------------------
The Historical Annual Financial Statements have been prepared to present the net
assets of the Aiken and Huntingdon Manufacturing Facilities (including the OCC
Assets). The Historical Annual Financial Statements present
10
<PAGE>
fairly, in all material respects, the net assets of the Aiken and Huntingdon
Manufacturing Facilities (including the OCC Assets) as of December 31, 1996 and
1997 and the related revenues and certain expenses of the Aiken and Huntingdon
Manufacturing Facilities for the three years ended December 31, 1997, in
conformity with GAAP on the basis specified in the notes thereto. The Historical
Interim Financial Statements have been prepared in accordance with GAAP and
present fairly, in all material respects, the net assets of the Aiken and
Huntington Manufacturing facilities (including the OCC Assets) as of March 31,
1998 and the revenues and certain expenses of the Aiken and Huntington
Manufacturing facilities (including the OCC Assets) for the three months ended
March 31, 1998, subject to normal year-end adjustments. The Pro Forma
Information has been prepared to give effect to the events described in Notes 1
and 2 of the Pro Forma Information and should be read in conjunction with the
Historical Financial Statements. The Pro Forma Information is unaudited and is
not necessarily indicative of the results that would have actually occurred had
the sale been consummated, or of the results which may be obtained in the
future; however, subject to the foregoing, the Pro Forma Information reasonably
presents the assets and liabilities and revenues and certain expenses of the
Business as of the dates and for the periods presented, pro forma for the events
described in Notes 1 and 2 of the Pro Forma Information. All Financial
Statements and Historical Interim Financial Statements are qualified by the fact
that the Business has not operated as a separate "stand-alone" entity within
Seller and as a result, the Business received certain allocated charges and
credits as discussed more fully in the notes accompanying such Financial
Statements. Such charges and credits, while believed by Seller to be reasonable,
do not necessarily reflect the amounts which would have resulted from arm's-
length transactions. In order to present the Financial Statements
11
<PAGE>
and Historical Interim Financial Statements for the Business, a number of
significant assumptions regarding the basis of presentation have been made, all
of which are believed by Seller to be reasonable and are outlined in the notes
to such Financial Statements.
The books, records, and accounts of Seller maintained with respect to
the Business accurately and fairly reflect, in all material respects, the assets
and liabilities of the Business on the basis described in the Notes to the
Financial Statements.
2.8 Absence of Changes.
------------------
Except as otherwise disclosed on Schedule 2.8 or as contemplated by
------------
this Agreement or the ACA, since March 31, 1998, (i) the Business has been
conducted in all material respects in the ordinary course consistent with past
practice; and (ii) there has not been any:
(i) change in the Business, other than seasonal changes,
changes relating to the economy in general or changes relating to the industry
in which the Business operates in general, none of which individually or in the
aggregate has had a Material Adverse Effect;
(ii) material change in accounting methods, principles or
practices utilized by Seller with respect to the Business, or the Company except
as required by law or by generally applicable changes instituted in the
accounting profession;
(iii) material damage, destruction or loss (whether or not
covered by insurance) to a material tangible Asset;
(iv) waiver or release of any material right or claim of Seller
or the Company with respect to the Business;
12
<PAGE>
(v) increase in the rate of compensation payable or to become
payable to any employee of the Business, except increases in the ordinary course
of business or pursuant to a collective bargaining agreement;
(vi) adverse change in employee relations having a Material
Adverse Effect;
(vii) amendment, cancellation or termination (other than a
scheduled termination as set forth therein) of any Material Contract;
(viii) sale, assignment or transfer of any material portion of
the Assets, other than pursuant to the Asset Contribution Agreement or in the
ordinary course of business of the Business;
(ix) material changes in payment terms with material customers
or suppliers;
(x) failure to make capital expenditures in the ordinary
course consistent with past practice;
(xi) failure to maintain the Assets in the ordinary course
consistent with past practice; or
(xii) agreement by Seller, the Company, NVOC or OCC (as
applicable) to do any of the things described in the preceding clauses (i)
through (xi) other than as expressly provided for herein.
2.9 Real and Personal Properties.
----------------------------
(a) The Company has or will have on the Closing Date good title to,
or a valid and binding leasehold interest in, the real or personal property
included in the Assets, free and
13
<PAGE>
clear of all liens, charges and other encumbrances, except (i) as set forth on
Schedule 2.9(a); (ii) as disclosed in the Financial Statements; (iii) liens for
- ---------------
Taxes not yet due and payable or, if due, (A) not delinquent or (B) being
contested in good faith by appropriate proceedings during which collection or
enforcement against the property is stayed; (iv) mechanics', workmen's,
repairmen's, warehousemen's, carriers' or other like liens arising or incurred
in the ordinary course of business if the underlying obligations are not past
due, original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business; (v) with
respect to real property, (A) easements, licenses, covenants, rights-of-way and
other similar restrictions, including, without limitation, any other agreements
or restrictions shown by the current title reports described on Schedule
2.9(a)(v)(A), (B) any conditions that may be shown by a current survey, title
report or physical inspection and (C) zoning, building and other similar
restrictions, so long as none of (A), (B) or (C) renders the title of such real
property unmarketable or prevents the use of such real property substantially as
currently used; (vi) other liens, charges or other encumbrances which would not
have a Material Adverse Effect and (vii) with respect to the Leased Real
Property, liens or encumbrances created by, through or under the lessor thereof
or its predecessors in interest, (such liens, charges and encumbrances described
in clauses (i)-(vii) hereof are referred to herein as "Permitted Liens").
---------------
(b) Schedule 2.9(b) contains a list of the Owned Real Property and
---------------
all Real Property Leases principally used in the Business (the real property
covered by such Real Property Leases is hereinafter referred to the "Leased Real
-----------
Property" and, together with the Owned Real Property, the "Real Property"),
- -------- -------------
including all buildings, structures and other improvements situated thereon
(individually referred to as a "Facility" and, collectively, as the
--------
14
<PAGE>
"Facilities"). Except as set forth on Schedule 2.9(b) and except in each case
---------- ---------------
as would not have a Material Adverse Effect, (i) there are no parties in
possession of any portion of the Owned Real or the Leased Real Properties
included in the Assets as lessees, tenants at sufferance or trespassers other
than the Company; and (ii) to the knowledge of Seller, there is no pending
special assessment affecting the Owned Real Properties or any part thereof
included in the Assets. Except as provided on Schedule 2.9(b), Seller has
---------------
received no actual notice, and Seller otherwise has no actual knowledge, that
the location, construction, occupancy, operation or use of the buildings located
on the Owned Real Properties or the Leased Real Properties included in the
Assets violates any restrictive covenant or deed restriction or any other
governmental laws, orders, rules or regulations, except for such violations or
restrictions which would not have a Material Adverse Effect.
(c) All Inventory, whether reflected on the Financial Statements or
subsequently acquired, (i) has been or will be manufactured by Seller or the
Company in the ordinary course of business consistent with past practice or
acquired by Seller or the Company only in bona fide transactions entered into in
the ordinary course of business, (ii) is of good and merchantable quality except
to the extent adequately reserved for in the Financial Statements consistent
with past practice, (iii) is not now and at the Closing Date will not be subject
to any write-down or write-off in excess of the reserves established based on
past practice, and (iv) is valued at the lesser of cost or net realizable market
value, with appropriate adjustments for stale and slow-moving Inventory in
accordance with GAAP.
(d) All Accounts Receivable shown on the Financial Statements
represent, and the Accounts Receivable of Seller or the Company outstanding on
the Closing Date will
15
<PAGE>
represent, sales actually made or services actually performed in the ordinary
course of business in bona fide transactions completed materially in accordance
with the terms and provisions contained in any documents relating thereto. The
reserves for uncollectible Accounts Receivable reflected on the Financial
Statements were established in accordance with GAAP and in accordance with
Seller's historical methods and practices in establishing such reserves.
2.10 Contracts.
---------
(a) Schedule 2.10(a) sets forth a true, correct and complete list of
----------------
all Contracts of the following categories (Contracts disclosed on Schedule
2.10(a) are hereafter referred to as "Material Contracts"):
------------------
(i) Employment contracts and severance agreements, including,
without limitation, Contracts (A) to employ or terminate executive officers or
other personnel and other contracts with present or former employees of the
Business currently in effect or (B) that will result in the payment by, or the
creation of any commitment or obligation (absolute or contingent) to pay on
behalf of Seller or the Company any severance, termination, "golden parachute,"
or other similar payments to any present or former employees of the Business
following termination of employment or otherwise as a result of the consummation
of the transactions contemplated by this Agreement;
(ii) Material distribution, franchise, license, sales,
commission, consulting agency or advertising contracts which are not cancelable
on thirty (30) calendar days notice;
(iii) Material options to buy or sell any property, real or
personal, included in the Assets;
16
<PAGE>
(iv) Contracts, NVOC Contracts and OCC Contracts each
individually involving aggregate expenditures of $100,000 or aggregate receipts
in excess of $1,000,000;
(v) Contracts containing covenants limiting the freedom of the
Company to compete with any Person during any period following the Closing;
(vi) Partnership and joint venture agreements related to the
Business; and
(vii) Commitments for capital expenditures that have been
approved or made prior to the date of this Agreement in excess of $250,000 by
Seller in respect of the Business or the Company and that remain outstanding as
of the date hereof.
(b) Each of Seller, the Company, NVOC or OCC (as applicable)
has furnished or shall have made available to Buyer prior to the Closing a true
and correct and complete copy of each Material Contract. Each Material Contract
assigned or to be assigned (i) by Seller to the Company pursuant to the ACA,
(ii) by NVOC to the Company pursuant to the NVOC Asset Purchase Agreement, or
(iii) by OCC to the Company pursuant to the OCC Asset Purchase Agreement, is
valid and in full force and effect according to its terms. Except in regard to
collective bargaining agreements (which is the subject of Section 2.15), each of
Seller, the Company, NVOC, or OCC (as applicable) has duly performed all of its
material obligations under such Material Contracts to the extent those
obligations to perform have accrued and no material violation of, or material
default or breach under, such Material Contracts by Seller, the Company, NVOC or
OCC (as applicable) has occurred. To the Knowledge of Seller, the Company, NVOC
or OCC (as applicable), the other parties to any of the Material Contracts are
not in material default or breach under any such Material Contract nor has
Seller, the Company,
17
<PAGE>
NVOC or OCC received notice that with notice or lapse of time or both such other
parties would be in violation or breach of or default under any such Material
Contract.
(c) Except for those Material Contracts listed on Schedule 2.10(c),
----------------
no Material Contract assigned to the Company pursuant to the Asset Contribution
Agreement, assigned by NVOC to the Company pursuant to the NVOC Asset Purchase
Agreement or assigned by OCC to the Company pursuant to the OCC Asset Purchase
Agreement requires the consent of any other party thereto to effectuate the
assignment thereof to the Company or its subsidiaries.
(d) Except as indicated on Schedule 2.10(d), neither Seller nor the
----------------
Company has received written notice of any actual or threatened termination,
cancellation, or limitation of, or any amendment, modification, or change to (i)
any Material Contract, (ii) the business relationship of Seller or the Company
with any customer, distributor or related group of customers or distributors
whose purchases individually or in the aggregate are material to the operations
and financial condition of the Business, (iii) the requirements of any customer
or related group of customers of Seller or the Company whose purchases
individually or in the aggregate are material to the operations and financial
condition of the Business, or (iv) the business relationship of Seller or the
Company with any material supplier to the Business, which termination,
cancellation, limitation, amendment, modification or change would have a
Material Adverse Effect.
2.11 Litigation.
----------
Except as set forth on Schedule 2.11, there are no actions, suits,
-------------
proceedings or investigations pending or, to the Knowledge of Seller, threatened
in law or in equity, or before
18
<PAGE>
any governmental agency (a) related to or affecting the Assets or the Business,
(b) seeking to delay, limit or enjoin the transactions contemplated by this
Agreement or (c) that would materially impair the abilities of Seller or its
Affiliates to perform their respective obligations under this Agreement or any
of the Ancillary Agreements. Except as set forth on Schedule 2.11, neither
-------------
Seller nor the Company is in default under any judgment, order, injunction or
decree of any court or government agency relating to the Business. There are no
unsatisfied judgments against the Assets or Seller, the Company, NVOC or OCC.
2.12 Intangible Property Rights.
--------------------------
The Proprietary Rights, together with the Intellectual Property Rights
licensed to the Company pursuant to the Patent and Know How License Agreement
(the "Licensed Proprietary Rights"), constitute all of the material Intellectual
Property Rights as: (a) are in use, or have been used, or are or were under
development for use, in the Manufacturing Facilities to manufacture Business
Products on or before the Closing Date; (b) are necessary to the use of the
Business Manufacturing Technology; or (c) are necessary to the continued
manufacture of the Business Products using the Business Manufacturing
Technology. Except as set forth on Schedule 2.12, (a) the Company will on the
-------------
Closing Date own and possess all right, title and interest in and to all of the
Proprietary Rights and will have valid and subsisting licenses to continue to
use the Licensed Proprietary Rights in a manner consistent with past business
practices of the Business; (b) no claim by any third party contesting the
validity, enforceability, use or ownership of any of the Proprietary Rights or
the Licensed Proprietary Rights is pending or, to Seller's Knowledge, is
threatened and (c) neither Seller nor the Company has received any notice of,
and neither Seller nor the Company has any Knowledge of, any infringement or
19
<PAGE>
misappropriation by any third party with respect to the Proprietary Rights or
the Licensed Proprietary Rights by the manufacture, use or sale of Business
Products, or any claim that any Proprietary Rights or Licensed Proprietary
Rights is invalid or unenforceable by Seller or the Company; and (d) to Seller's
Knowledge, the Company's use of the Proprietary Rights is not infringing upon or
otherwise violating the rights of any third party. All Proprietary Rights are
assignable by Seller to the Company, and all Licensed Proprietary Rights may be
licensed by Seller or one or more of its Affiliates to the Company in the manner
contemplated by the Master Patent and Know How Assignment Agreement and the
Patent and Know How License Agreement.
2.13 Insurance.
---------
Seller has in force the policies of insurance set forth on Schedule
--------
2.13. Seller has not been refused any insurance with respect to the Business,
- ----
by any insurance carrier to which it has applied for insurance or with which it
has carried insurance during the past five (5) years. There are no outstanding
requirements or recommendations by any current insurer or underwriter with
respect to the Business or the Assets which require changes in the conduct of
the Business, or require any repairs or other work to be done with respect to
any of the Assets or operations of the Business.
2.14 Tax Matters.
-----------
(a) Liens. There are no liens (other than Permitted Liens) for Taxes
-----
on any of the Assets.
(b) Safe Harbor Lease Property; Tax Exempt Use Property; Security
-------------------------------------------------------------
for Tax-Exempt Obligations. None of the Assets (i) are required to be treated
- --------------------------
as being owned by any
20
<PAGE>
other person pursuant to the so-called safe harbor lease provisions of former
Section 168(f)(8) of the Code; (ii) directly or indirectly secures any debt the
interest on which is tax-exempt under Section 103(a) of the Code or (iii) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(c) United States Person. Seller is a United States person within
--------------------
the meaning of 7701(a)(30) of the Code.
2.15 Employment and Benefits.
-----------------------
(a) Labor Controversies. Except as described on Schedule 2.15(a) or
------------------- ----------------
as a result of the transactions contemplated by the ACA, (i) Seller and the
Company are in compliance in all material respects with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours; (ii) Seller and the Company have no material
Liability for non-compliance with any collective bargaining agreement related to
the Business; (iii) there is no unfair labor practice complaint against Seller
or the Company pending before the National Labor Relations Board; (iv) there is
no labor strike, dispute, slowdown or stoppage actually pending or threatened
against or affecting Seller or the Company; (v) within the past five years,
neither Seller nor the Company has experienced any strike, work stoppage or
other labor difficulty; and (vi) neither Seller nor the Company is a party to,
or subject to, a collective bargaining agreement, and no collective bargaining
agreement relating to employees included within the Business is currently being
negotiated.
(b) Employee Benefit Plans.
----------------------
(i) For purposes of this Agreement, "Benefit Plans" shall mean
-------------
all employee benefit plans and programs (including any "employee benefit plan"
within the meaning
21
<PAGE>
of Section 3(3) of ERISA) maintained or contributed to by Seller for the benefit
of any Business Employee (or any dependent thereof). Schedule 2.15(b)(i) sets
-------------------
forth a list of each material Benefit Plan. No Benefit Plan is a multiemployer
plan as defined in Section 4001(a)(3) or 3(37) of ERISA.
(ii) With respect to each material Benefit Plan, Seller has made
available to Buyer (A) copies of any written plan document relating thereto and
any description thereof, (B) the most recent determination or opinion issued by
the Internal Revenue Service, if applicable, (C) the most recent Form 5500
filing, if applicable, and (D) lists of certain data relating to Business
Employees.
(iii) Except as described on Schedule 2.15(b)(iii), each material
---------------------
Benefit Plan has been established and administered in accordance with its terms
and in material compliance with the applicable provisions of ERISA, the Code and
other applicable laws. Each Benefit Plan intended to qualify under Section
401(a) of the Code is the subject of a favorable determination from the Internal
Revenue Service as to its qualified status, and to the knowledge of Seller, no
event has occurred since the date of such letter which would adversely affect
such qualified status.
(c) Employment Contracts. Except as described on Schedule 2.15(c),
-------------------- ---------------
there are no employment bonus, severance or similar contracts between the
Company, and any employee included within the Business on the other hand, other
than contracts representing the standard terms and conditions prevailing between
the Company and the Business Employees.
22
<PAGE>
2.16 Compliance with Laws.
--------------------
To the best of Seller's knowledge, except as disclosed on Schedule
--------
2.16 and except for violations or defaults the existence of which would not have
- ----
a Material Adverse Effect, none of Seller, the Company, NVOC or OCC is in any
material respect in violation of or default under any Law with respect to the
operation of the Business or the Assets or has received any notification
thereof.
2.17 Finders; Brokers.
----------------
With the exception of fees and expenses payable to SBC Warburg Dillon
Read Inc., which shall be Seller's sole responsibility, neither Seller nor the
Company is a party to any agreement with any finder or broker, or in any other
way obligated to any finder or broker, for any commissions, fees or expenses in
connection with the origin, negotiation, execution or performance of this
Agreement.
2.18 Environmental Matters.
---------------------
Except as disclosed on Schedule 2.18 and except as a result of the
-------------
transactions contemplated by the ACA:
(a) Seller is in compliance and on the Closing Date the Company will
be in compliance with all Environmental Laws applicable to the Business as
presently conducted, except for violations of such Environmental Laws that would
not have a Material Adverse Effect.
(b) Seller holds and is in compliance with, and on the Closing
Date the Company will hold and be in compliance with, all Licenses and Permits
required under Environmental Laws applicable to the Assets or the conduct of the
Business as presently
23
<PAGE>
conducted, except for the absence of, or the noncompliance with, such Licenses
and Permits that would not have a Material Adverse Effect.
(c) Neither Seller nor the Company has received any written or, to
Seller's knowledge, other notice of any pending lawsuit, action, proceeding,
investigation or claim by any person or private or governmental entity alleging
a violation of or liability under any Environmental Law arising from the conduct
of the Business or with respect to any Real Property, except in all such cases
that would not have a Material Adverse Effect.
(d) There has been no Release of any Hazardous Substance at any Real
Property or any real property previously owned, leased or operated by Seller or
the Company in respect of the Business that is in violation of or is reasonably
likely to lead to any liability arising under any Environmental Law, except for
any such violations or liability that would not have a Material Adverse Effect.
(e) There is no material environmental assessment, investigation,
study, test, review, or audit report prepared by or for Seller or the Company in
relation to the Business or the Assets that has not been delivered to or made
available to Buyer prior to the date hereof.
(f) Neither Seller nor the Company has transported or arranged for
the treatment, storage, or disposal of any Hazardous Substances to any off-site
location in connection with the Business that has resulted in or could result in
a liability to Seller or the Company under applicable Environmental Laws, except
for any such liability that would not have a Material Adverse Effect.
24
<PAGE>
2.19 Entire Business.
---------------
Except as set forth on Schedule 2.19, the Assets, together with the
-------------
rights and services made available in the agreements described in Sections 4.5,
4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20,
4.21, 4.22, 4.23, 4.24, 4.25, 4.26, 4.27, 4.28 and 4.29, constitute all the
assets, properties and rights necessary to conduct the Business in all material
respects as currently conducted.
2.20 Disclaimer of Warranty.
----------------------
SELLER MAKES NO WARRANTY WITH RESPECT TO THE VALUE, CONDITION OR USE
OF THE ASSETS OWNED OR USED BY THE COMPANY, WHETHER EXPRESSED OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
2.21 Inventory.
---------
Neither Seller, in respect of the Business, nor the Company is under
any liability or obligation with respect to the return of inventory in the
possession of distributors or other customers which shall not be reserved
against in the Closing Statement.
2.22 Accounts Receivable.
-------------------
The Accounts Receivable outstanding on the Closing Date will be
subject to no defenses, counterclaims or rights of setoff other than those
arising in the ordinary course of business and for which adequate reserves will
have been established in the Closing Statement.
25
<PAGE>
2.23 No Other Representations or Warranties.
--------------------------------------
Except for the representations and warranties contained in this
Section 2, none of Seller, the Company or any other person makes any other
express or implied representation or warranty on behalf of Seller or the
Company, including, without limitation, as to the probable success or
profitability of the ownership, use or operation of the Business or the Assets
by the Company after the Closing.
3 REPRESENTATIONS OF BUYER
------------------------
Buyer represents and warrants that:
3.1 Corporate Existence.
-------------------
Buyer is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite power and authority to acquire the Buyer Interest. Buyer is duly
authorized, qualified or licensed to do business as a foreign corporation and in
good standing in every jurisdiction wherein, by reason of the nature of the
Business or the character of the Assets, the failure to be so qualified would
have a material adverse effect on the Company or the ability of Buyer to
consummate the transactions contemplated hereby (a "Buyer Material Adverse
----------------------
Effect").
- ------
3.2 Corporate Authority.
-------------------
The execution and delivery of this Agreement, the Ancillary Agreements
and the consummation of all of the transactions provided for herein and therein
have been duly authorized by the Board of Directors of Buyer, and no other
corporate or stockholder approval is required to be obtained by Buyer prior to
the Closing. Buyer has the corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements to which it is a
26
<PAGE>
party and to perform its obligations hereunder and thereunder. This Agreement
has been duly executed and delivered by Buyer, and constitutes a valid and
legally binding obligation of Buyer, enforceable in accordance with its terms,
except as enforceability may be (i) limited by bankruptcy, insolvency,
fraudulent conveyance or other similar laws affecting the enforcement of
creditor's rights, or (ii) subject to general principles of equity.
3.3 No Conflicts.
------------
The execution and delivery of this Agreement by Buyer and the
Ancillary Agreements to which it is a party and the consummation by Buyer of the
transactions contemplated hereby and thereby will not violate or conflict with
any provision of the Certificate of Incorporation or By-Laws of Buyer, or result
in any breach or constitute any material default under any contract, indenture,
mortgage, lease, note or other agreement or instrument to which Buyer is a party
or otherwise subject, except for any such violation, breach or default which
would not have a Buyer Material Adverse Effect.
3.4 Governmental Approvals; Consents.
--------------------------------
Neither Buyer nor any of its Affiliates is subject to any order,
judgment or decree which would prevent the consummation of the transactions
contemplated hereby. No claim, legal action, suit, arbitration, governmental
investigation, action or other legal or administrative proceeding is pending or,
to the knowledge of Buyer, threatened against Buyer or any of its Affiliates
which would enjoin or delay the transactions contemplated hereby. Except as set
forth on Schedule 3.4 hereto, no consent, approval, order or authorization of,
------------
license or permit from, notice to or registration, declaration or filing with,
any governmental authority or entity, domestic or foreign, or of any third
party, is or has been required on the part of Buyer in
27
<PAGE>
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby and, except for such consents,
approvals, orders or authorizations of, licenses or permits, notices,
registrations, declarations or filings which have already been obtained or made
or the failure of which to obtain or make would not have a Buyer Material
Adverse Effect.
3.5 Finders; Brokers.
----------------
With the exception of fees and expenses payable to First Union Capital
Markets, Buyer is not a party to any agreement with any finder or broker, or in
any other way obligated to any finder or broker, for any commissions, fees or
expenses in connection with the origin, negotiation, execution or performance of
this Agreement.
3.6 Financial Capacity.
------------------
Buyer has in hand cash and binding commitment letters (the "Commitment
----------
Letters"), which are currently in effect and true and correct copies of which
- -------
are attached hereto as Schedule 3.6, with a reputable financial institution or
------------
institutions, to provide all funds necessary to enable Buyer and the Company to
consummate the transactions described in this Agreement (including the Company
Financing, the "Financings").
----------
3.7 Knowledge of Buyer.
------------------
In the course of performing its due diligence investigation, neither
Buyer nor its Affiliates, their respective officers, directors, agents,
employees or advisors have identified any facts which would render any of
Seller's representations incorrect, false or misleading.
28
<PAGE>
3.8 No Other Representations or Warranties.
--------------------------------------
Except for the representations and warranties contained in this
Section 3, neither Buyer nor any other person makes any other express or implied
representation or warranty on behalf of Buyer.
4 AGREEMENTS OF BUYER AND SELLER
------------------------------
4.1 Operation of the Business.
-------------------------
Except as otherwise contemplated by this Agreement, the ACA or as
disclosed on Schedule 4.1, Seller covenants that until the Closing it will and
------------
it will cause the Company to use all reasonable efforts to operate the Business
in a manner consistent with the past practices of the Business, to maintain and
preserve intact the Business and to maintain the ordinary and customary
relationships of the Business with its suppliers, customers and others having
business relationships with it with a view toward preserving to and after the
Closing Date the Business, the Assets and the goodwill associated therewith.
Until the Closing Date, Seller shall cause the Company to continue to operate
and conduct the Business in the ordinary course and maintain its books and
records in accordance with Seller's past practices with respect to the Business
and will cause the Company not to, without the prior written approval of Buyer
or as otherwise contemplated by this Agreement, Schedule 4.1 or the existing
------------
business plans related to the Business, take any of the following actions:
(a) sell, transfer or otherwise dispose of or encumber any of the
properties or assets pertaining to the Business, other than (A) in the ordinary
course of business consistent with past practice, (B) any property or asset
which is not material to the results of operations,
29
<PAGE>
financial condition or business of the Business and (C) the subdivision of
Seller's Aiken, South Carolina property as contemplated by the ACA;
(b) cancel any debt or waive any claim or right pertaining to the
Business, except in the ordinary course of business consistent with past
practice;
(c) grant any increase in the compensation of officers or employees
principally engaged in the Business (including any such increase pursuant to any
bonus, pension, profit sharing or other plan or commitment) or enter into any
employment agreement with any employee of the Business, except for increases (i)
in the ordinary course of business and consistent with past practice, (ii) as a
result of the collective bargaining described on Schedule 4.1(c) or (iii) as
---------------
required by any Benefit Plan;
(d) make any capital expenditure or commitment pertaining to the
Business or prepay any obligation related to the Business or the Assets, other
than (A) in the ordinary course of business consistent with past practice, (B)
pursuant to existing commitments disclosed to Buyer prior to the execution of
this Agreement or (C) those which are not material to the results of operations,
financial condition or business of the Business;
(e) except with respect to endorsement of negotiable instruments in
the ordinary course of the Business, incur, assume or guarantee any indebtedness
for borrowed money;
(f) dispose of or permit to lapse, other than through expiration by
operation of law (or in the case of the Licensed Proprietary Rights pursuant to
the terms of the relevant license) any rights to the Proprietary Rights or the
Licensed Proprietary Rights or any of the intellectual property to be licensed
to the Company under the Seller License Agreement;
30
<PAGE>
(g) enter into, materially modify, materially amend or terminate any
Material Contract, License or Permit intended to be assumed by the Company
pursuant to the ACA other than in the ordinary course of business consistent
with past practice (including the entering into any license in respect of
Proprietary Rights other than those described on Schedule 4.1(g));
(h) commence any litigation other than consistent with past practice
or settle any litigation involving liability for material money damages or
restrictions which will have a Material Adverse Effect on the operation of the
Business or the use of the Assets or on the ability of Seller to perform its
material obligations under this Agreement; or
(i) agree, whether in writing or otherwise, to do any of the
foregoing.
4.2 Investigation of the Business; Confidentiality.
----------------------------------------------
(a) Buyer may, prior to the Closing Date, make or cause to be made
such investigation of the business and properties of the Business and of its
financial and legal condition as Buyer deems necessary or advisable. Seller will
cause the Company to permit Buyer, Buyer's lenders and their respective counsel,
accountants, technical consultants and, to the extent reasonably acceptable to
Seller and the Company, other agents or representatives of each of them, to have
full access to the properties, books and records of the Business at reasonable
hours to review information and documentation relative to the properties, books,
contracts, commitments and other records of the Business; provided, however,
-------- -------
that Buyer shall not have access to customer lists (or other customer-specific
information) or trade secrets prior to the Closing.
(b) Seller covenants that, from and after the date of this Agreement
(including after the Closing), it will not and it shall cause the Company to
not, without the prior written
31
<PAGE>
consent of the Buyer, disclose to any person confidential information relating
to or concerning the Company, the Assets, the Business, or the Buyer obtained
by, or in the possession of, the Seller or the Company prior to the Closing Date
(the "Buyer Confidential Information"), except to its officers, directors,
------------------------------
employees and representatives who need to know such information for purposes of
taxes, accounting, litigation and other matters necessary in respect of the
Seller's ownership, prior to the Closing, of its Interest in the Company, the
Assets or the Business, unless, (i) upon the advice of the Seller's counsel,
disclosure is required to be made under the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, any other applicable Law or the
Regulations of the New York Stock Exchange or any other relevant securities
exchange or trading market or (ii) disclosure is necessary in the conduct of the
Business. In the event that Seller or the Company is requested or required by
subpoena, civil investigative demand, interrogatories, requests for information,
or other similar process to disclose any Buyer Confidential Information which
otherwise may not be disclosed except as set forth in the preceding sentence,
Seller will provide Buyer with prompt notice of such request or demand or other
similar process so that Buyer may seek an appropriate protective order or, if
such request, demand or other similar process is not mandatory, waive Seller's
and the Company's compliance with the provisions of this Section 4.2(b), as
appropriate. Notwithstanding the foregoing, neither Seller nor the Company shall
be obligated to comply with the terms of the immediately preceding sentence if
such compliance could result in the imposition of any liability, civil or
criminal on Seller or the Company. The term "Buyer Confidential Information"
does not include information which (i) becomes generally available to the public
other than as a result of disclosure by Seller or the Company, (ii) was
available on a
32
<PAGE>
non-confidential basis prior to its disclosure by Seller or the Company, or
(iii) becomes available to Seller or the Company on a non-confidential basis
from a source other than the Business, provided that such source is not bound by
a confidentiality agreement with Buyer or its representatives.
(c) Buyer covenants that, from and after the date of this Agreement
(including after the Closing), it will not, without the prior written consent of
Seller, disclose to any person confidential information relating to or
concerning Seller (the "Seller Confidential Information"), except to its
-------------------------------
officers, directors, employees and representatives who need to know such
information for purposes of taxes, accounting, litigation and other matters
necessary in respect of Buyer's ownership, subsequent to the Closing, of the
Buyer Interest, unless, (i) upon the advice of Buyer's counsel, disclosure is
required to be made under the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, any other applicable Law or the regulations of
any relevant securities exchange or trading market or (ii) disclosure is
reasonably necessary in the conduct of the Business and such disclosure would
not have an adverse effect on Seller. In the event the Buyer is requested or
required by subpoena, civil investigative demand, interrogatories, requests for
information, or other similar process to disclose any Seller Confidential
Information which otherwise may not be disclosed except as set forth in the
preceding sentence, Buyer will provide Seller with prompt notice of such
request, demand or other similar process so that Seller may seek an appropriate
protective order or, if such request, demand or other similar process is not
mandatory, waive Buyer's compliance with the provisions of this Section 4.2(c),
as appropriate. Notwithstanding the foregoing, Buyer shall not be obligated to
comply with the terms of the immediately preceding sentence if such compliance
33
<PAGE>
could result in the imposition of any liability, civil or criminal, on Buyer.
The term "Seller Confidential Information" does not include information which
(i) becomes generally available to the public other than as a result of
disclosure by Buyer, (ii) was available on a non-confidential basis prior to its
disclosure by Buyer, or (iii) becomes available to Buyer on a non-confidential
basis from a source other than Seller, provided that such source is not bound by
a confidentiality agreement with Seller or its representatives.
(d) For purposes of Sections 4.2(b) and 4.2(c), "Seller" shall
include Seller, its subsidiaries and Affiliates, and any of their respective
directors, officers, employees and representatives, and "Buyer" shall include
Buyer, its subsidiaries and Affiliates, and any of their respective directors,
officers, employees and representatives.
(e) No failure or delay by either party hereto in exercising any
right, power or privilege under Section 4.2(b) or 4.2(c) shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
4.3 Mutual Cooperation; No Inconsistent Action.
------------------------------------------
(a) Subject to the terms and conditions hereof, Seller and Buyer
agree to use their reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, including all of the following: (i) obtain prior to the Closing all
licenses, certificates, permits, approvals, authorizations, qualifications and
orders of governmental authorities as are necessary for the consummation of the
transactions
34
<PAGE>
contemplated hereby and (ii) effect all necessary registrations and filings.
Seller and Buyer shall cooperate fully with each other to the extent reasonable
in connection with the foregoing.
(b) Buyer and Seller shall timely and promptly make all filings which
may be required by each of them in connection with the consummation of the
transactions contemplated hereby including but not limited to those set forth on
Schedule 4.3(b). Each party shall furnish to each other such necessary
- ---------------
information and assistance as the other party may reasonably request in
connection with the preparation of any necessary filings or submissions by it to
any U.S. or foreign governmental agency.
(c) Each of Seller and Buyer shall notify and keep the other advised
as to (i) any litigation or administrative proceeding pending and known to such
party, or to its knowledge threatened, which challenges the transactions
contemplated hereby and (ii) any event or circumstance which would constitute a
breach of their respective representations and warranties in this Agreement;
provided, however, that the failure of Seller or Buyer to comply with clause
- -------- -------
(ii) shall not subject Seller or Buyer to any liability hereunder except as and
to the extent Seller or Buyer would be responsible for a breach of such
representations and warranties pursuant to Section 8 (including, without
limitation, the limitations on recovery and the time periods for bringing claims
thereunder). Subject to the provisions of Section 8 hereof, Seller and Buyer
shall not take any action inconsistent with their obligations under this
Agreement or which would materially hinder or delay the consummation of the
transactions contemplated by this Agreement.
(d) Seller and Buyer shall use their reasonable efforts to obtain
at the earliest practicable date and prior to the Closing all Contractual
Consents contemplated herein, and will
35
<PAGE>
provide to each other copies of each such Contractual Consent promptly after it
is obtained. To the extent any such approval, waiver or consent is not received
prior to the Closing, Seller and Buyer shall continue for a reasonable time
after Closing to use their reasonable efforts to obtain at the earliest
practicable date all such approvals, waivers or consents.
4.4 Public Disclosures.
------------------
Prior to the Closing Date, no party to this Agreement will issue any
press release or make any other public disclosures concerning this transaction
or the contents of this Agreement without the prior written consent of the other
party. Notwithstanding the above, nothing in this Section will preclude any
party from making any disclosures required by law or regulation or necessary and
proper in conjunction with the filing of any Tax Return or other document
required to be filed with any federal, state or local governmental body,
authority or agency; provided, however, that the party required to make the
-------- -------
release or statement shall allow the other party reasonable time to comment on
such release or statement in advance of such issuance.
4.5 Patent and Know How License Agreement.
-------------------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, a license
agreement, substantially in the form attached as Exhibit A hereto (the "Patent
and Know How License Agreement"), pursuant to which Seller shall grant to the
Company, and Company shall grant to the Seller, a license to use certain patents
and know-how as set forth therein.
36
<PAGE>
4.6 Non-Solicitation.
----------------
Until the Closing shall actually have occurred, Buyer acknowledges
that it remains subject to the term of the Confidentiality Agreement dated
February 24, 1998 by and between Seller and Groupe Porcher Industries.
4.7 Financing.
---------
If Buyer requires the Financings to consummate the transactions
contemplated by this Agreement, Buyer will use its best efforts to obtain, and
to cause the Company to obtain, and Seller shall reasonably cooperate in
obtaining and causing the Company to obtain the Financings on and subject to
substantially the same terms and conditions as those previously set forth in the
Commitment Letters. Buyer shall use its best efforts to satisfy at or before
the Closing all requirements which are conditions to its closing all
transactions constituting the Financings and to its and the Company's drawing
down the cash proceeds thereunder. Buyer expressly acknowledges that the
consummation of any financing transaction shall not be a condition to Buyer's
obligations under this Agreement.
4.8 Services Agreement.
------------------
Following the date hereof Seller and Buyer shall negotiate in good
faith a transitional services agreement to be executed at the Closing pursuant
to which Seller and the Company shall agree to provide each other agreed upon
transactional services for periods and upon terms to be agreed between the
parties.
4.9 Glass Marbles Supply Agreement.
------------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, an agreement,
substantially in the form
37
<PAGE>
attached hereto as Exhibit C (the "Glass Marbles Supply Agreement"), pursuant to
------------------------------
which Seller shall agree to supply glass marbles to the Company on the terms and
subject to the conditions set forth therein.
4.10 Alloy Services Agreement.
------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, an agreement,
substantially in the form attached hereto as Exhibit D (the "Alloy Services
--------------
Agreement"), pursuant to which Seller shall agree to provide alloy services to
- ---------
the Company on the terms and subject to the conditions set forth therein.
4.11 Huntingdon Lease Agreement.
--------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, an agreement,
substantially in the form attached hereto as Exhibit E (the "Huntingdon Lease
----------------
Agreement"), pursuant to which the Company shall agree to lease a portion of the
- ---------
Huntingdon property to Seller on the terms and subject to the conditions set
forth therein.
4.12 Battice Facility Supply Agreement.
---------------------------------
On the Closing Date, Seller shall cause NVOC and Buyer shall cause the
Company to and the Company shall execute and deliver an agreement, substantially
in the form attached hereto as Exhibit F (the "Battice Facility Supply
-----------------------
Agreement"), pursuant to which NVOC shall supply heavy yarns to the Company
through NVOC's facility in Battice, Belgium (the "Battice Facility") on the
----------------
terms and subject to the conditions set forth therein.
38
<PAGE>
4.13 Guelph Facility Supply Agreement.
--------------------------------
On the Closing Date, Seller shall cause OCC and Buyer shall cause the
Company to and the Company shall execute and deliver, an agreement,
substantially in the form attached hereto as Exhibit G (the "Guelph Facility
---------------
Supply Agreement"), pursuant to which OCC shall supply heavy yarns to the
- ----------------
Company through OCC's Facility in Guelph, Ontario, Canada (the "Guelph
------
Facility") on the terms and subject to the conditions set forth therein.
- --------
4.14 Sanitary Sewer and Stormwater Agreements.
----------------------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver (i) a Sanitary
Sewer Agreement and (ii) a Stormwater Agreement substantially in the forms
attached hereto as Exhibit H-1 and H-2 (the "Sanitary Sewer and Stormwater
-----------------------------
Agreements").
- ----------
4.15 Non-Compete Agreement.
---------------------
On the Closing Date, Buyer Groupe Porcher Industries, the Company and
Seller shall execute and deliver a Non-Compete Agreement substantially in the
form attached hereto as Exhibit I (the "Non-Compete Agreement").
---------------------
4.16 Manufacturing Services Agreement.
--------------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, an agreement
substantially in the form attached hereto as Exhibit J (the "Manufacturing
-------------
Services Agreement"), pursuant to which the Company shall provide to Seller
- ------------------
certain manufacturing services on the terms and subject to the conditions set
forth therein.
4.17 Intentionally Omitted
---------------------
39
<PAGE>
4.18 Air Modeling Agreements.
-----------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver (i) a joint
modeling agreement in respect of the Aiken facility and (ii) a joint modeling
agreement in respect of the Huntington facility, substantially in the forms
attached hereto as Exhibit, L-1 and L-2 (the "Air Modeling Agreements").
4.19 Wastewater Treatment Agreement.
------------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to, and the Company shall, execute and deliver, a Wastewater
Treatment Services Agreement, substantially in the form attached hereto as
Exhibit M (the "Wastewater Treatment Agreement"), pursuant to which the Company
------------------------------
shall provide to Seller Waste Water Treatment Services with respect to the
retained portion of Seller's Aiken, South Carolina Facility on the terms and
subject to the conditions set forth therein.
4.20 Operating Agreement.
-------------------
On the Closing Date, Seller shall cause Jefferson Holdings, Inc. and
Buyer shall execute and deliver the Lincoln Yarns LLC Amended and Restated
Limited Liability Operating Agreement, substantially in the form attached hereto
as Exhibit N (the "Operating Agreement").
-------------------
4.21 Trademark Assignment/Master Patent and Know How Assignment.
----------------------------------------------------------
On the Closing Date, Seller shall and shall cause Owens-Corning
Fiberglas Technology, Inc. to execute and deliver a (i) trademark assignment
(the "Trademark Assignment") and (ii) Master Patent and Know How Assignment (the
--------------------
"Master Patent and Know
----------------------
40
<PAGE>
How Assignment") substantially in the form attached hereto as Exhibits O-1 and
- --------------
O-2, respectively.
4.22 Use of Packaging.
----------------
Buyer acknowledges that Seller and the Company have agreed that,
following the Closing Date, the Company may use the existing inventory of
packaging materials displaying Seller's trademarks for a period of six (6)
months. After such six-month period, the Company shall destroy any such unused
packaging material; provided, however, that the Company shall not be required to
-------- -------
repackage any finished goods which on the Closing Date shall have already been
packaged in packaging material displaying the Company's trademarks. After such
six (6) month period, Company may only continue to use pallets and recyclable
materials if any of Seller's trademarks thereon are obliterated or obscured.
The Company shall not manufacture new pallets or recyclable materials bearing
Seller's trademarks.
4.23 Sliver Supply Agreement.
-----------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, an agreement
substantially in the form attached hereto as Exhibit P (the "Sliver Supply
-------------
Agreement"), pursuant to which the Company shall supply Seller certain products
- ---------
on the terms and subject to the conditions set forth therein.
4.24 Borates Supply Agreement.
------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, an agreement
substantially in the form attached hereto as Exhibit Q (the "Borates Supply
--------------
Agreement"), pursuant to which Seller shall supply the Company certain products
- ---------
on the terms and subject to the conditions set forth therein.
41
<PAGE>
4.25 Carly Sublease.
--------------
On the Closing Date, Seller and the Company shall execute and deliver
an agreement substantially in the form attached hereto as Exhibit R (the "Carly
-----
Sublease"), pursuant to which Seller shall sublease to the Company certain
- --------
equipment on the terms and subject to the conditions set forth therein.
4.26 Pitney Bowes 1997 Sublease.
--------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, an agreement
substantially in the form attached hereto as Exhibit S (the "Pitney Bowes 1997
-----------------
Sublease"), pursuant to which Seller shall sublease to the Company certain
- --------
equipment on the terms and subject to the conditions set forth therein.
4.27 Pitney Bowes 1996 Sublease.
--------------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, an agreement
substantially in the form attached hereto as Exhibit T (the "Pitney Bowes 1996
-----------------
Sublease"), pursuant to which Seller shall sublease to the Company certain
- --------
equipment on the terms and subject to the conditions set forth therein.
4.28 Landfill Agreement.
------------------
On the Closing Date, Seller shall execute and deliver, and Buyer shall
cause the Company to and the Company shall execute and deliver, an agreement
substantially in the form attached hereto as Exhibit U (the "Landfill
--------
Agreement").
- ---------
42
<PAGE>
4.29 NVOC and OCC Assets.
-------------------
(a) Seller shall cause its subsidiary, NVOC, to execute and deliver
and Buyer shall cause the Company, or an Affiliate of the Company, to and the
Company shall execute and deliver an Asset Purchase Agreement in the form of
Exhibit V (the "NVOC Asset Purchase Agreement") concerning the sale of the
-----------------------------
assets described therein (the "NVOC Assets") and the assumption of the
-----------
liabilities described therein by the Company or its wholly-owned subsidiary.
(b) Seller shall cause its subsidiary, OCC, to execute and deliver
and Buyer shall cause the Company, or an Affiliate of the Company, to and the
Company shall execute and deliver an Asset Purchase Agreement in the form of
Exhibit W (the "OCC Asset Purchase Agreement") concerning the sale of the assets
----------------------------
described therein (the "OCC Assets") and the assumption of the liabilities
----------
described therein by the Company or its wholly-owned subsidiary.
4.30 "GLAS Marks".
----------
Buyer acknowledges that, as between the parties, Seller is the owner of all
right, title and interest in and to the GLAS family of GLAS marks (the "GLAS
----
Marks") in any form or embodiment thereof and is also the owner of the goodwill
- -----
attached or which shall become attached to the GLAS Marks. Neither Buyer nor the
Company shall, at any time, knowingly do or permit to be done any act or thing
which may in any way adversely affect any rights of Seller in and to the GLAS
Marks or any registrations thereof or which, directly or indirectly, may reduce
the value of the GLAS Marks or detract from their reputation, other than at the
express request of Seller. Neither Buyer nor the Company shall join any name or
names with the GLAS Marks so as to form a new mark. Neither Buyer nor the
Company shall use any name or names in connection with the GLAS Marks in any
advertising, publicity, labeling, packaging or printed
43
<PAGE>
matter of any kind, unless and until Seller consents to these particular uses in
writing. At Seller's request, Buyer and the Company shall execute any documents
reasonably required by Seller to confirm Seller's ownership of all rights in and
to the GLAS Marks and the respective rights of LALLC and the Surviving Company
pursuant to this Agreement.
4.31 No Solicitation.
---------------
(a) Seller will not, and will ensure that the Company and their
respective directors, officers, employees or other Affiliates or representatives
do not, directly or indirectly encourage, solicit, participate in or initiate
discussions or negotiation with, or provide any information to, any person or
entity (other than Buyer or its directors, officers, employees or other
Affiliates or representatives) with respect to any sale, disposition, lease or
other transfer of any of the Assets (except as contemplated by the ACA or sales
of inventory and other routine sales of assets in the ordinary course of
business consistent with past practice) or the Business (an "Acquisition
Transaction"). Seller shall notify Buyer upon receipt of any bona-fide proposal
concerning an Acquisition Transaction and the terms thereof.
(b) In the period between the date of this Agreement and the Closing
and for 12 months after the Closing Date, neither Seller nor any of its
Affiliates shall, directly or indirectly, on its own behalf or in the service or
on behalf of others, initiate any solicitation of or offer employment to any
Business Employee until the employee rejects Company's offer of employment or,
as to any Transferred Employee, while such employee is employed by Company or
any of its Affiliates. For this purpose, the general posting of placement of job
openings and descriptions by Seller on newspapers, magazines, intranet or
internet websites, bulletin boards or any other form of communication or
advertisement not specifically targeted at the Business or
44
<PAGE>
Transferred Employees or through any other method of general solicitation will
not be deemed to be an act of initiating solicitation of a Business or
Transferred Employee. The Business Employees shall not be treated as employees
of Seller or its Affiliates for the purposes of any "hiring freeze" or "job
transfer" program of Seller or any of its Affiliates.
4.32 Casualty to Assets; Eminent Domain.
----------------------------------
(a) If on or prior to the Closing Date any of the tangible Assets
shall have suffered loss or damage on account of fire, flood, accident, act of
war, civil commotion, or any other cause or event beyond the reasonable power
and control of Seller or the Company (whether or not similar to the foregoing)
which has a Material Adverse Effect, Seller shall promptly notify the Buyer and
Buyer shall have the right to elect within fourteen (14) days from and after
such notice, by notice to Seller either (a) to terminate this Agreement and all
of Buyer's obligations hereunder (other than those set forth in Section 4.2(c)
hereof) without incurring any liability to Seller as a result of such
termination or (b) to consummate the transactions provided for herein provided
that the full amount of all insurance proceeds, if any, paid or payable to
Seller for the benefit of the Company in respect of such loss plus an amount
equal to any deductible applicable to such loss shall be paid to the Company. If
under the circumstances described in the foregoing sentence, Buyer shall elect
to consummate the transactions provided for herein, Seller shall, on demand,
pay, or assign its right to receive, to the Company at or after the Closing the
full amount of any insurance proceeds actually received by Seller for the
benefit of the Company in respect of any such loss together with the amount of
any deductible applicable to such loss. If Buyer does not elect to terminate
this Agreement within the aforesaid fourteen (14) day period, Buyer shall be
deemed to have elected to consummate the transactions contemplated hereby.
45
<PAGE>
(b) If, after the date hereof and prior to the Closing, Seller or the
Company receives notice of the commencement or threatened commencement of
eminent domain or other like proceedings against the Real Properties or any
portion thereof which has a Material Adverse Effect, Seller shall promptly
notify Buyer, and Buyer shall have the right to elect within fourteen (14) days
from and after such notice, by notice to Seller, to terminate this Agreement and
all of Buyer's obligations hereunder (other than those set forth in Section
4.2(c)). If Buyer does not make such election within the aforesaid fourteen (14)
day period, Buyer shall be deemed to have elected to consummate the transactions
contemplated hereby.
4.33 Intentionally Omitted.
---------------------
4.34 Employees and Employee Benefits.
-------------------------------
(a) Hiring of Employees. Buyer shall cause the Company to offer
-------------------
employment as of the Closing Date to each employee of Seller engaged in the
Business who is listed on Schedule 4.34(a) (collectively, the "Business
Employees"), which schedule shall be provided as soon as practicable after the
date hereof and shall be updated from time to time prior to the Closing Date,
and shall include current annual salary or wage rates; provided, however, that
-------- -------
if any such Business Employee is on leave of absence as of the Closing, such
offer of employment shall be effective upon the employee's return to active
employment, provided such return is within two (2) years following the Closing
Date. Each such offer shall be on at least the same wage rates or cash salary
levels, and on such other terms and conditions including benefit plan coverages)
that are, in the aggregate, no less favorable than those in effect immediately
prior to the Closing Date. With respect to each such Business Employee who
accepts the Company's offer of employment (a "Transferred Employee"), Buyer
--------------------
shall cause the Company to (i) maintain
46
<PAGE>
such equivalent or higher cash salary levels and substantially similar terms and
conditions from the Closing Date until at least December 31, 1999 (or shall
maintain such other terms and conditions and for such period as may be required
pursuant to any collective bargaining agreement assumed pursuant to clause (iii)
below), and (ii) credit periods of service prior to the Closing for purposes of
determining seniority, eligibility, vesting and benefit entitlement under all
compensation and benefit plans, programs and policies maintained by the Company
after the Closing . If Seller materially amends or terminates any Benefit Plan,
the Company shall have the right to amend or terminate its corresponding plan in
the same or similar manner. Seller shall notify the Company of any such material
amendment or termination.
(b) Health and Life Coverages; Workers Compensation. Without limiting
-----------------------------------------------
the scope of Section 4.34(a), Buyer shall cause the Company to cause each
Transferred Employee (and his or her eligible dependents) to be covered
immediately following the Closing by a group health plan that provides health
benefits (within the meaning of Section 5000(b)(1) of the Code) that (i) does
not limit or exclude coverage on the basis of any pre-existing condition of such
Transferred Employee or dependent, and (ii) that provides each Transferred
Employee full credit, for the year during which the Closing occurs, with any
deductible already incurred by the Transferred Employee under Seller's group
health plan and with any other out-of-pocket expenses that count against any
maximum out-of-pocket expense provision of Seller's or the Company's group
health plan (or if the Company's plan does not provide such credit, Buyer will
cause the Company to reimburse each Transferred Employee for such deductibles
and out-of-pocket expenses incurred under Seller's plan during the calendar year
in which the Closing occurs). In addition, from the Closing Date until at least
December 31, 1999 (or such other
47
<PAGE>
period as may be required pursuant to any collective bargaining agreement
assumed hereunder) following the Closing Date, Buyer shall cause the Company to
provide Transferred Employees with post-retirement health and life coverage at
levels that are substantially similar to the levels provided to such employees
under Seller's group health and life plans immediately prior to the Closing. The
Company shall be solely responsible for, and Buyer shall indemnify Seller
against, any and all claims by a Transferred Employee or his dependents for
retiree health and life benefits, and Seller shall remain responsible for such
benefits as to any employee or former employee of the Business other than a
Transferred Employee. Following the Closing, Buyer shall cause the Company to
provide continuation health coverage to all Transferred Employees or any
qualified beneficiary thereof who incur a qualifying event after the Closing in
accordance with the continuation health care requirements of "COBRA" and Seller
shall provide such COBRA coverage to any employee or former employee of the
Seller engaged in the Business, or any qualified beneficiary thereof who incurs
a qualifying event on or prior to the Closing. Seller shall remain responsible
for, and shall indemnify the Company and Buyer against, any and all claims
incurred by Transferred Employees prior to the Closing Date that are covered (or
alleged to be covered) under Seller's group health plans. For purposes of
clarity, a claim shall be considered incurred when the treatment for a given
condition is provided, and not when the condition arose. Workers Compensation
benefits for any Transferred Employee shall be the responsibility of Seller only
if the claim therefor was properly filed by the Transferred Employee prior to
the Closing Date, and otherwise shall be the responsibility of the Company.
(c) Severance. Without limiting the scope of Section 4.34(a), with
---------
respect to each Transferred Employee whose employment is terminated by the
Company within one year of
48
<PAGE>
the Closing Date, Buyer shall cause the Company to provide severance benefits
which are no less favorable than those to which such Transferred Employee would
have been entitled under Seller's severance policies set forth on Schedule
--------
2.15(b)(i) had such Transferred Employee been terminated by Seller immediately
- ----------
prior to the Closing.
(d) Accrued Vacation. With respect to any accrued but unused vacation
----------------
time to which any Transferred Employee is eligible to take pursuant to the
vacation policy applicable to such Transferred Employee immediately prior to
Closing, Buyer shall cause the Company to allow such Transferred Employee to use
such accrued vacation. The Company shall have no obligation to provide any cash
payments for unused vacation.
(e) Disability Benefits. Without limiting the scope of Section
-------------------
4.34(a), Buyer shall cause the Company to provide long-term disability benefits
to any Transferred Employee who becomes disabled after the Closing Date. Any
Business Employee who was on short-term disability leave immediately prior to
the Closing and who subsequently satisfies the eligibility requirements for
long-term disability benefits on or after the Closing Date (including any
benefit elimination period) shall be covered under Seller's long-term disability
plan. Any Business Employee who was on short-term disability leave immediately
prior to the Closing and who subsequently is able to return to work before
qualifying for long-term disability coverage shall be offered employment by the
Company as required pursuant to Section 4.34(a). If the offer of employment is
accepted, Buyer shall cause the Company to reimburse Seller its cost of
providing short-term disability payments to such employee from the Closing Date
until the date such employee commences employment with the Company. Seller shall
retain responsibility for the making of long-term disability payments for
employees who are receiving long-term disability payments as of the Closing. If
any former employee of the Business who is identified to Buyer as receiving
long-term disability
49
<PAGE>
payments as of the Closing is, subsequent to the Closing, legally entitled to be
re-employed by Seller, Buyer shall cause the Company to offer employment to such
employee as if such employee were a Transferred Employee on the Closing Date.
(f) Flexible Spending Accounts. Without limiting the scope of Section
--------------------------
4.34(a), effective as of the Closing and through at least December 31, 1998,
Buyer shall cause the Company to establish flexible spending accounts for
medical and dependent care expenses, and shall credit such accounts with the
amount credited as of the Closing under comparable accounts maintained with
Seller from the beginning of the plan year to the Closing. As soon as
practicable after the Closing, (A) Seller shall pay to the Company in cash the
amount, if any, by which aggregate contributions made by Transferred Employees
to Seller's flexible spending accounts exceeded the aggregate benefits provided
to Transferred Employees as of the Closing, or (B) Buyer shall cause the Company
to pay to Seller in cash the amount, if any, by which the aggregate benefits
provided to Transferred Employees under Seller's flexible spending accounts
exceeded the aggregate contributions made by Transferred Employees as of the
Closing. The Company shall have no obligation to contribute to or allow
contributions to any flexible spending accounts that exceed Seller's prior
obligation to contribute or allow contributions.
(g) Defined Benefit Plans. Seller shall cause each Transferred
---------------------
Employee to become fully vested in his accrued benefit under any tax-qualified
defined benefit pension plan maintained by Seller (a "Seller Pension Plan") in
-------------------
which such Transferred Employee participates as of the Closing. Seller will
amend each Seller Pension Plan to provide for the continuing
50
<PAGE>
eligibility for early retirement of each Transferred Employee who does not, as
of the Closing Date, qualify for an early retirement benefit thereunder, and for
this purpose shall treat service with the Company as service with Seller. If any
such Transferred Employee remains employed by the Company until he qualifies for
early retirement, then such plans will treat such Transferred Employee as having
elected early retirement when he retires from the Company. Such early retirement
benefit shall be based solely upon service and compensation earned prior to the
Closing. The Company will provide Seller with as much notice as possible of the
retirement of any such Transferred Employee. Seller shall calculate the
difference between the lump sum benefit payable to such Transferred Employee as
an early retiree and the lump sum benefit payable to such Transferred Employee
as a deferred vested benefit on the date of retirement from the Company and
under the provisions of the applicable Seller Pension Plan, determined in the
same manner that such plan calculates lump sum benefits at the time such
Transferred Employee shall retire. The Company shall pay Seller such difference
within 60 days of such transferred Employee's retirement. In addition, should
the Company institute any reduction in force, early retirement window program or
otherwise provide any financial inducement that results in the termination of
employment of any Transferred Employee who, as of the Closing, qualifies for an
early retirement benefit under a Seller Pension Plan, Buyer shall cause the
Company to promptly pay to Seller an amount equal to the incremental cost of
providing such early retirement benefit. Such cost shall be determined by an
enrolled actuary engaged by Seller based on the excess of the present value of
such subsidized early retirement benefits for all such Transferred Employees
over the present value of the accrued benefits for all such Transferred
Employees determined as if such employees had not elected to commence
51
<PAGE>
retirement benefits and using normal actuarial assumptions with respect to
projected retirement dates.
(h) 401(k) Plan. Without limiting the scope of Section 4.34(a), as
-----------
of the Closing, Buyer shall cause the Company to make available, and maintain
from the Closing Date until at least December 31, 1999 (or such other period as
may be required pursuant to any collective bargaining agreement assumed
hereunder), a tax-qualified defined contribution plan or plans with a cash or
deferred feature (a "Company 401(k) Plan") for the benefit of each Transferred
-------------------
Employee who was eligible (or would have been eligible but for any waiting
period) to participate in a tax-qualified defined contribution plan maintained
by Seller with a cash or deferred feature (a "Seller 401(k) Plan"). Immediately
------------------
prior to the Closing, Seller shall cause all account balances of all Transferred
Employees under each Seller 401(k) Plan to become fully vested as of the
Closing, and as soon as practicable after the Closing (or, if Transitional
Coverage is provided under a Seller 401(k) Plan, after cessation of such
Transitional Coverage) shall cause such account balance to be transferred to a
Company 401(k) Plan, and Buyer shall cause such Company 401(k) Plan to accept
such transfer. Prior to such transfer, Buyer shall cause the Company to provide
to Seller such evidence or assurance as reasonably requested by Seller as to the
tax-qualified status of each Company 401(k) Plan (including an IRS determination
letter, a submission therefor and/or an opinion of counsel). The transfer shall
be made in cash, provided that (i) the portion of the transferred accounts
represented by participant loans shall be transferred in kind, and (ii) the
portion of the transferred accounts invested in an Owens Corning stock fund
shall be transferred in kind. The Company may, in its discretion, prohibit
additional investment into such stock fund, but shall notify affected
participants of its intention to liquidate
52
<PAGE>
such stock fund at least two years prior to such liquidation; provided, however,
-------- -------
that liquidation of the Owens Coring stock fund shall be allowed at any time if
a fiduciary of the plan reasonably determines that failure to liquidate the
stock fund would cause the fiduciary to breach his fiduciary obligations under
ERISA. The parties shall comply with all provisions of the Code and ERISA
applicable to such transfer, including Sections 414(l) and 411(d)(6) of the Code
and the corresponding provisions of ERISA. After such transfer, Buyer shall be
solely responsible for, and shall indemnify Seller against, all liabilities
relating to the transferred accounts. Each Transferred Employee participating in
a Seller 401(k) Plan as of the Closing shall be eligible for an allocation of
any profit sharing contribution made by Seller thereto with respect to Seller's
1998 fiscal year based on such Transferred Employee's participation therein
through the Closing, provided that such Transferred Employee would otherwise
have been eligible for an allocation had he remained an employee of Seller
through the end of such year. The Company shall reimburse Seller for the profit
sharing contribution allocated to such Transferred Employees.
(i) Stock Options. With respect to vesting and exercisability of
-------------
outstanding options to purchase Seller common stock held by Transferred
Employees as of the Closing, Seller shall treat employment with the Company as
employment with Seller.
(j) Performance Awards. With respect to Seller's 1998 fiscal year,
------------------
the Company shall pay to Transferred Employees performance share bonuses under
Seller's Global Stock Plan and bonuses under Seller's Annual Corporate Incentive
Plan in the amounts that such employees would have been paid by Seller had they
remained employed by Seller through the end of such fiscal year.
53
<PAGE>
(k) Transitional Coverage. If requested by Company, Seller shall
---------------------
allow Transferred Employees to continue to participate in, be covered by, or
accrue benefits under any Benefit Plan of Seller that provides pension or
welfare coverage (any such continued participation, coverage or accrual
hereinafter referred to as "Transitional Coverage"). Such Transitional Coverage
---------------------
shall be made available only to the extent permitted by applicable law, and in
any event shall not in extend beyond December 31, 1999. Buyer shall cause the
Company to reimburse Seller for the cost of providing the Transitional Coverage.
Buyer agrees that the provision (or subsequent cessation) of such Transitional
Coverage shall not relieve Buyer of its obligations contained elsewhere in the
Section 4.35 (i.e., Buyer shall remain responsible for the retiree medical
obligations of all Transferred Employees, even those who retire and are provided
Transitional Coverage through a Seller retiree medical plan).
(l) No Third-Party Beneficiary. Nothing herein, expressed or
--------------------------
implied, shall confer upon any employee or former employee of Seller or Company
or any of their Affiliates (including, without limitation, the Transferred
Employees), any rights or remedies including, without limitation, any right to
employment or continued employment for any specified period) of any nature or
kind whatsoever, under or by reason of this Agreement.
4.35 Forward-Underwriting Commitment.
-------------------------------
Buyer agrees that if the Financings are not consummated by October 15,
1998, Buyer will consummate the Financing through the execution of their bridge
financing with First Union Capital Markets or by other means.
54
<PAGE>
4.36 Cash Assets.
-----------
Buyer agrees and acknowledges that immediately prior to the closing
all cash and cash equivalents, including, without limitation, bank deposits,
investments in so-called "money market" funds, commercial paper funds,
Certificates of Deposits, Treasury bills and accrued interest thereon, of the
Company will be withdrawn or otherwise transferred from the Company to Seller
and/or Jefferson Holdings, Inc.
4.37 Contribution of Assets of the Company.
-------------------------------------
On or prior to the Closing, Seller shall have consummated any and all
transactions contemplated in the ACA and shall have caused all of its rights and
title to the Business Assets to be transferred to the Company in accordance with
the terms of the ACA.
4.38 Post-Closing Distributions by the Company.
-----------------------------------------
Immediately upon the Closing, the parties shall cause the Company to
and the Company shall make a cash distribution in the aggregate amount of four
hundred twenty-five million Dollars ($425,000,000) to its members, pro rata in
accordance with their then respective ownership interests in the Company, and
Buyer shall have caused the Company to obtain any and all financing necessary to
fund such cash distribution (the "Company Financing") in accordance with the
-----------------
terms and conditions set forth in the Commitments.
4.39 Toll Manufacturing.
------------------
The parties agree that prior to Closing they will discuss the
possibility that Seller may be willing to toll manufacture for the Company
products with TEX up to 400 (including low TEX type 30) that have historically
been manufactured by the Business but are not Business Products.
55
<PAGE>
5 CONDITIONS
----------
5.1 Conditions Precedent to the Obligations of Buyer and Seller.
-----------------------------------------------------------
The respective obligations of Buyer and Seller to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing Date of the following conditions:
(a) No Injunction, etc. At the Closing Date, there shall be no
------------------
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the purchase or the transfer to Buyer
by Seller of the Buyer Interest.
(b) Regulatory Authorizations. All (i) consents, approvals,
-------------------------
authorizations and orders of federal, state and foreign governmental and
regulatory authorities as are necessary in connection with the transfer of the
Buyer Interest to Buyer or which if not obtained would be reasonably likely to
subject Buyer or Seller, or any officer, director or agent of any such person,
to civil or criminal liability or could render such transfer void or voidable
(the "Required Consents") shall have been obtained, except for Required Consents
-----------------
the failure of which to obtain are not material, individually or in the
aggregate, to the operations of the Business taken as a whole and the failure of
which to obtain would not subject Buyer or Seller, or any officer, director or
agent of any such person, to civil or criminal liability.
5.2 Conditions Precedent to the Obligation of Seller.
------------------------------------------------
The obligation of Seller to consummate the transactions provided for
in this Agreement is subject to fulfillment of each of the following conditions:
56
<PAGE>
(a) Accuracy of Buyer's Representations and Warranties; Covenants of
----------------------------------------------------------------
Buyer. The representations and warranties of Buyer contained in this Agreement
- -----
that are qualified as to materiality shall be true and correct and the
representations and warranties of Buyer set forth in this Agreement that are not
so qualified shall be true and correct in all material respects, in each case on
the date of this Agreement (except to the extent cured prior to the Closing
Date) and on the Closing Date as though made on the Closing Date, except to the
extent such representations and warranties speak as of an earlier date; Buyer
shall have complied in all material respects with all covenants contained in
this Agreement to be performed by it prior to the Closing; and Seller shall have
received a certificate signed by an authorized officer of Buyer to such effect.
(b) Ancillary Agreements. Buyer and the Company shall have executed
--------------------
the Ancillary Agreements to which they are parties or shall have caused the
Company to and the Company shall have executed the Ancillary Agreements to which
it is a party.
(c) Company Financing. Buyer and the Company shall have executed and
-----------------
delivered any and all agreement, documents and instruments required to effect
the Company Financing and no further conditions shall exist to the funding of
the Company Financing other than the consummation of the Closing.
5.3 Conditions Precedent to the Obligation of Buyer.
-----------------------------------------------
The obligation of Buyer to consummate the transactions provided for in
this Agreement is subject to fulfillment of each of the following conditions:
(a) Accuracy of Representations and Warranties of Seller; Covenants
---------------------------------------------------------------
of Seller. The representations and warranties of Seller contained in this
- ---------
Agreement that are
57
<PAGE>
qualified as to materiality shall be true and correct and the representations
and warranties of Seller set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case on the date of
this Agreement (except to the extent cured prior to the Closing Date) and on the
Closing Date as though made on the Closing Date, except to the extent such
representations and warranties speak as of an earlier date; Seller shall have
complied in all material respects with all covenants contained in this Agreement
to be performed by it prior to the Closing; and Buyer shall have received a
certificate signed by an authorized officer of Seller to such effect.
(b) Ancillary Agreements. Seller, NVOC and OCC shall have executed
--------------------
the Ancillary Agreements to which they are parties.
(c) Contractual Consents. All contractual approvals, waivers and
--------------------
consents set forth on Schedule 5.3(c) ("Contractual Consents") shall have been
--------------------
obtained and shall remain in full force and effect.
6 CLOSING
-------
6.1 Closing Date.
------------
Unless this Agreement shall have been terminated and the transactions
herein shall have been abandoned pursuant to Section 8 hereof, the closing of
the transactions contemplated by this Agreement (the "Closing") shall take place
-------
at the offices of Morgan, Lewis & Bockius LLP, at 10:00 a.m., New York City
time, on September 30,1998 (or as soon as practicable thereafter as all of the
conditions to the Closing set forth in Section 5 hereof are satisfied or
waived), or such other date, time and place as shall be agreed upon by Seller
and
58
<PAGE>
Buyer (the actual date and time being herein called the "Closing Date"). The
------------
Closing shall be deemed effective as of 12:01 a.m. on the Closing Date.
6.2 Buyer Deliveries.
----------------
At the Closing, Buyer shall deliver to Seller or one or more of its
Affiliates (as directed by Seller) (i) the Purchase Price as provided in Section
1.2 hereof, (ii) the documents described in Section 5.2 hereof and (iii) such
other documents and instruments as counsel for Buyer and Seller mutually agree
to be reasonably necessary to consummate the transactions described herein.
6.3 Seller Deliveries.
-----------------
At the Closing, Seller shall deliver or cause one or more of its
Affiliates to deliver to Buyer (i) the documents described in Section 5.3
hereof, (ii) the Buyer Interest and (iii) such other documents and instruments
as counsel for Buyer and Seller mutually agree to be reasonably necessary to
consummate the transactions described herein.
7 TAX MATTERS
-----------
7.1 Asset Allocation.
----------------
Buyer and Seller each agrees that Schedule 7.1 attached hereto
------------
reflects (i) the fair market value of each category of Company assets listed
thereon, including all property of the Company that constitutes "unrealized
receivables" of the Company for purposes of Section 751 of the Code, and (ii)
the Seller's interest and gain in each such category of Company assets. The
parties further agree that the valuations listed on Schedule 7.1 shall be used
by Buyer, Seller and the Company for any and all income tax purposes, including,
without limitation, adjustments to the tax basis of the Company's assets
pursuant to Section 743(b) of the Code.
59
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8 INDEMNIFICATION
---------------
8.1 Survival of Representations and Warranties; Time for Assertion of
-----------------------------------------------------------------
Claims.
- ------
Subject to the limitations and other provisions of this Agreement, and
regardless of any investigation made by or on behalf of Seller or Buyer, (i) the
representations and warranties of the parties hereto contained herein shall
survive the Closing and shall remain in full force and effect, for a period of
one year after the Closing Date; provided, however, that the representations and
-------- -------
warranties set forth in Section 2.18 (environmental) and Section 2.14 (tax)
shall remain in full force and effect for a period of five (5) years after the
Closing Date and (ii) the covenants and agreements of the parties hereto
contained herein shall survive the Closing and shall remain in full force and
effect for a period of one year after the date on which performance of such
covenant or agreement was due (in each case, the "Termination Date"). Any right
----------------
of indemnification pursuant to this Section 8 shall expire on the Termination
Date of the respective representation, warranty, covenant or agreement claimed
to be breached unless, on or prior to the Termination Date, a Claim (as defined
below) has been timely made to the party from whom indemnification is sought, in
which case such Claim may continue to be asserted beyond the respective
Termination Date.
8.2 Indemnification by Seller.
-------------------------
(a) Seller shall defend, indemnify and hold Buyer and its Affiliates
(including the Company after the Closing) harmless from and against and in
respect of any and all actual losses, liabilities, damages, demands, claims,
suits, proceedings, judgments, settlements, assessments, costs and expenses,
including reasonable attorneys' fees, incurred directly by Buyer or its
Affiliates (hereinafter "Buyer Losses") which arise out of (i) any breach of any
------------
of the
60
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representations and warranties contained in Section 2 hereof or the certificate
delivered pursuant to Section 5.3(a), or (ii) any breach by Seller of any of its
covenants in this Agreement but not of any Ancillary Agreement which shall be
governed by the terms thereof. Buyer shall give Seller prompt written notice of
any third party claim which may give rise to any indemnity obligation under this
Section, together with the estimated amount of such claim, and Seller shall have
the right to assume the defense of any such claim through counsel of its own
choosing, by so notifying Buyer within thirty (30) days of receipt of Buyer's
written notice; provided, however, that Seller's counsel shall be reasonably
-------- -------
satisfactory to Buyer. Failure to give prompt notice shall not affect the
indemnification obligations hereunder in the absence of actual prejudice. If
Buyer desires to participate in any such defense assumed by Seller, it may do so
at its sole cost and expense. If Seller declines or fails to assume any such
defense, it shall be liable for all reasonable costs and expenses of defending
such claim incurred by Buyer, including reasonable fees and disbursements of
counsel. Neither party shall, without the prior written consent of the other
party, which shall not be unreasonably withheld, settle, compromise or offer to
settle or compromise any such claim or demand on a basis which would result in
the imposition of a consent order, injunction or decree which would restrict the
future activity or conduct of the other party or any subsidiary or Affiliate
thereof or if such settlement or compromise involves a finding or admission of
any violation of law, or if such settlement or compromise does not include an
unconditional release of the other party for any liability arising out of such
claim or demand or any related claim or demand.
(b) The foregoing obligation to indemnify Buyer set forth in Section
8.2(a) shall be subject to each of the following limitations:
61
<PAGE>
(i) No reimbursement for Buyer Losses asserted against Seller
under Section 8.2(a)(i) shall be required unless and until the cumulative
aggregate amount of such Buyer Losses equals or exceeds seven million five
hundred thousand dollars ($7,500,000) (the "Threshold") and then only to the
---------
extent that the cumulative aggregate amount of Buyer Losses, as finally
determined, exceeds the Threshold; provided that in calculating the Threshold
--------
any Buyer Losses which individually total less than fifty thousand dollars
($50,000.00) each ("De Minimis Buyer Losses") shall be excluded in their
-----------------------
entirety and Seller in any event shall have no liability hereunder to Buyer and
its Affiliates for any such De Minimis Buyer Losses.
(ii) Seller's liability to Buyer under Section 8.2(a)(i) for
Buyer Losses in excess of the Threshold shall not exceed one hundred fifty
million dollars ($150,000,000.00).
(iii) Seller's indemnification obligation for any breach of the
representation and warranties contained in Section 2.18 with respect to matters
relating to the investigation, remediation, cleanup, removal or monitoring of
Hazardous Substances at or migrating from the Real Property ("Remedial Action")
shall be limited to compliance with standards established under applicable
Environmental Laws, (including, without limitation the imposition of
institutional or engineering controls, deed restrictions, natural attenuation,
capping and site-specific risk-based standards) based on the existing use of the
relevant Real Property as of the Closing Date.
(iv) Notwithstanding anything to the contrary in this Agreement
or the ACA, Seller shall have satisfied its indemnification obligation and shall
be released from any further indemnification obligation or liability for any
Remedial Action in the event and to the extent it receives a notice of final
approval (including, without limitation, a no further action
62
<PAGE>
letter, certificate of completion, or release-and-covenant-not-to-sue) from a
state or federal Governmental or Regulatory Authority with jurisdiction over the
relevant Real Property pursuant to a clean-up program, voluntary or otherwise.
(c) The indemnities provided in this Section 8.2 shall survive the
Closing. Except as expressly provided in this Agreement, the indemnity provided
in this Section 8.2 shall be the sole and exclusive remedy of the indemnified
party against the indemnifying party at law or equity for any matter covered by
Sections 8.2(a) and 8.2(b); provided, that nothing in this Section 8 shall
prevent or otherwise limit Buyer from seeking temporary or permanent injunctive
relief for any breach by Seller of Section 4.2(b).
(d) In no event shall Seller be liable to Buyer for special,
indirect, incidental, consequential or punitive damages but, to the extent Buyer
is required to pay punitive damages to a third party, such payment shall
constitute an indemnifiable expense.
8.3 Indemnification by Buyer.
------------------------
(a) Buyer shall defend, indemnify and hold Seller and the Company
harmless from and against and in respect of any and all actual losses,
liabilities, damages, demands, claims, suits, proceedings, judgments,
settlements, assessments, costs and expenses, including reasonable attorney's
fees, incurred directly by Seller, the Company and their respective Affiliates
(hereinafter "Seller Losses"; together with Buyer Losses, "Losses") arising out
------------- ------
of (i) any breach of any of the representations and warranties contained in
Section 2 hereof or (ii) any breach by Buyer of any of its covenants in this
Agreement other than in the Ancillary Agreements which shall be governed by the
terms thereof. Seller shall give Buyer prompt written notice of any third party
claim which may give rise to any indemnity obligation under
63
<PAGE>
this section, together with the estimated amount of such claim, and Buyer shall
have the right to assume the defense of any such claim through counsel of its
own choosing, by so notifying Seller within thirty (30) days of receipt of
Seller's written notice; provided, however, that Buyer's counsel shall be
-------- -------
reasonably satisfactory to Seller. Failure to give prompt notice shall not
affect the indemnification obligations hereunder in the absence of actual
prejudice. If Seller desires to participate in any such defense assumed by
Buyer, it may do so at its sole cost and expense. If Buyer declines or fails to
assume any such defense, it shall be liable for all costs and expenses of
defending such claim incurred by Seller, including reasonable fees and
disbursements of counsel. Neither party shall, without the prior written consent
of the other party, which shall not be unreasonably withheld, settle, compromise
or offer to settle or compromise any such claim or demand on a basis which would
result in the imposition of a consent order, injunction or decree which would
restrict the future activity or conduct of the other party or any subsidiary or
Affiliate thereof or if such settlement or compromise involves a finding or
admission of any violation of law, or if such settlement or compromise does not
include an unconditional release of the other party for any liability arising
out of such claim or demand.
(b) The foregoing obligation to indemnify Seller and the Company set
forth in Section 8.3(a) shall be subject to each of the following limitations:
(i) No reimbursement for Seller Losses asserted against Buyer
under Section 8.3(a)(i) above shall be required unless and until the cumulative
aggregate amount of such Seller Losses equals or exceeds seven million five
hundred thousand dollars ($7,500,000.00) (the "Buyer Threshold") and then only
---------------
to the extent that the cumulative aggregate amount of Seller Losses, as finally
determined, exceeds the Buyer Threshold; provided
--------
64
<PAGE>
that in calculating the Buyer Threshold, any Seller Losses which individually
total less than fifty thousand dollars ($50,000.00) each ("De Minimis Seller
-----------------
Losses") shall be excluded in their entirety and Buyer in any event shall have
- ------
no liability hereunder to Seller or the Company for any such De Minimis Seller
Losses; and
(ii) Buyer's liability to Seller and the Company under Section
8.2(a)(i) for Seller Losses in excess of the Buyer Threshold shall not exceed
one hundred fifty million dollars ($150,000,000.00).
(c) The indemnities provided in this Section 8.3 shall survive the
Closing. Except as expressly provided in this Agreement, the indemnity provided
in this Section 8.3 shall be the sole and exclusive remedy of the indemnified
party against the indemnifying party at law or equity for any matter covered by
paragraphs (a) and (b); provided, that nothing in this Section 8 shall prevent
or otherwise limit Seller from seeking temporary or permanent injunctive relief
for any breach by Buyer of Section 4.2(c).
(d) In no event shall Buyer be liable to Seller or its Affiliates for
special, indirect, incidental, consequential or punitive damages but, to the
extent Seller is required to pay punitive damages to a third party, such payment
shall constitute an indemnifiable expense.
8.4 Indemnification Calculations.
----------------------------
(a) The amount of any Seller Losses or Buyer Losses for which
indemnification is provided under this Section 8.4 shall be computed net of any
insurance proceeds received by the indemnified party in connection with such
Losses. If the amount with respect to which any claim is made under this
Section 8.4 (an "Indemnity Claim") gives rise to a currently realizable Tax
---------------
Benefit to the party making the claim, the indemnity payment shall be
65
<PAGE>
reduced by the amount of the Tax Benefit available to the party making the
claim. To the extent such Indemnity Claim does not give rise to a currently
realizable Tax Benefit, if the amount with respect to which any Indemnity Claim
is made gives rise to a subsequently realized Tax Benefit to the party that made
the claim, such party shall refund to the indemnifying party the amount of such
Tax Benefit when, as and if realized. For the purposes of this Agreement, any
subsequently realized Tax Benefit shall be treated as though it were a reduction
in the amount of the initial Indemnity Claim, and the liabilities of the parties
shall be redetermined as though both occurred at or prior to the time of the
indemnity payment. For purposes of this Section 8.4, a "Tax Benefit" means an
amount by which the tax liability of the party (or group of corporations
including the party) is reduced (including, without limitation, by deduction,
reduction of income by virtue of increased tax basis or otherwise, entitlement
to refund, credit or otherwise) plus any related interest received from the
relevant taxing authority. Where a party has other losses, deductions, credits
or items available to it, the Tax Benefit from any losses, deductions, credits
or items relating to the Indemnity Claim shall be deemed to be realized
proportionately with any other losses, deductions, credits or items. For the
purposes of this Section 8.4, a "Tax Benefit" is "currently realizable" to the
extent it can be reasonably anticipated that such Tax Benefit will be realized
in the current taxable period or year or in any Tax Return with respect thereto
(including through a carry-back to a prior taxable period) or in any taxable
period or year prior to the date of the Indemnity Claim. In the event that there
should be a determination disallowing the Tax Benefit, the indemnifying party
shall be liable to refund to the indemnified party the amount of any related
reduction previously allowed or payments previously made to the indemnifying
party pursuant to this Section 8.4.
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<PAGE>
(b) The parties agree that any indemnification payments made pursuant
to this Agreement shall be treated for tax purposes as an adjustment to the
Purchase Price, unless otherwise required by applicable law, in which case such
payments shall be made in an amount sufficient to indemnify the relevant party
on a net after-tax basis.
8.5 Cooperation.
-----------
Each party will provide, and will cause its Affiliates to provide, to
the other party and its Affiliates, with reasonable access during business hours
to all records, documents and relevant personnel of such party relating to any
third party Claim asserted against such party or its Affiliates or against such
other party and its Affiliates in order to assist each party in defending any
such third party Claim.
9 TERMINATION
-----------
9.1 Termination Events.
------------------
Without prejudice to other remedies which may be available to the
parties by law or this Agreement, this Agreement may be terminated and the
transactions contemplated herein may be abandoned:
(a) by mutual consent of the parties hereto;
(b) by Seller, in its sole discretion, after the date which is thirty
(30) days after the date of this Agreement, if Seller shall not have received
either (i) evidence, in form and substance reasonably satisfactory to Seller,
that Buyer has sufficient cash on hand to consummate the transactions
contemplated by this Agreement or (ii) copies of definitive written agreements
(the "Definitive Financing Agreements") with reputable financial institutions to
-------------------------------
provide at the Closing, subject only to customary conditions, all of the
Financing, in form and substance
67
<PAGE>
reasonably satisfactory to Seller, or if at any time thereafter any such
Definitive Financing Agreements shall cease to be in full force and effect;
(c) by any party by notice to the other party if the Closing shall
not have been consummated on or before December 31, 1998, unless extended by
written agreement of the parties hereto, so long as the party terminating this
Agreement shall not be in default or breach hereunder;
(d) by Seller if Buyer shall fail to consummate the Financing by
October 15, 1998; and
(e) by Buyer under the circumstances described in Section 4.32.
9.2 Effect of Termination.
---------------------
In the event of any termination of the Agreement as provided in
Section 9.1 above, this Agreement shall forthwith become wholly void and of no
further force and effect and there shall be no liability on the part of Buyer or
Seller, except that (i) the obligations of Buyer and Seller under Sections 4.2
(relating to confidentiality only), 4.5 and 10.3 of this Agreement shall remain
in full force and effect and (ii) termination shall not preclude either party
from suing the other party for breach of this Agreement.
10 MISCELLANEOUS AGREEMENTS OF THE PARTIES
---------------------------------------
10.1 Notices.
-------
All communications provided for hereunder shall be in writing and
shall be deemed to be given when delivered in person or by private courier with
receipt, when telecopied and received, or three (3) days after being deposited
in the United States mail, first-class, registered or certified, return receipt
requested, with postage paid and,
68
<PAGE>
If to Buyer: Glass Holdings Corp.
3802 Robert Porcher Way
Greensboro, NC 27410
Fax: 336-545-7715
Attention: President
With a copy to: Alston & Bird LLP
601 Pennsylvania Avenue, N.W. , North Building
Washington, D.C. 20004-2601
Fax: 212-756-3333
Attention: Frank M. Conner III
If to Seller : Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such party shall designate by written notice to
the other parties hereto.
10.2 Transaction Taxes.
-----------------
Buyer and Seller agree that they shall cause the Company to discharge
any liability for the payment of all sales, use, transfer, vehicle transfer,
real property transfer (including any deed recording fee), recording, gains and
other similar taxes, if any, payable with respect to Seller's contribution of
the Assets to the Company or the sale of the Buyer's Interest to the Buyer. The
Company shall file all necessary documentation and Tax Returns with respect to
such taxes and, to the extent any exemptions from such taxes are available,
Buyer and Seller
69
<PAGE>
shall cooperate to prepare any certificates or other documents necessary to
claim such exemptions. For purposes of Section 1.4, the amount of any taxes paid
or payable by the Company pursuant to this Section 10.2 shall not reduce (or
shall be added back to) the Closing NAV of the Company.
10.3 Expenses.
--------
Subject to Section 10.2, Seller and Buyer shall each pay their
respective expenses (such as legal, investment banking and accounting fees)
incurred in connection with the origination, negotiation, execution and
performance of this Agreement. The Company and Buyer shall be solely
responsible for any costs incurred in connection with the Financing.
10.4 Non-Assignability.
-----------------
This Agreement shall inure to the benefit of and be binding on the
parties hereto and their respective successors and permitted assigns. Except as
otherwise expressly provided in this Agreement, this Agreement shall not be
assigned by either party hereto without the express prior written consent of the
other party, and any attempted assignment, without such consents, shall be null
and void. Notwithstanding any non-assignment provisions contained in this
Section 10.4 Buyer may assign or otherwise transfer all of its rights and/or
obligations hereunder (i) to any entity or entities, providing financing for the
transactions contemplated by this Agreement or to any entity or entities
providing to Buyer or Buyer's Affiliates financing relating to the Business or
(ii) to any Affiliate of Buyer, provided that (x) such Affiliate shall agree
with Seller and its permitted assignees or transferees, if any, in writing to
assume the Buyer's obligations hereunder and (y) any such assignment to an
Affiliate of the Buyer shall not relieve the Buyer from its obligations
hereunder.
70
<PAGE>
10.5 Amendment; Waiver.
-----------------
This Agreement may be amended, supplemented or otherwise modified only
by a written instrument executed by the parties hereto. No waiver by either
party of any of the provisions hereof shall be effective unless explicitly set
forth in writing and executed by the party so waiving. Except as provided in
the preceding sentence, no action taken pursuant to this Agreement, including
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained herein, and
in any documents delivered or to be delivered pursuant to this Agreement and in
connection with the Closing hereunder. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
10.6 Schedules and Exhibits.
----------------------
All exhibits and schedules hereto are hereby incorporated by reference
and made a part of this Agreement. Any fact or item which is clearly disclosed
on any Schedule or Exhibit to this Agreement or in the Financial Statements in
such a way as to make its relevance to a representation or representations made
elsewhere in this Agreement or to the information called for by another Schedule
or other Schedules (or Exhibit or other Exhibits) to this Agreement readily a
shall be deemed to be an exception to such representation or representations or
to be disclosed on such other Schedule or Schedules (or Exhibit or Exhibits), as
the case may be, notwithstanding the omission of a reference or cross reference
thereto. Any fact or item disclosed on any Schedule or Exhibit hereto shall not
by reason only of such inclusion be
71
<PAGE>
deemed to be material and shall not be employed as a point of reference in
determining any standard of materiality under this Agreement.
10.7 Third Parties.
-------------
Except as provided herein, this Agreement does not create any rights,
claims or benefits inuring to any person that is not a party hereto nor create
or establish any third party beneficiary hereto.
10.8 Governing Law.
-------------
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York applicable to a contract executed and
performed in such State without giving effect to the conflicts of laws
principles thereof, except that matters herein strictly within the purview of
the matters covered by the Limited Liability Company Act of the State of
Delaware shall be governed by such Limited Liability Company Act.
10.9 Consent to Jurisdiction.
-----------------------
Each of the parties hereto, irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York located in the borough of Manhattan in the City of New York, or if such
court does not have jurisdiction, the Supreme Court of the State of New York,
New York County, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the parties hereto, further agrees that service of any process, summons, notice
or document by U.S. registered mail to such party's respective address set forth
in Section 10.1 shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence.
72
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Each of the parties hereto, irrevocably and unconditionally waives any objection
to the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (a) the United States
District Court for the Southern District of New York or (b) the Supreme Court of
the State of New York, New York County, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
10.10 Definitions.
-----------
(a) As used in this Agreement, the following defined terms shall have
the meanings indicated below:
"ACA" means the Amended and Restated Asset Contribution Agreement
---
dated as of July 30, 1998 by and between Seller and the Company.
"Acquisition Transaction" has the meaning ascribed to it in Section
-----------------------
4.31.
"Affiliate" means any Person that directly, or indirectly through one
---------
or more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether by Contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning ten
percent (10%) or more of the voting securities of a second Person shall be
deemed to control that second Person.
"Agreement" means this Asset Purchase Agreement and the Exhibits and
---------
the Schedules hereto.
73
<PAGE>
"Alloy Services Agreement" has the meaning ascribed to it in Section
------------------------
4.10.
"Ancillary Agreements" shall mean the Agreements contained in Exhibits
--------------------
A through W.
"Assets" means the Business Assets, the NVOC Assets and the OCC
------
Assets.
"Base NAV" has the meaning ascribed to it in Section 1.4(a).
--------
"Battice Facility" has the meaning ascribed to in Section 4.12.
----------------
"Battice Facility Supply Agreement" has the meaning ascribed to it in
---------------------------------
Section 4.12.
"Benefit Plans" has the meaning ascribed to it in Section 2.15(b).
-------------
"Borates Supply Agreement" has the meaning ascribed to it in Section
------------------------
4.24.
"Business" has the meaning ascribed to it in the forepart of this
--------
Agreement.
"Business Assets" means all of the assets, rights, properties, claims,
---------------
contracts and business of Seller, which, except as expressly provided in the
ACA, are principally related to the Business, other than Excluded Assets.
"Business Manufacturing Technology" means the manufacturing equipment,
---------------------------------
machinery, tooling, and processes which are or have been in use, operational,
ordered, or being refurbished on or prior to the Closing: (i) in the
Manufacturing Facilities to manufacture Business Products; or (ii) in the
Battice or Guelph facilities dedicated exclusively to the manufacture of
Business Products.
"Business Products" means glass fiber specialty products made of:
-----------------
(i) untwisted glass fibers or filaments with a maximum nominal
diameter of 13.96 (micronage values herein shall refer to maximum or minimum
nominal values in common usage in the industry, in this instance, a K filament),
which products have a
74
<PAGE>
linear density of a TEX value of less than or equal to 300 g/km, and which
filaments are continuous;
(ii) chopped strands or fibers having a maximum nominal
diameter of 13.96 and a fiber length greater than 1.5" as dry chop for use in
carding processes;
(iii) any glass fiber products of any TEX or micronage
mechanically twisted and/or plied in a secondary operation;
(iv) S Glass products in any form;
(v) conventional or assembled roving of glass fiber coated
with a conductive material to produce a roving having a resistance greater than
3,000 /m for use in applications in which such resistance is a required
property;
(vi) air texturized glass fiber strands with a maximum nominal
diameter of greater than 12.70; and
(vii) waste products from the production of any of the Business
Products defined in (i) through (iii) in the form of chopped glass fiber strands
made with twisted bobbin input, dry chopped glass fiber with starch-based
sizing, and hanks (cut forming packages), provided that such waste products not
exceed 3% of the production of the underlying product;
Business Products as defined in (i) through (iii) shall not include:
(viii) any air texturized product made of glass filaments or
fibers having a minimum nominal diameter of 13.97; or
75
<PAGE>
(ix) assembled or multiend roving of fibers except for the
purpose of making (i) texturized strands, (ii) textile yarn beams, or (iii)
wound products currently made at the Huntingdon, Pennsylvania facility.
"Buyer" has the meaning ascribed to it in the forepart of this
-----
Agreement.
"Buyer Confidential Information" has the meaning ascribed to it in
------------------------------
Section 4.2(b).
"Buyer Interest" has the meaning ascribed to it in the forepart of
--------------
this Agreement.
"Buyer Losses" has the meaning ascribed to it in Section 8.2(a).
------------
"Buyer Material Adverse Effect has the meaning ascribed to it in
-----------------------------
Section 3.1.
"Buyer Threshold" has the meaning ascribed to it in Section 8.3(b).
---------------
"Buyer's Objection" has the meaning ascribed to it in Section 1.4(d).
-----------------
"Carly Sublease" has the meaning ascribed to it in Section 4.25.
--------------
"Claim" means a written notice asserting a breach of a representation,
-----
warranty, covenant, agreement or obligation specified in this Agreement, which
shall reasonably set forth, in light of the information then known to the party
giving such notice, a reasonably detailed description of and estimate (if then
reasonable to make) of the amount involved in such breach.
"Closing" has the meaning ascribed to it in Section 6.1.
-------
"Closing Calculation" has the meaning ascribed to it in Section
-------------------
1.4(d).
"Closing Date" has the meaning ascribed to it in Section 6.1.
------------
"Closing NAV" has the meaning ascribed to it in Section 1.4(a).
-----------
"Closing Statement" has the meaning ascribed to it in Section 1.4(c).
-----------------
"Commitment Letters" has the meaning ascribed to it in Section 3.6.
------------------
"Company 401(k) Plan has the meaning ascribed to it in Section
-------------------
4.34(g).
76
<PAGE>
"Company Financing" has the meaning ascribed to it in Section 4.38.
-----------------
"Company Pension Plan" has the meaning ascribed to it in Section
--------------------
4.34(f).
"Contracts" means all commitments, contracts, indentures and
---------
agreements, written or oral, to which Seller transferred to the Company pursuant
to the ACA.
"Contractual Consents" has the meaning ascribed to it in Section
--------------------
5.3(c).
"Cross License Agreement" has the meaning ascribed to it in Section
-----------------------
4.19.
"Definitive Financing Agreements" has the meaning ascribed to it in
-------------------------------
Section 9.1(b).
"De Minimis Buyer Losses" has the meaning ascribed to it in Section
-----------------------
8.2(b).
"De Minimis Seller Losses" has the meaning ascribed to it in Section
------------------------
8.3(b).
"Disclosed Contracts" has the meaning ascribed to in Section 2.10(a).
-------------------
"Environmental Law" means any applicable law, order, regulation,
-----------------
decree, permit, license, ordinance, or other federal, state or local
governmental requirements relating to pollution, the protection of human health
and the environment, the discharge or Release of Hazardous Substances into the
environment, or the exposure to Hazardous Substances (including odors) in the
work place.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and the rules and regulations promulgated thereunder.
"Estimated Closing NAV" has the meaning ascribed to it in Section
---------------------
1.4(b).
"Estimated Closing Statement" has the meaning ascribed to it in
---------------------------
Section 1.4(b).
"Facilities" has the meaning ascribed to it in Section 2.9(b).
----------
"Financial Statements" has the meaning ascribed to it in Section 2.7.
--------------------
"Financing" has the meaning ascribed to it in Section 3.6.
---------
77
<PAGE>
"GAAP" means United States generally accepted accounting principles,
----
consistently applied throughout the specified period and in the immediately
prior comparable period.
"GLAS Marks" has the meaning ascribed to it in Section 4.30.
----------
"Glass Marbles Supply Agreement" has the meaning ascribed to it in
------------------------------
Section 4.9.
"Governmental or Regulatory Authority" means any court, tribunal,
------------------------------------
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Guarantees" has the meaning ascribed to it in Section 4.33.
----------
"Guelph Facility" has the meaning ascribed to it in Section 4.13.
---------------
"Guelph Facility Supply Agreement" has the meaning ascribed to it in
--------------------------------
Section 4.13.
"Hazardous Substance" means petroleum, petroleum by-products,
-------------------
polychlorinated biphenyls and any other chemicals, materials, substances or
wastes which are currently defined or regulated as "hazardous substances,"
--------------------
"hazardous materials," "hazardous wastes," "extremely hazardous wastes,"
- -------------------- ---------------- ---------------------------
"restricted hazardous wastes," "toxic substances," "toxic pollutants," "toxic
- ---------------------------- ---------------- ---------------- -----
air pollutants," "pollutants," or "contaminants" under any Environmental Law.
- -------------- ---------- ------------
"Historical Annual Financial Statements" has the meaning ascribed to
--------------------------------------
it in Section 2.7.
"Historical Financial Statements" has the meaning ascribed to it in
-------------------------------
Section 2.7.
"Historical Interim Financial Statements" has the meaning ascribed to
---------------------------------------
it in Section 2.7
78
<PAGE>
"Huntingdon Lease Agreement" has the meaning ascribed to it in Section
--------------------------
4.11.
"Indebtedness" of any Person means all obligations of such Person (i)
------------
for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnity Claim" has the meaning ascribed to it in Section 8.4(a).
---------------
"Intellectual Property Rights" means copyrights, patents, trademarks,
----------------------------
know how, design marks, service marks, logos and trade names and other
intangible property, including any and all related goodwill, and foreign and
domestic registrations and applications.
"Interests" has the meaning ascribed to it in Section 2.3.
---------
"Inventory" has the meaning ascribed to it in the ACA.
---------
"Knowledge of Seller, the Company, NVOC or OCC" means the actual
---------------------------------------------
knowledge of any of the following individuals: Chuck Dana, Tim Winfrey, Pat
Lynch, Inger Eckert, Jay Harvey, Bob Fisher, Dennis Chalwick, John Christy,
Joseph Masciangelo and Jerry Hawkins.
"Landfill Agreement" has the meaning ascribed to it in Section 4.28.
------------------
"Law" means any law (including common law), statute, code, rule,
---
regulation, reporting, permitting or licensing requirement, ordinance and other
pronouncement having the effect of law of the United States, any foreign country
or any domestic or foreign state, county, city or other political subdivision,
including those promulgated or enforced by any Governmental or Regulatory
Authority.
79
<PAGE>
"Leased Real Property" has the meaning ascribed to it in Section
--------------------
2.9(b).
"Liabilities" means all Indebtedness, obligations and other
-----------
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licensed Proprietary Rights" has the meaning ascribed to it in
---------------------------
Section 2.12.
"Licenses and Permits" means the licenses, permits, certificates of
--------------------
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority
transferred by Seller to the Company pursuant to the ACA.
"Losses" has the meaning ascribed to it in Section 8.3(a).
------
"Manufacturing Facilities" means the portions of Seller's facilities
------------------------
at Aiken, South Carolina, Huntingdon, Pennsylvania, and South Hill, Virginia to
be transferred to Buyer which do not include the portions of the Aiken and
Huntingdon facilities at which Seller manufactures continuous filament mat or
wet process mat.
"Manufacturing Services Agreement" has the meaning ascribed to it in
--------------------------------
Section 4.16.
"Material Adverse Effect" has the meaning ascribed to it in Section
-----------------------
2.1.
"Material Contracts" has the meaning ascribed to it in Section
------------------
2.10(a).
"Net Asset Value" means the sum of Other Current Assets less Current
---------------
Liabilities as reflected in the Pro Forma Statement of Net Assets to be sold as
of 12/31/97 but excluding Trade Payables (which shall be paid in full
immediately prior to the Closing Date), with such amounts determined in
accordance with GAAP using the same assumptions reflected in the 12/31/97
Historical Financial Statements.
80
<PAGE>
"Neutral Accounting Firm" has the meaning ascribed to it in Section
-----------------------
1.4(d)(ii).
"Non-Compete Agreement" has the meaning ascribed to it in Section
---------------------
4.15.
"NVOC" shall mean N.V. Owens Corning S.A., a Belgian corporation and a
----
subsidiary of Seller.
"NVOC Assets" has the meaning ascribed to it in Section 4.29(a).
-----------
"NVOC Asset Purchase Agreement" has the meaning ascribed to it in
-----------------------------
Section 4.29(a).
"OCC" shall mean Owens-Corning Canada, Inc., a Canadian corporation
---
and a subsidiary of Seller.
"OCC Assets" has the meaning ascribed to it in Section 4.29(b).
----------
"OCC Asset Purchase Agreement" has the meaning ascribed to it in
----------------------------
Section 4.29(b).
"Owned Real Property" means those parcels of real property transferred
-------------------
by Seller to the Company pursuant to the ACA Agreement.
"Patent and Know How License Agreement" has the meaning ascribed to it
-------------------------------------
in Section 4.5.
"Permitted Liens" has the meaning ascribed to it in Section 2.9(a).
---------------
"Person" means any natural person, corporation, general partnership,
------
limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"Pitney Bowes 1997 Sublease" has the meaning ascribed to it in Section
--------------------------
4.26.
"Pitney Bowes 1996 Sublease" has the meaning ascribed to it in Section
--------------------------
4.27.
81
<PAGE>
"Pro Forma Information" has the meaning ascribed to it in Section 2.7.
---------------------
"Proprietary Rights" has the meaning ascribed to it in Section 1.1(e)
------------------
of the ACA.
"Purchase Price" has the meaning ascribed to it in Section 1.2.
--------------
"Real Property" has the meaning ascribed to it in Section 2.9(b).
-------------
"Real Property Leases" means the leases and subleases of real property
--------------------
transferred by Seller to the Company pursuant to the ACA.
"Release" means any spilling, leaking, pumping, pouring, emitting,
-------
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Substance into the environment.
"Required Consents" has the meaning ascribed to it in Section 5.1(b).
-----------------
"Schedule" means the record delivered to Buyer by Seller herewith and
--------
dated as of the date hereof, containing all lists, descriptions, exceptions and
other information and materials as are required to be included therein by Seller
pursuant to this Agreement.
"Seller" has the meaning ascribed to it in the forepart of this
------
Agreement.
"Seller 401(k) Plan" has the meaning ascribed to it in Section
------------------
4.34(g).
"Seller Confidential Information" has the meaning ascribed to it in
-------------------------------
Section 4.2(c).
"Seller Losses" has the meaning ascribed to it in Section 8.3(a).
-------------
"Seller Pension Plan" has the meaning ascribed to it in Section
-------------------
4.34(f).
"Services Agreement" has the meaning ascribed to it in Section 4.8.
------------------
"Sliver Supply Agreement" has the meaning ascribed to it in Section
-----------------------
4.23.
"Tax" or "Taxes" shall mean all federal, state, local or foreign net
--- -----
or gross income, gross receipts, net proceeds, sales, use, ad valorem, value
----------
added, franchise, bank shares,
82
<PAGE>
withholding, payroll, employment, excise, property, alternative or add-on
minimum, environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto;
"Tax Benefit" has the meaning ascribed to it in Section 7.4.
-----------
"Termination Date" has the meaning ascribed to it in Section 8.1.
----------------
"Threshold" has the meaning ascribed to it in Section 8.2(b).
---------
"Trade Payables" shall mean the obligations of the Business recorded
--------------
in the captions "Accounts Payable-Trade and Accounts Payable-Marbles" in the Pro
Forma Statement of Net Assets to be Sold.
"Trademark Assignment" has the meaning ascribed to it in Section 4.21.
--------------------
"Transferred Employee" HAS THE MEANING ASCRIBED TO IT IN SECTION 4.34.
--------------------
"Transitional Coverage" has the meaning ascribed to it in Section
---------------------
4.34.
"Waste Water Treatment Services Agreement" has the meaning ascribed to
----------------------------------------
it in Section 4.19.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender, (ii) words using the singular or
plural number also include the plural or singular number, respectively, (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement, (iv) the term "Section" refers to the specified Section
of this Agreement, (v) the phrases "ordinary course of business" and "ordinary
course of business consistent with past practice" refer to the business and
practice of Seller in connection
83
<PAGE>
with the Business. All accounting terms used herein and not expressly defined
herein shall have the meanings given to them under GAAP.
10.11 Entire Agreement.
----------------
This Agreement, the Schedules and Exhibits and the other agreements
referred to herein hereto set forth the entire understanding of the parties
hereto, and no modifications or amendments to this Agreement shall be binding on
the parties unless in writing and signed by the party or parties to be bound by
such modification or amendment.
10.12 Section Headings; Table of Contents.
-----------------------------------
The section headings contained in this Agreement and the Table of
Contents to this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
10.13 Severability.
------------
If any provision of this Agreement shall be declared by any court of
competent jurisdiction to be illegal, void or unenforceable, all other
provisions of this Agreement shall not be affected and shall remain in full
force and effect.
10.14 Counterparts.
------------
This Agreement may be executed in 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.
84
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
OWENS CORNING
By: /s/
------------------------------------
Name:
Title:
GLASS HOLDINGS CORP.
By: /s/ Robert Porcher
------------------------------------
Name:
Title:
LINCOLN YARNS, LLC
By: Owens Corning, Member
By: /s/
------------------------------------
Name:
Title:
85
<PAGE>
EXHIBIT 2.3
AMENDMENT NO. 1
TO
LLC INTEREST SALE AND PURCHASE AGREEMENT
AMENDMENT NO. 1 TO LLC INTEREST SALE AND PURCHASE AGREEMENT ("Amendment No.
-------------
1") dated as of September 30, 1998 among OWENS CORNING, a Delaware corporation
- -
("Seller"), ADVANCED GLASSFIBER YARNS LLC (formerly, Lincoln Yarns, LLC), a
------
Delaware limited liability company (the "Company"), and AGY HOLDINGS, INC., a
-------
Delaware corporation ("Buyer").
-----
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Seller, the Company and Glass Holdings, Inc. entered into a LLC
Interest Sale and Purchase Agreement dated as of July 31, 1998 (the "Purchase
--------
Agreement"), which Purchase Agreement was assigned by Glass Holdings, Inc. to
- ---------
Buyer by an Assignment and Assumption Agreement dated September 30, 1998; and
WHEREAS, Seller, the Company and Buyer desire to make certain amendments to
the Purchase Agreement, all as set forth below;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Defined Terms. Except as otherwise expressly provided herein, capitalized
-------------
terms used herein which are defined in the Purchase Agreement, as amended
hereby, shall have the meanings specified for such terms in the Purchase
Agreement, as so amended.
2. Amendments to Purchase Agreement.
--------------------------------
(a) Section 1.2 of the Purchase Agreement shall be amended to read as
follows:
"The aggregate purchase price for the Buyer Interest shall be three
hundred thirty one million five hundred thousand Dollars
($331,500,000) in the aggregate, subject to adjustment as provided in
Section 1.4 (the "Purchase Price")."
--------------
(b) Section 1.4 of the Purchase Agreement is hereby amended to read as
follows:
"1.4 Cash Payment for Change in Net Asset Value.
------------------------------------------
<PAGE>
(a) Calculation of the Cash Payment. The Company shall make a cash payment
-------------------------------
(the "NAV Payment") in the amount by which the Net Asset Value of the
-----------
Company as of the Closing Date (the "Closing NAV"), as finally determined
-----------
pursuant to Section 1.4(d) below, is greater or less than thirty one
million seven hundred thirty eight thousand dollars ($31,738,000)(the "Base
----
NAV"). The calculation of the Base NAV is set forth on Schedule 1.4(a).
--- ---------------
If the Closing NAV is greater than the Base NAV, then the Company shall
make the NAV Payment to Jefferson Holdings, Inc. ("Jefferson"). If the
---------
Closing NAV is less than the Base NAV, then the Company shall make the NAV
Payment to Buyer. Such NAV Payment shall be paid as set forth in Sections
1.4(b) and (e) below.
(b) Estimated Adjustment. On the Closing Date, Seller shall deliver to
--------------------
Buyer a statement (the "Estimated Closing Statement") prepared in
-----------------------------
accordance with GAAP setting forth a calculation of Seller's good faith
estimate of the Closing NAV (the "Estimated Closing NAV"). If the
-----------------------
Estimated Closing NAV as set forth on the Estimated Closing Statement is
in excess of the Base NAV, the Company shall make the NAV Payment to
Jefferson at Closing. If the Estimated Closing NAV as set forth on the
Estimated Closing Statement is less than the Base NAV, then the Company
shall make the NAV Payment to Buyer at Closing.
(c) Closing NAV. Within ninety (90) days after the Closing, Seller will
-----------
prepare and deliver to Buyer a balance sheet of the Company as of the
Closing Date prepared in accordance with GAAP together with a statement
setting forth a calculation of the Closing NAV (the "Closing Statement").
-----------------
At the option of the Buyer, exercisable in writing on or before the Closing
Date, the Closing Statement shall be audited by PricewaterhouseCoopers LLP.
The cost of such audit shall be borne by the Company. Buyer shall
cooperate fully and shall cause the Company to provide Seller with all
assistance and access to books and records necessary for Seller to prepare
the Closing Statement. In connection therewith, Buyer and Seller will
jointly conduct a physical inventory of the Inventory as of the Closing
Date in accordance with the procedures to be mutually agreed by Buyer and
Seller acting reasonably and in good faith and, at Buyer's option, such
physical inventory will be observed by Buyer's auditors,
PricewaterhouseCoopers LLP, and, at Seller's option, such physical
inventory will be observed by Seller's auditors, Arthur Andersen LLP.
(d) Closing Calculation.
-------------------
(i) Buyer shall be entitled to full access to the relevant records and
working papers prepared by or for Seller, and to Seller's employees
involved in such preparation, to aid in its review of the calculation of
the Closing NAV set forth on the Closing Statement. If Buyer believes that
the Closing NAV calculation (hereinafter the "Closing Calculation") has not
-------------------
been properly calculated in accordance with the calculation methodologies
set forth in this Section 1.4, it shall,
2
<PAGE>
within thirty (30) days after receipt of the Closing Calculation, give
written notice (the "Buyer's Objection") to Seller, setting forth the basis
----------------------
of the Buyer's Objection in reasonable detail and, to the extent
practicable, the adjustments to the Closing Calculation which Buyer
believes should be made. Failure to so notify Seller within such thirty
(30) day period shall constitute acceptance and approval of the Closing
Calculation. There shall be no adjustment to the Closing Calculation unless
the cumulative amount of Buyer's Objection equals or exceeds one million
dollars ($1,000,000.00) and provided that any individual item of adjustment
contained in Buyer's Objection which is less than fifty thousand dollars
($50,000.00) shall be excluded in its entirety. If Seller agrees that any
change proposed by Buyer is appropriate, the change shall be made to the
Closing Calculation, whereupon Buyer shall be deemed to have accepted and
approved the Closing Calculation with respect to such change and any other
non-disputed item of the Closing Calculation. If the proposed change is
disputed by Seller, then Seller and Buyer shall negotiate in good faith to
resolve such dispute as expeditiously as possible. If, after a period of
thirty (30) days following the date on which Buyer gives Seller notice of
any such proposed change, any such proposed change still remains disputed,
then:
(ii) KPMG Peat Marwick LLP (the "Neutral Accounting Firm") shall be
-----------------------
engaged to resolve any remaining disputes. The Neutral Accounting Firm
shall act as an arbitrator to determine, based solely on presentations
submitted by Seller and Buyer, and not by independent review, only those
issues still in dispute. Each of Buyer and Seller shall have made its
complete submission to the Neutral Accounting Firm within ten (10) days
following the expiration of the thirty (30) day negotiation period
described in Section 1.4(d)(i). The failure by either party to make a
complete submission prior to the expiration of such ten (10) day period
shall be deemed a waiver of such party's right to make a submission or a
further submission to the Neutral Accounting Firm. The Neutral Accounting
Firm's determination, based upon the calculation methodologies set forth in
this Section 1.4, shall be made within thirty (30) days following the date
on which the dispute is submitted, shall be set forth in a written
statement delivered to Seller and Buyer, and shall be final, binding and
conclusive. The fees and any expenses of the Neutral Accounting Firm shall
be shared equally by Seller and Buyer. In the event a party does not comply
with the procedure and time requirements contained herein, the Neutral
Accounting Firm shall render a decision based solely on the evidence it has
which was timely filed by either of the parties.
(e) Payment of Cash NAV Payment. If the Closing NAV shown on the Closing
---------------------------
Statement exceeds the Estimated Closing NAV, then the Company shall make
the NAV Payment to Jefferson, and if the Closing NAV shown on the Closing
Statement is less than the Estimated Closing NAV, then the Company shall
make the NAV Payment to Buyer. Payment of any NAV Payment pursuant to this
Section 1.4(e) shall be made by wire transfer to an account designated by
Jefferson or Buyer, as the
3
<PAGE>
case may be, in United States Dollars, in immediately available
federal funds within three (3) business days after the Closing
Calculation has been finally determined together with interest from
the Closing Date to the date of payment at the "base rate" of
Citibank, N.A. or any successor thereto in New York, New York in
effect on the Closing Date, based on a 360-day year."
(c) Schedule 1.4(a) of the Purchase Agreement is hereby amended to read as
---------------
set forth on Exhibit A hereto.
(d) Section 2.20 of the Purchase Agreement is hereby amended to read as
follows:
"Section 2.20 Disclaimer of Warranty.
----------------------
SELLER MAKES NO WARRANTY WITH RESPECT TO THE VALUE, CONDITION OR,
SUBJECT TO SECTION 2.19, USE OF THE ASSETS OWNED OR USED BY THE
COMPANY, WHETHER EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE."
(e) Section 4.20 of the Purchase Agreement is hereby amended to insert the
words "to execute and deliver" after the words "Jefferson Holdings, Inc." in the
first line.
(f) Section 4.29 of the Purchase Agreement is hereby amended to read as
follows:
"4.29 Purchase of Assets from Seller's Subsidiaries. The parties
---------------------------------------------
acknowledge that, pursuant to agreements dated September 29, 1998, the
Company has purchased certain assets from, and has assumed certain
liabilities of, Owens-Corning (Japan) Ltd., OCC and NVOC (the
"Subsidiary Asset Purchase Agreements"). The parties agree that to
-------------------------------------
the extent that there is any adjustment to the Purchase Price pursuant
to Section 2(b) of each of the Subsidiary Asset Purchase Agreements,
any payment required to be paid by the Company shall be paid by the
Seller, and any amount required to be paid to the Company shall be
paid to the Seller."
(g) Section 4.34(i) of the Purchase Agreement is hereby amended to read as
follows:
"(i) Stock Options. Each outstanding option to purchase Seller
-------------
common stock held by Transferred Employees shall vest immediately upon
the Closing and expire on the earlier of (a) December 31, 1999 or (b)
the date on which the option expires by the terms of the applicable
option contract. The Company agrees to indemnify Seller for any costs
or other damages incurred by Seller in connection with the extension
of any option beyond six months following the Closing."
4
<PAGE>
(h) Section 4.38 of the Purchase Agreement is hereby amended to read as
follows:
"4.38 Post-Closing Distributions by the Company.
-----------------------------------------
Immediately upon the Closing, the parties shall cause the
Company to, and the Company shall, make a cash distribution in the
aggregate amount of three hundred ninety million Dollars
($390,000,000) to its members, pro rata in accordance with their then
respective ownership interests in the Company, and Buyer shall have
caused the Company to obtain any and all financing necessary to fund
such cash distribution (the "Company Financing") in accordance with
-----------------
the terms and conditions set forth in the Commitments. In addition,
the parties shall cause the Company to, and the Company shall, make
the NAV Payment in accordance with and in the form and manner
described in Section 1.4 of this Amendment No. 1."
(i) Schedule 7.1 of the Purchase Agreement is hereby amended to read as
------------
set forth on Exhibit B hereto.
(j) Section 10.10(a) of the Purchase Agreement is hereby amended to revise
the definitions of "Material Adverse Effect" and "Net Asset Value" to read as
follows:
" "Material Adverse Effect" has the meaning ascribed to it in Section
-----------------------
2.2.
"Net Asset Value" means the sum of Total Current Assets less Current
---------------
Liabilities as reflected in the Pro Forma Statement of Net Assets to
be sold as of 12/31/97 but excluding Trade Payables (which shall be
paid in full immediately prior to the Closing Date), with such amounts
determined in accordance with GAAP using the same assumptions
reflected in the 12/31/97 Historical Financial Statements and
methodology in calculating the Base NAV as set forth in Schedule
1.4(a)."
(k) Section 10.10(a) of the Purchase Agreement is hereby amended to add
the following new definitions in appropriate alphabetical order:
" "Jefferson" has the meaning ascribed to it in Section 1.4(a).
---------
"NAV Distribution" has the meaning ascribed to it in Section 1.4(a).
----------------
"Subsidiary Asset Purchase Agreement" has the meaning ascribed to it
-----------------------------------
in Section 4.29."
5
<PAGE>
(l) Section 10.10(a) of the Purchase Agreement is hereby amended to delete
the following definitions: "NVOC Assets," "NVOC Asset Purchase Agreement," "OCC
Assets" and "OCC Asset Purchase Agreement."
(m) The Purchase Agreement is hereby amended to delete Exhibits V and W
therefrom.
3. Condition to Effectiveness of Amendment No. 1.
---------------------------------------------
The amendments contained in this Amendment No. 1 are subject to and
conditioned upon the Closing occurring on or before September 30, 1998.
4. Representations and Warranties.
------------------------------
(a) Seller represents and warrants to Buyer that:
(i) Each of Seller and the Company has the corporate power and
authority to execute and deliver this Amendment No. 1.
(ii) This Amendment No. 1 is the legal, valid and binding obligation
of Seller and the Company enforceable against each of them in accordance with
the terms hereof.
(b) Buyer represents and warrants to Seller that:
(i) Buyer has the corporate power and authority to execute and
deliver this Amendment No. 1.
(ii) This Amendment No. 1 is the legal, valid and binding obligation
of Buyer enforceable against it in accordance with the terms hereof.
5. Miscellaneous.
-------------
(a) Amendment to Purchase Agreement. This Amendment No. 1 shall be
-------------------------------
construed, administered and applied in accordance with all of the terms and
provisions of the Purchase Agreement.
(b) Successors and Assigns. This Amendment No. 1 shall inure to the
----------------------
benefit of and be binding on the parties hereto and their respective successors
and permitted assigns.
(c) Effect of Amendment No. 1. The amendments hereunder shall be limited
-------------------------
precisely as written and shall not constitute a waiver or modification of any
other covenants, terms or provisions of the Purchase Agreement, which shall
remain in full force and effect.
6
<PAGE>
(d) Amendment; Waiver. This Amendment No. 1 may be amended, supplemented
-----------------
or otherwise modified only by a written instrument executed by the parties
hereto. No waiver by either party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and executed by the party so
waiving.
(e) Governing Law. This Amendment No. 1 shall be governed by, and
-------------
construed in accordance with, the laws of the state of New York applicable to a
contract executed and performed in such State without giving effect to the
conflicts of laws principles thereof, except that matters herein strictly within
the purview of the matters covered by the Limited Liability Company Act of the
State of Delaware shall be governed by such Limited Liability Company Act.
(f) Counterparts. This Amendment No. 1 may be executed by the parties
------------
hereto in separate cou nterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same agreement, and all signatures need not appear on any one
counterpart.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be duly
executed as of the date first above written.
OWENS CORNING
By: /s/ Charles E. Dana
----------------------
Name:
Title:
GLASS HOLDINGS, CORP.
By: /s/ Robert Porcher
----------------------
Name: Robert Porcher
Title: President
ADVANCED GLASSFIBER YARNS LLC
By: Owens Corning, Member
By: /s/ Charles E. Dana
----------------------
Name:
Title:
8
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF FORMATION
OF
LINCOLN YARNS, LLC
The undersigned, an authorized natural person for the purpose of
forming a limited liability company under the provisions and subject to the
requirements of the Delaware Limited Liability Company Act, hereby certifies
that:
1. Name. The name of the limited liability company formed hereby is
----
Lincoln Yarns, LLC.
2. Registered Office. The address of its registered office in the
-----------------
State of Delaware is c/o United Corporate Services, Inc., 15 East
North Street, Dover, Delaware 19901.
3. Registered Agent. The name and address of its registered agent
----------------
for service of process in the State of Delaware is United
Corporate Services, Inc., 15 East North Street, Dover, Delaware
19901.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation of Lincoln Yarns, LLC this 26th day of June, 1998.
/s/ Steven A. Navarro
-----------------------------
Name: Steven A. Navarro
Title: Authorized Person
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF FORMATION
OF
LINCOLN YARNS, LLC
Pursuant to the provisions of the
Delaware Limited Liability Company Act
Lincoln Yarns, LLC, a Delaware Limited Liability Company, hereby certifies
as follows:
1. The Certificate of Formation of the limited liability company was
filed in the Office of the Secretary of State of Delaware on June 13, 1998.
2. Article FIRST of the Certificate of Formation is hereby amended and
restated in its entirety as follows:
"FIRST: The name of the limited liability company is Specialty Yarns
LLC (hereinafter the "LLC")."
3. This amendment to the Certificate of Formation was duly adopted by the
unanimous written consent of the members of the limited liability company in
accordance with the Delaware Limited Liability Company Act.
<PAGE>
IN WITNESS WHEREOF, the LLC has caused this Certificate of Amendment to its
Certificate of Formation to be executed this 7th day of August, 1998.
By: /s/ Steven A. Navarro
--------------------------
Steven A. Navarro,
Authorized Person
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF FORMATION
OF
SPECIALTY YARNS LLC
Pursuant to the provisions of the
Delaware Limited Liability Company Act
Specialty Yarns LLC, a Delaware Limited Liability Company, hereby
certifies as follows:
1. The Certificate of Formation of the limited liability company was
filed in the Office of the Secretary of State of Delaware on June 30, 1998.
2. Article FIRST of the Certificate of Formation, as amended, is
hereby amended and restated in its entirety as follows:
"FIRST: The name of the limited liability company is Advanced
Glassfiber Yarns LLC (hereinafter the "LLC")."
3. This amendment to the Certificate of Formation was duly adopted by
the unanimous written consent of the members of the limited liability company in
accordance with the Delaware Limited Liability Company Act.
<PAGE>
IN WITNESS WHEREOF, the LLC has caused this Certificate of Amendment
to its Certificate of Formation to be executed this 3rd day of September, 1998.
By: /s/ Steven A. Navarro
-----------------------------
Steven A. Navarro,
Authorized Person
<PAGE>
EXHIBIT 3.2
================================================================================
ADVANCED GLASSFIBER YARNS LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
between
JEFFERSON HOLDINGS, INC.
and
AGY HOLDINGS, INC.
Dated as of September 30, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS.................................................................. 1
1.1 Defined Terms................................................................ 1
1.2 Construction................................................................. 8
1.3 Certain Conventions.......................................................... 8
SECTION 2 ORGANIZATION................................................................. 8
2.1 Formation.................................................................... 8
2.2 Name......................................................................... 9
2.3 Term......................................................................... 9
2.4 Principal Place of Business.................................................. 9
2.5 Purpose of the Company....................................................... 9
2.6 Powers of the Company........................................................ 9
2.7 Foreign Qualification........................................................ 9
2.8 Registered Agent and Office.................................................. 9
2.9 No State Law Partnership..................................................... 10
SECTION 3 MANAGEMENT AND OPERATIONS.................................................... 10
3.1 Directors.................................................................... 10
3.2 Officers..................................................................... 12
3.3 Required Actions by the Board of Directors................................... 13
3.4 Insurance.................................................................... 14
3.5 Taxes and Charges; Governmental Rules........................................ 14
3.6 Contracts with AGY........................................................... 14
3.7 Business, Health, Safety and Environmental Practices......................... 14
3.8 Owners....................................................................... 14
SECTION 4 CAPITALIZATION; ALLOCATIONS; DISTRIBUTIONS................................... 15
4.1 Capital Contributions; Percentage Interests.................................. 15
4.2 Additional Capital Contributions............................................. 16
4.3 Capital Accounts............................................................. 16
4.4 Loans to the Company......................................................... 17
4.5 Allocations.................................................................. 17
4.6 Allocation of Taxable Income and Loss........................................ 19
4.7 Distributions................................................................ 20
4.8 Indemnification and Reimbursement for Payments on Behalf of an Owner......... 21
SECTION 5 RELATIONSHIP BETWEEN OWNERS.................................................. 22
5.1 Company Property............................................................. 22
5.2 Other Ventures............................................................... 22
</TABLE>
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<TABLE>
<S> <C>
5.3 Disclaimer of Agency, etc.................................................... 23
5.4 Limitation of Rights......................................................... 23
SECTION 6 BOOKS AND RECORDS; ACCOUNTING; BUDGETS; FINANCIAL STATEMENTS; BANK ACCOUNTS.. 23
6.1 Books and Records............................................................ 23
6.2 Methods of Accounting........................................................ 24
6.3 Accountants.................................................................. 24
6.4 Business Plan................................................................ 24
6.5 Financial Statements......................................................... 24
6.6 Bank Accounts................................................................ 25
SECTION 7 DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY...................... 25
7.1 Dissolution.................................................................. 25
7.2 Dissolution of the Company................................................... 26
7.3 Assumption of Certain Liabilities............................................ 27
7.4 Withdrawal................................................................... 27
7.5 Use of Company Identity...................................................... 28
7.6 Dispute Resolution........................................................... 28
SECTION 8 TRANSFERS OF INTERESTS; REGISTRATION RIGHTS.................................. 28
8.1 No Transfers................................................................. 28
8.2 Right of First Offer......................................................... 28
8.3 Put Option................................................................... 29
8.4 Registration Rights.......................................................... 31
SECTION 9 TAX MATTERS.................................................................. 32
9.1 Tax Returns; Tax Accounting Methods; Tax Elections........................... 32
9.2 Tax Matters Partner.......................................................... 32
10.2 Confidentiality.............................................................. 33
10.2 Non-Compete.................................................................. 34
SECTION 11 INDEMNIFICATION.............................................................. 34
SECTION 12 MISCELLANEOUS................................................................ 35
12.1 Interested Parties........................................................... 35
12.2 Liability to Third Parties................................................... 36
12.3 No Third Party Beneficiaries................................................. 36
12.4 Publicity.................................................................... 36
12.5 Notices...................................................................... 36
12.6 Binding Effect............................................................... 37
12.7 No Waiver.................................................................... 37
12.8 No Election of Remedies...................................................... 37
</TABLE>
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<TABLE>
<S> <C>
12.9 Entire Agreement............................................................. 37
12.10 Amendment.................................................................... 37
12.11 Assignment................................................................... 37
12.12 Severability................................................................. 37
12.13 Headings..................................................................... 38
12.14 Counterparts................................................................. 38
12.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS............................... 38
12.16 WAIVER OF TRIAL BY JURY...................................................... 38
12.17 Governing Law................................................................ 39
12.18 Special Covenants of Holdings................................................ 39
</TABLE>
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<PAGE>
ADVANCED GLASSFIBER YARNS LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
---------------------------------------------
AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT,
dated as of September 30, 1998 (the "Agreement"), by and between Jefferson
---------
Holdings, Inc., a Delaware corporation ("Holdings"), and AGY Holdings, Inc., a
Delaware corporation ("AGY").
---
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Owens Corning, a Delaware corporation and the parent of
Holdings ("OC"), formed a limited liability company pursuant to the Limited
--
Liability Company Act of the State of Delaware (the "Company") for the purpose
-------
of conducting the Business; and
WHEREAS, Holdings and AGY wish to amend and restate the Original
Operating Agreement in accordance with the terms hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS
-----------
1.1 Defined Terms. Capitalized terms used in this Agreement shall
-------------
have the respective meanings set forth below:
"Accounting Firm" shall mean the independent auditors for the
---------------
Company selected by the Board of Directors, initially PricewaterhouseCoopers
LLP.
"Act" shall mean the Delaware Limited Liability Company Act, Title
---
6, Sections 18-101 et seq., and any successor statute, as amended from time to
time.
"Affiliate" shall mean any entity that, directly or indirectly
---------
through one or more intermediaries, controls, is controlled by, or is under
common control with the specified party. "Control" (including, with correlative
meanings, the terms "controlled by" and "under common
<PAGE>
control with") means the ownership or control of securities possessing at least
50% of the voting power of all outstanding voting securities of an entity or the
power otherwise to direct or cause the direction of the management and policies
of such entity, whether through the ownership of voting stock or otherwise. For
the purposes of this definition, partnerships, joint ventures or similar
entities where a majority in interest of the partners, venturers or other owners
are a party hereto and/or Affiliates of a party hereto also shall be deemed to
be Affiliates of such party; provided that the Company shall not be deemed to be
an Affiliate of either party hereto for any purpose hereunder, including the
indemnification provisions contained in Section 11 of this Agreement.
"AGY" shall have the meaning set forth in the recitals.
---
"Allocation Regulations" shall mean the Treasury Regulations under
----------------------
Section 704 of the Code, as amended from time to time, and any other Treasury
Regulations that relate to the allocation of items of income, gain, deduction or
loss of the Company or the maintenance of the Capital Accounts.
"Asset Contribution" shall have the meaning set forth in the recitals.
------------------
"Assets" shall have the meaning set forth in the Contribution
------
Agreement.
"Assumed Liabilities" shall have the meaning set forth in the
-------------------
Contribution Agreement.
"Bankruptcy" shall mean an event where (a) an Owner or a Controlling
----------
Affiliate of an Owner shall (i) make a general assignment, arrangement or
composition with or for the benefit of creditors, (ii) become unable, or admit
in writing its inability, to pay its debts as they become due, (iii) commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, (iv) file any petition or answer seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution, order for relief or similar relief under any present or future
statute, law or regulation, or file any answer admitting or not contesting the
material allegations of a petition filed against such Owner or Controlling
Affiliate in any such proceeding, (v) seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of such Owner or Controlling
Affiliate or of all or any substantial part of the properties of such Owner or
Controlling Affiliate or (vi) take any action looking to the dissolution or
liquidation of such Owner or Controlling Affiliate (other than a dissolution or
liquidation into a Controlling Affiliate where such Controlling Affiliate agrees
to become an "Owner" under this Agreement in lieu of such Owner), or (b) (i) a
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of such Owner or a Controlling Affiliate of such Owner in an
involuntary case under any federal bankruptcy law now or hereafter in effect or
(ii) any proceeding shall be instituted by or against such Owner or Controlling
Affiliate seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment
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<PAGE>
of a receiver, trustee or other similar official for it or for any substantial
part of its property, and if instituted against such Owner or Controlling
Affiliate, such proceeding shall remain undismissed and unstayed for a period of
60 days, or (c) such Owner or a Controlling Affiliate of such Owner shall take
any corporate action to authorize any of the actions set forth above.
"Board of Directors" shall mean the Board of Directors appointed by
------------------
the Owners pursuant to Section 3.1.
"Book Property" shall mean property of the Company that is properly
-------------
reflected on the books of the Company at a book value that differs from the
adjusted tax basis of such property, within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(iv)(g).
-
"Budget" shall mean the annual budget of the Company approved by the
------
Owners as of the date hereof and, after the date hereof, any amended or
subsequent annual budget approved by the Board of Directors in accordance with
Section 3.3.
"Business" shall have the meaning set forth in Section 2.5.
--------
"Business Plan" shall mean the five-year strategic business plan of
-------------
the Company approved by the Owners as of the date hereof and attached as Exhibit
A hereto, and, after the date hereof, any amendment or modification thereto
approved by the Board of Directors in accordance with Section 3.3.
"Capital Account" shall mean, with respect to any Owner, such Owner's
---------------
capital account established and maintained in accordance with the provisions of
this Agreement.
"Capital Contribution" shall mean, with respect to any Owner, the
--------------------
amount of money and the fair market value of any property other than money
contributed to the capital of the Company by such Owner (net of liabilities
assumed by the Company or to which property contributed to the Company is
subject).
"Certificate" shall have the meaning set forth in Section 2.1.
-----------
"Code" shall mean the United States Internal Revenue Code of 1986, as
----
amended from time to time.
"Company" shall have the meaning set forth in the recitals.
-------
"Company Financing" shall mean the Company Financing as defined in the
-----------------
Purchase Agreement which, for the purpose of clarity, includes (i) the $150
million senior subordinated credit facility provided by First Union Investors,
Inc.; and (ii) the credit facility provided by First Union National Bank and
other lenders permitting the Company to borrow up to $315 million.
-3-
<PAGE>
"Contract" shall mean any agreement, lease, evidence of Indebtedness,
--------
mortgage, indenture, security agreement or other contract or commitment (whether
written or oral).
"Contribution Agreement" shall mean the Asset Contribution Agreement,
----------------------
dated July 1, 1998 and as amended and restated pursuant to an Amended and
Restated Asset Contribution Agreement, dated July 31, 1998.
"Designated Officers" shall have the meaning set forth in Section 7.6.
-------------------
"Director" shall mean each then-current member of the Board of
--------
Directors appointed by Holdings or AGY.
"Dissolution Event" shall have the meaning set forth in Section 7.1.
-----------------
"Distribution" shall mean, with respect to any Owner, the amount of
------------
money or the fair market value (determined pursuant to Section 7.2(e), in the
case of any Distribution of property in liquidation of the Company) of any
property other than money distributed to such Owner by the Company (net of
liabilities assumed by such Owner or to which property distributed to such Owner
is subject).
"EO Demand Registration" shall have the meaning set forth in Section
----------------------
8.4.
"Exercising Owner" shall have the meaning set forth in Section 8.
----------------
"Fiscal Year" of the Company shall commence on January 1 and end on
-----------
December 31 of each year except as may otherwise be required by the Code or
Treasury Regulations, provided, however, that (a) in the case of the Company's
-------- -------
first fiscal year, Fiscal Year means the period from and including the date on
which the Company is formed under the Act to and including the immediately
following December 31 and (b) the final Fiscal Year of the Company shall end on
the date on which the winding up of the Company is completed.
"GAAP" shall mean United States generally accepted accounting
----
principles.
"GAAP Financial Statements" shall have the meaning set forth in
-------------------------
Section 6.2.
"GHC" shall mean Glass Holdings Corp.
---
"Holdings" shall have the meaning set forth in the recitals.
--------
"Holdings Contribution" shall have the meaning set forth in the
---------------------
recitals.
"Indebtedness" of any Person shall mean all obligations of such Person
------------
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the
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<PAGE>
deferred purchase price of goods or services (other than trade payables or
accruals incurred in the ordinary course of business), (iv) under capital leases
and (v) in the nature of guarantees of the obligations described in clauses (i)
through (iv) above of any other Person.
"Indemnified Damages" shall have the meaning set forth in Section
-------------------
11(a).
"Indemnifying Owner" shall have the meaning set forth in Section 4.8.
------------------
"Indemnitees" shall have the meaning set forth in Section 11(a).
-----------
"Interest" shall mean, with respect to an Owner, any and all ownership
--------
interests and rights of that Owner in or with respect to the Company, including,
without limitation, such Owner's right to a share of the Net Profit and Net Loss
of the Company, its right to Distributions and to a share of the assets of the
Company upon liquidation and its right to participate in the management of the
affairs of the Company.
"IRS" shall mean the United States Internal Revenue Service.
---
"Lien" shall mean any mortgage, pledge, assessment, security interest,
----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale contract, title retention contract or other contract to
give any of the foregoing.
"Losses" shall have the meaning set forth in Section 11.
------
"Majority of the Board" shall mean a number of Directors constituting
---------------------
not less than 50.1% of the number of Directors on the entire Board of Directors,
as such number may be adjusted from time to time pursuant to this Agreement,
regardless of whether there are any vacancies thereon.
"NAV Payment" shall have the meaning set forth in the Purchase
-----------
Agreement.
"Net Cash Flow" shall mean the gross cash receipts of the Company
-------------
during any given Fiscal Year, less the portion thereof used to pay all Company
expenses, debt payments, capital improvements and replacements payable during
such Fiscal Year or to establish reserves for such items payable during the
subsequent Fiscal Year, all as determined by the Board of Directors. "Net Cash
Flow" shall not be reduced by depreciation, amortization, cost recovery
deductions or similar non-cash allowances, and shall be increased by any
reductions of reserves previously established.
"Net Profit" or "Net Loss" shall mean, except as specified below, the
---------- --------
income or loss of the Company for "book" or "capital account" purposes under
Treasury Regulations Section 1.704-1(b)(2)(iv). In particular, but without
limitation, for each Fiscal Year, "Net Profit" or "Net Loss" shall mean the
Company's taxable income or loss for such Fiscal Year, determined in accordance
with Section 703(a) of the Code (it being understood that for this purpose, all
items
-5-
<PAGE>
of income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in such taxable income or loss),
with the following modifications:
(i) income, gain or loss from, and cost recovery, amortization or
depreciation deductions with respect to, Book Property shall be computed by
reference to the value of such property as set forth on the books of the
Company, all in accordance with the principles of Treasury Regulations Section
1.704-1(b)(2)(iv)(g), notwithstanding that the adjusted tax basis of such
property differs from such value;
(ii) any income of the Company that is exempt from federal income
tax, and that is not otherwise taken into account in computing Net Profit or Net
Loss, shall be added to such taxable income or loss;
(iii) any expenditures of the Company that are described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and that are not
otherwise taken into account in computing Net Profit or Net Loss, shall be
subtracted from such taxable income or loss;
(iv) in the event that the value of any Company property is adjusted
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(e) or Section 1.704-
1(b)(2)(iv)(f), the amount of such adjustment shall be taken into account as
gain or loss (as the case may be) from the disposition of such property for
purposes of computing Net Profit and Net Loss;
(v) to the extent (and only to the extent) that an adjustment to
the adjusted tax basis of any Company asset pursuant to Section 732, Section 734
or Section 743 of the Code is required to be taken into account in determining
Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m),
the amount of such adjustment shall be treated as an item of gain or loss (as
the case may be) for purposes of computing Net Profit or Net Loss; and
(vi) any items of income, gain, loss or deduction that are specially
allocated to an Owner under Sections 4.5(b) or Section 4.5(d) shall not be taken
into account in computing Net Profit and Net Loss (but the amount of such items
available for allocation under Section 4.5(b) or Section 4.5(d) shall be
determined by applying rules analogous to the rules set out in clauses (i)
through (v) above).
"Non-Compete Agreements" shall have the meaning set forth in Section
----------------------
10.2.
"1933 Act" shall have the meaning set forth in Section 8.4.
--------
"Notice of Election" shall have the meaning set forth in Section 8.
------------------
"OC" shall have the meaning set forth in the recitals.
--
-6-
<PAGE>
"OC Contribution" shall have the meaning set forth in Section 4.1.
---------------
"Officers" shall have the meaning set forth in Section 3.2 of this
--------
Agreement.
"Original Operating Agreement" shall mean the Limited Liability
----------------------------
Company Operating Agreement, dated as of June 26, 1998, executed by OC, as
amended by the Amended and Restated Operating Agreement, dated as of July 31,
1998, executed by OC and Holdings.
"Original Principal Amount" shall have the meaning set forth in
-------------------------
Section 8.3.
"Owner" shall mean, initially, each of Holdings and AGY.
-----
"Percentage Interest" shall mean the percentage interest of each Owner
-------------------
in the Net Profit and Net Loss of the Company. The initial Percentage Interest
of Holdings shall be 49% and the initial Percentage Interest of AGY shall be
51%.
"Person" or "person" shall mean any individual, corporation, company,
------ ------
partnership, firm, association, joint venture, trust, unincorporated
organization, government, governmental body, agency, political subdivision or
other entity.
"Priority Return" shall mean a return on an Owner's daily balance of
---------------
Unrecovered Reduced Distributions calculated at the highest non-default interest
rate, as is applicable from time to time, under the credit facility provided by
First Union National Bank to the Company (but in no event greater than 10% per
annum), compounded quarterly.
"Purchase Agreement" shall mean the LLC Interest Sale and Purchase
------------------
Agreement, dated July 31, 1998, as amended, by and between the Company, OC and
GHC, which Purchase Agreement was assigned by GHC to AGY by an Assignment and
Assumption Agreement dated September 30, 1998.
"Put Notice" shall have the meaning set forth in Section 8.3.
----------
"Receiving Owner" shall have the meaning set forth in Section 8.3
---------------
"Reduced Distribution" shall mean, with respect to an Owner, an amount
--------------------
equal to any excess of (i) the product of (A) a fraction the numerator of which
is such Owner's Percentage Interest and the denominator of which is the other
Owner's Percentage Interest and (B) the Distribution made to such other Owner
pursuant to Section 4.7(b)(iii) over (ii) the Distribution made to such Owner
pursuant to Section 4.7(b)(iii).
"Revolver" means the revolving credit facility of the Company.
--------
"Selling Owner" shall have the meaning set forth in Section 8.2.
-------------
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<PAGE>
"Supermajority of the Board" shall mean a number of Directors
--------------------------
constituting not less than 75% of the number of Directors of the entire Board of
Directors as provided in Section 3.1, regardless of whether there are any
vacancies therein.
"Supermajority of the Owners" shall mean a number of Owners holding
---------------------------
75% of the Percentage Interests.
"Tax Matters Partner" shall have the meaning set forth in Section 9.2
-------------------
and initially shall be AGY.
"Third Party Offeror" shall have the meaning set forth in Section 8.2.
-------------------
"Treasury Regulations" shall mean the regulations promulgated by the
--------------------
United States Treasury Department under the Code, as amended from time to time.
"Unrecovered Reduced Distributions" shall mean the excess of an
---------------------------------
Owner's aggregate Reduced Distributions over the aggregate Distributions
theretofore made to such Owner pursuant to Section 4.7(b)(iv)(B) and
7.2(d)(iii)(B).
1.2 Construction. The term "Owner" as used herein shall correspond
------------
to the term "member" within the meaning of the Act and the term "Director" as
used herein shall correspond to the term "manager" within the meaning of the
Act. This Agreement shall constitute the "limited liability company agreement"
of the Company within the meaning of the Act. Any reference to an Exhibit or
Schedule in this Agreement shall be deemed to be a reference to such Exhibit or
Schedule as amended and in effect from time to time. The Exhibits and Schedules
to this Agreement shall be deemed a part of this Agreement.
1.3 Certain Conventions. Unless the context of this Agreement
-------------------
otherwise requires, (a) words of any gender include each other gender and (b)
words using the singular or plural number also include the plural or singular
number, respectively. The terms "hereof," "herein," "hereby" and "hereunder,"
and words of similar import, refer to this Agreement as a whole and not to any
particular Section or provision.
SECTION 2. ORGANIZATION
------------
2.1 Formation. The Company has been organized as a Delaware limited
---------
liability company by the execution and filing of a Certificate of Formation (as
the same may be amended from time to time) (the "Certificate") by OC, as the
-----------
initial member, under and pursuant to the Act. The rights, powers, duties,
obligations and liabilities of the Owners shall be determined pursuant to the
Act and this Agreement. To the extent that the rights, powers, duties,
obligations and liabilities of any Owner are different by reason of any
provision of this Agreement than they would be in the absence of such provision,
this Agreement shall, to the extent permitted by the Act, control.
-8-
<PAGE>
2.2 Name. The name of the Company shall be "Advanced Glassfiber
----
Yarns LLC" and all business of the Company shall be conducted in that name or
in such other names that comply with applicable law as the Board of Directors
may select from time to time.
2.3 Term. The term of the Company shall commence on the date on
----
which the Certificate was filed with the office of the Secretary of State of
Delaware and shall continue in existence until September 30, 2097, unless sooner
dissolved as provided in Section 7.
2.4 Principal Place of Business. The principal place of business of
---------------------------
the Company shall be in Aiken, South Carolina. The Company may have offices at
such other places within or without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Company may
require, including, but not limited to, Huntingdon, Pennsylvania and South Hill,
Virginia.
2.5 Purpose of the Company. The purpose of the Company shall be to
----------------------
manufacture and sell glass fiber yarns and related specialty materials, and to
engage in such other activities as may be necessary therefor, incidental thereto
or otherwise provided for in this Agreement (the "Business"). The Company may,
--------
subject to Section 3.3, carry on any lawful business, purpose or activity. The
Company shall possess and may exercise all of the powers and privileges granted
by the Act or by any other law, together with any powers incidental thereto,
which are necessary or convenient for the conduct, promotion or attainment of
the business, purposes or activities of the Company.
2.6 Powers of the Company. Subject to the provisions of this
---------------------
Agreement, (i) the Company may, with the approval of the Board of Directors,
enter into and perform any and all documents, agreements and instruments, all
without any further act, vote or approval of any Owner and (ii) the Board of
Directors may authorize any Person (including any Owner or Officer) to enter
into and perform any document on behalf of the Company.
2.7 Foreign Qualification. Prior to the Company's conducting
---------------------
business in any jurisdiction other than Delaware, the Board of Directors shall
use its reasonable efforts to cause the Company to comply (to the extent that
procedures for doing so are available and such compliance is reasonably within
the control of the Board of Directors in the relevant jurisdiction) with all
requirements necessary to qualify the Company as a foreign limited liability
company in such jurisdiction. At the request of the Board of Directors, each
Owner shall execute, acknowledge, swear to and deliver all certificates and
other instruments conforming with this Agreement that are necessary or
appropriate to qualify, continue or terminate the Company as a foreign limited
liability company in each such jurisdiction in which the Company may conduct
business from time to time.
2.8. Registered Agent and Office. The registered office of the
---------------------------
Company required by the Act to be maintained in the State of Delaware shall be
the office of the initial registered agent named in the Certificate or such
other office (which need not be a place of business of the Company)
-9-
<PAGE>
as the Board of Directors may designate from time to time in the manner provided
by law. The registered agent of the Company in the State of Delaware shall be
the initial registered agent named in the Certificate or such other Person as
the Board of Directors may designate from time to time in the manner provided by
law.
2.9 No State Law Partnership. The Owners intend that the Company
------------------------
shall not constitute or be treated as a partnership (including, without
limitation, a limited partnership) or joint venture, and that no Owner shall be
a partner or joint venturer of any other Owner, for any purpose other than
federal and, if applicable, state and local income tax purposes, and this
Agreement shall not be construed to the contrary. The Owners intend that the
Company shall be treated as a partnership for federal and, if applicable, state
and local income tax purposes, and each Owner and the Company shall file all tax
returns and shall otherwise take all tax and financial reporting positions in a
manner consistent with such treatment. The Owners shall not make any election
under Treasury Regulations Section 301.7701-3, or any comparable provisions of
state or local law, to treat the Company as an entity other than a partnership
for federal, state or local income tax purposes.
SECTION 3. MANAGEMENT AND OPERATIONS
-------------------------
3.1 Directors. All powers vested by law in the Company shall be
---------
exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, the Board of Directors. The
Board of Directors shall consist of five (5) Directors, two (2) of whom shall be
appointed by Holdings, and three (3) of whom shall be appointed by AGY. The
Chairman of the Board of Directors shall be a Director appointed by AGY. Each
Director shall be a "manager" within the meaning of the Act.
(a) Meetings; Quorum. Meetings of the Board of Directors shall take
----------------
place from time to time, but not less frequently than once each fiscal quarter,
at the offices of the Company or at such other location as may be agreed upon by
the Directors. The presence of at least a Majority of the Board, including at
least one Director representing each Owner, shall be required to constitute a
quorum. Any Director shall have the right to appoint any Person to act as proxy
or otherwise on his behalf and in his place at any meeting of the Board of
Directors which he is unable to attend. The same Person may act as proxy or
otherwise on behalf of more than one Director. Meetings of the Board of
Directors may be called by any Owner or by the Chairman of the Board of
Directors. Written notice of every meeting of the Board of Directors shall be
given to each Director at least seven days prior to the date of such meeting.
Notice of a meeting need not be given to any Director who signs a waiver of
notice or a consent to holding the meeting or a consent in lieu of meeting or an
approval of the minutes of a meeting, whether before or after the meeting, or
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice. Subject to Section 3.3, actions and decisions
of the Board of Directors shall be determined at meetings of the Board of
Directors at which a quorum is present by a vote of at least a Majority of the
Board.
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(b) Organization. Meetings of the Board of Directors shall be
------------
presided over by the Chairman of the Board of Directors, who shall be chosen by
AGY. The Chairman of the Board of Directors may appoint any Person to act as
secretary of the meeting. The Chairman of the Board of Directors shall not have
any more votes than any other member of the Board of Directors.
(c) Minutes. The decisions and resolutions of each meeting of the
-------
Board of Directors shall be reported in minutes, which shall state the date and
place of the meeting, the Directors present and the Owner that each Director
represents, the resolutions put to a vote and the results of the voting. The
minutes shall be filed in the minute book of the Company at the principal place
of business of the Company. A copy of the minutes shall be provided to each
Owner.
(d) Action by Consent of Board of Directors. Any action required or
---------------------------------------
permitted to be taken at a meeting of the Board of Directors may be taken
without a meeting if a consent in writing, setting forth the action taken, is
signed by all of the members of the Board of Directors entitled to vote with
respect to the subject matter thereof. Any consent satisfying the provisions of
this Section 3.1(d) shall have the same effect as a vote of the members of the
Board of Directors at a duly convened meeting of the Board of Directors. The
consents shall be filed in the minute book of the Company at the principal place
of business of the Company. A copy of the consents shall be provided to each
Owner.
(e) Telephone Conference. Directors may participate in a meeting
--------------------
through the use of conference telephone or similar communications equipment,
provided that all of the Directors participating in such meeting can communicate
with each other. Participation in a meeting pursuant to this Section shall
constitute presence at the meeting for all purposes.
(f) Resignation; Removal. Any Director may resign at any time upon
--------------------
written notice to the Company. Such resignation shall be effective upon receipt
thereof by the Company or at such time as may be specified in the notice of
resignation. Any Director of the Company may be removed by the Owner that
appointed him with or without cause and with or without notice.
(g) Vacancies. A vacancy on the Board of Directors because of death,
---------
resignation, removal, disqualification or any other cause may be filled by the
Owner entitled to appoint the Director causing such vacancy.
(h) Compensation of Directors. Directors shall not be entitled to
-------------------------
compensation from the Company for their services. The Company shall, however,
reimburse Directors for their reasonable travel, lodging and meal expenses in
connection with their attendance at meetings of the Board of Directors or
otherwise incurred in connection with the Business.
(i) Limitation of Liability. Except as otherwise prohibited by the
-----------------------
Act, Directors shall not be liable, responsible or accountable for damages or
otherwise to the Company for any action taken or failure to act on behalf of the
Company within the scope of the authority conferred on the
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Directors by this Agreement, by law or by the Owners, unless such action or
omission is performed or omitted fraudulently or constitutes willful misconduct
or gross negligence.
(j) Limited Membership Status. For the purpose of electing Officers
-------------------------
under Section 3.2, each Director, as a "manager" within the meaning of the Act,
automatically shall be a "member" of the Company, within the meaning of the Act,
of a special class having, as the sole incident of membership of that class, the
exclusive power to elect, direct and remove Officers of the Company. A
Director, as such, shall not have any other rights of a "member" of the Company
within the meaning of the Act.
(k) Committees. The Board of Directors may, by resolution adopted by
----------
a Supermajority vote of the Directors, establish one or more committees
consisting of one or more Directors of the Company (or their designees).
Subject to the restrictions imposed in Section 3.3, any such committee shall
have and may exercise all of the powers and authority conferred on such
committee by the resolution of the Board of Directors.
3.2 Officers. (a) Designation and Appointment. The Company shall
-------- ---------------------------
have, but shall not be limited to, the following executive officers: a Chief
Executive Officer, a General Manager, a Chief Operating Officer, a Chief
Financial Officer, a Technical Vice President and a Vice President -Marketing
and Sales. Upon the effectiveness of this Agreement, the General Manager shall
be Robert Fisher who, for the first year, shall serve at the pleasure of a
Supermajority of the Board of Directors and thereafter at the pleasure of the
Board of Directors. All executive officers other than (i) the initial General
Manager and (ii) the Chief Executive Officer (who shall at all times be
designated by AGY) shall be designated by the Board of Directors after
consultation among the Members. In addition, the Board of Directors may, from
time to time, employ or retain such other Persons as may be necessary or
appropriate for the conduct of the Company's business (subject to the
supervision and control of the Board of Directors), including employees, agents
and other Persons who may be designated as officers (together with the executive
officers, the "Officers") of the Company. Any number of offices may be held by
--------
the same Person. In its discretion, the Board of Directors may choose not to
fill any office for any period as it may deem advisable. Officers need not be
residents of the State of Delaware or Owners. Any Officers so designated shall
have such authority and perform such duties as the Board of Directors may, from
time to time, delegate to them by written resolution of the Board of Directors.
The Board of Directors may assign titles to particular Officers. Each Officer
shall hold office until he or she shall resign or shall have been removed in the
manner hereinafter provided. The salaries or other compensation, if any, of the
Officers of the Company shall be fixed from time to time by the Board of
Directors.
(b) Resignation/Removal. Any Officer may resign as such at any time.
-------------------
Such resignation shall be made in writing and shall take effect at the time
specified therein or, if no time be specified, at the time of its receipt by the
Board of Directors. The acceptance of a resignation shall not be necessary to
make it effective, unless expressly so provided in the resignation. Any
Officer, other than an executive officer, may be removed as such, either with
or without cause, at
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any time by the Board of Directors. Any executive officer may be removed with or
without cause only by the vote of the Board of Directors after consultation
among the Members. Designation of an Officer shall not of itself create any
contractual or employment rights.
(c) Duties of Officers Generally. The Officers, in the performance
----------------------------
of their duties as such, shall owe to the Company duties of loyalty and due care
of the type owed by the officers of a corporation to such corporation and its
stockholders under the laws of the State of Delaware.
3.3 Required Actions by the Board of Directors. Notwithstanding any
------------------------------------------
other provision of this Agreement to the contrary, actions or decisions with
respect to any of the following matters shall require the approval of at least a
Supermajority of the Board:
(a) Issuance of additional ownership interests of the Company.
(b) Materially changing the Business Plan or the types of businesses
conducted by the Company or engaging in a new business not
currently conducted or contemplated by the Company.
(c) Effecting any merger, consolidation, plan of exchange or similar
transaction to which the Company is a party.
(d) Selling all or a substantial portion of the assets of the Company
other than in the ordinary course of business.
(e) Mortgaging or otherwise encumbering the assets of the Company
other than in connection with the Company Financing.
(f) Effecting a distribution of any assets of the Company, including
cash, to any Member other than as required or permitted by
Sections 4.7(b) (i) through (v) and 8.3.
(g) Effecting the liquidation or dissolution of the Company.
(h) Redemption of any ownership interest in the Company other than
pursuant to Section 8.3.
(i) Entering into any contract with any Affiliate of the Company or
with any Member (other than as contemplated by the LLC Interest
Sale and Purchase Agreement) other than pursuant to Section 8.3.
(j) Making of any tax election which is materially detrimental to the
Company or any Member.
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<PAGE>
(k) Sale, license or other disposition of OC assigned or licensed
technology to a third party, including, but not limited to any
Affiliate of a Member.
(l) Incurring indebtedness other than (i) indebtedness sufficient to
make the Distributions contemplated by Section 4.7(b)(i) through
(iv), (ii) indebtedness incurred to effect the transactions
contemplated by Section 8.3 and (iii) borrowings under the
Revolver which do not exceed $75 million in the aggregate.
(m) Materially amending any of the policies set forth in Section 3.7.
3.4 Insurance. The Company shall maintain such general property,
---------
liability and other insurance as is determined by the Board of Directors,
consistent with industry practice and all applicable laws.
3.5 Taxes and Charges; Governmental Rules. (a) The Company shall,
-------------------------------------
and the Owners shall cause the Company to, comply with all applicable laws,
rules, regulations, orders, rulings, certificates, licenses, demands, judgments,
writs, injunctions, awards and decrees applicable to the Company.
(b) Each Owner promptly shall pay all applicable taxes and other
governmental charges attributable to it in its individual capacity, shall
satisfy all Liens attributable to it in its individual capacity and shall comply
with all applicable governmental rules attributable to it in its individual
capacity, to the extent, and only to the extent, that a failure to do so would
create a Lien or claim on the Company or its assets or would impose additional,
or alter any existing, governmental approvals applicable to the Company or the
Business.
3.6 Contracts with AGY. The price for products of the Business for
------------------
all Affiliates of AGY will be at least as favorable, but not more favorable, as
the price offered under any material contract with a third party. Affiliates of
AGY will receive no more favorable a supply of product of the Business than is
given to any third party (i.e., each party to receive supply of product receives
its pro rata portion of the total supply).
3.7 Business, Health, Safety and Environmental Practices. The
----------------------------------------------------
Company shall adopt and put into effect those policies of OC regarding business,
health, safety and environmental practices as attached hereto as Exhibit 3.7.
-----------
3.8 Owners.
------
(a) Subject to the provisions of Section 3.1, each Owner shall have
all the rights, powers and obligations that may be possessed by a member of a
limited liability company under the Act and otherwise as provided by law.
Notwithstanding the immediately preceding sentence, no
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<PAGE>
Owner shall have any authority to bind the Company or any other Owner to third
parties without the written consent of all other Owners.
(b) Meetings of the Owners may be called by any Owner on at least
seven (7) days' prior written notice, which notice shall contain the time and
place of such meeting. A Supermajority of the Owners shall constitute a quorum
for the transaction of business by the Owners at such meeting. Except as
otherwise expressly set forth herein, all actions of the Members shall require
the affirmative vote or consent of at least a Supermajority of the Owners.
Members shall only be entitled to consider and vote upon those matters expressly
requiring approval of the Owners pursuant to this Agreement or the Act. All
other matters concerning the business and affairs of the Company shall be
determined by the Board of Directors.
(c) Notice of any meeting of the Owners may be waived by any Owner
before, at or after such meeting. Meetings of the Owners may be conducted by
conference telephone facilities. Any action required or permitted to be taken
at any meeting of the Owners may be taken without a meeting only if a
Supermajority of the Owners, or such greater number of Owners necessary to take
such action under the terms of this Agreement or applicable law, consent thereto
in writing. The writing or writings evidencing any such consent shall be filed
with the minutes of proceedings of the Owners. The Company shall give prompt
notice of the taking of such action to those Owners entitled to vote with
respect to such action and who have not consented in writing to the taking of
such action.
SECTION 4. CAPITALIZATION; ALLOCATIONS; DISTRIBUTIONS
------------------------------------------
4.1 Capital Contributions; Percentage Interests. (a) Pursuant to
-------------------------------------------
the Contribution Agreement, OC has transferred or caused to be transferred to
the Company the Assets, subject to the Assumed Liabilities (the "OC
Contribution"). For purposes of this Agreement, after taking into account the
NAV Payment (as finally adjusted), the net fair market value of the assets of
the Company shall be $650 million. After taking into account for Capital
Account purposes (i) the OC Contribution and all other transactions and payments
provided for in the Contribution Agreement, (ii) the sale of the 51% Interest to
AGY and (iii) the special distributions described in Sections 4.7(b)(i) and
4.7(b)(ii), it is the intention of the Owners that the initial relative balances
in their respective Capital Accounts will be in strict proportion to their
initial Percentage Interests.
(b) The initial Percentage Interest of Holdings shall be 49% and the
initial Percentage Interest of AGY shall be 51%. The Percentage Interests of
the Owners shall only be amended from time to time in accordance with this
Agreement.
(c) No Owner shall have any right to receive any interest on its
Capital Contributions to the Company or on its Capital Account in the Company.
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<PAGE>
(d) Except as otherwise provided in this Agreement, no Owner shall
have any right to withdraw any portion of its Capital Account or to receive any
particular asset in liquidation of the Company or otherwise.
4.2 Additional Capital Contributions. No Owner shall have any
--------------------------------
obligation to make any additional Capital Contributions to the Company.
4.3 Capital Accounts. (a) A separate Capital Account shall be
----------------
established for each Owner and shall be maintained in all respects in accordance
with Section 704 of the Code and the Allocation Regulations, including Treasury
Regulations Section 1.704-1(b) promulgated thereunder. Without limiting the
foregoing, an Owner's Capital Account shall be increased by (i) the amount of
the Capital Contributions made by such Owner to the Company, and (ii)
allocations of Net Profit and other items of income or gain to such Owner under
Section 4.5, and shall be reduced by (iii) the amount of the Distributions (not
including any guaranteed payment under Section 707(c) of the Code) made to such
Owner by the Company and (iv) allocations of Net Loss and other items of
deduction or loss to such Owner under Section 4.5.
(b) The manner in which the Capital Accounts are to be maintained
pursuant to this Section 4.3 is intended to comply with the requirements of
Section 704 of the Code and the Allocation Regulations, and the provisions of
this Agreement regarding the maintenance of Capital Accounts shall be
interpreted and applied consistently therewith. If, in the reasonable opinion
of the Company's tax counsel, the manner in which the Capital Accounts are to be
maintained pursuant to the provisions of this Section 4.3 should be modified in
order to comply with the requirements of Section 704 of the Code and the
Allocation Regulations, then, notwithstanding anything to the contrary contained
in this Section 4.3, the Tax Matters Partner may alter the method in which the
Capital Accounts are maintained, and the Tax Matters Partner shall have the
right, upon notice in writing to the other Owner(s), to amend this Agreement
without action by the Owners to reflect any such change in the manner in which
the Capital Accounts are maintained; provided that any such change in the manner
of maintaining the Capital Accounts shall not materially alter the economic
arrangement between the Owners.
(c) The Company shall increase or decrease the Capital Accounts of the
Owners to reflect a revaluation of the assets of the Company to their respective
fair market values in connection with (i) a contribution of money or other
property (other than a de minimis amount) to the capital of the Company by a new
-- -------
or existing Owner as consideration for an Interest in the Company, (ii) a
distribution of money or other property (other than a de minimis amount) by the
-- -------
Company to a retiring or continuing Owner as consideration for an Interest in
the Company or (iii) a liquidation of the Company, all in accordance with
Treasury Regulations Section 1.704-1(b)(2)(iv)(f).
(d) Except as may be required by the Act or any other applicable law,
no Owner shall be required to restore or pay to the Company or to any other
Owner any deficit or negative balance which may exist in such Owner's Capital
Account, whether upon liquidation of the Company or otherwise.
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<PAGE>
4.4 Loans to the Company. Funds required by the Company may be
--------------------
financed through borrowings from the Owners or their Affiliates or from
commercial lending sources, as the Board of Directors (subject to Section 3.3)
and the lending party may agree from time to time, at prevailing market rates
and upon customary terms and conditions for such loans. Any amounts payable on
such loans shall be paid before Distributions to the Owners.
4.5 Allocations. (a) Except as otherwise provided in this
-----------
Agreement, Net Profit and Net Loss of the Company (and items thereof) for each
Fiscal Year or other period of the Company shall be allocated to the Owners in
proportion to their respective Percentage Interests at the beginning of such
period. For purposes of this Section 4.5 and for other relevant purposes
hereunder, a fiscal period shall be deemed to end on any date when the
Percentage Interests are changed (and a new fiscal period shall commence on the
next day).
(b) Notwithstanding anything to the contrary contained in this
Agreement:
(i) Any nonrecourse deduction (within the meaning of Treasury
Regulations Section 1.704-2(b)(1)) for a Fiscal Year or other period shall
be allocated to the Owners in proportion to their respective Percentage
Interests at the beginning of such period, and if there is a net decrease
in the Company's minimum gain (as defined in Treasury Regulations Section
1.704-2(d)) during a Fiscal Year or other period of the Company, then items
of income and gain for such period (and, if necessary, for subsequent
periods) shall be allocated to the Owners in the manner and to the extent
required by Treasury Regulations Section 1.704-2(f). This clause is
intended to constitute a "minimum gain chargeback" as provided by Treasury
Regulations Section 1.704-2(f), and this clause shall be construed
accordingly.
(ii) Any partner nonrecourse deduction (within the meaning of
Treasury Regulations Section 1.704-2(i)(2)) shall be allocated in the
manner specified in Treasury Regulations Section 1.704-2(i)(1), and,
subject to the exceptions set forth in Treasury Regulations Section 1.704-
2(i)(4), if there is a net decrease in partner nonrecourse debt minimum
gain (within the meaning of Treasury Regulations Sections 1.704-2(i)(2) and
1.704-2(i)(3)) during a Fiscal Year or other period of the Company
attributable to a partner nonrecourse debt (within the meaning of Treasury
Regulations Section 1.704-2(b)(4)), then each Owner with a share of partner
nonrecourse debt minimum gain attributable to such partner nonrecourse
debt, determined in accordance with Treasury Regulations Section 1.704-
2(i)(5), shall be specially allocated items of income and gain for such
period (and, if necessary, for subsequent periods) in an amount equal to
such Owner's share of the net decrease in partner nonrecourse debt minimum
gain for such period attributable to such partner nonrecourse debt (which
share of such net decrease shall be determined under Treasury Regulations
Sections 1.704-2(i)(4) and 1.704-2(g)(2)). This clause is intended to
constitute a "chargeback of partner nonrecourse debt minimum gain" as
provided by Treasury Regulations Section 1.704-2(i)(4), and this clause
shall be construed accordingly.
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<PAGE>
(iii) In the event that an Owner unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and
- - - -
gain (consisting of a pro rata portion of each item of Company income,
--------
including gross income, and gain for such year) shall be specially
allocated to such Owner in the manner required by Treasury Regulations
Section 1.704-1(b)(2)(ii)(d) to eliminate, to the extent required by such
-
regulation, the deficit in the Capital Account of such Owner (determined as
contemplated by such regulation) as quickly as possible. This clause is
intended to constitute a "qualified income offset" as provided by Treasury
Regulations Section 1.704-1(b)(2)(ii)(d), and this clause shall be
-
construed accordingly.
(iv) If the allocation of any item of income, gain, deduction
or loss under this Agreement (A) does not have substantial economic effect
under Treasury Regulations Section 1.704-1(b)(2) and (B) is not in
accordance with the Owners' interests in the Company within the meaning of
Treasury Regulations Section 1.704-1(b)(3), then such item shall be
reallocated in such manner as (1) either to have substantial economic
effect or to be in accordance with the Owners' interests in the Company and
(2) to result as nearly as possible in the respective balances of the
Capital Accounts that would have been obtained if such item had instead
been allocated under the provisions of this Agreement without giving effect
to the provisions of this clause (iv).
(v) If any amount is allocated pursuant to clause (i), (ii),
(iii) or (iv) of this Section 4.5(b), then, notwithstanding anything to the
contrary in this Agreement (but subject to the provisions of clauses (i),
(ii), (iii) and (iv) of this Section 4.5(b) and Section 4.5(c)), income,
gain, deduction and loss, or items thereof, thereafter shall be allocated
in such manner and to such extent as may be necessary so that, after such
allocation, the respective balances of the Capital Accounts as nearly as
possible shall equal the balances that would have been obtained if the
amount allocated pursuant to such clause (i), (ii), (iii) or (iv) and the
amount allocated pursuant to this clause (v) instead had been allocated
under the provisions of this Agreement without giving effect to the
provisions of such clause (i), (ii), (iii) or (iv) or this clause (v).
(vi) If allocations are required for any Fiscal Year or other
period under more than one of Section 4.5(a) and clauses (i), (ii), (iii),
(iv) and (v) of this Section 4.5(b), then allocations shall be made in the
following order, proceeding to the next clause only after the allocations
required by the preceding clause have been made: first, clause (i) of this
Section 4.5(b); second, clause (ii) of this Section 4.5(b); third, clause
(iii) of this Section 4.5(b); fourth, clause (iv) of this Section 4.5(b);
fifth, clause (v) of this Section 4.5(b); and last, Section 4.5(a).
(c) The allocations and Distributions, including, without limitation,
the Distribution of assets in the event of liquidation of the Company, set forth
in this Agreement are intended to comply with the requirements of Sections
704(b) and 704(c) of the Code and the Allocation
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<PAGE>
Regulations and shall be interpreted and applied in a manner consistent
therewith. If, in the reasonable opinion of the Tax Matters Partner, the
allocations of income, gain, deduction and loss set forth herein shall not (i)
comply with the cited Code provisions and the Allocation Regulations or (ii)
comply with any other provision of the Code or the Treasury Regulations, then,
notwithstanding anything to the contrary contained herein, such allocations
shall, upon notice in writing to the other Owners, be modified to satisfy such
provisions of the Code and the Allocation Regulations, provided that any such
modification shall not alter materially the economic arrangement among the
Owners.
(d) Any drawdown fees paid by Holdings on behalf of the Company in
respect of the Company's senior subordinated credit facility provided by First
Union Investors, Inc. shall be treated as a Capital Contribution by Holdings to
the Company. Notwithstanding any other provision hereof, items of deduction or
loss in an amount equal to any such fees paid by Holdings shall be allocated
solely to Holdings for the Fiscal Year in which Holdings pays the fees for
Capital Account and tax purposes.
4.6 Allocation of Taxable Income and Loss. (a) Except as otherwise
-------------------------------------
provided in this Section 4.6, the taxable income or loss of the Company for any
Fiscal Year shall be allocated among the Owners in proportion to and in the same
manner as Net Profit, Net Loss and separate items of income, gain, loss and
deduction (excluding items for which there are no related tax items) are
allocated among the Owners for Capital Account purposes pursuant to the
provisions of Section 4.5. Except as otherwise provided in this Section 4.6,
the allocable share of an Owner for tax purposes in each specified item of
income, gain, deduction and loss of the Company comprising Net Profit, Net Loss
or an item allocated pursuant to Section 4.5 shall be the same as such Owner's
allocable share of Net Profit, Net Loss or the corresponding item for such
Fiscal Year.
(b) In accordance with Sections 704(b) and 704(c) of the Code and
applicable Treasury Regulations, including Treasury Regulations Section 1.704-
1(b)(4)(i), items of income, gain, deduction and loss with respect to any Book
Property of the Company (and, if necessary, any other property of the Company)
shall, solely for tax purposes, be allocated among the Owners so as to take
account of any variation between the adjusted basis of the Book Property to the
Company for federal income tax purposes and its book value. In making
allocations pursuant to this Section 4.6(b), the Tax Matters Partner is
authorized to apply any method or convention required or permitted by Section
704(c) of the Code; provided, however, that the Tax Matters Partner shall select
-------- -------
such method or convention as, in its opinion, will take such variation fully
into account.
(c) To the extent of any recapture income resulting from the sale or
other taxable disposition of Company assets, the amount of any gain from such
disposition allocated to an Owner (or a successor in interest) for federal
income tax purposes pursuant to the above provisions shall be deemed to be
recapture income to the extent that such Owner has been allocated or has claimed
any deduction directly or indirectly giving rise to the treatment of such gain
as recapture income.
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<PAGE>
(d) The items of income, gain, deduction and loss for tax purposes
allocated to the Owners pursuant to this Section 4.6 shall not be reflected in
the Owners' Capital Accounts. Any elections or other decisions relating to such
allocations shall be made by the Tax Matters Partner in any manner that
reasonably reflects the purpose and intent of this Agreement and is consistent
with the economic arrangement among the Owners.
(e) Pursuant to Treasury Regulations Section 1.752-3(a)(3), the
Owners hereby agree to allocate excess nonrecourse liabilities of the Company in
accordance with their respective Percentage Interests.
4.7 Distributions. (a) Subject to Section 7.2, distributions to the
-------------
Owners shall be made in the order and manner set forth in Section 4.7(b).
(b) (i) On the date hereof, the Company shall make a special
distribution of $390 million in cash, $191.1 million to Holdings and $198.9
million to AGY, from the proceeds of indebtedness incurred by the Company on the
date hereof. For United States federal income tax purposes, pursuant to
Treasury Regulations Section 1.707-5(b), the Company shall treat the portion of
the special distribution made to Holdings pursuant to this Section 4.7(b)(i) as
being allocable to, and equal in amount to, Holdings' share of the associated
indebtedness.
(ii) On the date hereof, the Company shall make a special
distribution to Holdings in an amount equal to the NAV Payment. Further, the
Company shall, subsequent to the date hereof, make a further distribution to
Holdings of any adjustment to the NAV Payment in Holdings' favor pursuant to the
Purchase Agreement when the same shall become due under the Purchase Agreement
or, as the case may be, Holdings shall, subsequent to the date hereof, make a
payment to the Company of any adjustment to the NAV Payment in the Company's
favor pursuant to the Purchase Agreement when the same shall become due under
the Purchase Agreement. For United States federal income tax purposes, the
Company shall treat the net payments made to Holdings pursuant to this Section
4.7(b)(ii) (a) 51% as a payment of purchase price made to Holdings in partial
exchange for the transfer of the Assets to the Company, all in accordance with
Treasury Regulations Section 1.707-3, and (b) 49% as a Distribution to Holdings
that is allocable to Holdings' share of the associated indebtedness, all in
accordance with Treasury Regulations Section 1.707-5(b).
(iii) Within 75 days after the end of each Fiscal Year, the
Company shall make Distributions from Net Cash Flow and permitted borrowings
under the Company Financing or other credit facilities of the Company to each
Owner in proportion to such Owner's share of the Company's net ordinary income
and net capital gain (taking into account the effects of adjustments under
Section 743 of the Code), until each Owner has received a Distribution pursuant
to this Section 4.7(b)(iii) equal to the product of (x) the maximum federal
corporate income tax rate in effect during each Fiscal Year plus 6% and (y) the
sum of the items of net ordinary income and net capital gain allocated to such
Owner for such Fiscal Year (taking into account any items specially allocated to
such Owner resulting from adjustments under Section 743 of the Code).
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(iv) As soon as permitted under the terms of the Company Financing,
the Company shall distribute from Net Cash Flow and permitted borrowings under
the Company Financing or other credit facilities of the Company amounts to any
Owner that has Unrecovered Reduced Distributions (A) until such Owner has
received aggregate payments pursuant to this Section 4.7(b)(iv)(A) equal to such
Owner's Priority Return, provided, however, that any amount paid pursuant to
this Section 4.7(b)(iv)(A) shall be characterized by the Company and the Owners
as a guaranteed payment under Section 707(c) of the Code in the year of payment
and not as a Distribution; and thereafter (B) until such Owner has no
Unrecovered Reduced Distributions.
(v) Within 90 days after the end of each Fiscal Year, the Company
shall make Distributions to the Owners in accordance with their respective
Percentage Interests in an amount equal to the difference, if any, between (i)
90% of the Company's Net Cash Flow for such Fiscal Year and (ii) the aggregate
amount distributed in respect of such Fiscal Year under Sections 4.7(b)(iii) and
4.7(b)(iv).
(vi) Thereafter, the Company shall make Distributions to the Owners in
accordance with their respective Percentage Interests at such times and in such
amounts as the Board of Directors has determined pursuant to Section 3.3(f).
(c) Subject to compliance with Section 3.3, the Board of Directors may
direct that property of the Company be distributed in kind, provided such a
distribution in kind shall, to the extent possible, be distributed to the Owners
in accordance with Section 4.7(b). For purposes of maintaining the Capital
Accounts when property of the Company is distributed in kind: (a) the Company
shall treat such property as if it had been sold for its fair market value on
the date of distribution, with such fair market value to be determined in
accordance with the valuation procedures set forth in Section 7.2(e); (b) any
difference between such fair market value and the Company's prior book value in
such property for Capital Account purposes shall constitute Net Profit or Net
Loss, as the case may be, for the Fiscal Year that includes the date of
distribution and shall be allocated to the Capital Accounts of the Owners
pursuant to Section 4.5; and (c) each Owner's Capital Account shall be reduced
by the fair market value on the date of Distribution, as determined in
accordance with the valuation procedures set forth in Section 7.2(e), of the
property distributed to such Owner (net of any liabilities secured by such
distributed property that such Owner is considered to assume or take subject
to).
(d) The Company shall (i) make any tax payments or (ii) withhold and pay
over any amount, in each case to the extent required by federal, state or local
law or any tax treaty on behalf of or with respect to any Owner. The amount of
any payment made pursuant to clause (i) or (ii) shall constitute an advance by
the Company to such Owner. Such advance shall be repaid to the Company in
accordance with Section 4.8.
4.8 Indemnification and Reimbursement for Payments on Behalf of an Owner.
--------------------------------------------------------------------
(a) If the Company is obligated to pay any amount to a agency or to any other
Person (or otherwise makes a payment) because of an Owner's status or otherwise
specifically attributable
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<PAGE>
to an Owner (including, without limitation, federal withholding taxes with
respect to foreign partners, state personal property taxes or state
unincorporated business taxes), then such Owner (the "Indemnifying Owner") shall
------------------
indemnify the Company in full for the entire amount paid (including, without
limitation, any interest, penalties and expenses associated with such payment).
At the option of the other Owner, the amount to be indemnified may be charged
against the Capital Account of the Indemnifying Owner, or, at the option of the
other Owner, either:
(i) promptly upon notification of an obligation to indemnify the
Company, the Indemnifying Owner shall make a cash payment to the Company equal
to the full amount to be indemnified in repayment of the advance made to such
Owner pursuant to Section 4.7(d) (and the amount paid shall not be added to the
Indemnifying Owner's Capital Account and shall not be deemed to be a Capital
Contribution hereunder), or
(ii) the Company shall reduce subsequent Distributions that would
otherwise be made to the Indemnifying Owner until the Company has recovered the
amount to be indemnified (provided that the amount of such reduction shall be
deemed to have been distributed for all purposes of this Agreement).
(b) An Owner's obligation to make contributions to the Company under
this Section 4.8 shall survive the termination, dissolution, liquidation and
winding up of the Company, and for purposes of this Section 4.8, the Company
shall be treated as continuing in existence. The Company may pursue and enforce
all rights and remedies that it may have against each Owner under this Section
4.8, including instituting a lawsuit to collect such contribution with interest.
SECTION 5. RELATIONSHIP BETWEEN OWNERS
---------------------------
5.1 Company Property. All property owned by the Company, whether
----------------
real or personal, tangible or intangible, shall be deemed to be owned by the
Company, and no Owner, individually, shall have any interest in such property.
Title to all such property shall be held in the name of the Company. Without
limiting the provisions of Section 7 hereof, no Owner or successor-in-interest
to an Owner shall have the right, while this Agreement remains in effect, to
have the property of the Company partitioned, or to file a complaint or
institute any proceeding at law or in equity to have the property of the Company
partitioned, and each Owner, on behalf of itself and its successors,
representatives and assigns, hereby waives any such right.
5.2 Other Ventures. Subject to Section 10.2 and the Non-Compete
--------------
Agreement and the respective obligations of the Owners and their respective
Affiliates under the Ancillary Agreements (as defined in the Purchase
Agreement), each Owner and Affiliates of the Owners may engage in or hold an
interest in other businesses, ventures and activities of any nature and shall
have no obligation to refer any business, acquisitions, joint ventures or other
strategic or business opportunities to the Company.
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<PAGE>
5.3 Disclaimer of Agency, etc. This Agreement does not create any
--------------------------
partnership or other relationship beyond the scope set forth herein, and except
as otherwise expressly provided herein, this Agreement shall not constitute any
party hereto the legal representative or agent of any other party hereto, nor
shall any party hereto have the right or authority to assume, create or incur
any liability or obligation, express or implied, against, in the name of or on
behalf of any other party hereto.
5.4 Limitation of Rights. (a) At such time as Holdings shall no
--------------------
longer own at least a 10% Percentage Interest, Holdings shall no longer have any
of the rights granted to it under Sections 3.1, 3.3(b)-(j), 3.3(l)-(m), 6.4 and
7.2(c), and no further distributions shall be made by the Company under Section
4.7(b)(v). At such time as Holdings shall no longer own any Interest, Holdings
shall no longer have any of the rights granted to it under this Agreement;
provided that, notwithstanding the foregoing, in the event that Holdings
transfers its Interest to one or more purchasers the Percentage Interest of one
or more of such purchasers is greater than 25%, the purchaser with the largest
Percentage Interest shall be entitled to exercise and receive all of the rights
specifically granted to Holdings under this Agreement.
(b) At such time as AGY's Percentage Interest shall be less (other
than pursuant to a sale of AGY's entire Interest to a single purchaser) than
Holdings' Percentage Interest, Holdings shall upon the consummation of any such
transfer of AGY's Interest be entitled to exercise and receive all of the rights
specifically granted to AGY under this Agreement and AGY shall be entitled to
exercise and receive all of the rights specifically granted to Holdings
hereunder other than pursuant to Section 3.3(k); provided that, notwithstanding
the foregoing, in the event that AGY transfers a portion of its Interest to one
or more purchasers and the Percentage Interest of one or more of such purchasers
is greater than Holding's Percentage Interest, the purchaser with the largest
Percentage Interest shall be entitled to exercise and receive all of the rights
specifically granted to AGY under this Agreement.
SECTION 6. BOOKS AND RECORDS; ACCOUNTING; BUDGETS;
FINANCIAL STATEMENTS; BANK ACCOUNTS
---------------------------------------
6.1 Books and Records. The books and records of the Company shall be
-----------------
kept at the principal offices of the Company. The books and records for any
taxable year shall be retained until such taxable year has been closed under
federal and state income tax laws, by the running of the statute of limitations
or otherwise, for each of the Owners. The Company shall, upon reasonable prior
notice and during normal business hours, make available to each Owner or its
representatives or designees all properties, assets, books of account, records,
contracts and other documents of the Company and any other material reasonably
requested by the inspecting Owner, for inspection and, in the case of books of
account, records, contracts and other documents, copying at the inspecting
Owner's cost, and shall use its best efforts to make available to the inspecting
Owner the accountants, officers, employees, customers and vendors of the Company
for interviews to verify any information furnished or to enable the inspecting
Owner otherwise to review the Company and
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<PAGE>
its operations. Without limiting the foregoing, the Company shall provide access
to the facilities, systems and books and records of the Company to the extent
reasonably considered necessary by the accountants and internal audit
departments of the inspecting Owner.
6.2 Methods of Accounting. (a) The Company shall cause to be
---------------------
prepared with respect to each Fiscal Year financial statements based on GAAP
(the "GAAP Financial Statements"). To the extent that any Owner shall require
-------------------------
that the GAAP Financial Statements be reconciled to such Owner's system of
accounts, the same shall be at such Owner's sole cost and expense.
(b) In addition, the Company shall maintain such records and accounts
as are necessary to compute (i) the Net Profit or Net Loss of the Company (and
individual items of income, gain, deduction and loss for Capital Account
purposes) and the Capital Accounts of the Owners and (ii) the taxable income or
loss of the Company (and individual items of income, gain, deduction and loss
for tax purposes).
6.3 Accountants. Unless otherwise agreed by the Owners, the
-----------
Accounting Firm shall be engaged as the independent auditors of the Company.
6.4 Business Plan. The Business Plan for the Company has been agreed
-------------
to by the Owners and is attached as Exhibit A hereto. Hereafter, on or before
September 30 of each year, beginning September 30, 2003, AGY shall prepare and
distribute to Holdings and the Board of Directors a proposed Business Plan for
the Company for the succeeding Fiscal Year and the four Fiscal Years thereafter.
Such proposed new Business Plan shall be approved or modified by the Board of
Directors without requiring the approval of a Supermajority of the Board.
6.5 Financial Statements. (a) As soon as practicable following the
--------------------
end of each Fiscal Year (and in any event not later than 90 days after the end
of such Fiscal Year), the Company shall prepare and deliver to each Owner and
each member of the Board of Directors a consolidated balance sheet of the
Company as of the end of such Fiscal Year and the related consolidated
statements of operations, capital accounts and cash flows of the Company for
such Fiscal Year (or similar statements if such statements change as the result
of changes in GAAP), together with appropriate notes to such financial
statements, and in each case setting forth in comparative form the corresponding
figures for the preceding Fiscal Year and for the Budget for the Fiscal Year
just completed. Such balance sheets, statements of operations, capital accounts
and cash flows of the Company for each Fiscal Year shall be audited by the
Accounting Firm. Such financial statements shall be accompanied by the report
of the Accounting Firm to the effect that such financial statements (except for
the comparison to the Budget) have been prepared in conformity with GAAP applied
on a basis consistent with prior years (except as otherwise specified in such
report) and that the audit of such financial statements has been performed in
accordance with generally accepted auditing standards. The Company shall
conduct its business so that such report of the Accounting Firm shall not
contain any qualifications as to the scope of the audit or with respect to the
Company's compliance with GAAP consistently applied, except for changes in
methods of
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<PAGE>
accounting in which the Accounting Firm concurs. At the same time, the Company
shall deliver to each Owner a report reviewed by the Accounting Firm indicating
each Owner's share of all items of income, gain, deduction and loss of the
Company for such Fiscal Year for financial reporting purposes on a GAAP basis,
for Capital Account purposes and for federal income tax purposes, a statement of
each Owner's Capital Account at the beginning and at the end of such period and
any other financial information related to the Company which is reasonably
requested by either Owner for federal income tax purposes. The Company also
shall provide similar information for state and local tax purposes upon request
by either Owner. The Company shall direct the Accounting Firm (i) prior to the
performance of its audit of the financial statements, to review its audit plan
for the Company with the accountants of each Owner to ensure that the planned
procedures are considered adequate and, within reason, to amend its audit plan
to meet the requirements of the Owners and (ii) upon completion of the audit, to
communicate with the accountants of each Owner on all significant issues noted
during such audit and provide access to the audit workpapers to the extent
requested by the accountants of each Owner.
(b) As soon as practicable following the end of each fiscal quarter
(and in any event not later than 15 days after the end of such fiscal month),
the Company shall prepare and deliver to each Owner and each member of the Board
of Directors a consolidated balance sheet and income statement of the Company as
of the end of such fiscal quarter and the related consolidated statements of
operations, capital accounts and cash flows of the Company for such fiscal
quarter and for the Fiscal Year to date (or similar statements if such
statements change as a result of changes in GAAP), in each case setting forth in
comparative form the corresponding figures for the preceding fiscal quarter, for
the fiscal quarter of the prior Fiscal Year corresponding to the fiscal quarter
just completed and for the Budget for such fiscal quarter and for the Fiscal
Year to date. At such time, the Company shall deliver to each Owner an estimate
of such Owner's share of all items of income, gain, deduction and loss of the
Company for Capital Account purposes and for federal income tax purposes and a
statement of each Owner's Capital Account for such fiscal quarter and for the
Fiscal Year to date.
6.6 Bank Accounts. The Company shall maintain appropriate accounts
-------------
at one or more financial institutions, as determined by the Board of Directors,
for all funds of the Company. Such accounts shall be used solely for the
business of the Company. Withdrawals from such accounts shall be made only upon
the signature of those Persons authorized by the Board of Directors.
SECTION 7. DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY
-------------------------------------------------------
7.1 Dissolution. The Company shall be dissolved and its affairs
-----------
shall be wound up on the first to occur of the following (each, a "Dissolution
-----------
Event"):
- -----
(a) the expiration of its term pursuant to Section 2.3;
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<PAGE>
(b) upon agreement of the Members;
(c) at the election of one Member upon a material breach of this
Agreement by the other Member which is not cured within ninety (90) days
following notice thereof; and
(d) automatically upon the Bankruptcy or liquidation of either
Member, unless the other Member elects to continue the Company.
7.2 Dissolution of the Company. On dissolution of the Company, the
--------------------------
Owner or Owners designated by the Board of Directors shall act as liquidator(s).
The liquidator(s) shall proceed diligently to wind up the affairs of the Company
and make final Distributions as provided herein and in the Act. The costs of
liquidation shall be borne as a Company expense. Until final Distribution, the
liquidator(s) shall continue to operate the Company's properties with all of the
power and authority of the Board of Directors, subject to the power of the Board
of Directors to remove and replace such liquidator(s). The steps to be
accomplished by the liquidator(s) are as follows:
(a) As promptly as possible after dissolution and again after final
liquidation, the liquidator(s) shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed, as applicable.
(b) The liquidator(s) shall cause the Company's property to be
liquidated as promptly as is consistent with obtaining the fair market value
thereof.
(c) Each of Holdings and AGY shall have the right for sixty (60) days
following the occurrence of a Dissolution Event, at its option, to purchase from
the Company (or cause any of its Affiliates to purchase) any or all assets owned
by the Company at the highest price either of the Members shall offer unless
they shall agree upon an alternative purchase price or, in the event only one
Member elects its purchase option, at a price determined by an independent
investment banking firm jointly selected by the Members.
(d) The liquidator(s) shall distribute the proceeds of such
liquidation and any other assets of the Company (subject to any requirement
under the Act) in the following order of priority:
(i) first, to payment of all of the debts, liabilities and
-----
obligations of the Company (including all expenses incurred in
liquidation);
(ii) second, to the establishment of adequate reserves for the
------
payment and discharge of all debts, liabilities and obligations of the
Company, including contingent, conditional or unmatured liabilities, in
such amount and for such term as the liquidator(s) may reasonably
determine;
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<PAGE>
(iii) third, to any Owner that has Unrecovered Reduced
-----
Distributions until (A) such Owner has received aggregate payments pursuant
to Sections 4.7(b)(iv)(A) and this 7.2(d)(iii)(A) equal to such Owner's
Priority Return (with any such amount paid pursuant to this Section
7.2(d)(iii)(A) to be characterized by the Company and the Owners as a
guaranteed payment under Section 707(c) of the Code in the year of payment
and not as a Distribution), and (B) such Owner has no Unrecovered Reduced
Distributions; and
(iv) fourth, any remaining proceeds of liquidation, and any
------
assets that are to be distributed in kind, shall be distributed to the
Owners in accordance with their respective positive Capital Account
balances, as promptly as practicable, but in any event within the time
required by Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2).
- -
(e) The liquidator(s) shall use all reasonable efforts to reduce the
assets of the Company to cash and to distribute cash upon liquidation to the
Owners. Subject to the foregoing, if any assets of the Company are not reduced
to cash, then the Owners (i) shall hire independent recognized appraisers to
appraise the value of the non-cash assets of the Company (the cost of such
appraisal to be considered an expense of the Company), (ii) shall allocate, in
accordance with Section 4.7(c) and Section 4.5, any unrealized gain or loss
determined by such appraisal to the Owners' Capital Accounts as though the non-
cash assets had been sold on the date of Distribution and (iii) shall, after
giving effect to any such adjustment, treat the Distribution of such non-cash
assets as equivalent to a Distribution of cash in the amount determined by the
appraisal of such assets. No Owner shall have any right to any specific assets
of the Company except as otherwise herein specifically provided. In making
Distributions of non-cash assets under this Section 7.2, such assets may be
distributed unequally among the Owners to the extent necessary to avoid an Owner
receiving an asset that it is prohibited from holding or that could result in
adverse tax consequences to an Owner; provided that such unequal Distribution
shall not affect the aggregate amount of Distributions to any Owner.
(f) Each of the Owners shall be furnished with a statement prepared
by, or under the supervision of, the Owners, which shall set forth the assets
and liabilities of the Company as of the date of complete liquidation.
(g) As soon as possible following application of the proceeds of
liquidation and any assets that are to be distributed in kind, any Owner (or any
other appropriate representative of the Company) shall execute a certificate of
dissolution in the form prescribed by the Act and shall file the same with the
Secretary of State of the State of Delaware.
7.3 Assumption of Certain Liabilities. No party hereto shall incur,
---------------------------------
nor be deemed to incur, any liabilities or obligations as a result of the
dissolution of the Company in accordance with the provisions set forth in this
Section 7.
7.4 Withdrawal. Neither Owner shall withdraw or resign from the
----------
Company without the prior written consent of the other Owner (which consent may
be withheld in its sole
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<PAGE>
discretion) and neither Owner shall be subject to expulsion from the Company
except as expressly agreed between the Owners. Neither the withdrawal,
resignation, expulsion or admission of any Owner nor any other circumstance,
action or condition shall permit any early termination or dissolution of the
Company, which, except as provided in Section 7.1, shall not be wound up or
liquidated and which shall continue unaffected.
7.5 Use of Company Identity. Unless the Owners agree otherwise
-----------------------
in asigned written agreement approved by the Board of Directors, no Owner or
Affiliate thereof shall use the Company's telephone number, address, name (or
any deceptively similar name), trademarks, service marks or logos after the
dissolution of the Company.
7.6 Dispute Resolution. Any dispute between the Members regarding
------------------
the terms and provisions of this Agreement or the operations of the Business
shall be resolved as follows: each Member shall designate an officer thereof
(collectively, the "Designated Officers") to attempt to resolve the dispute
through good faith negotiations. In the event the designated Officers fail to
resolve the dispute within thirty (30) days, each Member's Chairman of the Board
shall attempt to resolve the dispute through good faith negotiation. In the
event such Chairmen of the Board fail to resolve the dispute within thirty (30)
days, each Member's sole remedy shall be as provided in Section 8.
SECTION 8. TRANSFERS OF INTERESTS; REGISTRATION RIGHTS
-------------------------------------------
8.1 No Transfers. No party hereto shall, directly or indirectly
------------
(including through a change-in-control of either party), transfer all or any
portion of its Interest prior to the fifth anniversary of the date hereof
without the prior written consent of the other party hereto. Thereafter, no
party shall, directly or indirectly (including through a change-in-control of
either party), transfer all or any portion of its Interest other than pursuant
to and in accordance with the terms of this Section 8, unless previously
consented to in writing by the other party hereto.
8.2 Right of First Offer. If at any time following the fifth
--------------------
anniversary of the date hereof either Owner (the "Selling Owner") shall decide
-------------
to offer its Interest for sale or shall receive an offer from a third party (the
"Third Party Offeror") to purchase the Selling Owner's Interest, the Selling
-------------------
Owner shall notify the other Owner accordingly and shall provide such other
Owner with the opportunity to make an offer to the Selling Owner to purchase its
Interest. If, within thirty (30) days of the date of receipt of such
notification, such other Owner fails to make an offer or if such other Owner
makes an offer that the Selling Owner rejects, the Selling Owner shall
thereafter be free to sell its Interest to the Third Party Offeror or to any
other party; provided, however, that if the Selling Owner subsequently conducts
-------- -------
an auction or similar process by which it offers to sell its Interest to
multiple potential bidders, it will include such other Owner among the potential
bidders to which offering documents are distributed. Notwithstanding the
foregoing, under no circumstances shall either Owner, directly or indirectly
(including through a change-in-control of either Owner) sell its Interest to
Compagnie Saint-Gobain or any Affiliate thereof.
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8.3 Put Option. (a) At any time following the fifth anniversary of
----------
the date hereof, each Owner (the "Exercising Owner") shall have the right,
----------------
exercisable by written notice (the "Put Notice") to the other Owner (the
----------
"Receiving Owner") and the Company, to sell all, but not less than all, of its
- ----------------
Interest to the Company. Within thirty (30) days of receipt of the Put Notice,
each Owner shall cause an investment banking firm selected by it to undertake,
complete and submit to the other Owner and to the Company a valuation of the
Exercising Owner's Interest. Each Owner shall cooperate, and cause the Company
to cooperate, with such investment banking firms, with such cooperation to
include the provision of such financial statements and other documentation as
may be reasonably required, in connection with such valuations.
(b) Each investment banking firm shall value the Exercising Owner's
Interest according to the following formula: "enterprise value" of the Company,
minus all indebtedness of the Company (including undistributed amounts to which
any Owner is entitled pursuant to Section 4.7(b)(iv)), multiplied by the
Percentage Interest of the Exercising Owner, the product of which shall then be
increased by any unpaid amount to which the Exercising Owner is entitled under
Section 4.7(b)(iv). In establishing the value of the Exercising Owner's
Interest, each investment banking firm may determine whether it is appropriate
to take into account any minority interest discount or control premium and
adjust its value of the Exercising Owner's Interest based on such determination.
Notwithstanding the foregoing, the parties agree that the investment banking
firms shall not utilize a minority discount in excess of the percentages set
forth in the following table:
DURING THE YEAR FOLLOWING THE INDICATED
MINORITY DISCOUNT ANNIVERSARY OF THE DATE HEREOF
----------------- ------------------------------
25% 5
20% 6
15% 7
10% 8
0% thereafter
(c) If the higher valuation prepared by the two investment banking
firms is not higher than 110% of the lower valuation, the Exercising Owner
shall, and the Receiving Owner and the Exercising Owner shall cause the Company
to, within fourteen (14) days of submission of the two valuations, execute such
documents and instruments as are reasonably required to cause the purchase and
sale to the Company of the Exercising Owner's Interest at a purchase price equal
to the average of the two valuations. The closing of such purchase and sale
shall take place as soon as practicable, but in any event within seventy-five
(75) days after execution of such documents and
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<PAGE>
instruments. At the closing, the Exercising Owner shall transfer its Interest to
the Company free and clear of any and all encumbrances.
(d) If the higher valuation prepared by the two investment banking
firms is higher than 110% of the lower valuation, the Exercising Owner and the
Receiving Owner shall jointly select a third investment banking firm to value
the Exercising Owner's Interest. If the parties cannot agree on a third
investment banking firm within ten (10) days of receipt by them of the two
valuations, the third investment banking firm shall be J.P. Morgan unless J.P.
Morgan shall have performed any investment banking services for either Owner
during the immediately preceding two-year period, in which case the party for
which J.P. Morgan has not provided any such service shall select the third
investment banking firm which shall not have provided any investment banking
services to either Owner during such two-year period. Such third investment
banking firm shall have thirty (30) days to complete and submit to each Owner
and to the Company its valuation of the Exercising Owner's Interest, which
valuation shall be based on the formula set forth in Section 8.3(b) and shall,
if within the range of the first two valuations, be binding on each Owner and on
the Company. If such valuation is not within the range of the first two
valuations, the valuation that is closest to that submitted by such third
investment banking firm shall be binding on each Owner and the Company. Within
fourteen (14) days of submission of such binding valuation, the Exercising Owner
shall execute, and the Receiving Owner and the Exercising Owner shall cause the
Company to execute, such documents and instruments as are reasonably required to
cause the purchase and sale of the Exercising Owner's Interest at a purchase
price equal to such final valuation. The closing of such purchase and sale
shall take place as soon as practicable but in any event within seventy-five
(75) days after execution of such documents and instruments. At the closing,
the Exercising Owner shall transfer its Interest to the Company free and clear
of any and all encumbrances. The Company shall pay the fees and expenses of
each investment banking firm described in this Section 8.3(d).
(e) Notwithstanding the foregoing provisions of this Section 8.3, the
Company's obligation to purchase, and the Receiving Owner's obligation to cause
the Company to purchase, the Exercising Owner's Interest in the Company shall be
conditioned on the Company financing the purchase of the Exercising Owner's
Interest from a third party lender while maintaining or obtaining, as
appropriate, a rating of not less than a B rating by either Standard and Poors
or Moody's or their successor rating agencies on its outstanding unsecured
subordinated indebtedness after giving effect to the purchase of the Exercising
Owner's Interest.
(f) In connection with the exercise by an Owner of its right to sell
its Interest to the Company, the Exercising Owner shall reimburse the Company
for twenty-five percent (25%) of the following expenses actually incurred by the
Company to third parties in connection with refinancing the then outstanding
principal amount of the Company Financing only and no increases thereof (the
"Original Principal Amount"): (i) reasonable legal, accounting and printing
- --------------------------
fees; (ii) pre-payment premiums and penalties payable in respect of the Original
Principal Amount; (iii) the net present value of increased interest costs on the
Original Principal Amount for the periods prior to the scheduled maturity of the
Original Principal Amount taking into account scheduled amortization of the
Original Principal Amount and of the refinanced debt, which increased costs are
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incurred as a result of an increase in interest rates; (iv) commitment or
origination fees; and (v) any reimbursable expenses of the lenders.
8.4 Registration Rights. (a) In the event that the Company is unable
-------------------
to finance the purchase of all of the Interest of the Exercising Owner as
provided in Section 8.3, the Exercising Owner may request in writing (each such
request being an "EO Demand Registration") that the Company file a registration
----------------------
statement under the Securities Act of 1933, as amended (the "1933 Act"),
--------
covering the registration of the Interest of the Exercising Owner (including any
security issued as a dividend or other distribution with respect to, or in
exchange for, or in replacement of such Interest then held by the Exercising
Owner).
(b) Whenever the Company proposes to register any Interests for its
own or others' account under the 1933 Act for a public offering, AGY shall cause
the Company to give prompt written notice to Holdings of its intent to do so.
Upon the written request of either Owner given within 30 days after receipt of
such notice, AGY shall cause the Company to include in such registration such
requesting Owner('s) Interest (or the portion thereof designated by such
requesting Owner(s)). If the Company is advised in writing in good faith by any
managing underwriter of an underwritten offering of the Interest being offered
pursuant to any registration statement under this Section 8.4(b) that the dollar
value of the Interest to be offered by the requesting Owner(s) is greater than
the dollar value of such Interest that can be offered without adversely
affecting the offering, the Company may reduce the dollar value of such Interest
offered for the account of the requesting Owner(s) to a dollar value deemed
satisfactory by such managing underwriter. If there shall be more than one
requesting Owner, any such reduction shall be on a pro-rata basis based upon the
requesting Owners' Percentage Interest.
(c) All expenses incurred in connection with registrations under this
Section 8.4 (including all registration, filing, qualification, legal, printer
and accounting fees, but excluding underwriting commissions and discounts) shall
be borne by the Company. In connection with such registrations under this
Section 8.4, AGY shall cause the Company to (i) use its reasonable best efforts
to prepare and file with the Securities Exchange Commission, as soon as
reasonably practicable, a registration statement with respect to the Interests
to be offered and use its reasonable best efforts to cause such registration
statement to promptly become and remain effective for a period of at least 180
days (or such shorter period as is required to sell the Interest (or portion
thereof) that the requesting Owner requested to be registered); (ii) use its
reasonable best efforts to register and qualify the Interests covered by such
registration statement under such state securities laws as the requesting Owner
shall reasonably request for the distribution of such Interests; and (iii) take
such other actions as are reasonable and necessary to comply with the
requirements of the 1933 Act and the regulations thereunder. AGY shall be
obligated to cause the Company to effect only two EO Demand Registrations
pursuant to Section 8.4(a) and to keep each such EO Demand Registration current
and effective for not less than 180 days (or such shorter period as is required
to sell the entire Interest of the Exercising Owner registered thereon).
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(d) In connection with each registration pursuant to this Section 8.4
covering an underwritten registered public offering, the requesting Owner shall,
and AGY shall cause the Company to, enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of the Company's size and investment
stature, including with respect to indemnification.
SECTION 9. TAX MATTERS
-----------
9.1 Tax Returns; Tax Accounting Methods; Tax Elections. The Tax
--------------------------------------------------
Matters Partner shall cause the federal and any required state or local income
tax returns of the Company to be prepared and filed on behalf of the Company,
and it shall cause copies of such returns to be furnished to each of the Owners.
The Tax Matters Partner shall select such tax accounting methods and, except as
provided in Section 2.9 and in the immediately following sentence, shall cause
such tax elections to be made on behalf of the Company as the Tax Matters
Partner determines, in its reasonable discretion, to be in the best interest of
the Company, subject always to the limitation set forth in Section 3.3(j). The
Owners acknowledge that the taxable year of the Company shall close on the date
hereof pursuant to Treasury Regulations Section 1.708-1(b)(i)(iii)(b) and that
the Tax Matters Partner shall make, and the Owners shall take all action
necessary for the Company to make, an election under Section 754 of the Code for
the Fiscal Year of the Company that includes the date hereof without requiring
the approval of a Supermajority of the Board. The Owners intend that the
Company shall be treated as a partnership for federal, state and local income
tax purposes and shall take all reasonable actions, including the amendment of
this Agreement and the execution of other documents, but without changing the
economic relationships created by, or the essential terms of, this Agreement, as
may be reasonably required to qualify for and receive treatment as a partnership
for federal income tax purposes.
9.2 Tax Matters Partner. (a) AGY is hereby appointed and shall serve
-------------------
as the tax matters partner of the Company (the "Tax Matters Partner") as defined
-------------------
in Section 6231(a)(7) of the Code, for so long as it is not the subject of a
Bankruptcy and otherwise is entitled hereunder to act as the Tax Matters
Partner. If AGY is no longer entitled to act as Tax Matters Partner, then the
other Owner shall be automatically appointed Tax Matters Partner and thereafter
shall serve for so long as it is not the subject of a Bankruptcy and otherwise
is entitled to act as the Tax Matters Partner. The Tax Matters Partner shall
(i) furnish to each Owner affected by an audit of Company income tax returns a
copy of each notice or other communication received from the IRS or applicable
state authority, (ii) keep such Owner informed of any administrative or judicial
proceeding, as required by Section 6223(g) of the Code and (iii) allow such
Owner an opportunity to participate in all such administrative and judicial
proceedings. The Tax Matters Partner shall take such action as may be
reasonably necessary to constitute each other Owner a "notice partner" within
the meaning of Section 6231(a)(8) of the Code, provided that the other Owner
provides the Tax Matters Partner with the information that is necessary to take
such action.
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(b) The Company shall not be obligated to pay any fees or other
compensation to the Tax Matters Partner in its capacity as such. However, the
Company shall reimburse the out-of-pocket expenses (including attorneys' and
other professional fees) incurred by the Tax Matters Partner in such capacity.
Each Owner that elects to participate in a tax proceeding of the Company shall
be responsible for its own expenses incurred in connection with such
participation. In addition, the cost of any adjustments to an Owner and the
cost of any resulting audits or adjustments of an Owner's tax return shall be
borne solely by the affected Owner.
(c) The Company shall indemnify and hold harmless the Tax Matters
Partner from and against any loss, liability, damage, cost or expense (including
attorneys' fees) sustained or incurred as a result of any act or decision
concerning Company tax matters and within the scope of such Owner's
responsibilities as Tax Matters Partner, so long as such act or decision was not
the result of gross negligence, fraud, bad faith or willful misconduct by the
Tax Matters Partner. The Tax Matters Partner shall be entitled to rely on the
advice of outside legal counsel as to the nature and scope of its
responsibilities and authority as Tax Matters Partner, and any act or omission
of the Tax Matters Partner pursuant to such advice in no event shall subject the
Tax Matters Partner to liability to the Company or any Owner.
SECTION 10. CONFIDENTIALITY; NON-COMPETE
----------------------------
10.1 Confidentiality. Each Owner and its respective Affiliates will
---------------
hold and keep confidential (and will not use, other than in connection with this
Agreement and the transactions contemplated hereby) any information provided to
it or any of its respective Affiliates or any of their representatives pursuant
to or in connection with this Agreement by or on behalf of the Company or the
other Owner or any of its Affiliates (whether such information is regarding the
Company, the Business or otherwise relating to such other Owner or any of its
Affiliates), provided that this Section 10.1 shall not apply to the following:
(i) information which is publicly available at the time of
disclosure (through no act of the Owner receiving such information or any
of its Affiliates);
(ii) information which is disclosed to the Owner receiving
such information or an Affiliate of such Owner by a third party which did
not disclose it in violation of a duty of confidentiality;
(iii) information which was known to the Owner receiving such
information or any of its Affiliates before such information was provided
to them or their representatives by or on behalf of the Company or the
Owner disclosing such information or any of its Affiliates;
(iv) information which was developed by an employee, agent or
contractor of the Owner receiving such information or any of its Affiliates
independent of (and without any knowledge of) any disclosure to such Owner
or any of its Affiliates or their
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representatives by or on behalf of the Company or the Owner disclosing such
information or any of its Affiliates; or
(v) disclosures which are required to be made by the Owner
receiving such information or any of its Affiliates under legal process by
subpoena or other court order or other applicable laws or regulations
(provided that such Owner or Affiliate makes reasonable efforts to provide
copies of such information to, or informs, the other Owner before
disclosure).
As used in this Section 10.1, the term "Affiliates" includes Affiliates as of
the date hereof and all future Affiliates. This Section 10.1 shall survive any
of the events referred to in Section 7.1 for a period of five years.
10.2 Non-Compete. Simultaneously with the execution hereof, each
-----------
Owner and the Company shall execute and deliver a Non-Compete Agreement
substantially in the form of Exhibit I to the Purchase Agreement (the "Non-
---
Compete Agreement").
- -----------------
SECTION 11. INDEMNIFICATION
---------------
(a) Except as otherwise prohibited by the Act, the Company shall
indemnify and hold each Owner and its Affiliates and its officers, employees,
directors, members, stockholders, managers, agents and representatives, and
their successors and assigns, and each of the members of the Board of Directors
and each Officer (collectively, the "Indemnitees"), harmless from and against
-----------
any and all losses, claims, damages, costs, liabilities and expenses (including
without limitation costs of investigation and reasonable attorneys' fees)
("Losses") suffered or incurred by any and/or all of the Indemnitees (or to
- --------
which any and/or all of the Indemnitees may become subject) arising out of,
resulting from, based upon or in connection with the management or conduct of
the business or affairs of the Company or the activities of each such Indemnitee
with respect thereto, other than those which are the result of willful
misconduct or gross negligence by such Indemnitee (the "Indemnified Damages").
-------------------
(b) Any payment by the Company to an Indemnitee hereunder shall be
increased by an additional amount sufficient to pay all applicable income taxes
(if any) of any jurisdiction with respect to the total amount (including both
the initial amount and such additional amount) paid to such Indemnitee
hereunder.
(c) To the extent that insurance from third parties has been
obtained and is available in respect of any Indemnified Damages, the amount of
any Indemnified Damages shall be reduced by any amount actually recovered by the
Indemnitee from such third parties (to the extent such reimbursement was not
taken into account in assessing the amount of Indemnified Damages incurred by
the Indemnitee) rather than having the Company make any payments pursuant to the
indemnification obligations contained herein; provided that if such proceeds are
--------
not readily available, the Board of Directors will cause the Company to pay such
Indemnified Damages, in
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<PAGE>
which event the Company shall be entitled to reimbursement therefor out of the
proceeds of insurance when and if obtained. The Board of Directors may (but
shall not be obligated to) obtain, at the expense of the Company, insurance
against any Indemnified Damages whether or not the Company would, pursuant to
this Section 11.1, be required to indemnify any Indemnitee in respect thereof.
(d) The Company shall, at its sole cost and expense, (i) maintain,
with insurers or underwriters of national standing, in the name of the Company,
(x) liability insurance to protect members of the Board of Directors and the
Officers, and (y) employee fidelity and other insurance consistent with industry
practice, in the case of (x) and (y), in at least such amounts as are sufficient
to cover reasonable risks of loss and are consistent with industry practice, and
(ii) pay all premiums and other sums payable in respect of maintaining such
insurance.
SECTION 12. MISCELLANEOUS
-------------
12.1 Interested Parties. A contract or transaction between the
------------------
Company, on the one hand, and one or more of the Owners, Directors or Officers,
on the other hand, or between the Company, on the one hand, and any other
limited liability company, corporation, partnership, joint venture, association
or other organization or enterprise in which one or more Owners, Directors or
Officers is a shareholder, director, member, manager or officer or has a
financial or other interest, on the other hand, shall not be void or voidable
solely for that reason, or solely because the Owner, Director or Officer is
present at or participates in the meeting of the Owners or Board of Directors
that authorizes the contract or transaction, or solely because its, his or their
votes are counted for such purpose, if:
(a) the material facts as to the relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of Directors
and the Board of Directors in good faith authorizes the contract or transaction
in accordance with Section 3.3; or
(b) the material facts as to the relationship or interest and as to
the contract or transaction are disclosed or are known to the Owners entitled to
vote thereon and the contract or transaction is specifically approved in good
faith by vote of the Owners; or
(c) the contract or transaction is fair as to the Company as of the
time it is authorized, approved or ratified by the Owners or the Board of
Directors.
12.2 Liability to Third Parties. The debts, obligations and
--------------------------
liabilities of the Company shall be solely the debts, obligations and
liabilities of the Company, and no party hereto, including the Owners, nor any
member of the Board of Directors nor any Officer shall be obligated personally
for any such debt, obligation or liability of the Company, except as otherwise
provided in this Agreement or by applicable law.
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<PAGE>
12.3 No Third Party Beneficiaries. The parties agree that the
----------------------------
provisions of this Agreement are intended for the benefit of, and are
enforceable by, each Owner and the Company. Nothing in this Agreement shall be
construed as giving any other Person any right, remedy or claim under or in
respect of this Agreement or any provision hereof.
12.4 Publicity. Unless otherwise required by applicable law, the
---------
Owners and their respective Affiliates shall agree before making any public
announcements or public comments regarding this Agreement or the transactions
contemplated hereby.
12.5 Notices. All notices and other communications given or made
-------
pursuant hereto shall be in writing and shall be delivered by messenger,
overnight courier, registered or certified mail (postage prepaid, return receipt
requested) or transmitted by facsimile to the parties hereto at the following
respective addresses:
If to Holdings:
Jefferson Holdings, Inc.
c/o Owens Corning
Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
With a copy to:
Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
If to AGY:
AGY Holdings, Inc.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336-545-7715
Attention: The President
If to the Company, addressed to each Owner as herein above provided;
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<PAGE>
or to such other Persons or at such other addresses as shall be furnished by
like notice to the other parties. Such notice or other communication shall be
deemed to have been given or made as of the date so delivered or received.
12.6 Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.7 No Waiver. No course of dealing and no delay on the part of any
---------
party hereto in exercising any right, power or remedy conferred by this
Agreement shall operate as a waiver thereof or otherwise prejudice such party's
rights, powers and remedies. No single or partial exercise of any rights,
powers or remedies conferred by this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
12.8 No Election of Remedies. No provision of, or any rights granted
-----------------------
or remedies available under, this Agreement or any other agreements shall limit
the availability of any other right or remedy for the breach or violation of any
of the provisions contained in this Agreement or any such other agreements or
documents.
12.9 Entire Agreement. This Agreement, together with the schedules
----------------
and exhibits hereto (which schedules and exhibits are deemed a part of this
Agreement), the Purchase Agreement, the Ancillary Agreements (as defined in the
Purchase Agreement) and the Non-Compete Agreement, together with the schedules
and exhibits thereto, (i) contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and thereof and (ii)
supersedes all prior negotiations, discussions, correspondence, communications,
understandings and agreements between the parties and their Affiliates relating
to the subject matter hereof, all of which are merged into this Agreement. No
prior drafts of this Agreement, the Purchase Agreement or the Ancillary
Agreements and the Non-Compete Agreement and no words or phrases from any such
prior drafts shall be admissible into evidence in any action or proceeding
involving this Agreement.
12.10 Amendment. This Agreement may be amended only by the written
---------
consent of both Owners.
12.11 Assignment. No party hereto may assign this Agreement or any
----------
of its rights hereunder, including all or any part of its Interest in the
Company, or delegate the performance of any of its obligations hereunder, except
in accordance with the provisions of Section 8.
12.12 Severability. Any provision hereof which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof void or
unenforceable in any respect.
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<PAGE>
12.13 Headings. The headings and captions in this Agreement and the
--------
table of contents are for convenience of reference only and shall not in any way
affect the meaning or interpretation of any of the terms or provisions hereof.
12.14 Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same agreement, and all signatures need not appear on any one
counterpart.
12.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH OF THE
----------------------------------------------
PARTIES HERETO CONSENTS TO THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN
THE COUNTY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT ALL
ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT MAY BE LITIGATED IN SUCH
COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE PARTY AT THE ADDRESS SPECIFIED IN THIS AGREEMENT,
SUCH SERVICE TO BECOME EFFECTIVE 15 DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY PARTY HERETO TO SERVE ANY
SUCH LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS IN ANY OTHER MANNER PERMITTED
BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR
PROCEEDINGS AGAINST ANY OF THE OTHER PARTIES HERETO IN SUCH OTHER JURISDICTIONS,
AND IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
12.16 WAIVER OF TRIAL BY JURY. EACH OF THE PARTIES HERETO HEREBY
-----------------------
WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT. EACH OF THE PARTIES HERETO ALSO WAIVES ANY BOND
OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE
REQUIRED OF SUCH PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-
ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. EACH OF THE PARTIES HERETO FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. THIS WAIVER IS
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<PAGE>
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENT, RENEWAL, SUPPLEMENT OR
MODIFICATION OF OR TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
12.17 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware (without regard
to principles of conflicts of laws which might apply the laws of any other
jurisdiction) applicable to contracts made and to be performed therein.
12.18 Special Covenants of Holdings. Holdings agrees for the benefit
-----------------------------
of any and all lenders now or hereafter providing the Company Financing that
should any such lender succeed to the interest of AGY by virtue of such lender
foreclosing upon its security interest in AGY's Interest in the Company,
Holdings shall waive any and all rights to require approval by a Supermajority
of the Board in connection with any transfer or sale of the assets of the
Company; provided that such sale or transfer shall not be to Compagnie Saint-
Gobain or any Affiliate thereof.
12.19 Company Financing/Keep-Well Limitations. The provisions of
---------------------------------------
this Agreement are subject to any and all limitations, restrictions, or
prohibitions imposed upon the Company and the Owners under the Company Financing
and any Keep-well Agreement that may be entered into by and between the Company
and OC.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
JEFFERSON HOLDINGS, INC.
By: /s/ Glen H. Hiner
-------------------
Name: Glen H. Hiner
Title: President
AGY HOLDINGS, INC.
By: /s/ Robert Porcher
-------------------
Name: Robert Porcher
Title: President
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<PAGE>
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
AGY CAPITAL CORP.
ARTICLE I
NAME
The name of the corporation is AGY Capital Corp. (the "Corporation").
ARTICLE II
ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
ARTICLE III
PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law. It shall have all powers that may now or hereafter be
lawful for a corporation to exercise under the Delaware General Corporation Law.
ARTICLE IV
CAPITAL STOCK
SECTION 4.1. TOTAL NUMBER OF SHARES OF STOCK. The total number of shares
of stock that the Corporation shall have authority to issue is one thousand
(1,000) shares of common stock, $0.01 par value per share (the "Common Stock").
SECTION 4.2. COMMON STOCK. The holders of Common Stock shall be entitled
to vote at any meeting of stockholders of the Corporation. Except as otherwise
provided in this Certificate of Incorporation, as regards matters as to which
they are entitled to vote, holders of Common Stock shall be entitled to one vote
for each share of Common Stock held by them. The holders of Common Stock shall
be entitled to participate share for share in any cash or stock dividend which
may be declared from time to time on the Common Stock of the Corporation by the
Board of Directors and to receive pro rata the net assets of the Corporation
upon liquidation.
<PAGE>
ARTICLE V
LIMITATION ON LIABILITY OF DIRECTORS
No person shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director; provided,
--------
however, that the foregoing shall not eliminate or limit the liability of a
- -------
director (i) for any breach of the director's duty of loyalty to the Corporation
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 Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended hereafter to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any amendment, repeal or modification of this Article V shall not adversely
affect any right or protection of a director of the Corporation existing
hereunder with respect to any act or omission occurring prior to such amendment,
repeal or modification.
ARTICLE VI
COMPROMISE
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under Section 291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this Corporation under Section 279 of
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
-2-
<PAGE>
ARTICLE VII
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation hereby reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation. Any such
amendment, alteration, change or repeal shall require the affirmative vote of
both (a) a majority of the members of the Board of Directors then in office and
(b) a majority of the voting power of all of the shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
ARTICLE VIII
SEVERABILITY
In the event that any of the provisions of this Certificate of
Incorporation (including any provision within a single Article, Section,
paragraph or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions are severable
and shall remain enforceable to the full extent permitted by law.
ARTICLE IX
INCORPORATOR
The name and mailing address of the incorporator is Dominic C. Mazzone,
Alston & Bird LLP, One Atlantic Center, 1201 West Peachtree Street, Atlanta,
Georgia 30309-3424.
IN WITNESS WHEREOF, the undersigned executes this Certificate of
Incorporation this 24th day of September, 1998.
/s/ Dominic C. Mazzone
--------------------------
Dominic C. Mazzone
Incorporator
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<PAGE>
EXHIBIT 3.4
AGY CAPITAL CORP.
BYLAWS
SECTION I
CAPITAL STOCK
SECTION 1.1. CERTIFICATES. Every holder of stock in the Corporation shall
be entitled to have a certificate signed in the name of the Corporation by the
Chairman of the Board of Directors or the President or a Vice President, and by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation certifying the number of shares in the Corporation
owned by such holder. If such certificate is countersigned (a) by a transfer
agent other than the Corporation or its employee, or, (b) by a registrar other
than the Corporation or its employee, any other signature on the certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent, or registrar at the date of issue.
SECTION 1.2. RECORD OWNERSHIP. A record of the name and address of the
holder of each certificate, the number of shares represented thereby and the
date of issue thereof shall be made on the Corporation's books. The Corporation
shall be entitled to treat the holder of record of any share of stock as the
holder in fact thereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
required by the laws of the State of Delaware.
SECTION 1.3. TRANSFER OF RECORD OWNERSHIP. Transfers of stock shall be
made on the books of the Corporation only by direction of the person named in
the certificate or such person's attorney, lawfully constituted in writing, and
only upon the surrender of the certificate therefor and a written assignment of
the shares evidenced thereby, which certificate shall be canceled before the new
certificate is issued.
SECTION 1.4. LOST CERTIFICATES. Any person claiming a stock certificate in
lieu of one lost, stolen or destroyed shall give the Corporation an affidavit as
to such person's ownership of the certificate and of the facts which go to prove
its loss, theft or destruction. Such person shall also, if required by policies
adopted by the Board of Directors, give the Corporation a bond, in such form as
may be approved by the Corporation, sufficient to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss of
the certificate or the issuance of a new certificate.
<PAGE>
SECTION 1.5. TRANSFER AGENTS; REGISTRARS; RULES RESPECTING CERTIFICATES.
The Board of Directors may appoint, or authorize any officer or officers to
appoint, one or more transfer agents and one or more registrars. The Board of
Directors may make such further rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock certificates of the
Corporation.
SECTION 1.6. RECORD DATE. The Board of Directors may fix in advance a
future date, not exceeding sixty (60) days (nor, in the case of a stockholders'
meeting, less than ten (10) days) preceding the date of any meeting of
stockholders, payment of dividend or other distribution, allotment of rights, or
change, conversion or exchange of capital stock or for the purpose of any other
lawful action, as the record date for determination of the stockholders entitled
to notice of and to vote at any such meeting and any adjournment thereof, or to
receive any such dividend or other distribution or allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, or to participate in any such other lawful action, and in such
case such stockholders and only such stockholders as shall be stockholders of
record on the date so fixed shall be entitled to such notice of and to vote at
such meeting and any adjournment thereof, or to receive such dividend or other
distribution or allotment of rights, or to exercise such rights, or to
participate in any such other lawful action, as the case may be, notwithstanding
any transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
SECTION II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. ANNUAL. The annual meeting of stockholders for the election
of directors and the transaction of such other proper business shall be held
within or without the State of Delaware on such date and at such time as shall
be designated by the Board of Directors.
SECTION 2.2. SPECIAL. Special meetings of stockholders for any purpose or
purposes may be called by the Board of Directors, pursuant to a resolution
adopted by a majority of the members of the Board of Directors then in office,
or by the holders of not less than fifty percent (50%) of all shares entitled to
vote at the meeting. Special meetings may be held at any place, within or
without the State of Delaware, as determined by the Board of Directors. The only
business which may be conducted at such a meeting, other than procedural matters
and matters relating to the conduct of the meeting, shall be the matter or
matters described in the notice of the meeting.
SECTION 2.3. NOTICE. Written notice of each meeting of stockholders,
stating the date, time, place and, in the case of a special meeting, the purpose
thereof, shall be given as provided by law by the Secretary or an Assistant
Secretary not less than ten (10) days
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nor more than sixty (60) days before such meeting (unless a different time is
specified by law) to every stockholder entitled by law to notice of such
meeting.
SECTION 2.4. LIST OF STOCKHOLDERS. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder, shall be prepared by the Secretary and shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified at the place where the meeting is to be held, for at least ten (10)
days before the meeting and at the place of the meeting during the whole time of
the meeting.
SECTION 2.5. QUORUM. The holders of shares of stock entitled to cast a
majority of the votes on the matters at issue at a meeting of stockholders,
present in person or represented by proxy, shall constitute a quorum, except as
otherwise required by the Delaware General Corporation Law. In the event of a
lack of a quorum, the chairman of the meeting or a majority in interest of the
stockholders present in person or represented by proxy may adjourn the meeting
from time to time without notice other than announcement at the meeting, until a
quorum shall be obtained. At any such adjourned meeting at which there is a
quorum, any business may be transacted that might have been transacted at the
meeting originally called.
SECTION 2.6. ORGANIZATION AND PROCEDURE.
(a) The Chairman of the Board, or, in the absence of the Chairman of the
Board, the President, or any other person designated by the Board of Directors,
shall preside at meetings of stockholders. The Secretary of the Corporation
shall act as secretary, but in the absence of the Secretary, the presiding
officer may appoint a secretary.
(b) At each meeting of stockholders, the chairman of the meeting shall fix
and announce the date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at the meeting and shall
determine the order of business and all other matters of procedure. Except to
the extent inconsistent with any such rules and regulations as adopted by the
Board of Directors, the chairman of the meeting may establish rules, which need
not be in writing, to maintain order for the conduct of the meeting, including,
without limitation, restricting attendance to bona fide stockholders of record
and their proxies and other persons in attendance at the invitation of the
chairman and making rules governing speeches and debates. The chairman of the
meeting acts in his or her absolute discretion and his or her rulings are not
subject to appeal.
SECTION 2.7. VOTING. Unless otherwise provided by the Delaware General
Corporation Law, each stockholder shall be entitled to one vote, in person or by
written proxy, for each share held of record by such stockholder who is entitled
to vote generally
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in the election of directors. All elections for the Board of Directors shall be
decided by a plurality of the votes cast and all other questions shall be
decided by a majority of the votes cast, except as otherwise required by the
Delaware General Corporation Law or as provided for in the Certificate of
Incorporation or these Bylaws. Abstentions shall not be considered to be votes
cast.
SECTION 2.8. INSPECTORS. The Board of Directors by resolution shall, in
advance of any meeting of stockholders, appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the Corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives of the Corporation, to act at the meeting and make a written
report thereof. One or more persons may be designated by the Board of Directors
as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the chairman
of the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall have the
duties prescribed by the Delaware General Corporation Law.
SECTION III
BOARD OF DIRECTORS
SECTION 3.1. POWERS OF THE BOARD OF DIRECTORS. The business and affairs
of the Corporation shall be managed by or under the direction of its Board of
Directors. In furtherance, and not in limitation, of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized to:
(a) adopt, amend, alter, change or repeal the Bylaws of the Corporation, by
the affirmative vote of a majority of the whole Board of Directors; provided,
--------
however, that the stockholders entitled to vote may prescribe that any Bylaw
- -------
adopted by the stockholders may not be amended, altered, changed or repealed by
the Board of Directors; and provided, further, that no Bylaws hereafter adopted
-------- -------
shall invalidate any prior act of the directors that would have been valid if
such new Bylaws had not been adopted;
(b) determine the rights, powers, duties, rules and procedures that affect
the power of the Board of Directors to manage and direct the business and
affairs of the Corporation, including the power to designate and empower
committees of the Board of Directors, to elect, appoint and empower the officers
and other agents of the Corporation, and to determine the time and place of, and
the notice requirements for, Board meetings, as well as quorum and voting
requirements for, and the manner of taking, Board action; and
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(c) exercise all such powers and do all such acts as may be exercised or
done by the Corporation, subject to the provisions of the laws of the State of
Delaware, the Certificate of Incorporation and these Bylaws.
SECTION 3.2. NUMBER OF DIRECTORS. The number of directors constituting
the Board of Directors shall be as authorized from time to time by resolution of
the stockholders or of the Board of Directors. The initial number of directors
constituting the Board of Directors shall be five (5).
SECTION 3.3. VACANCIES. Any vacancies in the Board of Directors for any
reason and any newly created directorships resulting by reason of any increase
in the number of directors may be filled by a majority of the directors then in
office, although less than a quorum, or by the sole remaining director.
SECTION 3.4. REMOVAL OF DIRECTORS. Any director, or the entire Board of
Directors, may be removed from office at any time, with or without cause, by the
affirmative vote of the holders of at least a majority of the voting power of
all of the shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
SECTION 3.5. RESIGNATION. A director may resign at any time by giving
written notice to the Chairman of the Board, to the President, or to the
Secretary. Unless otherwise stated in such notice of resignation, the
acceptance thereof shall not be necessary to make it effective; and such
resignation shall take effect at the time specified therein or, in the absence
of such specification, it shall take effect upon the receipt thereof.
SECTION IV
MEETINGS OF BOARD OF DIRECTORS
SECTION 4.1. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without further notice at such time as shall from time to time be
determined by the Board of Directors. A meeting of the Board of Directors for
the election of officers and the transaction of such other business as may come
before it may be held without notice immediately following the annual meeting of
stockholders.
SECTION 4.2. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President, or at the request
in writing of one-third of the members of the Board of Directors then in office.
SECTION 4.3. NOTICE OF SPECIAL MEETINGS. Notice of the date, time and
place of each special meeting shall be mailed by regular mail to each director
at his or her designated address at least six (6) days before the meeting; or
sent by overnight courier to each director at his or her designated address at
least two (2) days before the meeting (with delivery scheduled to occur no later
than the day before the meeting); or given orally
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by telephone or other means, or by telegraph or telecopy, or by any other means
comparable to any of the foregoing, to each director at his designated address
at least 24 hours before the meeting; provided, however, that if less than five
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(5) days' notice is provided and one-third of the members of the Board of
Directors then in office object in writing prior to or at the commencement of
the meeting, such meeting shall be postponed until five (5) days after such
notice was given pursuant to this sentence (or such shorter period to which a
majority of those who objected in writing agree), provided that notice of such
postponed meeting shall be given in accordance with this Section 4.3. The notice
of the special meeting shall state the general purpose of the meeting, but other
routine business may be conducted at the special meeting without such matter
being stated in the notice.
SECTION 4.4. PLACE OF MEETINGS. The Board of Directors may hold their
meetings and have an office or offices inside or outside of the State of
Delaware.
SECTION 4.5. TELEPHONIC MEETING AND PARTICIPATION. Any or all of the
directors may participate in a meeting of the Board of Directors or any
committee thereof by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
such participation shall constitute presence in person at the meeting.
SECTION 4.6. ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or of such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
SECTION 4.7. QUORUM AND ADJOURNMENT. A majority of the directors then
holding office shall constitute a quorum. The vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Whether or not a quorum is present to conduct a meeting,
any meeting of the Board of Directors (including an adjourned meeting) may be
adjourned by a majority of the directors present, to reconvene at a specific
time and place. It shall not be necessary to give to the directors present at
the adjourned meeting notice of the reconvened meeting or of the business to be
transacted, other than by announcement at the meeting that was adjourned;
provided, however, notice of such reconvened meeting, stating the date, time,
- -------- -------
and place of the reconvened meeting, shall be given to the directors not present
at the adjourned meeting in accordance with the requirements of Section 4.3
hereof.
SECTION 4.8. ORGANIZATION. The Chairman of the Board, or in the absence
of the Chairman of the Board, a member of the Board of Directors selected by the
members present, shall preside at meetings of the Board of Directors. The
Secretary of the Corporation shall act as secretary, but in the absence of the
Secretary, the presiding officer may appoint a secretary.
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SECTION 4.9. COMPENSATION OF DIRECTORS. Directors shall receive such
compensation for their services as the Board of Directors may determine. Any
director may serve the Corporation in any other capacity and receive
compensation therefor.
SECTION 4.10. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors when a vote on any matter is
taken is deemed to have assented to the action taken unless he or she votes
against or abstains from the action taken, or unless at the beginning of the
meeting or promptly upon arrival the director objects to the holding of the
meeting or transacting specified business at the meeting. Any such dissenting
votes, abstentions or objections shall be entered in the minutes of the meeting.
SECTION V
COMMITTEES
SECTION 5.1. COMMITTEES. The Board of Directors may, by resolutions passed
by a majority of the members of the Board of Directors, designate members of the
Board of Directors to constitute committees which shall in each case consist of
such number of directors, and shall have and may execute such powers as may be
determined and specified in the respective resolutions appointing them. Any such
committee may fix its rules of procedure, determine its manner of acting and the
time and place, whether within or without the State of Delaware, of its meetings
and specify what notice thereof, if any, shall be given, unless the Board of
Directors shall otherwise by resolution provide. Unless otherwise provided by
the Board of Directors or such committee, the quorum, voting and other
procedures shall be the same as those applicable to actions taken by the Board
of Directors. A majority of the members of the Board of Directors then in office
shall have the power to change the membership of any such committee at any time,
to fill vacancies therein and to discharge any such committee or to remove any
member thereof, either with or without cause, at any time.
SECTION VI
OFFICERS
SECTION 6.1. DESIGNATION. The officers of the Corporation shall be a Chief
Executive Officer, a Chairman of the Board, a Chief Financial Officer, a
President, a General Manager, a Secretary and a Treasurer. The Board of
Directors may elect or appoint, or provide for the appointment of, such other
officers, including a Treasurer, one or more Assistant Secretaries and Assistant
Treasurers, and one or more Vice Presidents or Managers in such gradation as the
Board of Directors may determine, or agents as may from time to time appear
necessary or advisable in the conduct of the business and affairs of the
Corporation. Any number of offices may be held by the same person.
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SECTION 6.2. ELECTION AND TERM. At its first meeting after each annual
meeting of stockholders, the Board of Directors shall elect the officers or
provide for the appointment thereof. Subject to Sections 6.3 and 6.4 hereof,
the term of each officer elected by the Board of Directors shall be until the
first meeting of the Board of Directors following the next annual meeting of
stockholders and until such officer's successor is chosen and qualified.
SECTION 6.3. RESIGNATION. Any officer may resign at any time by giving
written notice to the President or the Secretary. Unless otherwise stated in
such notice of resignation, the acceptance thereof shall not be necessary to
make it effective; and such resignation shall take effect at the time specified
therein or, in the absence of such specification, it shall take effect upon the
receipt thereof.
SECTION 6.4. REMOVAL. Any officer may be removed at any time with or
without cause by the affirmative vote of a majority of the members of the Board
of Directors then in office. Any officer appointed by another officer may be
removed with or without cause by such officer or the President.
SECTION 6.5. VACANCIES. A vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors or, in the case of
offices held by officers who may be appointed by other officers, by any officer
authorized to appoint such officer.
SECTION 6.6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
responsible for carrying out the policies adopted by the Board of Directors.
SECTION 6.7. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any,
shall have such powers and perform such duties as may be provided for herein and
as may be incident to the office and as may be assigned by the Board of
Directors.
SECTION 6.8. PRESIDENT. The President shall have general supervision of
the business of the Corporation and shall perform such other duties as may be
assigned by the Chairman of the Board or the Board of Directors. The initial
President of the Corporation shall be the General Manager.
SECTION 6.9. GENERAL MANAGER. The General Manager shall have general
supervision of the business of the Corporation and shall perform such other
duties as may be assigned by the Chairman of the Board or the Board of
Directors.
SECTION 6.10. VICE PRESIDENT. Each Vice President shall have such powers
and perform such duties as may be provided for herein and as may be assigned by
the Chairman of the Board, the President or the Board of Directors. The
Executive Vice President shall have the duties and powers of the President upon
the demonstrated unavailability or incapacity of the President.
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SECTION 6.11. MANAGER. Each Manager shall have such powers and perform such
duties as may be provided for herein and as may be assigned by the Chairman of
the Board, the President or the Board of Directors. The Executive Manager shall
have the duties and powers of the President upon the demonstrated unavailability
or incapacity of the President.
SECTION 6.12. TREASURER AND CHIEF FINANCIAL OFFICER. The Treasurer shall
have charge of all funds of the Corporation and the custody and operation of the
accounting books and records of the Corporation and shall perform all acts
incident to the position of Treasurer, subject to the control of the Board of
Directors. The Treasurer shall initially be Chief Financial Officer of the
Corporation and thereafter, at such times as the Board of Directors shall
determine, the Chief Financial Officer shall be such officer as the Board of
Directors shall designate from time to time.
SECTION 6.13 SECRETARY. The Secretary shall keep the minutes, and give
notices, of all meetings of stockholders and directors and of such committees as
directed by the Board of Directors. The Secretary shall have charge of such
books and papers as the Board of Directors may require. The Secretary or any
Assistant Secretary is authorized to certify copies of extracts from minutes and
of documents in the Secretary's charge and anyone may rely on such certified
copies to the same effect as if such copies were originals and may rely upon any
statement of fact concerning the Corporation certified by the Secretary or any
Assistant Secretary. The Secretary shall perform all acts incident to the office
of Secretary, subject to the control of the Board of Directors.
SECTION 6.14. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant
Secretaries and Assistant Treasurers shall have such powers and perform such
duties as usually pertain to their respective offices and as may be assigned by
the Board of Directors or an officer designated by the Board of Directors.
SECTION 6.15. COMPENSATION OF OFFICERS. The officers of the Corporation
shall receive such compensation for their services as the Board of Directors may
determine. The Board of Directors may delegate its authority to determine
compensation to designated officers of the Corporation.
SECTION 6.16 EXECUTION OF INSTRUMENTS. Checks, notes, drafts, other
commercial instruments, assignments, guarantees of signatures and contracts
(except as otherwise provided herein or by law) shall be executed by the
Chairman of the Board, the President, any Vice President or such officers or
employees or agents as the Board of Directors or any of such designated officers
may direct.
SECTION 6.17 MECHANICAL ENDORSEMENTS. The Chairman of the Board, the
President, any Vice President or the Secretary may authorize any endorsement on
behalf of the Corporation to be made by such mechanical means or stamps as any
of such officers may deem appropriate.
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SECTION VII
INDEMNIFICATION
SECTION 7.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, and whether formal or
informal (hereinafter a "proceeding"), by reason of the fact:
(a) that he or she is or was a director or officer of the Corporation, or
(b) that he or she, being at the time a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
trustee, officer, employee or agent of another corporation or of a partnership,
limited liability company, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (collectively, "another
enterprise" or "other enterprise"),
whether either in case (a) or in case (b) the basis of such proceeding is
alleged action or inaction (x) in an official capacity as a director or officer
of the Corporation, or as a director, trustee, officer, employee or agent of
such other enterprise, or (y) in any other capacity related to the Corporation
or such other enterprise while so serving as a director, trustee, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent permitted by Section 145 of the Delaware General Corporation
Law (or any successor provision or provisions) as the same exists or may
hereafter be amended (but, in the case of any such amendment, with respect to
alleged action or inaction occurring prior to such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto), against all expense, liability and loss
(including without limitation attorneys' fees and expenses, judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement) actually and
reasonably incurred by such person in connection therewith. The persons
indemnified by this Section VII are hereinafter referred to as "indemnitees."
Such indemnification as to such alleged action or inaction shall continue as to
an indemnitee who has after such alleged action or inaction ceased to be a
director or officer of the Corporation, or director, trustee, officer, employee
or agent of such other enterprise; and shall inure to the benefit of the
indemnitee's heirs, executors and administrators. Notwithstanding the foregoing,
except as may be provided in these Bylaws or by the Board of Directors, the
Corporation shall not indemnify any such indemnitee in connection with a
proceeding (or portion thereof) initiated by such indemnitee, unless such
proceeding (or portion thereof) was authorized by the Board of Directors (but
this prohibition shall not apply to a counterclaim, cross-claim or third-party
claim brought by the indemnitee in any proceeding). The right to indemnification
conferred in this Section VII: (i) shall be a contract right; (ii) shall not be
affected adversely to any indemnitee by any amendment of the Certificate of
Incorporation or these Bylaws with respect to any alleged action or inaction
occurring prior to such amendment;
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and (iii) shall, subject to any requirements imposed by law and these Bylaws,
include the right to be paid by the Corporation the expenses (including
attorneys' fees) incurred in defending any such proceeding in advance of its
final disposition.
SECTION 7.2. RELATIONSHIP TO OTHER RIGHTS AND PROVISIONS CONCERNING
INDEMNIFICATION. The rights to indemnification and to the advancement of
expenses conferred in this Section VII shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Certificate of Incorporation, any agreement, a vote of stockholders or
disinterested directors or otherwise.
SECTION 7.3. AGENTS AND EMPLOYEES. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification, and to the advancement of expenses, to any employee or agent of
the Corporation (or any person serving at the Corporation's request as a
director, trustee, officer, employee or agent of another enterprise) or to any
person who is or was a director, officer, employee or agent of any of the
Corporation's affiliates, predecessor or subsidiary corporations or of a
constituent corporation absorbed by the Corporation in a consolidation or merger
or who is or was serving at the request of such affiliate, predecessor or
subsidiary corporation or of such constituent corporation as a director,
trustee, officer, employee or agent of another enterprise, in each case as
determined by the Board of Directors to the fullest extent of the provisions of
this Section VII in cases of the indemnification and advancement of expenses of
directors and officers of the Corporation, or to any lesser extent (or greater
extent, if permitted by law) determined by the Board of Directors. If so
indemnified, such persons shall be included in the term "indemnitee" or
"indemnitees" as used in this Section VII.
SECTION 7.4. UNDERTAKINGS FOR ADVANCES OF EXPENSES. If and to the extent
the Delaware General Corporation Law requires, an advancement by the Corporation
of expenses incurred by an indemnitee pursuant to clause (iii) of the last
sentence of Section 7.1 (hereinafter an "advancement of expenses") shall be made
only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section VII or otherwise.
SECTION 7.5. CLAIMS FOR INDEMNIFICATION. If a claim for indemnification
under Section 7.1 is not paid in full by the Corporation within sixty (60) days
after it has been received in writing by the Corporation, except in the case of
a claim for an advancement of expenses, in which case the applicable period
shall be twenty (20) days, the indemnitee may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim. If the
indemnitee is successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In any suit brought by the
indemnitee to enforce a
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right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that,
and in any suit by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking the Corporation shall be entitled to
recover such expenses only upon a final adjudication that, the indemnitee has
not met the applicable standard of conduct set forth in Section 145 of the
Delaware General Corporation Law (or any successor provision or provisions).
Neither the failure of the Corporation (including the Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in Section 145 of the Delaware General Corporation
Law (or any successor provision or provisions), nor an actual determination by
the Corporation (including the Board of Directors, independent legal counsel, or
its stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to have or retain such advancement of expenses,
under this Section VII or otherwise, shall be on the Corporation.
SECTION 7.6. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, trustee, officer, employee or agent
of the Corporation or another enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General Corporation
Law.
SECTION 7.7. SEVERABILITY. In the event that any of the provisions of this
Section VII (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall remain
enforceable to the fullest extent permitted by law.
SECTION VIII
MISCELLANEOUS
SECTION 8.1. SEAL. The Corporation shall have a suitable seal, containing
the name of the Corporation. The Secretary shall be in charge of the seal and
may authorize one or more duplicate seals to be kept and used by any other
officer or person.
SECTION 8.2. WAIVER OF NOTICE. Whenever any notice is required to be
given, a waiver thereof in writing, signed by the person or persons entitled to
the notice, whether
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before or after the time stated therein shall be deemed equivalent thereto.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
SECTION 8.3. VOTING OF STOCK OWNED BY THE CORPORATION. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the Chairman of the Board, the President, any Vice
President or such officers or employees or agents as the Board of Directors or
any of such designated officers may direct. Any such officer may, in the name of
and on behalf of the Corporation, take all such action as any such officer may
deem advisable to vote in person or by proxy at any meeting of security holders
of any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and powers incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may from time to time confer like powers upon any other person or
persons.
SECTION IX
AMENDMENT OF BYLAWS
The Board of Directors, by the affirmative vote of a majority of the whole
Board of Directors, shall have power to amend, alter, change, adopt or repeal
the Bylaws of the Corporation at any regular or special meeting; provided,
--------
however, that the stockholders entitled to vote may prescribe that any Bylaw
- -------
adopted by the stockholders may not be amended, altered, changed or repealed by
the Board of Directors. The stockholders entitled to vote also shall have the
power to amend, alter, change, adopt or repeal the Bylaws of the Corporation at
any annual or special meeting subject to the requirements of the Certificate of
Incorporation.
-13-
<PAGE>
EXHIBIT 4.1
=============================
ADVANCED GLASSFIBER YARNS LLC
AND
AGY CAPITAL CORP.,
AS ISSUERS,
AND
THE BANK OF NEW YORK,
AS TRUSTEE
9-7/8% SENIOR SUBORDINATED NOTES DUE 2009
---------------
INDENTURE
Dated as of January 21, 1999
--------------
=============================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions................................................ 1
Section 1.2. Other Definitions.......................................... 23
Section 1.3. Incorporation by Reference of Trust Indenture Act.......... 24
Section 1.4. Rules of Construction...................................... 24
ARTICLE II
THE NOTES
Section 2.1. Form and Dating............................................ 25
Section 2.2. Execution and Authentication............................... 27
Section 2.3. Registrar and Paying Agent................................. 28
Section 2.4. Deposit of Monies; Paying Agent to Hold Money in Trust..... 28
Section 2.5. Noteholder Lists........................................... 29
Section 2.6. Book-Entry Provisions...................................... 29
Section 2.7. Legends.................................................... 30
Section 2.8. Transfer and Exchange...................................... 30
Section 2.9. Mutilated, Destroyed, Lost or Stolen Notes................. 36
Section 2.10. Temporary Notes............................................ 37
Section 2.11. Cancellation............................................... 37
Section 2.12. Payment of Interest; Defaulted Interest.................... 37
Section 2.13. Computation of Interest.................................... 38
Section 2.14. Add On Notes............................................... 39
Section 2.15. CUSIP Numbers.............................................. 39
ARTICLE III
COVENANTS
Section 3.1. Payment of Notes........................................... 39
Section 3.2. Maintenance of Office or Agency............................ 40
Section 3.3. Corporate Existence........................................ 40
Section 3.4. Payment of Taxes and Other Claims.......................... 40
Section 3.5. Compliance Certificate..................................... 41
Section 3.6 Maintenance of Properties.................................. 41
Section 3.7. Further Instruments and Acts............................... 41
Section 3.8. Waiver of Stay, Extension or Usury Laws.................... 41
Section 3.9. Limitation on Incurrence of Additional Indebtedness........ 42
Section 3.10. Limitation on Restricted Payments.......................... 42
Section 3.11. Limitation on Asset Sales.................................. 45
</TABLE>
i
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<TABLE>
<S> <C>
Section 3.12. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries..................... 47
Section 3.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries............................... 47
Section 3.14. Designation of Unrestricted Subsidiaries.................... 48
Section 3.15. Limitation on Layered Indebtedness.......................... 49
Section 3.16. Limitation on Liens......................................... 49
Section 3.17. Limitation on Transactions with Affiliates.................. 50
Section 3.18. Change of Control........................................... 50
Section 3.19. Conduct of Business; Limitation on Activities of Capital.... 51
Section 3.20. Reports to Holders.......................................... 51
Section 3.21. Payments for Consent........................................ 52
ARTICLE IV
SUCCESSOR COMPANY
Section 4.1. Merger, Consolidation and Sale of Assets.................... 52
ARTICLE V
REDEMPTION OF NOTES
Section 5.1. Optional Redemption......................................... 54
Section 5.2. Applicability of Article.................................... 54
Section 5.3. Election to Redeem; Notice to Trustee....................... 54
Section 5.4. Notice of Redemption........................................ 55
Section 5.5. Section Deposit of Redemption Price......................... 56
Section 5.6. Notes Payable on Redemption Date............................ 56
Section 5.7. Notes Redeemed in Part...................................... 56
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1. Events of Default........................................... 56
Section 6.2. Acceleration................................................ 58
Section 6.3. Other Remedies.............................................. 59
Section 6.4. Waiver of Past Defaults..................................... 59
Section 6.5. Control by Majority......................................... 59
Section 6.6. Limitation on Suits......................................... 60
Section 6.7. Rights of Holders to Receive Payment........................ 60
Section 6.8. Collection Suit by Trustee.................................. 60
Section 6.9. Trustee May File Proofs of Claim............................ 60
Section 6.10. Priorities.................................................. 61
Section 6.11. Undertaking for Costs....................................... 61
ARTICLE VII
TRUSTEE
Section 7.1. Duties of Trustee........................................... 61
</TABLE>
ii
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<TABLE>
<S> <C>
Section 7.2. Rights of Trustee........................................... 63
Section 7.3. Individual Rights of Trustee................................ 63
Section 7.4. Trustee's Disclaimer........................................ 63
Section 7.5. Notice of Defaults.......................................... 63
Section 7.6. Reports by Trustee to Holders............................... 64
Section 7.7. Compensation and Indemnity.................................. 64
Section 7.8. Replacement of Trustee...................................... 65
Section 7.9. Successor Trustee by Merger................................. 65
Section 7.10. Eligibility; Disqualification............................... 66
Section 7.11. Preferential Collection of Claims Against Issuers........... 66
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1. Termination of the Issuers' Obligations..................... 66
Section 8.2. Legal Defeasance and Covenant Defeasance.................... 67
Section 8.3. Conditions to Defeasance.................................... 68
Section 8.4. Application of Trust Money.................................. 70
Section 8.5. Repayment to Issuers........................................ 70
Section 8.6. Indemnity for U.S. Government Obligations................... 70
Section 8.7. Reinstatement............................................... 70
ARTICLE IX
AMENDMENTS
Section 9.1. Without Consent of Holders.................................. 70
Section 9.2. With Consent of Holders..................................... 71
Section 9.3. Compliance with Trust Indenture Act......................... 72
Section 9.4. Revocation and Effect of Consents and Waivers............... 72
Section 9.5. Notation on or Exchange of Notes............................ 73
Section 9.6. Trustee to Sign Amendments.................................. 73
ARTICLE X
SUBORDINATION OF THE NOTES
Section 10.1. Agreement to Subordinate................................... 73
Section 10.2. Liquidation, Dissolution, Bankruptcy....................... 74
Section 10.3. Default on Senior Indebtedness of the Issuers.............. 74
Section 10.4. Acceleration of Payment of Notes........................... 75
Section 10.5. When Distribution Must Be Paid Over........................ 75
Section 10.6. Subrogation................................................ 75
Section 10.7. Relative Rights............................................ 75
Section 10.8. Subordination May Not Be Impaired by Issuers............... 76
Section 10.9. Rights of Trustee and Paying Agent......................... 76
Section 10.10. Distribution or Notice to Representative................... 76
Section 10.11. Article X Not to Prevent Events of Default or Limit
Right to Accelerate................................... 76
Section 10.12. Trust Moneys Not Subordinated.............................. 76
Section 10.13. Trustee Entitled to Rely................................... 77
</TABLE>
iii
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<TABLE>
<S> <C>
Section 10.14. Trustee to Effectuate Subordination.......................... 77
Section 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness..... 77
Section 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions................................ 77
ARTICLE XI
GUARANTEE
Section 11.1. Guarantee.................................................... 78
Section 11.2. Limitation on Liability; Termination, Release and Discharge.. 79
Section 11.3. Right of Contribution........................................ 80
Section 11.4. No Subrogation............................................... 80
Section 11.5. Additional Note Guarantees................................... 81
ARTICLE XII
SUBORDINATION OF THE NOTE GUARANTEES
Section 12.1. Agreement to Subordinate..................................... 81
Section 12.2. Liquidation, Dissolution, Bankruptcy......................... 81
Section 12.3. Default on Senior Indebtedness of Note Guarantors............ 82
Section 12.4. Demand for Payment........................................... 83
Section 12.5. When Distribution Must Be Paid Over.......................... 83
Section 12.6. Subrogation.................................................. 83
Section 12.7. Relative Rights.............................................. 83
Section 12.8. Subordination May Not Be Impaired by Note Guarantors......... 83
Section 12.9. Rights of Trustee and Paying Agent........................... 84
Section 12.10. Distribution or Notice to Representative..................... 84
Section 12.11. Article XII Not to Prevent Defaults Under the Note
Guarantees or Limit Right to Demand Payment............. 84
Section 12.12. Trustee Entitled to Rely..................................... 84
Section 12.13. Trustee to Effectuate Subordination.......................... 85
Section 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness
of Note Guarantors...................................... 85
Section 12.15. Reliance by Holders of Senior Indebtedness on
Subordination Provisions................................ 85
ARTICLE XIII
MISCELLANEOUS
Section 13.1. Trust Indenture Act Controls................................. 85
Section 13.2. Notices...................................................... 86
Section 13.3. Communication by Holders with Other Holders.................. 86
Section 13.4. Certificate and Opinion as to Conditions Precedent........... 86
Section 13.5. Statements Required in Certificate or Opinion................ 87
Section 13.6. Rules by Trustee, Paying Agent and Registrar................. 87
Section 13.7. GOVERNING LAW, ETC........................................... 87
Section 13.8. No Recourse Against Others................................... 88
Section 13.9. Successors................................................... 88
Section 13.10. Multiple Originals........................................... 88
Section 13.11. Severability................................................. 88
</TABLE>
iv
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<TABLE>
<S> <C>
Section 13.12. Qualification of Indenture.......................... 88
Section 13.13. Table of Contents; Headings......................... 88
</TABLE>
EXHIBIT A FORM OF INITIAL NOTE
EXHIBIT B FORM OF EXCHANGE NOTE
EXHIBIT C FORM OF TRANSFER CERTIFICATE FOR TRANSFER TO QIBS
EXHIBIT D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS
TO INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT E FORM OF CERTIFICATE TO BE DELIVERED BY HOLDERS OF BENEFICIAL
INTERESTS IN THE REGULATION S TEMPORARY GLOBAL NOTE
EXHIBIT F FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
EXHIBIT G FORM OF NOTE GUARANTEE
v
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ----------- -----------
<S> <C>
310(a)(1) ........................................... 7.10
(a)(2) ........................................... 7.10
(a)(3) ........................................... N.A.
(a)(4) ........................................... N.A.
(b) ........................................... 7.8; 7.10
(c) ........................................... N.A.
311(a) ........................................... 7.11
(b) ........................................... 7.11
(c) ........................................... N.A.
312(a) ........................................... 2.5
(b) ........................................... 13.3
(c) ........................................... 13.3
313(a) ........................................... 7.6
(b)(1) ........................................... N.A.
(b)(2) ........................................... 7.6
(c) ........................................... 7.6
(d) ........................................... 7.6
314(a) ........................................... 3.20
(b) ........................................... N.A.
(c)(1) ........................................... 13.4
(c)(2) ........................................... 13.4
(c)(3) ........................................... N.A.
(d) ........................................... N.A.
(e) ........................................... 13.5
315(a) ........................................... 7.2
(b) ........................................... 13.2
(c) ........................................... 7.1
(d) ........................................... 7.1
(e) ........................................... 6.11
316(a)(last sentence) ........................................... 1.1
(a)(1)(A) ........................................... 6.5
(a)(1)(B) ........................................... 6.4
(a)(2) ........................................... N.A.
(b) ........................................... 6.7
317(a)(1) ........................................... 6.8
(a)(2) ........................................... 6.9
(b) ........................................... 2.4
318(a) ........................................... 13.1
</TABLE>
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
vi
<PAGE>
EXECUTION COPY
INDENTURE dated as of January 21, 1999, between Advanced Glassfiber
Yarns LLC (the "Company") and AGY Capital Corp. ("Capital" and, together with
------- -------
the Company, the "Issuers"), as joint and several obligors, and The Bank of New
-------
York, as trustee (the "Trustee").
-------
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the holders (the "Holders" or
-------
"Noteholders") of: (i) the Issuers' 9-7/8% Senior Subordinated Notes due 2009
-----------
on the date hereof (the "Initial Notes"), (ii) any Add On Notes that may be
-------------
issued after the Issue Date (all such securities in clauses (i) and (ii) being
referred to collectively as "Initial Notes") and (iii) if and when issued in
-------------
exchange for Initial Notes as provided in the Registration Rights Agreement or a
similar agreement relating to Initial Notes (as hereinafter defined), the
Issuers' 9-7/8% Senior Subordinated Notes due 2009 (the "Exchange Notes", and
--------------
together with the Initial Notes, the "Notes").
-----
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any of its Restricted
Subsidiaries or is assumed in connection with the acquisition of assets from
such Person and in each case not Incurred in connection with, or in anticipation
or contemplation of such acquisition, merger or consolidation. Such
Indebtedness shall be deemed to have been Incurred at the time such Person
becomes a Restricted Subsidiary or at the time it merges or consolidates with
the Company or a Restricted Subsidiary or at the time such Indebtedness is
assumed in connection with the acquisition of assets from such Person.
"Affiliate" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling," "controlled by" and "under common control with"
have meanings correlative of the foregoing; provided, however, that beneficial
ownership of 10% or more of the Voting Stock of a Person shall be deemed to be
control.
"AGY Holdings" means AGY Holdings, Inc., a Delaware corporation.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Company or
any Restricted Subsidiary, or (b) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person (other than a Subsidiary of
the Company) which constitute all or substantially all of the assets of such
Person
<PAGE>
or comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, assignment or other transfer for value by the Company or any of its
Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than the Company or a Restricted Subsidiary (including a Person
that is or will become a Restricted Subsidiary immediately after such sale,
issuance, conveyance, transfer, assignment or other transfer for value) of (a)
any Capital Stock of any Restricted Subsidiary; or (b) any other property or
assets (other than cash, Cash Equivalents or Capital Stock) of the Company or
any Restricted Subsidiary other than in the ordinary course of business;
provided, however, that Asset Sale shall not include, (i) the sale, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Company and its Restricted Subsidiaries as permitted under Section 4.1 (ii) any
-----------
sale of Capital Stock in, or Indebtedness or other securities of an Unrestricted
Subsidiary, (iii) a disposition of inventory or leases in the ordinary course of
business, (iv) dispositions of assets in any fiscal year with a Fair Market
Value not to exceed $2.0 million in the aggregate, (v) for purposes of Section
-------
3.11 only, the making of a Permitted Investment or Restricted Payment, and (vi)
- ----
a disposition in the ordinary course of business of obsolete or worn-out
equipment.
"Asset Sale Transaction" means Asset Sales and, whether or not
constituting an Asset Sale, (i) any sale or other disposition of Capital Stock
and (ii) any sale or other disposition excluded from the definition of Asset
Sale by clause (b)(i) or (v) of such definition.
"Bankruptcy Law" means Title 11, United States Code, or any other
applicable federal, state, or foreign bankruptcy, insolvency or similar law as
nor or hereafter constituted.
"Board of Directors" means (i) in the case of a Person that is a
corporation, the board of directors of such Person or any committee authorized
to act therefor and (ii) in the case of any other Person, the board of
directors, management committee or similar governing body or any authorized
committee thereof responsible for the management of the business and affairs of
such Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
(or person performing a similar function) to have been duly adopted by the Board
of Directors of such Person and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banking institutions are authorized or required by law to
close in New York City.
"Capitalized Lease Obligations" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
2
<PAGE>
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all membership,
partnership or other equity or ownership interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at Least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $500.0 million; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"Certificated Notes" means Notes held in certificated form, other than
Global Notes, including IAI Notes.
"Change of Control" means the occurrence of one or more of the
following events:
(i) Prior to the first Public Equity Offering, (A) the Permitted
Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, in the aggregate at
least of 51% of the total voting power of the Voting Stock of the Company,
(B) any Permitted Holder ceases to be the "beneficial owner," directly or
indirectly of at least 10% of the total voting power of the Voting Stock of
the Company or (C) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the "beneficial owner" (except that for purposes of this clause (C)
such person shall be deemed to have "beneficial ownership" of all shares
that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of a percentage of the total voting power of the Voting Stock
of the Company that is equal to or greater than the percentage of the total
voting power of the Voting Stock of the Company beneficially owned,
directly or indirectly, by any one Permitted Holder, whether, in the case
of each of clause (A), (B), or (C), as a result of the
3
<PAGE>
issuance of securities of the Company or any parent company of the Company,
any merger, consolidation, liquidation or dissolution of the Company, any
direct or indirect transfer of securities by the Company or otherwise (for
purposes of this clause (i) and clause (ii) below, the Permitted Holders
shall be deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate at least 51% of the
voting power of the Voting Stock of the parent corporation);
(ii) subsequent to the first Public Equity Offering, (A) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in Rule 13d-3 and 13d-5 under the Exchange
Act, except that for purposes of this clause (ii) such person shall be
deemed to have "beneficial ownership" of all shares that any such person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 35%
of the total voting power of the Voting Stock of the Company and (B) the
Permitted Holders "beneficially own" (as defined in this clause (ii)),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company than such other person (for
the purposes of this clause (ii)), such other person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial owner (as
defined in this clause (ii)), directly or indirectly, of more than 35% of
the voting power of the Voting Stock of such parent corporation and the
Permitted Holders "beneficially own" (as defined in this clause (ii)),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation);
(iii) during any period of two consecutive years (or, in the case
this event occurs within the first two years after the Issue Date, such
shorter period as shall have begun on the Issue Date), individuals who at
the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office;
(iv) the Company consolidates with, or merges with or into, another
Person (other than the Company or a Wholly Owned Restricted Subsidiary) or
the Company or any of its Restricted Subsidiaries sell, conveys, assigns,
transfers, leases or otherwise disposes of all or substantially all of the
assets of the Company and its Restricted Subsidiaries (determined on a
consolidated basis for the Company and its Restricted Subsidiaries) to any
Person (other than the Company or any Wholly Owned Restricted Subsidiary),
other than any such transaction where immediately after such transaction
the Person or Persons that "beneficially owned" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act,
4
<PAGE>
except that a Person shall be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time) immediately
prior to such transaction, directly or indirectly, a majority of the total
voting power of the then outstanding Voting Stock of the Company
"beneficially own" (as so determined), directly or indirectly, a majority
of the total voting power of the then outstanding Voting Stock of the
surviving or transferee Person;
(v) CSG becomes an Affiliate of GHC if such affiliation results in
the termination of the various intellectual property agreements between
Owens Corning and the Company; or
(vi) the Non-Compete Agreement ceases to be in full force and effect
at any time prior to September 30, 2003.
"Closing Date" means, with respect to any Initial Notes, the date on
which such Initial Notes are originally issued.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, or any
successor agency thereto with respect to the regulation or registration of
securities.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on the
Issue Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;
(ii) Consolidated Interest Expense for such period; and (iii) Consolidated Non-
cash Charges for such period; less (A) all non-cash items increasing
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of the aggregate amount of Consolidated EBITDA for the
four most recent full fiscal quarters for which financial statements are
available ending prior to the date of such determination (the "Four Quarter
Period") to Consolidated Fixed Charges for such Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the Incurrence or repayment of any Indebtedness of the
Company or any of its Restricted Subsidiaries (and the application of the
proceeds thereof), including the Incurrence of any Indebtedness (and the
application of the proceeds thereof) giving rise to the need to make such
determination, occurring
5
<PAGE>
during or after such Four Quarter Period and on or prior to such date of
determination, as if such Incurrence or repayment, as the case may be (and the
application of the proceeds thereof), occurred on the first day of such Four
Quarter Period and (ii) any Asset Sale Transactions or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such determination as a result of the Company or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) Incurring Acquired Indebtedness and including,
without limitation, by giving pro forma effect to any Consolidated EBITDA
(provided that such pro forma Consolidated EBITDA shall be calculated in a
manner consistent with the exclusions in the definition of "Consolidated Net
Income" but without giving effect to clause (c) of the definition of
Consolidated Net Income) attributable to the assets which are the subject of the
Asset Sale Transaction or Asset Acquisition during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the last
day of the Four Quarter Period and on or prior to such date of determination, as
if such Asset Sale Transaction or Asset Acquisition (including the Incurrence of
any such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If the Company or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the Incurrence of such guaranteed Indebtedness as if the
Company or any of its Restricted Subsidiaries had directly Incurred such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the date of determination
and which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on such date of determination; (2) if interest on any
Indebtedness actually Incurred on such date of determination may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on such date of determination will be deemed to have been in effect
during the Four Quarter Period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by Hedging Obligations, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements. For purposes of determining the Consolidated Fixed Charges Coverage
Ratio at any time prior to October 1, 1999, Consolidated EBITDA and Consolidated
Fixed Charges shall be calculated as follows: for the fiscal quarter ending
December 31, 1998, Consolidated EBITDA and Consolidated Fixed Charges shall
equal Consolidated EBITDA and Consolidated Fixed Charges, respectively, for such
fiscal quarter; for the fiscal quarter ending March 31, 1999, Consolidated
EBITDA and Consolidated Fixed Charges shall equal Consolidated EBITDA and
Consolidated Fixed Charges, respectively, for the two fiscal quarters then
ending; and for the fiscal quarter ending June 30, 1999, Consolidated EBITDA and
Consolidated Fixed Charges shall equal Consolidated EBITDA and Consolidated
Fixed Charges, respectively, for the three fiscal quarters then ending.
"Consolidated Fixed Charges" means, for any period the sum, without
duplication, of (i) Consolidated Interest Expense, plus (ii) the product of (x)
the amount of all dividend payments on any series of Preferred Stock of the
Company (other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period
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times (y) a fraction, the numerator of which is one and the denominator of which
is one minus the sum of (A) the maximum federal corporate income tax rate in
effect during such taxable year and (B) six percent.
"Consolidated Income Tax Expense" means, with respect to the Company
for any period, the product of (i) the net income of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP and (ii) the sum of (x) the maximum federal corporate
income tax rate in effect during such period and (y) six percent.
"Consolidated Interest Expense" means, for any period, the sum of,
without duplication: (i) the aggregate of cash and non-cash interest expense of
the Company and its Restricted Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, and in any event shall include,
without limitation (whether or not interest expense in accordance with GAAP),
(a) any amortization of debt discount and any amortization or write off of
deferred financing costs, (b) the net costs under Hedging Obligations related to
Indebtedness (including amortization of fees), (c) all capitalized interest, (d)
the interest portion of any deferred payment obligation, (e) commissions,
discounts and other fees and charges Incurred in respect of letters of credit or
bankers' acceptances and (f) any interest expense on Indebtedness of another
Person that is guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on the assets of such Person or one of its Restricted
Subsidiaries (whether or not such guarantee or Lien is called upon); and (ii)
the interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by the Company and its Restricted Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
on a consolidated basis, determined in accordance with GAAP; provided, however,
that there shall be excluded therefrom (a) net after-tax gains and losses
(assuming for tax purposes that no special allocations are made to any member of
the Company under Section 743 of the Code) from Asset Sale Transactions or
abandonments of reserves relating thereto, (b) net after-tax items (assuming for
tax purposes that no special allocations are made to any member of the Company
under Section 743 of the Code) classified as extraordinary or nonrecurring gains
or losses, (c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary or is
merged or consolidated with the Company or any Restricted Subsidiary, (d) the
net income (but not loss) of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted Subsidiary
of that income is restricted by contract, operation of law or otherwise, (e) the
net income of any Person, other than a Restricted Subsidiary, except to the
extent of cash dividends or distributions paid to the Company or to a Restricted
Subsidiary by such Person, (f) any restoration to income of any contingency
reserve, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date and (g) all
gains and losses from the cumulative effect of any change in accounting
principles.
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"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Company and its
Restricted Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP (excluding any such charge which requires an accrual of or
a reserve for cash charges for any future period).
"CSG" means Compagnie Saint-Gobain, a corporation organized under the
laws of France.
"Currency Agreement" means, in respect of any Person, any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party.
"Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which, with
the lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Indebtedness" means, (a) in respect of the Company,
the Senior Credit Facility and any other Senior Indebtedness of the Company
which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $25.0 million and is specifically
designated by the Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" and (b) in respect of any Note
Guarantor, the Senior Credit Facility and any guarantee by such Note Guarantor
of Indebtedness of the Company referred to in clause (a) and (c) any other
Senior Indebtedness of such Note Guarantor which, at the date of determination,
has an aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $25.0
million and is specifically designated by such Note Guarantor in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness."
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof, in any case, on or prior to the 91st
day after the final maturity date of the Notes.
"DTC" means The Depository Trust Company, its nominees and their
respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
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"Exchange Offer Registration Statement" has the meaning assigned to it
in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets may be determined conclusively by the Board of
Directors of the Company acting in good faith, and shall be evidenced by a Board
Resolution.
"Foreign Subsidiary" means, with respect to any Person, any direct or
indirect Subsidiary of such Person that is organized under the laws of any
jurisdiction outside the United States, any state thereof or the District of
Columbia.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"GHC" means Glass Holdings Corp., a Delaware corporation.
"GPI" means Groupe Porcher Industries, a corporation organized under
the laws of France.
"Hedging Obligations" means the obligations of any Person pursuant to
any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered in the Note Register.
"IAI" means an institutional "accredited investor," as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act, other than a QIB.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the
foregoing). Indebtedness of any Person or any of its Subsidiaries existing at
the time such Person becomes a Restricted Subsidiary (or is merged into or
consolidated with the Company or any Restricted Subsidiary), whether or not such
Indebtedness was Incurred in connection with, as a result of, or in
contemplation of such Person becoming a Restricted Subsidiary (or being
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merged into or consolidated with the Company or any Restricted Subsidiary),
shall be deemed Incurred at the time any such Person becomes a Restricted
Subsidiary or merges into or consolidates with the Company or any Restricted
Subsidiary. Accrual of interest, the accretion of accreted value and the payment
of regularly scheduled interest in the form of additional Indebtedness of the
same instrument will not be deemed to be an Incurrence of Indebtedness for
purposes of Section 3.9.
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"Indebtedness" means with respect to any Person, without duplication,
(i) the principal amount (or, if less, the accreted value) of all obligations of
such Person for borrowed money, (ii) the principal amount (or, if less, the
accreted value) of all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all Capitalized Lease
Obligations of such Person, (iv) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all obligations under any title retention agreement (but
excluding trade accounts payable and other accrued liabilities arising in the
ordinary course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted), (v) all obligations of such Person for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations of such Person in
respect of Indebtedness referred to in clauses (i) through (v) above and clause
(viii) below, (vii) all Indebtedness of any other Person of the type referred to
in clauses (i) through (vi) which is secured by any Lien on any property or
asset of such Person, the amount of such Indebtedness being deemed to be the
lesser of the Fair Market Value of such property or asset or the amount of the
Indebtedness so secured, (viii) all obligations under Hedging Obligations of
such Person and (ix) all Disqualified Capital Stock issued by such Person with
the amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any.
For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be the Fair Market Value thereof.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Independent Financial Advisor" means an accounting firm, appraisal
firm, investment banking firm or consultant to Persons engaged in a Permitted
Business, in each case, of nationally recognized standing that is, in the
judgment of the Company's Board of Directors, qualified to perform the task for
which it has been engaged and which is independent in connection with the
relevant transaction.
"Interest Rate Agreement" of any Person means any interest rate
protection agreement (including, without limitation, interest rate swaps, caps,
floors, collars, derivative instruments and similar agreements) and/or other
types of interest hedging agreements.
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"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude accounts receivable or deposits
arising in the ordinary course of business. For purposes of Section 3.10,
------------
"Investment" shall include and be valued at the Fair Market Value of the net
assets of any Restricted Subsidiary at the time that such Restricted Subsidiary
is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company will be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the total amount of the
Company's "Investments" in such Subsidiary made prior to or at the time of such
redesignation less (y) that portion of the Fair Market Value of the net assets
of such Subsidiary at the time that such Subsidiary is so re-designated a
Restricted Subsidiary that is proportionate to the Company's share of the equity
interest in such Subsidiary; and (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at its Fair Market Value at the time of
such transfer. If the Company or any Restricted Subsidiary sells or otherwise
disposes of any Common Stock of a Restricted Subsidiary (including any issuance
and sale of Capital Stock by a Restricted Subsidiary) such that, after giving
effect to any such sale or disposition, such Restricted Subsidiary would cease
to be a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the Fair Market
Value of the Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means January 21, 1999.
"JH" means Jefferson Holdings, Inc., a Delaware corporation.
"JV Contract" means all supply, purchase, service and management
agreements, real property and equipment leases, co-location and space-sharing
and allocation agreements and requirements and off-take contracts and agreements
and other like agreements between or among the Company and the LLC Members and
their Affiliates existing on the Issue Date, together with all renewals,
extensions and amendments thereof, provided, that such renewals, extensions or
amendments do not materially change the rights and obligations of the Company or
any of its Restricted Subsidiaries, and all other such agreements entered into
after the Issue Date between or among the Company, any Subsidiary thereof, the
LLC Members and their Affiliates.
"Keep-Well Agreement" means the Keep-Well Agreement dated as of
September 30, 1998, between Owens Corning and the Company, as in effect on the
Issue Date.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"LLC Members" means collectively, JH and AGY Holdings and,
individually, either of them.
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"LLC Interest Sale and Purchase Agreement" means the LLC Interest Sale
and Purchase Agreement dated as of July 31, 1998 among Owens Corning, the
Company and GHC, as in effect on the Issue Date.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries from
such Asset Sale, net of (a) reasonable out-of-pocket expenses and fees relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) the amount of tax
distributions reasonably estimated to be required to be made to JH and AGY
Holdings as a result of such Asset Sale within two years of the date of such
Asset Sale, (c) repayment of Indebtedness that is required to be repaid in
connection with such Asset Sale, (d) appropriate amounts to be provided by the
Company or any Restricted Subsidiary, as the case may be, as a reserve, in
accordance with GAAP, against any liabilities associated with such Asset Sale
and retained by the Company or any Restricted Subsidiary, as the case may be,
after such Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"Non-Compete Agreement" means the Non-Compete Agreement dated as of
September 30, 1998, by and among GPI, GHC, Owens Corning and the Company, as in
effect on the Issue Date.
"Non-U.S. Person" means a person who is not a U.S. person, as defined
in Regulation S.
"Note Custodian" means, with respect to each Global Note, the
custodian with respect to such Global Note (as appointed by DTC), or any
successor Person thereto and shall initially be the Trustee.
"Note Guarantee" means the guarantee of the Notes by each Note
Guarantor under Article 11 hereof.
"Note Guarantor" means all direct and indirect Restricted
Subsidiaries, other than Capital and Foreign Subsidiaries, but including,
without limitation, upon a Revocation of the Designation of a Subsidiary as an
Unrestricted Subsidiary.
"Note Register" means the register of Notes, maintained by the
Trustee, pursuant to Section 2.3.
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"Obligations" means, with respect to any Indebtedness, any principal,
interest (including, without limitation, Post-Petition Interest), penalties,
fees, indemnifications, reimbursements, including, in the case of the Notes and
the Note Guarantees in respect thereof, damages, and other liabilities payable
under the documentation governing such Indebtedness.
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"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President, the
Treasurer, the Controller or the Secretary of any Person.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the chief executive officer, the president or any vice
president of such Person and the chief financial officer or any treasurer of
such Person.
"Operating Agreement" means the Amended and Restated Limited Liability
Company Operating Agreement for the Company dated as of September 30, 1998, by
and between JH and AGY Holdings, as amended and in effect on the Issue Date.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Issuers or the Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Issuers) in trust or set aside
and segregated in trust by the Issuers (if the Company shall act as its own
Paying Agent) for the Holders of such Notes; provided that, if the Notes
are to be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the Trustee has
been made;
(iii) Notes which have been paid pursuant to Section 2.9 or in
-----------
exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in respect
of which there shall have been presented to the Trustee proof satisfactory
to it that such Notes are held by a bona fide purchaser in whose hands such
Notes are valid obligations of the Issuers; and
(iv) Notes which have been defeased pursuant to Article VIII;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Issuers or any other obligor upon the Notes or any Affiliate of either of
the Issuers or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes which a Trust Officer of the Trustee actually
knows to be so owned shall be so disregarded. Notes so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
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such Notes and that the pledgee is not either of the Issuers or any other
obligor upon the Notes or any Affiliate of either of the Issuers or of such
other obligor.
"Permitted Business" means the business or businesses conducted by the
Company and its Restricted Subsidiaries as of the Issue Date and any business
ancillary or complementary or reasonably related thereto.
"Permitted Holders" means any of Owens Corning and its Affiliates and
GHC and GPI and their Affiliates.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness in respect of the Notes issued on the Issue Date
and Exchange Notes and any replacement Notes therefor, and the Note
Guarantees in respect thereof;
(ii) guarantees by any Note Guarantor of Indebtedness of the Company
other than the Notes; provided, however, that if any such guarantee is of
Subordinated Indebtedness, then the Note Guarantee of such Note Guarantor
shall be senior to such Note Guarantor's guarantee of such Subordinated
Indebtedness;
(iii) Indebtedness Incurred pursuant to the Senior Credit Facility in
an aggregate principal amount at any time outstanding not to exceed $315.0
million (including any amounts Incurred pursuant to clause (xiv) of this
definition) less the amount of any permanent prepayments of Indebtedness
made with the Net Cash Proceeds of an Asset Sale pursuant to the third
sentence of Section 3.11;
------------
(iv) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date, reduced by the amount of any
scheduled amortization payments or mandatory prepayments when actually paid
or permanent reductions thereon;
(v) Hedging Obligations entered into in the ordinary course of
business and not for speculative purposes;
(vi) Indebtedness of any Restricted Subsidiary owed to and held by
the Company or any Note Guarantor for so long as such Indebtedness is held
by the Company or such Note Guarantor, in each case subject to no Lien
securing Indebtedness other than Permitted Liens; provided, however, that
if as of any date any Person other than the Company or any Note Guarantor
holds any such Indebtedness or holds a Lien in respect of such Indebtedness
securing Indebtedness other than Permitted Liens, such date shall be deemed
the Incurrence of Indebtedness not constituting Permitted Indebtedness by
the issuer of such Indebtedness;
(vii) Indebtedness of the Company owed to and held by any Note
Guarantor that is unsecured and subordinated in right of payment to the
payment and performance of the Company's obligations under any Senior
Indebtedness, this Indenture, the Notes and the
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Note Guarantees and subject to no Lien securing Indebtedness other than
Permitted Liens; provided, however, that if as of any date any Person other
than any Note Guarantor owns or holds any such Indebtedness or any Person
other than any Note Guarantor holds a Lien in respect of such Indebtedness
securing Indebtedness other than Permitted Liens, such date shall be deemed
the Incurrence of Indebtedness not constituting Permitted Indebtedness by
the Company;
(viii) Indebtedness of the Company or any of its Restricted
Subsidiaries arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Indebtedness is
extinguished within two business days of Incurrence;
(ix) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or any Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations in
connection with self-insurance or similar requirements in the ordinary
course of business;
(x) Refinancing Indebtedness in respect of Indebtedness (other than
Permitted Indebtedness) Incurred pursuant to Section 3.9 or Indebtedness
-----------
Incurred pursuant to clause (i) or (iv) of this definition of Permitted
Indebtedness;
(xi) Capitalized Lease Obligations and Purchase Money Indebtedness
of the Company and its Restricted Subsidiaries that do not exceed $10.0
million in the aggregate at any one time outstanding;
(xii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred in connection with the
disposition of any business, assets, or Restricted Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the purpose
of financing such acquisition; provided, that the maximum aggregate
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by the Company and the Restricted
Subsidiary in connection with such disposition;
(xiii) Additional Indebtedness of the Company or any Restricted
Subsidiary in an aggregate principal amount not to exceed $10.0 million at
any one time outstanding (which amount may, but need not, be Incurred in
whole or in part under the Senior Credit Facility); provided, that no more
than $5.0 million of Indebtedness permitted pursuant to this clause (xiii)
may be Incurred by Restricted Subsidiaries that are not Note Guarantors;
(xiv) Indebtedness of Foreign Subsidiaries which are Restricted
Subsidiaries may Incur Indebtedness in the form of local lines of credit
not to exceed $25.0 million in the
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aggregate at any one time outstanding so long as such Indebtedness is
secured by a letter of credit issued pursuant to the Senior Credit
Facility; and
(xv) Indebtedness of the Company Incurred pursuant to the Keep-Well
Agreement.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary in any Person that is, or that result in any Person
becoming, immediately after such Investment, a Restricted Subsidiary or
constituting a merger or consolidation of such Person into the Company or with
or into a Restricted Subsidiary; (ii) Investments by any Restricted Subsidiary
in the Company; (iii) Investments in cash and Cash Equivalents; (iv) any
extension, modification or renewal of any Investments existing as of the Issue
Date (but not Investments involving additional advances, contributions or other
investments of cash or property or other increases thereof, other than as a
result of the accrual or accretion of interest or original issue discount or
payment-in-kind pursuant to the terms of such Investment as of the Issue Date);
(v) transactions or arrangements with officers, directors or employees of the
Company or any Subsidiary of the Company entered into in the ordinary course of
business (including compensation or employee benefit arrangements with any
officer or director of the Company or any Subsidiary of the Company permitted
under Section 3.17; (vi) Investments received as a result of the bankruptcy or
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reorganization of any Person or taken in settlement of or other resolution of
claims or disputes, and, in each case, extensions, modifications and renewals
thereof, (vii) Investments in the form of intercompany Indebtedness permitted to
be issued under Section 3.9; (viii) Investments made by the Company or its
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Restricted Subsidiaries as a result of non-cash consideration permitted to be
received in connection with an Asset Sale made in compliance with Section 3.11
------------
and (ix) other Investments not to exceed $5.0 million at any one time
outstanding.
"Permitted Junior Securities" means any securities of the Company or
any other Person that are (i) equity securities without special covenants or
(ii) debt securities expressly subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the Notes are subordinated as provided
herein, in any event pursuant to a court order so providing and as to which (a)
the rate of interest on such securities shall not exceed the effective rate of
interest on the Notes on the Issue Date, (b) such securities shall not be
entitled to the benefits of covenants or defaults materially more beneficial to
the holders of such securities than those in effect with respect to the Notes on
the Issue Date and (c) such securities shall not provide for amortization
(including sinking fund and mandatory prepayment provisions) commencing prior to
the date six months following the final scheduled maturity date of the Senior
Indebtedness (as modified by the plan of reorganization pursuant to which such
securities are issued).
"Permitted Liens" means any of the following:
(i) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith,
16
<PAGE>
if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made in respect thereof;
(ii) Liens Incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iii) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, however, that such Liens do not extend to any
property which is not leased property subject to such Capitalized Lease
Obligation;
(iv) purchase money Liens to finance property of the Company or a
Restricted Subsidiary acquired in the ordinary course of business;
provided, however, that (A) the related purchase money Indebtedness shall
not exceed the cost of such property and shall not be secured by any
property of the Company or any Restricted Subsidiary other than the
property so acquired and (B) the Lien securing such Indebtedness shall be
created within 90 days of such acquisition;
(v) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(vi) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(vii) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or a Restricted Subsidiary, including rights of offset and set-off;
(viii) Liens securing Hedging Obligations that relate to Indebtedness
that is Incurred in accordance with Section 3.9 and that are secured by the
-----------
same assets as secure such Hedging Obligations;
(ix) Liens existing on the Issue Date and Liens to secure any
Refinancing Indebtedness which is Incurred to Refinance any Indebtedness
which has been secured by a Lien permitted under Section 3.16 and which
------------
Indebtedness has been Incurred in accordance with Section 3.9; provided,
-----------
however, that such new Liens (A) are not materially less favorable to the
Holders of Notes and are not materially more favorable to the lienholders
with respect to such Liens than the Liens in respect of the Indebtedness
17
<PAGE>
being Refinanced and (B) do not extend to any property or assets other than
the property or assets securing the Indebtedness Refinanced by such
Refinancing Indebtedness;
(x) Liens securing Acquired Indebtedness Incurred in accordance with
Section 3.9; provided, however, that (A) such Liens secured such Acquired
-----------
Indebtedness at the time of and prior to the Incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and were not granted
in connection with, or in anticipation of the Incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and (B) such Liens
do not extend to or cover any property of the Company or any Restricted
Subsidiary other than the property that secured the Acquired Indebtedness
prior to the time such Indebtedness became Acquired Indebtedness of the
Company or a Restricted Subsidiary and are no more favorable to the
lienholders than the Liens securing the Acquired Indebtedness prior to the
Incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary; and
(xi) Liens securing other Indebtedness not in excess of $5.0 million
at any one time outstanding.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Post-Petition Interest" means all interest accrued or accruing after
the commencement of any insolvency or liquidation proceeding (and interest that
would accrue but for the commencement of any insolvency or liquidation
proceeding) in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing any Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
as a claim in such insolvency or liquidation proceeding.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights over any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Private Exchange Notes" means any Initial Notes exchanged for
Exchange Notes with a Private Placement Legend pursuant to the Registration
Rights Agreement.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price, or other cost of construction or improvement of any
property; provided, however, that the aggregate principal amount of such
Indebtedness does not exceed the lesser of the Fair Market Value of such
property or such purchase price or cost, including any Refinancing of such
Indebtedness that does not increase the aggregate principal amount (or accreted
amount, if less) thereof as of the date of Refinancing.
18
<PAGE>
"QIB" means any "qualified institutional buyer" (as defined in Rule
144A under the Securities Act).
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Redemption Date" means, with respect to any redemption of Notes, the
date of redemption with respect thereto.
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary, to the extent that such Refinancing does not (i) result
in an increase in the aggregate principal amount of the Indebtedness of such
Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (ii) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; provided, however,
that (x) if such Indebtedness being Refinanced is Indebtedness of the Company,
then such Refinancing Indebtedness shall be Indebtedness of the Company, (y) if
such Indebtedness being Refinanced is Indebtedness of a Note Guarantor, then
such Indebtedness shall be Indebtedness of the Company and/or such Note
Guarantor and (z) if such Indebtedness being Refinanced is subordinate or junior
to the Notes or any Note Guarantee, then such Refinancing Indebtedness shall be
subordinate to the Notes or such Note Guarantee at least to the same extent and
in the same manner as the Indebtedness being Refinanced.
"Registered Exchange Offer" means the registration by the Issuers
under the Securities Act pursuant to a registration statement of the offer by
the Issuers to each Holder of the Initial Notes to exchange all the Initial
Notes held by such Holder for the Exchange Notes in an aggregate principal
amount equal to the aggregate principal amount of the Initial Notes held by such
Holder, all in accordance with the terms and conditions of the Registration
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement dated January 21, 1999 among the Issuers and First Union Capital
Markets.
"Regulation S" means Regulation S under the Securities Act or any
successor regulation.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company.
19
<PAGE>
"Restricted Add-On Notes" means Add-On Notes initially issued other
than in a public offering registered under the Securities Act.
"Restricted Period" means, with respect to any Initial Notes offered
and sold outside the United States in reliance on Regulation S, the 40
consecutive days beginning on and including the later of (A) the day on which
such Initial Notes are offered to persons other than distributors (as defined in
Regulation S under the Securities Act) and (B) the Closing Date for such Initial
Notes.
"Restricted Subsidiary" of the Company means Capital and any other
Subsidiary of the Company which at the time of determination is not an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act or any successor
rule.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party providing for
the leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person by whom funds have
been or are to be advanced on the security of such Property.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto.
"Senior Credit Facility" means that certain Credit Agreement dated as
of September 30, 1998, by and between the Company, the guarantors from time to
time a party thereto, the lenders from time to time a party thereto and First
Union National Bank, as agent, pursuant to which the Company may, as of the
Issue Date, borrow up to $315.0 million in the aggregate at any one time
outstanding together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder or
increasing the principal amount available thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Senior Indebtedness" means, at any date, with respect to any Person
(a) all Obligations of such Person under the Senior Credit Facility; (b) all
Hedging Obligations of such Person; (c) all Obligations of such Person under
letters of credit; and (d) all other Indebtedness of such Person permitted under
this Indenture, including principal, premium, if any, and interest (including
Post-Petition Interest) on such Indebtedness, unless the instrument under which
such Indebtedness is Incurred expressly provides that such Indebtedness is not
senior or superior in right of payment to the Notes in the case of the Company
or a Note Guarantee in the case of a Note Guarantor, and all renewals,
extensions, modifications, amendments or refinancings thereof in whole or in
part. Notwithstanding the foregoing, Senior Indebtedness shall not include (a)
to
20
<PAGE>
the extent that it may constitute Indebtedness, any Obligation for Federal,
state, local or other taxes; (b) any Indebtedness among or between the Company
and any Subsidiary of the Company or any Affiliate of the Company or any of such
Affiliate's Subsidiaries (other than Indebtedness created by the Company in
connection with the guarantee of Indebtedness of a Subsidiary); unless and for
so long as such Indebtedness has been pledged to secure obligations under or in
respect of Senior Indebtedness; (c) to the extent that it may constitute
Indebtedness, any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the ordinary course
of business; (d) that portion of any Indebtedness that is Incurred in violation
of this Indenture; (e) Indebtedness evidenced by the Notes or the Note
Guarantees; (f) Indebtedness of the Company or a Note Guarantor that is
expressly subordinate or junior in right of payment to any other Indebtedness of
the Company or a Note Guarantor; (g) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capitalized Lease
Obligations) or management agreements; (h) any obligation that by operation of
law is subordinate to any general unsecured obligations of such Person; and (i)
Indebtedness of the Company to the extent such Indebtedness is owed to and held
by any Federal, state, local or other governmental authority (excluding
Indebtedness owing to state or local governmental authorities in the form of
industrial revenue bonds or other state or local bond financings).
"Senior Subordinated Indebtedness" means, with respect to the Company,
the Notes and, with respect to any Note Guarantor, such Note Guarantor's Note
Guarantee and any other Indebtedness of the Company or such Note Guarantor that
specifically provides that such Indebtedness is to rank pari passu in right of
payment with the Notes or such Note Guarantee, as the case may be, and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company or such Note Guarantor which is not Senior
Indebtedness.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-
02(w) of Regulation S-X under the Securities Act.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Indebtedness" means, with respect to the Company or any
Note Guarantor, any Indebtedness of the Company or such Note Guarantor, as the
case may be, which is expressly subordinated in right of payment to the Notes or
such Note Guarantor's Note Guarantee, as the case may be.
"Subsidiary" with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person; or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
21
<PAGE>
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939
(15 U.S.C. (S)(S) 77aaa-77bbbb), as in effect on the date of this Indenture
------
(except as otherwise provided in this Indenture).
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means, when used with respect to the Trustee, any
officer within the corporate trust department of the Trustee, including any vice
president, assistant vice president, assistant secretary, assistant treasurer,
trust officer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of such person's knowledge of and familiarity with the particular
subject and who shall have direct responsibility for the administration of this
Indenture.
"Unrestricted Subsidiary" means any Subsidiary of the Company (other
than Capital) designated as such pursuant to Section 3.14. Any such designation
------------
may be revoked by a Board Resolution of the Company, subject to the provisions
of such covenant.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" with respect to any Person, means securities of any
class of Capital Stock of such Person entitling the holders thereof (whether at
all times or only so long as no senior class of stock has voting power by reason
of any contingency) to vote in the election of members of the Board of Directors
(or equivalent governing body) of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness (including any Disqualified Capital Stock) at any date, the number
of years obtained by dividing (a) the sum of the products obtained by
multiplying (x) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (y) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment, by (b) the then outstanding principal amount or liquidation
preference, as applicable, of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of the Company means any
Restricted Subsidiary of which all the outstanding Capital Stock (other than in
the case of a foreign Restricted Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by the Company or any Wholly Owned Restricted
Subsidiary.
22
<PAGE>
Section 1.2. Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- -----------
<S> <C>
"Additional Guarantee"................................................................. 11.5
"Additional Guarantor" 11.5
"Acceleration Notice".................................................................. 6.2
"Add On Notes"......................................................................... 2.14
"Affiliate Transaction"................................................................ 3.17
"Agent Member"......................................................................... 2.6(b)
"Authenticating Agent"................................................................. 2.2(d)
"Blockage Notice"...................................................................... 10.3
"Capital".............................................................................. Introduction
"Change of Control Offer".............................................................. 3.18(a)
"Change of Control Payment Date"....................................................... 3.18(a)
"Company".............................................................................. Introduction
"Company Order"........................................................................ 2.2(c)
"Corporate Trust Office"............................................................... 3.2(a)
"Covenant Defeasance".................................................................. 8.2(c)
"Defaulted Interest"................................................................... 2.12(b)
"Designation".......................................................................... 3.14(a)
"Designation Amount"................................................................... 3.14(a)
"Event of Default"..................................................................... 6.1
"Exchange Global Note"................................................................. 2.1(g)
"Exchange Notes"....................................................................... Introduction
"Global Note".......................................................................... 2.6(a)
"Guaranteed Obligations"............................................................... 11.1(a)
"Holders".............................................................................. Introduction
"IAI Note"............................................................................. 2.1(f)
"Initial Notes"........................................................................ Introduction
"Issuers".............................................................................. Introduction
"Legal Defeasance"..................................................................... 8.2(b)
"Net Proceeds Offer"................................................................... 3.11
"Net Proceeds Offer Payment Date"...................................................... 3.11
"Net Proceeds Offer Trigger Date"...................................................... 3.11
"Note Register"........................................................................ 2.3(a)
"Noteholders".......................................................................... Introduction
"Notes"................................................................................ Introduction
"Paying Agent"......................................................................... 2.3(a)
"Payment Blockage Period".............................................................. 10.3
"Private Placement Legend"............................................................. 2.7(b)
"Public Equity Offering"............................................................... Exhibit A
"Registrar"............................................................................ 2.3(a)
"Regulation S Certification"........................................................... 2.1(e)
"Regulation S Global Note"............................................................. 2.1(e)
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
"Regulation S Permanent Global Note"......................................................... 2.1(e)
"Regulation S Temporary Global Note"......................................................... 2.1(e)
"Release Date"............................................................................... 2.1(e)
"Replacement Assets"......................................................................... 3.11
"Resale Restriction Termination Date"........................................................ 2.7(b)
"Restricted Payment"......................................................................... 3.10
"Rule 144A Global Note"...................................................................... 2.1(d)
"Special Interest Payment Date".............................................................. 2.12
"Special Record Date"........................................................................ 2.12
"Surviving Entity"........................................................................... 4.1(a)
</TABLE>
Section 1.3. Incorporation by Reference of Trust Indenture Act. This
-------------------------------------------------
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings assigned to them by such definitions.
Section 1.4. Rules of Construction. Unless the context otherwise
---------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular; and
(6) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP.
24
<PAGE>
ARTICLE II
THE NOTES
Section 2.1. Form and Dating. (a) The Initial Notes are being
---------------
offered and sold by the Issuers pursuant to the Purchase Agreement. The Initial
Notes and the Trustee's certificate of authentication shall be substantially in
the form of Exhibit A hereto. The Exchange Notes and the Trustee's certificate
---------
of authentication shall be substantially in the form of Exhibit B hereto.
---------
(b) The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Issuers and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
The Notes may have notations, legends or endorsements required by law, stock
exchange rule or DTC rule or usage. The Issuers and the Trustee shall approve
the form of the Notes and any notation, legend or endorsement on them. Each
Note shall be dated the date of its authentication.
(c) The Notes shall be issuable only in fully registered form, without
coupons, and only in denominations of $1,000 and any integral multiple thereof,
provided that, except as provided in Section 5.7, each IAI Note shall be in a
-----------
minimum denomination of $250,000.
(d) Initial Notes offered and sold to QIBs in the United States of
America in reliance on Rule 144A will be issued in the form of a permanent
global Note, without interest coupons, substantially in the form of Exhibit A
---------
(the "Rule 144A Global Note"). The Rule 144A Global Note will be duly executed
---------------------
by the Issuers, authenticated by the Trustee as hereinafter provided and
deposited with the Trustee, as Note Custodian. The Rule 144A Global Note may be
represented by more than one certificate, if so required by DTC's rules
regarding the maximum principal amount to be represented by a single
certificate. The aggregate principal amount of the Rule 144A Global Note may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as Note Custodian, as hereinafter provided.
(e) Initial Notes offered and sold outside the United States of
America in reliance on Regulation S will be issued on a Closing Date in the form
of a temporary global Note, in fully registered form without interest coupons,
substantially in the form set forth in Exhibit A (a "Regulation S Temporary
--------- ----------------------
Global Note"). Beneficial interests in a Regulation S Temporary Global Note
- -----------
will be exchangeable for beneficial interests in a single permanent global Note,
in fully registered form without interest coupons (the "Regulation S Permanent
----------------------
Global Note", together with the Regulation S Temporary Global Note, the
- -----------
"Regulation S Global Note") on or after the expiration of the Restricted Period
- -------------------------
(the "Release Date") upon the receipt by the Trustee or its agent of a
------------
certification substantially in the form set forth in Exhibit E (a "Regulation S
--------- ------------
Certification"). Upon receipt by the Trustee or Paying Agent of a Regulation S
- -------------
Certification, (i) with respect to the first such Regulation S Certification,
the Issuers shall execute and upon receipt of a Company Order for
authentication, the Trustee or Authenticating Agent shall authenticate and
deliver to the Note Custodian, the applicable Regulation S Permanent Global Note
and (ii) with respect to the first and all subsequent Regulation S
Certifications, the Note Custodian shall exchange on behalf of the applicable
beneficial owners the portion of the
25
<PAGE>
Regulation S Temporary Global Note covered by such Regulation S Certifications
for a comparable portion of the applicable Regulation S Permanent Global Note.
Upon any exchange of a portion of a Regulation S Temporary Global Note for a
comparable portion of a Regulation S Permanent Global Note, the Note Custodian
shall endorse on the schedules affixed to each of such Regulation S Global Note
(or on continuations of such schedules affixed to each of such Regulation S
Global Note and made parts thereof) appropriate notations evidencing the date of
transfer and:
(x) with respect to the applicable Regulation S Temporary Global Note,
a decrease in the principal amount thereof equal to the amount covered
by the applicable certification;
and (y) with respect to the applicable Regulation S Permanent Global
Note, an increase in the principal amount thereof equal to the
principal amount of the decrease in the applicable Regulation S
Temporary Global Note pursuant to clause (x) above.
Each Regulation S Global Note will be duly executed by the Issuers,
authenticated by the Trustee as hereinafter provided and deposited with the
Trustee, as Note Custodian. The Regulation S Global Note may be represented by
more than one certificate, if so required by DTC's rules regarding the maximum
principal amount to be represented by a single certificate. The aggregate
principal amount of the Regulation S Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
Note Custodian, as hereinbefore or hereinafter provided.
(f) Initial Notes offered and sold or otherwise transferred to IAIs in
the United States of America will be issued in non-global, fully registered
form, without interest coupons, substantially in the form set forth in Exhibit
-------
A, duly executed by the Issuers and authenticated by the Trustee or
Authenticating Agent as hereinafter provided (each, an "IAI Note"). Upon such
--------
issuance, the Trustee shall register such IAI Note in the name of the beneficial
owner or owners of such note (or the nominee of such beneficial owner or owners)
and deliver the certificates for such IAI Notes to, or as directed by, the
respective beneficial owner or owners.
(g) All or part of any Rule 144A Global Note, Regulation S Global Note
and any IAI Note exchanged in the Registered Exchange Offer will be exchanged
for a permanent global Note in fully registered form, without interest coupons
(or beneficial interest therein) substantially in the form of Exhibit B,
---------
deposited with the Trustee, as Note Custodian, duly executed by the Issuers and
authenticated by the Trustee, as hereinafter provided (the "Exchange Global
---------------
Note"). The Exchange Global Note may be represented by more than one
certificate, if so required by DTC's rules regarding the maximum principal
amount to be represented by a single certificate. The aggregate principal
amount of the Exchange Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as Note Custodian,
as hereinafter provided.
Section 2.2. Execution and Authentication. (a) Two Officers, one of
----------------------------
whom shall be the Chairman of the Board, the President, the Chief Executive
Officer or the Chief Financial
26
<PAGE>
Officer of each of the Issuers, shall sign the Notes for the Issuers by manual
or facsimile signature. If an Officer whose signature is on a Note no longer
holds that office at the time the Trustee authenticates the Note, the Note shall
be valid nevertheless.
(b) A Note shall not be valid until an authorized signatory of the
Trustee manually authenticates the Note. The signature of the Trustee on a Note
shall be conclusive evidence that such Note has been duly and validly
authenticated and issued under this Indenture.
(c) At any time and from time to time after the execution and delivery
of this Indenture, the Trustee shall authenticate and make available for
delivery: (1) Initial Notes for original issue on the Issue Date in an aggregate
principal amount of $150,000,000, (2) Exchange Notes for issue only in a
Registered Exchange Offer pursuant to the Registration Rights Agreement, and
only in exchange for Initial Notes of an equal principal amount and (3) Add On
Notes in unlimited aggregate principal amount, and, if applicable, the related
exchange of Initial Notes for Exchange Notes, in each case upon a written order
of the Issuers signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of each of the Issuers (a "Company Order").
-------------
Such Company Order shall specify the amount of the Notes to be authenticated and
the date on which the original issue of Notes is to be authenticated and whether
the Notes are to be Initial Notes or Exchange Notes. The aggregate principal
amount of Notes which may be authenticated and delivered under this Indenture is
unlimited. Except as permitted in Section 2.14 or Section 2.15(b), all Notes
------------ ---------------
issued on the Issue Date and all Add On Notes shall be identical in all respects
other than issue dates, the date from which interest accrues and any changes
relating thereto. Notwithstanding anything to the contrary contained in this
Indenture, all Notes issued under this Indenture shall vote and consent together
on all matters as one class and no series of Notes will have the right to vote
or consent as a separate class on any matter.
(d) The Trustee may appoint an agent (the "Authenticating Agent")
--------------------
reasonably acceptable to the Issuers to authenticate the Notes. Unless limited
by the terms of such appointment, any such Authenticating Agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by the Authenticating
Agent.
(e) In case either of the Issuers, pursuant to Article IV, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which either of the Issuers
shall have been merged, or the Person which shall have received a conveyance,
transfer, lease or other disposition as aforesaid, shall have executed an
indenture supplemental hereto with the Trustee pursuant to Article IV, any of
the Notes authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Notes executed in the
name of the successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Notes surrendered
for such exchange and of like principal amount; and the Trustee, upon Company
Order of the successor Person, shall
27
<PAGE>
authenticate and deliver Notes as specified in such order for the purpose of
such exchange. If Notes shall at any time be authenticated and delivered in any
new name of a successor Person pursuant to this Section 2.2 in exchange or
-----------
substitution for or upon registration of transfer of any Notes, such successor
Person, at the option of the Holders but without expense to them, shall provide
for the exchange of all Notes at the time Outstanding for Notes authenticated
and delivered in such new name.
Section 2.3. Registrar and Paying Agent. (a) The Issuers shall
--------------------------
maintain an office or agency in the Borough of Manhattan, City of New York,
where Notes may be presented for registration of transfer or for exchange (the
"Registrar"), where Notes may be presented for payment (the "Paying Agent") and
- ---------- ------------
for the service of notices and demands to or upon the Issuers in respect of the
Notes and this Indenture. The Registrar shall keep a register of the Notes and
of their transfer and exchange (the "Note Register"). The Issuers may have one
-------------
or more co-registrars and one or more additional paying agents. The term
"Paying Agent" includes any additional paying agent.
(b) The Issuers shall enter into an appropriate agency agreement with
any Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Issuers shall
notify the Trustee of the name and address of each such agent. If the Issuers
fail to maintain a Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to Section 7.7.
-----------
Either of the Issuers may act as Paying Agent, Registrar or co-registrar.
(c) The Issuers initially appoint the Trustee at its principal
corporate trust office in the Borough of Manhattan, City of New York (the
"Corporate Trust Office") as Registrar, Paying Agent and agent for service of
- -----------------------
demands and notices in connection with the Notes and this Indenture, until such
time as the Trustee has resigned or a successor Trustee has been appointed or
until a successor registrar, Paying Agent or agent for service of demands and
notices in connection with the Notes and this Indenture has been appointed.
Section 2.4. Deposit of Monies; Paying Agent to Hold Money in Trust.
------------------------------------------------------
By at least 10:00 a.m. (New York City time) on the date on which any principal
of or interest on any Note is due and payable, the Issuers shall deposit with
the Paying Agent in immediately available funds money sufficient to pay such
principal or interest when due. The Issuers shall require each Paying Agent
(other than the Trustee) to agree in writing that such Paying Agent shall hold
in trust for the benefit of Noteholders or the Trustee all money held by such
Paying Agent for the payment of principal of or interest on the Notes and shall
notify the Trustee in writing of any default by the Issuers in making any such
payment. If either of the Issuers acts as Paying Agent, it shall segregate the
money held it as Paying Agent and hold it as a separate trust fund. The Issuers
at any time may require a Paying Agent (other than the Trustee) to pay all money
held by it to the Trustee and to account for any funds disbursed by such Paying
Agent. Upon complying with this Section, the Paying Agent (if other than either
of the Issuers) shall have no further liability for the money delivered to the
Trustee. At any time that either of the Issuers is serving
28
<PAGE>
as paying Agent for the Notes, upon any bankruptcy, reorganization or similar
proceeding with respect to either of the Issuers, the Trustee shall serve as
Paying Agent for the Notes.
Section 2.5. Noteholder Lists. The Trustee shall preserve in as
----------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Registrar,
or to the extent otherwise required under the TIA, the Issuers shall furnish to
the Trustee, in writing at least seven Business Days before each interest
payment date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Noteholders.
Section 2.6. Book-Entry Provisions. (a) Each Rule 144A Global Note
---------------------
and Regulation S Global Note (each a "Global Note" and collectively, the "Global
Notes") initially shall (i) be registered in the name of DTC or the nominee of
DTC, (ii) be delivered to the Note Custodian and (iii) bear the appropriate
legends, as set forth in Exhibit A or Exhibit B, as the case may be.
--------- ---------
(b) Members of, or participants in, DTC ("Agent Members") shall have
-------------
no rights under this Indenture with respect to any Global Note held on their
behalf by DTC or by the Note Custodian or under such Global Note, and DTC may be
treated by the Issuers, the Trustee and any agent of the Issuers or the Trustee
as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the
Trustee or any agent of the Issuers or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by DTC or impair,
as between DTC and its Agent Members, the operation of customary practices of
DTC governing the exercise of the rights of a Holder of a beneficial interest in
any Global Note. The registered Holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
(c) Except as provided below, owners of beneficial interests in
Global Notes will not be entitled to receive Certificated Notes. If required to
do so pursuant to any applicable law or regulation, beneficial owners may obtain
Certificated Notes in exchange for their beneficial interests in a Global Note
upon written request in accordance with DTC's and the Registrar's procedures.
In addition, Certificated Notes (in the form of Exhibit A or Exhibit B, as
--------- ---------
applicable) shall be transferred to all beneficial owners in exchange for their
beneficial interests in a Global Note if:
(i) DTC notifies the Issuers that it is unwilling or unable to
continue as depositary for such Global Note or DTC ceases to be a clearing
agency registered under the Exchange Act at a time when DTC is required to
be so registered in order to act as depositary, and in each case a
successor depositary is not appointed by the Issuers within 90 days of such
notice,
(ii) the Issuers execute and deliver to the Trustee and Registrar an
Officers' Certificate stating that such Global Note shall be so
exchangeable, or
29
<PAGE>
(iii) an Event of Default has occurred and is continuing and the
Registrar has received a request from DTC.
In connection with the transfer of an entire Global Note to the beneficial
owners thereof pursuant to this subsection (c), such Global Note shall be deemed
to be surrendered to the Trustee for cancellation, and the Issuers shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by DTC in exchange for its beneficial interest in such Global
Note, an equal aggregate principal amount of Notes in definitive form of
authorized denominations.
(d) In connection with the exchange of a portion of a Certificated
Note for a beneficial interest in a Global Note, the Trustee shall cancel such
Certificated Note, and the Issuers shall execute, and the Trustee shall
authenticate and deliver, to the transferring Holder a new Certificated Note
representing the principal amount not so transferred.
Section 2.7 Legends.
-------
(a) Each Global Note shall bear the legend specified therefor in
Exhibit A or Exhibit B, as the case may be, on the face thereof.
- --------- ---------
(b) Initial Notes that are not Regulation S Global Notes shall, prior
to the date which is two years after the Issue Date (or, in the case of
Restricted Add On Notes that are not Regulation S Global Notes, the Closing Date
therefor) (the "Resale Restriction Termination Date") and each Regulation S
-----------------------------------
Temporary Global Note shall, bear the Private Placement Legend specified in
Exhibit A on the face thereof (the "Private Placement Legend.")
- --------- ------------------------
(c) Each Regulation S Temporary Global Note shall bear the legend
specified therefor in Exhibit A on the face thereof.
---------
Section 2.8. Transfer and Exchange.
---------------------
(a) The following provisions shall apply with respect to any proposed
transfer of a beneficial interest in a Rule 144A Global Note or an IAI Note
prior to the Resale Restriction Termination Date therefor:
(i) if the Holder of one or more IAI Note(s) wishes to transfer such
IAI Note(s) (or a portion thereof) to a QIB pursuant to Rule 144A, (x) upon
receipt by the Registrar of:
(A) such IAI Note(s), duly endorsed as provided herein,
(B) instructions from such Holder directing the Registrar to
credit or cause to be credited a beneficial interest in the Rule
144A Global Note equal to the principal amount (or portion
thereof) of such IAI Note(s) to be transferred, specifying the
participant account at DTC to be credited with such increase,
and, if the entire principal amount of such IAI Note(s) is not
being transferred,
30
<PAGE>
to issue one or more IAI Notes to the transferor IAI in a
principal amount equal to the principal amount not transferred,
and
(C) a certificate in the form of Exhibit C duly executed by the
transferor, and
(y) subject to the rules and procedures of DTC, the Registrar shall:
(1) cancel the IAI Notes delivered to it;
(2) increase the Rule 144A Global Note and credit or
cause to be credited the participant account at DTC in
accordance with the foregoing; and
(3) if applicable, authenticate and deliver to the IAI
transferor one or more IAI Note(s) in accordance with
the foregoing.
(ii) If the Holder of one or more IAI Notes wishes to transfer such
IAI Note(s) (or any portion thereof) to an IAI, upon receipt by the
Registrar of:
(A) such IAI Note(s), duly endorsed as provided herein;
(B) instructions from such Holder directing the Registrar to
issue one or more IAI Notes in the amounts specified to the
transferee IAI and, if the entire principal amount of such IAI
Note(s) is not being transferred, the transferor IAI in an
amount equal to the principal amount not transferred; and
(C) a certificate in the form of Exhibit D duly executed by the
---------
transferee.
(iii) If the holder of a beneficial interest in a Rule 144A Global
Note wishes to transfer such interest (or a portion thereof) to an IAI, (x)
upon receipt by the Registrar of:
(A) instructions from the Holder of the Rule 144A Global Note
directing the Registrar to issue one or more IAI Notes in the
amounts specified to the transferee IAI, debit or cause to be
debited an equivalent amount of beneficial interest in the Rule
144A Global Note and specifying the participant account at DTC
to be debited with such decrease and
(B) a certificate in the form of Exhibit D from the IAI
---------
transferee,
and (y) subject to the rules and procedures of DTC, the Registrar shall:
(A) authenticate and deliver to the IAI transferee IAI Note(s)
in a principal amount equivalent to the principal amount of the
beneficial interest in the Rule 144A Global Note being
transferred in accordance with the foregoing and
31
<PAGE>
(B) decrease the Rule 144A Global Note and debit the account of
the specified participant account at DTC for such amount in
accordance with the foregoing.
(iv) If (1) the holder of a beneficial interest in a Rule 144A Global
Note wishes to transfer such interest (or any portion thereof) to a Non-
U.S. Person pursuant to Regulation S and (2) such Non-U.S. Person wishes to
hold its interest in the Notes through a beneficial interest in the
Regulation S Global Note, (x) upon receipt by the Registrar of:
(A) instructions from the Holder of the Rule 144A Global Note
directing the Registrar to credit or cause to be credited a
beneficial interest in the Regulation S Global Note equal to the
principal amount of the beneficial interest in the Rule 144A
Global Note to be transferred, specifying the participant
accounts with DTC to be credited and debited and
(B) a certificate in the form of Exhibit F from the transferor
---------
and (y) subject to the rules and procedures of DTC, the Registrar shall:
(1) increase the Regulation S Global Note and credit or caused to be
credited the specified participant account at DTC for such amount in
accordance with the foregoing, and
(2) decrease the Rule 144A Global Note for such amount and debit or
cause to be debited the specified participant account at DTC for such
amount in accordance with the foregoing.
(v) Transfers of beneficial interests in the Rule 144A Global Note
not described in this Section 2.8 shall be made in accordance with the
-----------
rules and procedures of DTC.
(vi) After the expiration of the Resale Restriction Termination date,
beneficial interests in Rule 144A Global Notes and IAI Notes may be
transferred without requiring the certifications described above or any
additional certification.
(b) The following provisions shall apply with respect to any proposed
transfer of a beneficial interest in a Regulation S Temporary Global Note:
(i) if the holder of a beneficial interest in a Regulation S
Temporary Global Note wishes to transfer such interest (or any portion
thereof) to a QIB pursuant to Rule 144A, (x) upon receipt by the Registrar
of:
(A) instructions from the Holder of the Regulation S Temporary Global
Note directing the Registrar to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal to the
principal amount of the beneficial interest in
32
<PAGE>
the Regulation S Temporary Global Note to be transferred, specifying
the participant accounts at DTC to be credited and debited, and
(B) a certificate in the form of Exhibit C duly executed by the
---------
transferor, and
(y) in accordance with the rules and procedures of DTC, the Registrar
shall:
(1) increase the Rule 144A Global Note and credit or caused to be
credited the specified participant account at DTC for such amount in
accordance with the foregoing, and
(2) decrease the Regulation S Temporary Global Note amount and debit
or cause to be debited the specified participant account at DTC for
such amount in accordance with the foregoing.
(ii) if the holder of a beneficial interest in a Regulation S
Temporary Global Note wishes to transfer such interest (or a portion
thereof) to an IAI, (x) upon receipt by the Registrar of:
(A) instructions from the Holder directing the Registrar to issue one
or more IAI Notes in specified amounts in the name of the transferee
IAI, debit or cause to be debited an equivalent amount of beneficial
interest in the Regulation S Temporary Global Note and specifying the
participant account with DTC to be debited with such decrease and
(B) a certificate in the form of Exhibit D from the IAI transferee,
---------
and (y) subject to the rules and procedures of DTC, the Registrar shall:
(1) authenticate and deliver to the IAI transferee IAI Note(s) in an
equivalent amount to the beneficial interest in the Regulation S
Temporary Global Note being transferred in accordance with the
foregoing, and
(2) decrease the Regulation S Temporary Global Note debited to the
account of the specified participant for such amount in accordance
with the foregoing.
(ii) except for transfers of beneficial interests in the Regulation S
Temporary Global Note described in this Section 2.8, transfers of
-----------
beneficial interests in the Regulation S Temporary Global Note shall be
made in accordance with the rules and procedures of DTC.
(iii) Interests in a Regulation S Permanent Global Note may be
transferred without requiring the certification described above or any
additional certification.
33
<PAGE>
(c) Any other transfer of (i) Initial Notes (other than Regulation S
Temporary Global Notes) prior to the expiration of the Resale Restriction
Termination Date therefor or (ii) a Regulation S Temporary Global Note, shall be
made only upon receipt by the Registrar and the Issuers of such Opinions of
Counsel, certifications and/or other information satisfactory to each of them in
order to ensure compliance with the Securities Act.
(d) Upon the transfer, exchange or replacement of Notes (or
beneficial interests in a Global Note) not bearing a Private Placement Legend,
the Registrar shall deliver Notes (or cause to be increased the principal amount
of a Global Note to reflect increases in the amount of beneficial interests
covered thereby) that do not bear a Private Placement Legend. Upon the
transfer, exchange or replacement of Notes (or beneficial interests in a Global
Note) bearing a Private Placement Legend, the Registrar shall deliver only Notes
that bear a Private Placement Legend unless
(i) such Notes (or beneficial interest) are exchanged in the
Registered Exchange Offer;
(ii) such Notes (or beneficial interest) are transferred pursuant to
an effective Registration Statement;
(iii) such Notes (or beneficial interest) are transferred, replaced
or exchanged following the expiration of the Resale Restriction Termination
Period therefor; or
(iv) in connection with such transfer, the Registrar (and, if the
Company is not then serving as the registrar, the Company) shall have
received an Opinion of Counsel satisfactory to it to the effect that
neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
The Issuers shall deliver to the Trustee an Officers' Certificate promptly upon
effectiveness, withdrawal or suspension of any Registration Statement applicable
to any Notes.
(e) If one or more Exchange Global Notes have been issued, upon the
transfer of any Note (or beneficial interest therein) for which a Private
Placement Legend would not be required pursuant to clause (d) for such Note (or
beneficial interest) following such transfer, such Note (or beneficial interest
therein) may be exchanged for a beneficial interest in the Exchange Global Note.
If no Exchange Global Note has been issued, upon the transfer of any Note
bearing a Private Placement Legend (or beneficial interest therein) for which a
Private Placement Legend would not be required pursuant to clause (d) for such
Note (or beneficial interest) following such transfer, such Note (or beneficial
interest therein) may be exchanged for a beneficial interest in a Global Note
without a Private Placement Legend.
(f) The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to this Article II. The Issuers
shall have the right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the giving of
reasonable written notice to the Registrar.
34
<PAGE>
(g) (i) To permit registrations of transfers and exchanges, the
Issuers shall, subject to the other terms and conditions of this Article
II, execute and the Trustee shall authenticate Certificated Notes and
Global Notes at the Registrar's or co-registrar's request.
(ii) In accordance with the Registration Rights Agreement, the
Trustee shall, upon receipt of a Company Order, exchange Initial Notes for
Exchange Notes or Private Exchange Notes, as the case may be.
(iii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Issuers may require payment
of a sum sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments or similar governmental charges payable upon
exchange or transfer pursuant to Section 3.11, Section 3.18 or Section
------------ ------------ -------
9.5).
(iv) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of any Note for a period beginning (1)
15 days before the mailing of a notice of an offer to repurchase or redeem
Notes and ending at the close of business on the day of such mailing or (2)
15 days before an interest payment date and ending on such interest payment
date.
(v) Prior to the due presentation for registration of transfer
of any Note, the Issuers, the Trustee, the Paying Agent, the Registrar or
any co-registrar may deem and treat the person in whose name a Note is
registered as the absolute owner of such Note for the purpose of receiving
payment of principal of and interest on such Note and for all other
purposes whatsoever, whether or not such Note is overdue, and none of the
Issuers, the Trustee, the Paying Agent, the Registrar or any co-registrar
shall be affected by notice to the contrary.
(vi) All Notes issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Notes surrendered
upon such transfer or exchange.
(h) No Obligation of the Trustee.
----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Note, a member of, or a participant in, DTC or
other Person with respect to the accuracy of the records of DTC or its
nominee or of any participant or member thereof, with respect to any
ownership interest in the Notes or with respect to the delivery to any
participant, member, beneficial owner or other Person (other than DTC) of
any notice (including any notice of redemption) or the payment of any
amount or delivery of any Notes (or other security or property) under or
with respect to such Notes. All notices and communications to be given to
the Holders and all payments to be made to Holders in respect of the Notes
shall be given or made only to or upon the order of the registered Holders
(which shall be DTC or its nominee in the case of a Global Note). The
rights of
35
<PAGE>
beneficial owners in any Global Note shall be exercised only through DTC
subject to the applicable rules and procedures of DTC. The Trustee may rely
and shall be fully protected in relying upon information furnished by DTC
with respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or
among Depositary participants, members or beneficial owners in any Global
Note) other than to require delivery of such certificates and other
documentation or evidence as is expressly required by, and to do so if and
when expressly required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the express
requirements hereof.
Section 2.9. Mutilated, Destroyed, Lost or Stolen Notes. If a
------------------------------------------
mutilated Note is surrendered to the Registrar or if the Holder of a Note claims
that the Note has been lost, destroyed or wrongfully taken, the Issuers shall
issue and the Trustee shall authenticate a replacement Note if the requirements
of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. If required by the Trustee or
the Issuers, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Issuers and the Trustee to protect the Issuers, the Trustee, the
Paying Agent, the Registrar and any co-registrar from any loss which any of them
may suffer if a Note is replaced, and, in the absence of notice to the Issuers
or the Trustee that such Note has been acquired by a bona fide purchaser, the
Issuers shall execute and upon Company Order the Trustee shall authenticate and
make available for delivery, in exchange for any such mutilated Note or in lieu
of any such destroyed, lost or stolen Note, a new Note of like tenor and
principal amount, bearing a number not contemporaneously Outstanding. In case
any such mutilated, destroyed, lost or stolen Note has become or is about to
become due and payable, the Issuers in their discretion may, instead of issuing
a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Issuers may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) in connection therewith.
Every new Note issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuers, any Note Guarantor (if
applicable) and any other obligor upon the Notes, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all benefits of this Indenture equally and proportionately
with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
36
<PAGE>
Section 2.10. Temporary Notes. Until definitive Notes are ready for
---------------
delivery, the Issuers may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Issuers consider appropriate for temporary
Notes. Without unreasonable delay, the Issuers shall prepare and the Trustee
shall authenticate definitive Notes. After the preparation of definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at any office or agency maintained by the Issuers for that
purpose and such exchange shall be without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Notes, the Issuers shall execute,
and the Trustee shall authenticate and make available for delivery in exchange
therefor, one or more definitive Notes representing an equal principal amount of
Notes. Until so exchanged, the Holder of temporary Notes shall in all respects
be entitled to the same benefits under this Indenture as a Holder of definitive
Notes.
Section 2.11. Cancellation. The Issuers at any time may deliver
------------
Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else shall cancel and
return to the Issuers all Notes surrendered for registration of transfer,
exchange, payment or cancellation. The Issuers may not issue new Notes to
replace Notes it has paid or delivered to the Trustee for cancellation for any
reason other than in connection with a transfer or exchange.
Section 2.12. Payment of Interest; Defaulted Interest. (a) Interest
---------------------------------------
on any Note which is payable, and is punctually paid or duly provided for, on
any interest payment date shall be paid to the Person in whose name such Note
(or one or more predecessor Notes) is registered at the close of business on the
regular record date for such interest at the office or agency of the Issuers
maintained for such purpose pursuant to Section 2.3.
-----------
(b) Any interest on any Note which is payable, but is not paid when
the same becomes due and payable and such nonpayment continues for a period of
30 days shall forthwith cease to be payable to the Holder on the regular record
date by virtue of having been such Holder. Such defaulted interest ("Defaulted
---------
Interest") shall, without regard to any applicable grace periods, be paid by the
- --------
Issuers at the rate of 2% per annum in excess of the rate shown on the Note, at
its election in each case, as provided in clause (i) or (ii) below:
(i) The Issuers may elect to make payment of any Defaulted Interest
to the Persons in whose names the Notes (or their respective predecessor
Notes) are registered at the close of business on a Special Record Date (as
defined below) for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Issuers shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date (not less than 30 days after such notice) of the proposed
payment (the "Special Interest Payment Date"), and at the same time the
-----------------------------
Issuers shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this
37
<PAGE>
clause provided. Thereupon the Trustee shall fix a record date (the
"Special Record Date") for the payment of such Defaulted Interest which
-------------------
shall be not more than 15 days and not less than 10 days prior to the
Special Interest Payment Date and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Issuers of such Special Record Date, and in the name
and at the expense of the Issuers, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date and Special
Interest Payment Date therefor to be given in the manner provided for in
Section 13.2 not less than 10 days prior to such Special Record Date.
------------
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date and Special Interest Payment Date therefor having been so
given, such Defaulted Interest shall be paid on the Special Interest
Payment Date to the Persons in whose names the Notes (or their respective
predecessor Notes) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following clause
(ii).
(ii) The Issuers may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange, if, after notice given by the Issuers
to the Trustee of the proposed payment pursuant to this clause, such manner
of payment shall be deemed practicable by the Trustee.
(c) Subject to the foregoing provisions of this Section 2.12, each
------------
Note delivered under this Indenture upon registration of, transfer of or in
exchange for or in lieu of any other Note shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Note.
Section 2.13. Computation of Interest. Interest on the Notes shall
-----------------------
be computed on the basis of a 360-day year of twelve 30-day months.
Section 2.14. Add On Notes. The Issuers may, from time to time,
------------
subject to compliance with any other applicable provisions of this Indenture
(including but not limited to Section 3.9), without the consent of the Holders,
-----------
create and issue pursuant to this Indenture additional notes having terms and
conditions identical to those of the Notes except for issue date ("Add On
------
Notes") (or the same except for the payment of interest accruing prior to the
- -----
issue date of such Add On Notes or except for the first payment of interest
following the issue date of such Add On Notes and as provided in the following
sentence), which Add On Notes will be treated, together with any other
Outstanding Notes, as a single issue of securities. The Issuers may, in
connection with the issuance of any Add On Notes, by Board Resolution or
supplemental indenture make appropriate adjustments to this Article II
applicable to such Add On Notes in order to ensure compliance with the
Securities Act and any registration rights or similar agreement applicable to
such Add On Notes.
Section 2.15. CUSIP Numbers. (a) The Issuers in issuing the Notes
-------------
may use "CUSIP" or "ISIN" numbers (if then generally in use) and, if so, the
Trustee shall use CUSIP or ISIN numbers in notices of redemption as a
convenience to Holders; provided, however, that any
38
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such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by
any defect in or omission of such CUSIP or ISIN numbers.
(b) In the event that the Issuers shall issue and the Trustee shall
authenticate any Add On Notes pursuant to Section 2.2, the Issuers shall use
-----------
their best efforts to obtain the same CUSIP or ISIN number for such Add On Notes
as is printed on the Notes Outstanding at such time; provided, however, that if
any Add On Notes are determined, pursuant to an Opinion of Counsel, to be a
different class of security than the Notes Outstanding at such time for federal
income tax purposes, the Issuers may obtain a CUSIP or ISIN number for such
series of Add On Notes that is different from the CUSIP or ISIN number printed
on the Notes then Outstanding and if any Add On Notes are required to carry a
Private Placement Legend and other Notes Outstanding at such time are not or
vice versa, the Issuers may obtain and use a different CUSIP or ISIN number for
such Add On Notes for such time as such difference applies.
ARTICLE III
COVENANTS
Section 3.1. Payment of Notes. (a) The Issuers shall pay the
----------------
principal of and interest on the Notes on the dates and in the manner provided
in the Notes and in this Indenture. Principal and interest shall be considered
paid on the date due if on such date the Trustee or the Paying Agent holds in
accordance with this Indenture money sufficient to pay all principal and
interest then due and the Trustee or the Paying Agent, as the case may be, is
not prohibited from paying such money to the Noteholders on that date pursuant
to the terms of this Indenture.
(b) The Issuers shall pay, to the extent such payments are lawful,
interest (including Post-Petition Interest in any proceeding under any
Bankruptcy Law) on overdue principal at the rate specified therefor in the
Notes, and on Defaulted Interest (without regard to applicable grace periods) at
the rate specified therefor in the Notes.
(c) Notwithstanding anything to the contrary contained in this
Indenture, the Issuers may, to the extent required to do so by law, deduct or
withhold income or other similar taxes imposed by the United States of America
from principal or interest payments hereunder.
Section 3.2. Maintenance of Office or Agency. (a) The Issuers shall
-------------------------------
maintain each office or agency required under Section 2.3. The Issuers will
-----------
give prompt written notice to the Trustee of any change in the location of any
such office or agency. If at any time the Issuers shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the corporate trust office of the Trustee (the "Corporate Trust
Office"), and the Issuers hereby appoint the Trustee as their agent to receive
all such presentations, surrenders, notices and demands.
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(b) The Issuers may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York) where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Issuers of their
obligation to maintain an office or agency in The City of New York for such
purposes. The Issuers will give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
Section 3.3. Corporate Existence. Subject to Article IV, Section
------------------- -------
3.11 and Section 10.2, the Company will do or cause to be done all things
- ---- ------------
necessary to preserve and keep in full force and effect its corporate existence
and that of each Restricted Subsidiary and the corporate rights (charter and
statutory) licenses and franchises of the Company and each Restricted
Subsidiary; provided, however, that the Company shall not be required to
preserve any such existence (except the Company's), right, license or franchise
if the Board of Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
each of its Restricted Subsidiaries, taken as a whole, and that the loss thereof
is not, and will not be, disadvantageous in any material respect to the Holders.
Section 3.4. Payment of Taxes and Other Claims. The Issuers will pay
---------------------------------
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all material taxes, assessments and governmental charges levied
or imposed upon the Issuers or any Restricted Subsidiary or upon the income,
profits or property of the Issuers or any Restricted Subsidiary and (ii) all
lawful claims for labor, materials and supplies, which, if unpaid, might by law
become a material liability or Lien upon the property of the Issuers or any
Restricted Subsidiary; provided, however, that the Issuers shall not be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which appropriate reserves, if
necessary (in the good faith judgment of management of the Company), are being
maintained in accordance with GAAP or where the failure to effect such payment
will not be disadvantageous to the Holders.
Section 3.5. Compliance Certificate. The Issuers shall deliver to
----------------------
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Issuers they would normally have
knowledge of any Default or Event of Default and whether or not the signers know
of any Default or Event of Default that occurred during such period. If they
do, the certificate shall describe the Default or Event of Default, its status
and what action the Issuers are taking or proposes to take with respect thereto.
The Issuers also shall comply with TIA (S) 314(a)(4).
Section 3.6. Maintenance of Properties. The Company and its
-------------------------
Restricted Subsidiaries shall cause all property used or useful in the conduct
of their business or businesses to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and shall
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as, in the judgment of the Company, may be necessary
40
<PAGE>
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided that nothing in this Section 3.6
-----------
shall prevent the Company or any of its Subsidiaries from discontinuing the
operation or maintenance of any of such property if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of its Subsidiaries and not disadvantageous in any material respect to
the Holders.
Section 3.7. Further Instruments and Acts. Upon request of the
----------------------------
Trustee, the Issuers will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
Section 3.8. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Issuers and each Note Guarantor covenant (to the extent that it
may lawfully do so) that they will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Issuers or such Note Guarantor from paying all or any portion of the principal
of or interest on the Notes as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that they may lawfully do so)
the Issuers and each Note Guarantor hereby expressly waive all benefit or
advantage of any such law, and covenants that they will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
Section 3.9. Limitation on Incurrence of Additional Indebtedness.
---------------------------------------------------
(a) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness; provided,
however, that the Company and any Note Guarantor may Incur Indebtedness if, at
the time of and immediately after giving pro forma effect to the Incurrence
thereof and the application of the proceeds therefrom, the Consolidated Fixed
Charge Coverage Ratio is greater than 2.0 to 1.0.
(b) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, the amount of Indebtedness issued at a price
that is less than the principal amount thereof will be equal to the amount of
the liability in respect thereof determined in accordance with GAAP.
Section 3.10. Limitation on Restricted Payments. The Company will
---------------------------------
not, and will not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly, (a) declare or pay any dividend or make any distribution
(other than dividends or distributions payable in Qualified Capital Stock of the
Company or in warrants, rights or options to purchase or acquire shares of
Qualified Capital Stock of the Company or dividends or distributions payable to
the Company or a Restricted Subsidiary and pro rata dividends or distributions
to the Company and/or its Restricted Subsidiaries and to minority holders of
Capital Stock of Restricted
41
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Subsidiaries) on or in respect of shares of Capital Stock of the Company or any
Restricted Subsidiary to holders of such Capital Stock, (b) purchase, redeem or
otherwise acquire or retire for value (other than any such purchase, redemption,
acquisition or retirement that constitutes a Permitted Investment) any Capital
Stock of the Company or any RestrictedSubsidiary or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock (other
than any such Capital Stock, warrants, rights or options owned by the Company or
any Restricted Subsidiary), (c) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, as the case may be, any Subordinated Indebtedness, or (d) make any
Investment (other than Permitted Investments) (each of the foregoing actions set
forth in (but not excluded from) clauses (a), (b), (c) and (d) being referred to
as a "Restricted Payment"), if at the time of such Restricted Payment or
immediately after giving effect thereto, (i) a Default or an Event of Default
shall have occurred and be continuing or (ii) the Company is not able to Incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 3.9 or (iii) the aggregate amount of Restricted Payments
-----------
(including such proposed Restricted Payment) made subsequent to the Issue Date
(the amount expended for such purposes, if other than in cash, being the Fair
Market Value of such property) shall exceed the sum of: (A) 50% of cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) accrued during the period (treated as one
accounting period) beginning on the first day of the fiscal quarter beginning on
January l, 1999 to the end of the most recent fiscal quarter for which
consolidated financial information of the Company is available; plus (B) 100% of
the aggregate net cash proceeds received by the Company from any Person (other
than a Restricted Subsidiary of the Company) from any capital contribution to
the Company or issuance and sale (other than to a Restricted Subsidiary) of
Qualified Capital Stock of the Company subsequent to the Issue Date or any
warrants, rights or options to purchase or acquire shares of Capital Stock of
the Company or from the issuance and sale (other than to a Restricted
Subsidiary) subsequent to the Issue Date of any Indebtedness of the Company or
any Restricted Subsidiary that has been converted into or exchanged for
Qualified Capital Stock of the Company (excluding any net cash proceeds applied
in accordance with the following paragraph); plus (C) without duplication of any
amounts included in clause (A) above or clause (D) below), in the case of the
disposition or repayment of, or the receipt by the Company or any Restricted
Subsidiary of any dividends or distributions from, any Investment constituting a
Restricted Payment made after the Issue Date, an amount equal to the lesser of
the amount of such Investment and the amount received by the Company or any
Restricted Subsidiary upon such disposition, repayment, dividend or
distribution; plus (D) without duplication of any amounts included in clause (C)
above, in the event the Company or any Restricted Subsidiary makes any
Investment in a Person that, as a result of or in connection with such
Investment, becomes a Restricted Subsidiary, an amount equal to the Company's or
any Restricted Subsidiary's existing Investment in such Person that was
previously treated as a Restricted Payment; plus (E) so long as the Designation
thereof was treated as a Restricted Payment made after the Issue Date, with
respect to any Unrestricted Subsidiary that has been redesignated as a
Restricted Subsidiary after the Issue Date in accordance with Section 3.14 an
------------
amount equal to the Company's Investment in such Unrestricted Subsidiary
(provided that such amount shall not in any case exceed the Designation Amount
with respect to such Restricted Subsidiary upon its Designation; plus (F) $5.0
million; provided; that the amount of Restricted
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Payments permitted by this clause (F) will not be reduced by any negative amount
that occurs under clause (A) or clause (H); minus (G) the Designation Amount
(measured as of the date of Designation) with respect to any Subsidiary of the
Company which has been designated as an Unrestricted Subsidiary after the Issue
Date in accordance with Section 3.14; and minus (H) 50% of the distributions
------------
made pursuant to clause (5) of the succeeding paragraph.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration of such dividend if the
dividend would have been permitted on the date of declaration; (2) if no Default
or Event of Default shall have occurred and be continuing, the acquisition of
any shares of Capital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of Capital Stock of the Company, (i) in exchange for
shares of Qualified Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of Qualified Capital Stock of the Company
or (ii) through the application of the net proceeds of a substantially
concurrent sale for cash (other than to a Restricted Subsidiary of the Company)
of shares of Qualified Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of Qualified Capital Stock of the Company;
provided however, that the value of any such Qualified Capital Stock or
warrants, rights and options issued in exchange for such acquired capital stock,
warrants, rights or options and any such net cash proceeds shall be excluded
from clause (iii)(B) of the preceding paragraph (and were not included therein
at any time); (3) if no Default or Event of Default shall have occurred and be
continuing, the voluntary prepayment, purchase, defeasance, redemption or other
acquisition or retirement for value of any Subordinated Indebtedness (i) in
exchange for shares of Capital Stock of the Company or any warrants, rights or
options to purchase or acquire shares of Capital Stock of the Company; provided,
however, that if such Capital Stock is, or such warrants, rights or options to
purchase such Capital Stock are convertible into or exchangeable at the option
of the holder thereof for, Disqualified Capital Stock, then such Disqualified
Capital Stock shall not (A) by its terms, or upon the happening of any event,
mature or be mandatorily redeemable pursuant to a sinking fund obligation or
otherwise, or be redeemable at the option of the holder thereof, in any case, on
or prior to the final maturity of the Indebtedness permitted to be prepaid,
purchased, defeased, redeemed or acquired pursuant to this clause (3) and (B)
have a Weighted Average Life to Maturity less than the Indebtedness permitted to
be prepaid, purchased, defeased, redeemed or acquired pursuant to this clause
(3) or (ii) in exchange for Refinancing Indebtedness or through the application
of net proceeds of a substantially concurrent sale for cash (other than to a
Restricted Subsidiary of the Company) of (A) shares of Qualified Capital Stock
of the Company or any warrants, rights or options to purchase or acquire shares
of Qualified Capital Stock of the Company or (B) Refinancing Indebtedness; and
provided, further, that the value of such Capital Stock or warrants, rights or
options issued in exchange for such Subordinated Indebtedness and any such net
cash proceeds shall be excluded from clause (iii)(B) of the preceding paragraph
(and were not included therein at any time); (4) the making of loans or advances
to officers and directors of the Company or any Restricted Subsidiary entered
into in the ordinary course of business in an amount not to exceed $1.0 million
at any one time outstanding; (5) (a) the making of distributions in cash to JH
and AGY Holdings within 75 days after the end of each taxable year of the
Company in an amount equal to the greater of (i) the product of (A) the sum of
(x) the maximum federal corporate income tax rate in effect during such taxable
year and (y) six percent
43
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and (B) the sum of the items of ordinary income and expense and net capital gain
allocated to JH or AGY Holdings, as the case may be, for such taxable year
(taking into account any special allocations resulting from adjustments under
section 743 of the Code) and (ii) actual income taxes then being assessed
against JH or AGY Holdings on items of ordinary income and expense and net
capital gain allocated to JH or AGY Holdings so long as, in each case,
immediately both before and after giving effect to such payments no Event of
Default shall then exist; (b) the making of distributions to JH with respect to
the purchase price under the LLC Sale and Purchase Agreement for net asset value
not to exceed $2.5 million and (6) the repurchase, redemption or other
acquisition or retirement for value of (i) any Capital Stock of the Company held
by any member of the Company's management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the date of
this Indenture or entered into thereafter with members of the management of any
Person acquired after the Issue Date in connection with the acquisition of such
Person or (ii) Capital Stock of the Company held by employees, former employees,
directors or former directors pursuant to the terms of agreements (including
employment agreements) approved by the Board of Directors; provided, however,
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Capital Stock set forth in clauses (i) and (ii) shall not exceed
$750,000 in any twelve-month period and no Default or Event of Default shall
have occurred and be continuing immediately after any such transaction. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1) (without duplication for the
declaration of the relevant dividend) and (4) shall be included in such
calculation and amounts expended pursuant to clauses (2), (3), (5) and (6) shall
not be included in such calculation.
Section 3.11. Limitation on Asset Sales. The Company will not, and
-------------------------
will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale
unless (i) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to the
Fair Market Value of the assets sold or otherwise disposed of and (ii) at least
75% of the consideration received for the assets sold by the Company or the
Restricted Subsidiary as the case may be, in such Asset Sale shall be in the
form of (A) cash or Cash Equivalents or (B) (1) long-term assets (including
intellectual property associated with the use of such long-term assets) to be
used by the Company or any Restricted Subsidiary in a Permitted Business or (2)
Capital Stock of a Restricted Subsidiary or a Person engaged primarily in a
Permitted Business that will become, upon such purchase, a Restricted Subsidiary
(collectively, "Replacement Assets"), provided that any securities, notes or
other obligations received by the Company or a Restricted Subsidiary from such
transfers that are converted within 90 days of receipt thereof by the Company or
such Restricted Subsidiary into cash or Cash Equivalents (to the extent so
received), shall be deemed to be cash or Cash Equivalents for purposes of this
provision. The amount of any Indebtedness of the Company or such Restricted
Subsidiary (other than Subordinated Indebtedness) that is actually assumed by
the transferee in such Asset Sale and from which the Company or such Restricted
Subsidiary is fully and unconditionally released shall be deemed to be cash for
purposes of determining the percentage of cash consideration received by the
Company or such Restricted Subsidiary. The Company or such Restricted
Subsidiary, as the case may be, may apply the Net Cash Proceeds of any such
Asset Sale within 270 days of such Asset Sale to (x) repay any Senior
Indebtedness and
44
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permanently reduce the commitments, if any, with respect thereto, (y) purchase
from a Person other than the Company and its Restricted Subsidiaries Replacement
Assets or (z) any combination of (x) and (y); provided, however, that if the
Company or a Restricted Subsidiary makes an investment in Replacement Assets not
earlier than 90 days prior to such Asset Sale (or the execution by the Company
or a Restricted Subsidiary of a binding commitment to consummate such Asset
Sale, which commitment is not subject to any conditions precedent other than
obtaining necessary financing and the closing in respect of the Asset Sale that
is the subject of such binding commitment occurs within 90 days of the date such
commitment is executed), then such investment shall satisfy, to the extent of
the amount of such investment, the requirements of clause (y) above.
To the extent all or a portion of the Net Cash Proceeds of any Asset
Sale are not applied within 270 days of such Asset Sale as described in clause
(x), (y) or (z) of the immediately preceding paragraph (the "Net Proceeds Offer
Trigger Date"), the Issuers will make an offer to purchase (the "Net Proceeds
Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 20
business days following the date on which such offer is made (or such longer
period as may be required by law) nor more than 60 days following such Net
Proceeds Offer Trigger Date, from all Holders on a pro rata basis (and on a pro
rata basis with the holders of any other Senior Subordinated Indebtedness with
similar provisions requiring the Issuers to offer to purchase such Senior
Subordinated Indebtedness with the proceeds of Asset Sales), that principal
amount of Notes and such other Indebtedness equal to such unapplied Net Cash
Proceeds at a price, in the case of the Notes, equal to 100% of the principal
amount of the Notes to be purchased, plus accrued and unpaid interest thereon,
to the date of purchase (subject to the right of Holders of record on a record
date to receive interest due on an interest payment date that is on or prior to
such date of purchase). Notwithstanding the forgoing, the Issuers may defer the
Net Proceeds Offer until there is an aggregate amount of unapplied Net Cash
Proceeds equal to or in excess of $5.0 million resulting from one or more Asset
Sales (at which time, the entire amount of unapplied Net Cash Proceeds, and not
just the amount in excess of $5.0 million, shall be applied as required pursuant
to this paragraph).
Each Net Proceeds Offer will be mailed to the record Holders as shown
on the register of Holders within 30 days following the Net Proceeds Offer
Trigger Date, with a copy to the Trustee, and shall comply with the procedures
set forth in this Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders of Notes and
holders of other Senior Subordinated Indebtedness, if any, which are or is the
subject of a Net Proceeds Offer properly tender Notes or such other Senior
Subordinated Indebtedness in an aggregate amount exceeding the amount of
unapplied Net Cash Proceeds, Notes of tendering Holders and such other Senior
Subordinated Indebtedness of tendering holders will be purchased on a pro rata
basis (based on amounts tendered).
The Issuers will comply with the requirements of Rule 14e-l under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of
any securities laws or regulations conflict with this
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Section 3.11, the Issuers shall comply with the applicable securities laws and
- ------------
regulations and shall not be deemed to have breached their obligations under
this Section 3.11 by virtue thereof.
------------
Upon completion of a Net Proceeds Offer, the amount of Net Cash
Proceeds will be reset at zero. Accordingly, to the extent that the aggregate
amount of Notes and other Senior Subordinated Indebtedness tendered pursuant to
a Net Proceeds Offer is less than the aggregate amount of unapplied Net Cash
Proceeds, the Issuers may use any remaining Net Cash Proceeds for general
corporate purposes.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 4.1, the Surviving
-----------
Entity shall be deemed to have sold the properties and assets of the Company and
its Restricted Subsidiaries not so transferred for purposes of this covenant,
and shall comply with the provisions of this covenant with respect to such
deemed sale as if it were an Asset Sale. In addition, the Fair Market Value of
such properties and assets of the Company or its Restricted Subsidiaries deemed
to be sold shall be deemed to be Net Cash Proceeds for purposes of this
covenant. If at any time any non-cash consideration received by the Company or
any Restricted Subsidiary, as the case may be, in connection with any Asset Sale
is converted into or sold or otherwise disposed of for cash (other than interest
received with respect to any such non-cash consideration), then such conversion
or disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant.
Section 3.12. Limitation on Dividend and Other Payment Restrictions
-----------------------------------------------------
Affecting Restricted Subsidiaries. The Company will not, and will not cause or
- ---------------------------------
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or permit to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock to the
Company or any other Restricted Subsidiary or pay any Indebtedness owed to the
Company or any other Restricted Subsidiary; (b) make loans or advances to, or
guarantee any Indebtedness or other obligations of, or make any Investment in,
the Company or any other Restricted Subsidiary; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary, except for
such encumbrances or restrictions existing under or by reason of: (1) applicable
law; (2) this Indenture; (3) the Senior Credit Facility as in effect on the
Issue Date, and any amendments or restatements thereof; provided, however, that
any such amendment or restatement is not materially more restrictive with
respect to such encumbrances or restrictions than those in existence on the
Issue Date; (4) customary non-assignment provisions of any contract and
customary provisions restricting assignment or subletting in any lease governing
a leasehold interest of any Restricted Subsidiary, or any customary restriction
on the ability of a Restricted Subsidiary to dividend, distribute or otherwise
transfer any asset which secures Purchase Money Indebtedness of such Restricted
Subsidiary; (5) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties or assets of the
Person so acquired; (6) restrictions with respect to a Restricted Subsidiary of
the Company imposed pursuant to a binding agreement which has been entered into
for the sale or disposition of Capital
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Stock or assets of such Subsidiary; provided however, that such restrictions
apply solely to the Capital Stock or assets of such Restricted Subsidiary which
are being sold; (7) customary restrictions imposed on the transfer of
copyrighted or patented materials; (8) secured Indebtedness otherwise permitted
to be Incurred pursuant to Section 3.9 and 3.16, which encumbrance or
----------- ----
restriction is not applicable to any property or assets other than the property
or assets subject to the Lien securing such Indebtedness; (9) restrictions with
respect to a Restricted Subsidiary that is a Foreign Subsidiary contained in any
instrument governing Indebtedness of any such Restricted Subsidiary permitted
pursuant to clause (xiv) of the definition of Permitted Indebtedness; or (10) an
agreement governing Indebtedness Incurred to Refinance the Indebtedness issued,
assumed or Incurred pursuant to an agreement referred to in clause (3), (5) or
(8) above; provided, however, that such refinancing agreement is not materially
more restrictive with respect to such encumbrances or restrictions than those
contained in the agreement referred to in such clause (3), (5) or (8), as
determined by the Board of Directors in their reasonable good faith judgment.
Section 3.13. Limitation on the Sale or Issuance of Capital Stock of
------------------------------------------------------
Restricted Subsidiaries. The Company will not sell or otherwise dispose of any
- -----------------------
shares of Capital Stock of a Restricted Subsidiary, and will not cause or permit
any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock, except (i) to the Company or a
Wholly Owned Restricted Subsidiary; (ii) the sale of 100% of the shares of the
Capital Stock of any Restricted Subsidiary owned by the Company or any
Restricted Subsidiary effected in accordance with Section 3.11 and 4.1; (iii) in
------------ ---
the case of Restricted Subsidiaries other than Wholly Owned Restricted
Subsidiaries, issuance of Capital Stock on a pro rata basis to the Company and
its Restricted Subsidiaries and minority shareholders of such Restricted
Subsidiary (or on less than a pro rata basis to any such minority holder if such
minority holder does not acquire its pro rata amount); (iv) the sale of Capital
Stock of a Restricted Subsidiary or issuance by a Restricted Subsidiary of
Capital Stock if following such sale or issuance, (x) such Restricted Subsidiary
is no longer a Subsidiary, (y) the Company's continuing Investment in such
former Restricted Subsidiary is in compliance with Section 3.10 and (z) any sale
------------
of Capital Stock by the Company or such Restricted Subsidiary is made in
compliance with Section 3.11; provided, that, notwithstanding the foregoing,
------------
Capital shall, at all times prior to the reorganization of the Company as a
corporation, remain a Wholly Owned Restricted Subsidiary of the Company.
Section 3.14. Designation of Unrestricted Subsidiaries. The Company
----------------------------------------
may designate any Subsidiary of the Company (other than Capital) as an
"Unrestricted Subsidiary" (a "Designation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Designation:
(ii) at the time of and after giving effect to such Designation, the
Issuers could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 3.9 and
-----------
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(iii) the Issuers would be permitted to make an Investment at the
time of Designation (assuming the effectiveness of such Designation and
treating such Designation as an Investment at such time) pursuant to the
first paragraph of Section 3.10 in an amount (the "Designation Amount")
------------
equal to the amount of the Company's Investment in such Subsidiary on such
date.
Neither the Company nor any Restricted Subsidiary shall at any time
(x) provide credit support for, subject any of its property or assets (other
than the Capital Stock of any Unrestricted Subsidiary) to the satisfaction of,
or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) unless such
credit support or guarantee constitutes an Investment permitted pursuant to
Section 3.10, (y) be directly or indirectly liable for any Indebtedness of any
- ------------
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary,
except for any non-recourse guarantee given solely to support the pledge by the
Company or any Restricted Subsidiary of the Capital Stock of any Unrestricted
Subsidiary. For purposes of the foregoing, the Designation of a Subsidiary of
the Company as an Unrestricted Subsidiary shall be deemed to include the
Designation of all of the Subsidiaries of such Subsidiary.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
(i) No Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by resolutions of
the Board of Directors of the Company, delivered to the Trustee certifying
compliance with the foregoing provisions.
Section 3.15. Limitation on Layered Indebtedness. The Company shall
----------------------------------
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
Incur any Indebtedness that is subordinate in right of payment to any other
Indebtedness, unless such Indebtedness is subordinate in right of payment to, or
ranks pari passu with, the Notes or, in the case of Restricted Subsidiaries that
are Note Guarantors, such Indebtedness is subordinate in right of payment to, or
ranks pari passu with, the Note Guarantees of such Note Guarantors.
No Note Guarantor will, directly or indirectly, Guarantee any
Indebtedness of the Issuers that is subordinate in right of payment to any other
Indebtedness of the Issuers unless such Guarantee is subordinate in right of
payment to, or ranks pari passu with, the Note Guarantee of such Note Guarantor.
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Section 3.16. Limitation on Liens. The Company will not, and will not
-------------------
cause or permit any of its Restricted Subsidiaries to, directly or indirectly,
Incur any Liens of any kind against or upon any of their respective properties
or assets, whether owned on the Issue Date or acquired after the Issue Date, or
any proceeds therefrom, to secure any Indebtedness unless contemporaneously
therewith effective provision is made, (i) in the case of the Issuers to secure
the Notes and all other amounts due hereunder, and (ii) in the case of a Note
Guarantor, to secure such Note Guarantor's Note Guarantee and all other amounts
due hereunder, in each case, equally and ratably with such Indebtedness (or, in
the event that such Indebtedness is subordinated in right of payment to the
Notes or such Note Guarantee, prior to such Indebtedness) with a Lien on the
same properties and assets securing such Indebtedness for so long as such
Indebtedness is secured by such Lien, except for (A) Liens securing Senior
Indebtedness (including, without limitation, Indebtedness Incurred under the
Senior Credit Facility) and (B) Permitted Liens.
Section 3.17. Limitation on Transactions with Affiliates. (a) The
------------------------------------------
Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), unless:
(i) the terms of such Affiliate Transaction are no less favorable than those
that could reasonably be expected to be obtained in a comparable transaction at
such time on an arm's-length basis from a Person that is not an Affiliate of the
Company; (ii) in the event that such Affiliate Transaction (other than a JV
Contract) involves aggregate payments, or transfers of property or services with
a Fair Market Value in excess of $5.0 million during any twelve-month period,
the terms of such Affiliate Transaction shall be approved by a majority of the
members of the Board of Directors of the Company (including a majority of the
disinterested members thereof), such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions, (iii) in the event that such
Affiliate Transaction constitutes a JV Contract which involves aggregate
payments or transfers of property or services with a Fair Market Value in excess
of $5.0 million during any twelve month period, the terms of which shall be
approved by a majority of the disinterested members of the Board of Directors of
the Company, such approval to be evidenced by a Board Resolution stating that
such members of the Board of Directors have determined that such transaction
complies with the foregoing provisions and (iv) in the event that such Affiliate
Transaction (other than a JV Contract) involves aggregate payments, or transfer
of property or services with a Fair Market Value, in excess of $10.0 million
during any twelve month period, the Company shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction or
series of related transactions to the Company and the relevant Restricted
Subsidiary (if any) from a financial point of view from an Independent Financial
Advisor and file the same with the Trustee. For purposes hereof, the members of
the Board of Directors representing the LLC Member which is not a party to such
Affiliate Transaction shall be deemed to be disinterested directors.
(b) Notwithstanding the foregoing, the restrictions set forth in
paragraph (a) shall not apply to (i) transactions with or among the Company and
any Restricted Subsidiary or
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between or among Restricted Subsidiaries; (ii) reasonable fees and compensation
paid to, and any indemnity provided on behalf of, officers, directors,
employees, consultants or agents of the Company or any Restricted Subsidiary as
determined in good faith by the Company's Board of Directors; (iii) any
transactions undertaken pursuant to any contractual obligations or rights in
existence on the Issue Date (as in effect on the Issue Date), including any JV
Contracts; (iv) any Restricted Payments made in compliance with Section 3.10;
------------
(v) loans and advances to officers, directors and employees of the Company or
any Restricted Subsidiary for travel, entertainment, moving and other relocation
expenses, in each case made in the ordinary course of business; (vi) the
entering into by the Company and any of its consolidated Restricted Subsidiaries
of a tax sharing or similar arrangement.
Section 3.18. Change of Control. (a) Upon the occurrence of a Change
-----------------
of Control, each Holder will have the right to require that the Issuers purchase
all or a portion (in integral multiples of $1,000) of such Holder's Notes
pursuant to the offer described in this Section 3.18 (the "Change of Control
------------
Offer"), at a purchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest thereon to the date of purchase (subject to the
right of Holders of record on a record date to receive interest due on the
related interest payment date that is on or prior to such date of purchase).
Within 30 days following the date upon which the Change of Control occurred, the
Company must send, by first-class mail, a notice to each Holder, with a copy to
the Trustee, which notice shall govern the terms of the Change of Control Offer.
Such notice shall state, among other things, the purchase date, which must be no
earlier than 30 days nor later than 60 days from the date such notice is mailed,
other than as may be required by law (the "Change of Control Payment Date").
Holders electing to have a Note purchased pursuant to a Change of Control Offer
will be required to surrender the Note, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on the third
business day prior to the Change of Control Payment Date.
(b) The Issuers will comply with the requirements of Rule 14e-l under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the purchase
of Notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
-------
3.18, the Issuers shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached their obligations this
Section 3.18 by virtue thereof.
- ------------
Section 3.19. Conduct of Business; Limitation on Activities of
------------------------------------------------
Capital. The Company and its Restricted Subsidiaries will not engage in any
businesses other than a Permitted Business; provided, that, notwithstanding the
foregoing, the Company shall not permit Capital to acquire or hold any
significant assets or other properties or engage in any business activities.
Section 3.20. Reports to Holders. Notwithstanding that the Company
------------------
or Capital may not be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, so long as any Notes remain outstanding, the Issuers
shall (i) provide the Trustee, the Holders and the Initial Purchasers with such
annual reports and such information, documents and other
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reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections within 15 days after
the times specified for the filing of such information, documents and reports
under such Sections and (ii) beginning on the earlier of (x) the effective date
of the Exchange Offer Registration Statement and (y) 150 days following the
Issue Date, file with the Commission, to the extent permitted, the information,
documents and reports referred to in clause (i) within the periods specified
under such Sections. In addition, at any time when either the Company or Capital
is subject to or is not current in its reporting obligations under clause (ii)
of the preceding sentence, the Issuers will make available, upon request, to any
holder and any prospective purchaser of Notes the information required pursuant
to Rule 144A(d)(4) under the Securities Act.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuers'
compliance with any of the covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 3.21. Payments for Consent. Neither the Company nor any
--------------------
of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any
terms or provisions of the Notes, unless such consideration is offered to be
paid or agreed to be paid to all Holders of the Notes that so consent, waive or
agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
ARTICLE IV
SUCCESSOR COMPANY
Section 4.1. Merger, Consolidation and Sale of Assets. (a) Neither of
----------------------------------------
the Issuers will, in a single transaction or series of related transactions,
consolidate or merge with or into any Person (whether or not the Company is the
surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose
of (or cause or permit any Restricted Subsidiary to sell, assign, transfer,
lease, convey or otherwise dispose of) all or substantially all of the Company's
and its Restricted Subsidiaries' properties and assets (determined on a
consolidated basis for the Company and its Restricted Subsidiaries) to any
Person unless:
(i) either (1) the Company shall be the surviving or continuing
entity or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the Company's
Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under
the laws of the United States or any State thereof and (y) shall expressly
assume, by supplemental indenture (in
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form and substance satisfactory to the Trustee), executed and delivered to
the Trustee, the due and punctual payment of the principal of, and premium,
if any, and interest on all of the Notes and the performance and observance
of every covenant of the Notes and this Indenture and the Registration
Rights Agreement on the part of the Company to be performed or observed;
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect
on a pro forma basis to any Indebtedness, including any Acquired
Indebtedness, Incurred in connection with or in respect of such
transaction), (A) the Company or such Surviving Entity, as the case may be,
shall be able to Incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 3.9 or (B) the
-----------
Consolidated Fixed Charge Coverage Ratio for the Company or such Surviving
Entity, as the case may be, would be greater than the Consolidated Fixed
Charge Coverage Ratio for the Company immediately prior to such
transaction;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect on a pro forma basis to any
Indebtedness, including any Acquired Indebtedness, Incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred or be continuing;
(iv) each Note Guarantor (including Persons which become Note
Guarantors as a result of the transaction) shall have confirmed by
Supplemental Indenture that its Note Guarantee shall apply for such
Person's Obligations in respect of this Indenture and the Notes; and
(v) the Company or the Surviving Entity shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with the applicable provisions of this Indenture and that all
conditions precedent in this Indenture relating to such transaction have
been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The provisions of clause (ii) above shall not apply to (x) any
transfer of the properties or assets of a Restricted Subsidiary of the Company
to the Company or to a Wholly Owned Restricted Subsidiary, (y) any merger of a
Restricted Subsidiary into the Company or (z) any merger of the Company into a
Restricted Subsidiary.
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Upon any consolidation, combination or merger or any transfer of all
or substantially all of the properties and assets of the Company and its
Restricted Subsidiaries in accordance with the foregoing, in which the Company
is not the continuing corporation, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and under
the Notes with the same effect as if such surviving entity had been named as
such.
(b) Each Note Guarantor (other than any Note Guarantor whose Note
Guarantee is to be released in accordance with Section 11.2 will not, and the
------------
Company will not cause or permit any Note Guarantor to, consolidate with or
merge into any Person that is not a Note Guarantor unless such Person (if such
Person is the surviving entity) assumes by supplemental indenture all of the
obligations of such Note Guarantor in respect of its Note Guarantee.
ARTICLE V
REDEMPTION OF NOTES
Section 5.1. Optional Redemption. The Notes may be redeemed, as a
-------------------
whole or from time to time in part, subject to the conditions and at the
redemption prices specified in the form of Notes set forth in Exhibits A and B
----------------
hereto.
Section 5.2. Applicability of Article. Redemption of Notes at the
------------------------
election of the Issuers or otherwise, as permitted or required by any provision
of this Indenture, shall be made in accordance with such provision and this
Article.
Section 5.3. Election to Redeem; Notice to Trustee. (a) The
-------------------------------------
election of the Issuers to redeem any Notes pursuant to Section 5.1 shall be
-----------
evidenced by Board Resolutions. In case of any redemption at the election of
the Issuers, the Issuers shall, upon not less than 30 and not more than 60 days
prior to the Redemption Date fixed by the Issuers, notify the Trustee of the
provision of the Notes pursuant to which the redemption is being made, the
Redemption Date, the principal amount of Notes to be redeemed and shall deliver
to the Trustee such documentation and records as shall enable the Trustee to
select the Notes to be redeemed.
(b) In the event that less than all of the Notes are to be redeemed
at any time, selection of such Notes for redemption will be made by the Trustee
in compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not then
listed on a national securities exchange, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided, however, that
no Notes of a principal amount of $1,000 or less shall be redeemed in part and
Notes of a principal amount in excess of $1,000 may be redeemed in part in
multiples of $1,000 only; and provided, further, that if a partial redemption is
made with the proceeds of a Public Equity Offering, selection of the Notes or
portions thereof for redemption shall, subject to the preceding proviso, be made
by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of DTC or a successor depositary), unless
such method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than
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60 days before the Redemption Date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the Redemption Date, interest
will cease to accrue on Notes or portions thereof called for redemption as long
as the Issuers had deposited with the Paying Agent funds in satisfaction of the
applicable redemption price.
(c) For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Notes shall relate, in the
case of any Note redeemed or to be redeemed only in part, to the portion of the
principal amount of such Note which has been or is to be redeemed.
Section 5.4. Notice of Redemption. (a) Notice of redemption shall
--------------------
be given in the manner provided for in Section 13.2 not less than 30 nor more
------------
than 60 days prior to the Redemption Date, to each Holder of Notes to be
redeemed. At the Issuers' request, the Trustee shall give notice of redemption
in the Issuers' name and at the Issuers' expense; provided, however, that the
Issuers shall deliver to the Trustee, at least 45 days prior to the Redemption
Date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
following items.
(b) All notices of redemption shall state (in addition to the CUSIP
number, if any):
(1) the Redemption Date,
(2) the redemption price and the amount of accrued interest to
the Redemption Date payable as provided in Section 5.6, if any,
-----------
(3) if less than all Outstanding Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be redeemed,
as well as the aggregate principal amount of Notes to be redeemed and the
aggregate principal amount of Notes to be Outstanding after such partial
redemption,
(4) in case any Note is to be redeemed in part only, the notice
which relates to such Note shall state that on and after the Redemption
Date, upon surrender of such Note, the Holder will receive, without charge,
a new Note or Notes of authorized denominations for the principal amount
thereof remaining unredeemed,
(5) that on the Redemption Date the redemption price (and
accrued interest, if any, to the Redemption Date payable as provided in
Section 5.6) will become due and payable upon each such Note, or the
-----------
portion thereof, to be redeemed, and, unless the Issuers default in making
the redemption payment, that interest on Notes called for redemption (or
the portion thereof) will cease to accrue on and after said date,
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(6) the place or places where such Notes are to be surrendered
for payment of the Redemption Price and accrued interest, if any,
(7) the name and address of the Paying Agent,
(8) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price,
(9) the CUSIP or ISIN number, and that no representation is
made as to the accuracy or correctness of the CUSIP or ISIN number, if any,
listed in such notice or printed on the Notes, and
(10) the paragraph of the Notes pursuant to which the Notes are
to be redeemed.
Section 5.5. Section Deposit of Redemption Price. On or prior to 11
-----------------------------------
A.M. on the relevant Redemption Date, the Issuers shall deposit with the Trustee
or with a Paying Agent (or, if one of the Issuers is acting as Paying Agent,
segregate and hold in trust as provided in Section 2.4) an amount of money
-----------
sufficient to pay the redemption price of, and accrued interest on, all the
Notes which are to be redeemed on that date.
Section 5.6. Notes Payable on Redemption Date. Notice of redemption
--------------------------------
having been given in accordance with this Article V, the Notes so to be redeemed
shall, on the Redemption Date, become due and payable at the redemption price
therein specified (together with accrued interest, if any, to the Redemption
Date), and from and after such date (unless the Issuers shall default in the
payment of the redemption price and accrued interest) such Notes shall cease to
bear interest. Upon surrender of any such Note for redemption in accordance
with said notice, such Note shall be paid by the Issuers at the redemption
price, together with accrued interest, if any, to the Redemption Date (subject
to the rights of Holders of record on the relevant record date to receive
interest due on the relevant interest payment date). If any Note called for
redemption shall not be so paid upon surrender thereof for redemption, the
principal, and premium, if any, shall, until paid, bear interest from the
Redemption Date at the rate borne by the Notes.
Section 5.7. Notes Redeemed in Part. Upon surrender of a Note which
----------------------
is to be redeemed in part, the Issuers shall execute, and the Trustee shall
authenticate and make available for delivery to the Holder of such Note at the
expense of the Issuers, a new Note or Notes, of any authorized denomination as
requested by such Holder, in an aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Note so surrendered,
provided, that each such new Note will be in a principal amount of $1,000 or
integral multiple thereof.
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ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1. Events of Default. The following shall be "Events of
-----------------
Default":
(a) the failure to pay the principal of (or premium, if any, on) any
Note when due, at Stated Maturity, upon redemption or otherwise (including
the failure to make a required payment to purchase Notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer) and whether or not
prohibited under Articles X and XII");
(b) the failure to pay any interest on any Notes when due, continued
for 30 days or more (whether or not prohibited under Articles X and XII");
(c) the failure to perform or comply with Section 4.1;
-----------
(d) the failure to perform or comply with any other covenant or
agreement contained herein or in the Notes continued for 30 days or more
after written notice to the Issuers from the Trustee or the Holders of at
least 25% in aggregate principal amount of the Outstanding Notes;
(e) the failure to pay at final maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness of the Company or any Restricted Subsidiary, or the
acceleration of the final stated maturity of any such Indebtedness by
reason of a default or event of default in respect of such Indebtedness, in
any case if the aggregate principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness in default for
failure to pay principal at final maturity or which has been so
accelerated, aggregates $7.5 million or more at any time;
(f) one or more judgments in an aggregate amount in excess of $7.5
million (to the extent not covered by third-party insurance as to which a
financially sound insurer has not disclaimed coverage) shall have been
rendered against the Company or any of its Restricted Subsidiaries and such
judgment or judgments remain undischarged, unpaid or unstayed for a period
of 60 days after such judgment or judgments become final and non-
appealable;
(g) the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of either of the Issuers or any
Significant Subsidiary of the Company in an involuntary case or proceeding
under any Bankruptcy Law or (ii) a decree or order (A) adjudging either of
the Issuers or any Significant Subsidiary of the Company a bankrupt or
insolvent, or (B) approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of, or in respect
of, either of the Issuers or any Significant Subsidiary of the Company
under any Bankruptcy Law, or (C) appointing a Custodian of either of the
Issuers or any Significant Subsidiary of the Company or of any substantial
part of the property of either of the Issuers or any
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Significant Subsidiary of the Company, or (D) ordering the winding-up or
liquidation of the affairs of either of the Issuers or any Significant
Subsidiary of the Company, and in each case, the continuance of any such
decree or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive calendar days; or
(h) (i) the commencement by either of the Issuers or any Significant
Subsidiary of the Company of a voluntary case or proceeding under any
Bankruptcy Law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent; or (ii) the consent by either of the Issuers or any
Significant Subsidiary of the Company to the entry of a decree or order for
relief in respect of either of the Issuers or any Significant Subsidiary of
the Company in an involuntary case or proceeding under any Bankruptcy Law
or to the commencement of any bankruptcy or insolvency case or proceeding
against either of the Issuers or any Significant Subsidiary of the Company;
or (iii) the filing by either of the Issuers or any Significant Subsidiary
of the Company of a petition or answer or consent seeking reorganization or
relief under any Bankruptcy Law; or (iv) the consent by either of the
Issuers or any Significant Subsidiary of the Company to the filing of such
petition or to the appointment of or taking possession by a Custodian of
either of the Issuers or any Significant Subsidiary of the Company or of
any substantial part of the property of either of the Issuers or any
Significant Subsidiary of the Company, or (v) the making by either of the
Issuers or any Significant Subsidiary of the Company of an assignment for
the benefit of creditors; or (vi) the admission by either of the Issuers or
any Significant Subsidiary of the Company in writing of its inability to
pay its debts generally as they become due; or (vii) the approval by
stockholders of either of the Issuers or any Significant Subsidiary of the
Company of any plan or proposal for the liquidation or dissolution of
either of the Issuers or any Significant Subsidiary of the Company; or
(viii) the taking of corporate action by either of the Issuers or any
Significant Subsidiary of the Company in furtherance of any such action; or
(i) the Note Guarantee of any Note Guarantor is held or declared to be
unenforceable or invalid in a judicial proceeding or ceases for any reason
to be in full force and effect (other than by reason of a release of such
Note Guarantor from its Note Guarantee in accordance with the terms herein)
or any Note Guarantor or any Person acting on behalf of any Note Guarantor
denies or disaffirms such Note Guarantor's obligations under its Note
Guarantee (other than by reason of a release of such Note Guarantor from
its Note Guarantee in accordance with the terms herein).
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The Issuers shall deliver to a Trust Officer of the Trustee, within 30
days after either Issuer obtains knowledge of the occurrence thereof, written
notice in the form of an Officers' Certificate of any Default or Event of
Default under clauses (c)-(f), (i) and (j) of this
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Section 6.1, their status and what action the Issuers are taking or propose to
- -----------
take in respect thereof.
Section 6.2. Acceleration.
------------
If an Event of Default (other than an Event of Default relating to
either of the Issuers specified in clauses (g) and (h) of Section 6.1) shall
-----------
occur and be continuing, the Trustee or the Holders of at least 25% in principal
amount of Outstanding Notes may declare the principal of (and premium, if any)
and accrued and unpaid interest on all the Notes to be due and payable by notice
in writing to the Issuers and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice"),
and the same shall become immediately due and payable. If an Event of Default
specified in 6.1(g) or 6.1(h) relating to either of the Issuers occurs and is
continuing, then all unpaid principal of, and premium, if any, and accrued and
unpaid interest on all of the Outstanding Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the
Notes, the Holders of a majority in principal amount of the Outstanding Notes
may rescind and cancel such declaration and its consequences (i) if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration, (ii) to the
extent the payment of such interest is lawful, interest on overdue installments
of interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid and (iii) if the Issuers have paid
the Trustee its reasonable compensation and reimbursed the Trustee for its
reasonable expenses, disbursements and advances. No such rescission shall
affect any subsequent Default or impair any right consequent thereto.
Section 6.3. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.4. Waiver of Past Defaults. Subject to Section 9.2, the
-----------------------
Holders of not less than a majority in principal amount of the Outstanding Notes
by written notice to the Trustee or by written consent may waive any existing
Default or Event of Default and its consequences, except a Default in the
payment of principal of, premium, if any, and interest and Additional Interest,
if any, on any Note. The Issuers shall deliver to the Trustee an Officers'
Certificate stating that the requisite percentage of Holders have consented to
such waiver and attaching copies of such consents. When a Default or Event of
Default is waived, it is cured and ceases.
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Section 6.5. Control by Majority. The Holders of a majority in
-------------------
principal amount of the Outstanding Notes may direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. Subject to Sections 7.1
------------
and 7.2, however, the Trustee may refuse to follow any direction that conflicts
---
with law or this Indenture or, that the Trustee determines is unduly prejudicial
to the rights of other Noteholders; provided, however, that the Trustee may take
any other action deemed proper by the Trustee that is not inconsistent with such
direction.
Section 6.6. Limitation on Suits. No Holder of any Notes will have
-------------------
any right to institute any proceeding hereunder, unless (i) such Holder gives to
a Trust Officer of the Trustee written notice of a continuing Event of Default,
(ii) Holders of at least 25% in principal amount of the Outstanding Notes make a
written request to pursue the remedy, (iii) such Holders of the Notes provide
security and indemnity satisfactory to the Trustee, (iv) the Trustee does not
comply within 60 days and (v) during such 60 day period the Holders of a
majority in principal amount of the Outstanding Notes do not give the Trustee a
written direction which, in the opinion of the Trustee, is inconsistent with the
request. Otherwise, no Holder of any Note will have any right to institute any
proceeding with respect to this Indenture or for any remedy thereunder, except
(i) a Holder of a Note may institute suit for enforcement of payment of the
principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note or (ii) the institution of any
proceeding with respect to this Indenture or any remedy hereunder, including,
without limitation, acceleration, by the Holders of a majority in principal
amount of the Outstanding Notes; provided, however, that upon institution of any
proceeding or exercise of any remedy, such Holder or Holders provide the Trustee
with prompt notice thereof.
Section 6.7. Rights of Holders to Receive Payment. Notwithstanding
------------------------------------
any other provision of this Indenture (including, without limitation, Section
-------
6.6), the right of any Holder to receive payment of principal of, premium, if
- ---
any, or interest on the Notes held by such Holder, on or after the respective
due dates expressed in the Notes, or to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
Section 6.8. Collection Suit by Trustee. If an Event of Default
--------------------------
specified in clauses (a) or (b) of Section 6.1 occurs and is continuing, the
-----------
Trustee may recover judgment in its own name and as trustee of an express trust
against the Issuers for the whole amount then due and owing (together with
applicable interest on any overdue principal, and to the extent lawful, interest
on overdue interest) and the amounts provided for in Section 7.7.
-----------
Section 6.9. Trustee May File Proofs of Claim. The Trustee may file
--------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Noteholders allowed
in any judicial proceedings relative to the Issuers, the Company's Subsidiaries
or their respective creditors or properties and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions, and any Note
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the
59
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Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and its counsel, and any other amounts due the Trustee under
Section 7.7.
- -----------
Section 6.10. Priorities. If the Trustee collects any money or
----------
property pursuant to this Article VI, it shall pay out the money or property in
----------
the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
-----------
SECOND: if the Holders proceed against the Issuers directly without
the Trustee in accordance with this Indenture, to the Holders for their
collection costs;
THIRD: to the Holders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for principal and interest, respectively; and
FOURTH: to the Issuers or, to the extent the Trustee collects any
amount pursuant to Article XI hereof from any Note Guarantor, to such Note
Guarantor.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Issuers shall mail to each Noteholder and the Trustee a notice that states
the record date, the payment date and amount to be paid.
Section 6.11. Undertaking for Costs. In any suit for the enforcement
---------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by the Issuers, a suit by a Holder pursuant to Section 6.7 or a
-----------
suit by Holders of more than 10% in principal amount of the Outstanding Notes.
ARTICLE VII
TRUSTEE
Section 7.1. Duties of Trustee. (a) If a Default or an Event of
-----------------
Default has occurred and is continuing, the Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs; provided that if an Event of
Default occurs and is continuing, the Trustee will be under no obligation to
exercise any of the rights or powers under this Indenture at the request or
direction of any of the Holders
60
<PAGE>
unless such Holders have offered indemnity or security satisfactory to the
Trustee against loss, liability or expense.
(b) Except during the continuance of a Default or an Event of
Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificates or opinions which by any provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine such certificates and opinions to determine whether
or not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.2 or Section 6.5.
----------- -----------
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
61
<PAGE>
(i) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuers shall be sufficient if
signed by an Officer of the Issuers.
(j) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered security and indemnity
satisfactory to the Trustee against the costs, expenses (including reasonable
attorneys' fees and expenses) and liabilities that might be incurred by it in
compliance with such request or direction.
Section 7.2. Rights of Trustee. (a) Subject to Section 7.1, the
----------------- -----------
Trustee may rely on any document reasonably believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(a) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on an
Officers' Certificate or Opinion of Counsel.
(b) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(c) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
willful misconduct or negligence.
(d) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
Section 7.3. Individual Rights of Trustee. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuers or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
------------- ----
Section 7.4. Trustee's Disclaimer. The Trustee shall not be
--------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Issuers' use of
the proceeds from the Notes, and it shall not be responsible for any statement
of the Issuers in this Indenture or in any document issued in connection with
the sale of the Notes or in the Notes other than the Trustee's certificate of
authentication.
Section 7.5. Notice of Defaults. If a Default or Event of Default
------------------
occurs and is continuing and if a Trust Officer has actual knowledge thereof,
the Trustee shall mail to each Noteholder notice of the Default or Event of
Default within five days after it is known to a trust officer or written notice
of it is received by the Trustee. Except in the case of a Default or Event
62
<PAGE>
of Default in payment of principal of, premium, if any, or interest on any Note
(including payments pursuant to the optional redemption or required repurchase
provisions of such Note, if any), the Trustee may withhold the notice if and so
long as a committee of its trust officers in good faith determines that
withholding the notice is not opposed to the interests of the Noteholders.
Section 7.6. Reports by Trustee to Holders. The Trustee shall comply
-----------------------------
with TIA (S) 313. The Issuers agree to notify promptly the Trustee whenever the
Notes become listed on any stock exchange and of any delisting thereof.
Section 7.7. Compensation and Indemnity. (a) The Issuers shall pay
--------------------------
to the Trustee and any predecessor trustee from time to time such compensation
as shall be agreed to in writing by the Company and the Trustee for its
acceptance of this Indenture and services hereunder as the Issuers and the
Trustee shall from time to time agree in writing. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuers shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection,
costs of preparing and reviewing reports, certificates and other documents,
costs of preparation and mailing of notices to Noteholders and reasonable costs
of counsel retained by the Trustee in connection with the delivery of an Opinion
of Counsel or otherwise, in addition to the compensation for its services. Such
expenses shall include the reasonable compensation and expenses, disbursements
and advances of the Trustee's agents, counsel, accountants and experts.
(b) The Issuers and the Note Guarantors shall jointly and severally
indemnify the Trustee against any and all loss, liability or expense (including
reasonable attorneys' fees and expenses) incurred by it without negligence or
bad faith on its part in connection with the administration of this trust and
the performance of its duties hereunder, including the costs and expenses of
enforcing this Indenture (including this Section 7.7) and of defending itself
-----------
against any claims (whether asserted by any Noteholder, the Issuers or
otherwise). The Trustee shall notify the Issuers promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Issuers
shall not relieve the Issuers of their obligations hereunder. The Issuers shall
defend the claim and the Trustee may have separate counsel and the Issuers shall
pay the fees and expenses of such counsel provided that the Issuers shall not be
required to pay such fees and expenses if it assumes the Trustee's defense, and,
in the reasonable judgment of outside counsel to the Trustee, there is no
conflict of interest between the Issuers and the Trustee in connection with such
defense. The Issuers need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith.
(c) To secure the Issuers' payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Notes. The Trustee's right to receive
payment of any amounts due under this Section 7.7 shall not be subordinate to
-----------
any other liability or Indebtedness of either of the Issuers.
63
<PAGE>
(d) The Issuers' payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in clauses (g) and (h) of Section 6.1 with
-----------
respect to either of the Issuers, the expenses are intended to constitute
expenses of administration under any Bankruptcy Law; provided, however, that
this shall not affect the Trustee's rights as set forth in this Section or
Section 6.10.
- ------------
Section 7.8. Replacement of Trustee. (a) The Trustee may resign at
----------------------
any time by so notifying the Issuers. The Holders of a majority in principal
amount of the Outstanding Notes may remove the Trustee by so notifying the
Trustee and may appoint a successor Trustee. The Issuers shall remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
------------
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
(b) If the Trustee resigns or is removed by the Issuers or by the
Holders of a majority in principal amount of the Outstanding Notes and such
Holders or the Issuers do not reasonably promptly appoint a successor Trustee,
or if a vacancy exists in the office of the Trustee for any reason (the Trustee
in such event being referred to herein as the retiring Trustee), the Issuers
shall promptly appoint a successor Trustee.
(c) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7.
-----------
(d) If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of 10% in principal amount of the Outstanding Notes may petition, at the
Issuers' expense, any court of competent jurisdiction for the appointment of a
successor Trustee.
(e) If the Trustee fails to comply with Section 7.10, any Noteholder
------------
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
(f) Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuers' obligations under Section 7.7 shall continue for the
-----------
benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Merger. If the Trustee
---------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets
64
<PAGE>
to, another corporation or banking association, the resulting, surviving or
transferee corporation without any further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture, any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
Section 7.10. Eligibility; Disqualification. The Trustee shall at
-----------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $100 million as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of either of the
Issuers are outstanding if the requirements for such exclusion set forth in TIA
(S) 310(b)(1) are met.
Section 7.11. Preferential Collection of Claims Against Issuers. The
-------------------------------------------------
Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1. Termination of the Issuers' Obligations.
---------------------------------------
(a) This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights, or registration of transfer or exchange
of the Notes, as expressly provided for below) as to all outstanding Notes when:
(i) either (A) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid
and Notes for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Issuers and thereafter repaid to the
Issuers or discharged from such trust) have been delivered to the Trustee
for cancellation or (B) all Notes not theretofore delivered to the Trustee
for cancellation have become due and payable, or will be due and payable
within one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Issuers have irrevocably deposited or caused to be
deposited with the Trustee cash or U.S. Government Obligations sufficient
to pay and discharge the entire Indebtedness on the
65
<PAGE>
Notes not theretofore delivered to the Trustee for cancellation, for
principal of, premium, if any, and interest on the Notes to the earlier of
the Stated Maturity or the Redemption Date together with irrevocable
instructions from the Issuers directing the Trustee to apply such funds
and/or the proceeds of such U.S. Government Obligations to the payment
thereof at maturity or redemption, as the case may be;
(ii) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result
in a breach or violation of, or constitute a default under, any other
instrument to which the Issuers are a party or by which it is bound;
(iii) the Issuers shall have paid all other sums payable by it
hereunder or under the Notes; and
(iv) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for the termination of the Issuers' obligations under
the Notes and this Indenture have been complied with. Such Opinion of
Counsel shall also state that such satisfaction and discharge does not
result in a default under any instrument evidencing debt senior to the
Notes or any other agreement or instrument then known to such counsel that
binds or affects the Issuers.
Notwithstanding the foregoing paragraph, the Issuers' obligations in
Sections 2.5, 2.8, 2.9, 3.1, 3.2, 3.8, 7.7 and in this Article VIII shall
- ------------ --- --- --- --- --- ---
survive until all Notes are no longer Outstanding. After all Notes are no
longer Outstanding, the Issuers' obligations in Sections 7.7, 8.4 and 8.5 shall
------------ --- ---
survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Issuers' obligations under the
Notes and this Indenture except for those surviving obligations specified above.
Section 8.2. Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Issuers may, at their option, at any time, elect to have
either paragraph (b) or (c) below be applied to all Outstanding Notes upon
compliance with the conditions set forth in Section 8.3.
-----------
(b) Upon the Issuers' exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Issuers shall, subject to the
satisfaction of the conditions set forth in Section 8.3, be deemed to have been
-----------
discharged from their Obligations with respect to all Outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Issuers shall
be deemed to have paid and discharged the entire Indebtedness represented by the
Outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.4 hereof and the other Sections of this Indenture
-----------
referred to in (i) and (ii) below, and to have satisfied all their
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other Obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Issuers, shall execute proper instruments
acknowledging the same), except for the following provisions, which shall
survive until otherwise terminated or discharged hereunder: (i) the rights of
Holders of Outstanding Notes to receive solely from the trust fund described in
Section 8.4 hereof, and as more fully set forth in such Section 8.4, payments in
- ----------- -----------
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (ii) the Issuers' obligations with respect to such Notes
under Article II and Section 3.2 hereof, (iii) the rights, powers, trusts,
-----------
duties and immunities of the Trustee hereunder and the Issuers' obligations in
connection therewith and (iv) this Article VIII. Subject to compliance with
this Article VIII, the Issuers may exercise their option under this paragraph
(b) notwithstanding the prior exercise of its option under paragraph (c) hereof.
(c) Upon the Issuers' exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Issuers shall, subject to the
satisfaction of the conditions set forth in Section 8.3 hereof, be released from
-----------
their Obligations under the covenants contained in Sections 3.4-3.6, 3.9-3.21
---------------- --------
and 4.1(a)(ii) hereof with respect to the Outstanding Notes on and after the
----------
date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not outstanding for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be Outstanding for all other purposes hereunder (it being understood
that such Notes shall not be deemed outstanding for accounting purposes). For
this purpose, such Covenant Defeasance means that, with respect to the
Outstanding Notes, the Issuers may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event or Default under clauses of
Section 6.1(c)-(f), (i) or (j) hereof, but, except as specified above, the
- ----------------------- ---
remainder of this Indenture and such Notes shall be unaffected thereby.
Section 8.3. Conditions to Defeasance. The Issuers may exercise
------------------------
their legal defeasance option or its covenant defeasance option only if:
(1) the Issuers irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders cash in U.S. dollars, U.S. Government
Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
on the Notes on the stated date for payment thereof or on the applicable
Redemption Date, as the case may be;
(2) in the case of Legal Defeasance, the Issuers shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee to the effect that (A) the Issuers have received
from, or there has been published by, the Internal Revenue Service a ruling
or (B) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon
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such Opinion of Counsel shall state that, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee to the effect that the Holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(4) the Trustee shall have received an Officers' Certificate stating
that no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) the Trustee shall have received an Officers' Certificate stating
that such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a Default under this Indenture or any
other material agreement or instrument to which the Issuers or any
Restricted Subsidiaries is a party or by which the Issuers or any of the
Company's Subsidiaries is bound (and in that connection, the Trustee shall
have received a certificate from the agent under the Senior Credit Facility
to that effect with respect to the Senior Credit Facility then in effect);
(6) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the
intent of preferring the Holders over any other creditors of the Issuers or
any Subsidiary of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Issuers or others;
(7) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(8) the Issuers shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and
(9) the Issuers deliver to the Trustee an Opinion of Counsel (subject
to customary assumptions and exclusions) to the effect that the trust
resulting from the deposit does not constitute, or is qualified as, a
regulated investment company under the Investment Company Act of 1940.
Section 8.4. Application of Trust Money. The Trustee shall hold in
--------------------------
trust cash or U.S. Government Obligations deposited with it pursuant to this
Article VIII. It shall apply the
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deposited money and the money from U.S. Government Obligations through the
Paying Agent and in accordance with this Indenture to the payment of principal
of and interest on the Notes.
Section 8.5. Repayment to Issuers. (a) The Trustee and the Paying
--------------------
Agent shall promptly turn over to the Issuers upon request any excess money or
securities held by them upon payment of all the Obligations under this
Indenture.
(b) Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Issuers upon written request any money held by
them for the payment of principal of or interest on the Notes that remains
unclaimed for two years, and, thereafter, Noteholders entitled to the money must
look to the Issuers for payment as general creditors.
Section 8.6. Indemnity for U.S. Government Obligations. The Issuers
-----------------------------------------
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
Section 8.7. Reinstatement. If the Trustee or Paying Agent is unable
-------------
to apply any money or U.S. Government Obligations in accordance with this
Article VIII by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Obligations of the Issuers under
this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article VIII; provided, however, that, if
the Issuers have made any payment of interest on or principal of any Notes
because of the reinstatement of its obligations, the Issuers shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS
Section 9.1. Without Consent of Holders. The Issuers, the Note
--------------------------
Guarantors and the Trustee may amend this Indenture or the Notes without notice
to or consent of any Noteholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article IV in respect of the assumption by a
Surviving Entity of an obligation of the Issuers under this Indenture;
(3) to provide for uncertificated Notes in addition to or in place of
Certificated Notes; provided, however, that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code or in
a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code;
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(4) to add guarantees with respect to the Notes or to secure the
Notes;
(5) to add to the covenants of the Issuers for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Issuers;
(6) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(7) to make any change that does not, in the opinion of the Trustee,
adversely affect the rights of any Noteholder in any material respect;
(8) to provide for the issuance of the Exchange Notes pursuant to the
Registration Rights Agreement; or
(9) to provide for the issuance of Add-On Notes, which will have
terms identical to the other Notes except as specified in Section 2.14 or
------------
Section 2.15, and which will be treated, together with any other
------------
Outstanding Notes, as a single issue of Notes.
After an amendment under this Section becomes effective, the Issuers
shall mail to Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
Section 9.2. With Consent of Holders. The Issuers, the Note
-----------------------
Guarantors and the Trustee may amend this Indenture or the Notes without notice
to any Noteholder but with the written consent of the Holders of at least a
majority in principal amount of the Outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes). It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent approves the substance
thereof. However, without the consent of each Noteholder affected, an amendment
may not:
(i) reduce the amount of Notes whose Holders must consent to an
amendment or waiver;
(ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including Defaulted Interest, on any
Notes;
(iii) reduce the principal of or change or have the effect of changing
the Stated Maturity of any Notes, or change the date on which any
Notes may be subject to redemption, or reduce the redemption price
therefor;
(iv) make any Notes payable in money other than that stated in the
Notes;
(v) make any change in provisions of this Indenture entitling each
Holder to receive payment of principal of, premium, if any, and
interest on such Note on or after the due date thereof or to bring
suit to enforce such payment, or permitting
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Holders of a majority in principal amount of Notes to waive Defaults
or Events of Default;
(vi) amend, change or modify in any material respect the obligation
of the Issuers to comply with Sections 3.11 or 3.18;
------------- ----
(vii) modify the subordination provisions of this Indenture with
respect to the Issuers or any Note Guarantor in a manner that
adversely affects the rights of any Holder; or
(viii) eliminate or modify in any manner a Note Guarantor's
obligations with respect to its Note Guarantee which adversely affects
Holders in any material respect.
After an amendment under this Section becomes effective, the Issuers
shall mail to Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
An amendment under this Section 9.2 may not make any change that
-----------
adversely affects the rights under Article X or Article XII of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
Section 9.3. Compliance with Trust Indenture Act. Every amendment to
-----------------------------------
this Indenture or the Notes shall comply with the TIA as then in effect.
Section 9.4. Revocation and Effect of Consents and Waivers. A
---------------------------------------------
consent to an amendment or a waiver by a Holder of a Note shall bind the Holder
and every subsequent Holder of that Note or portion of the Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
or waiver is not made on the Note. However, any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's Note or portion of
the Note if the Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. After an amendment or waiver becomes
effective, it shall bind every Noteholder. An amendment or waiver shall become
effective upon receipt by the Trustee of the requisite number of written
consents under Section 9.1 or 9.2 as applicable.
----------- ---
The Issuers may, but shall not be obligated to, fix a record date for
the purpose of determining the Noteholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Noteholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall become valid or effective more than 90
days after such record date.
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Section 9.5. Notation on or Exchange of Notes. If an amendment
--------------------------------
changes the terms of a Note, the Trustee may require the Holder of the Note to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Note regarding the changed terms and return it to the Holder. Alternatively, if
the Issuers or the Trustee so determine, the Issuers in exchange for the Note
shall issue and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or to issue a new Note
shall not affect the validity of such amendment.
Section 9.6. Trustee to Sign Amendments. The Trustee shall sign any
--------------------------
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall receive indemnity reasonably satisfactory to it and to receive,
and (subject to Sections 7.1 and 7.2) shall be fully protected in relying upon,
--------------------
such evidence as it deems appropriate, including, without limitation, solely on
an Opinion of Counsel stating that such amendment is authorized or permitted by
this Indenture.
ARTICLE X
SUBORDINATION OF THE NOTES
Section 10.1. Agreement to Subordinate. The Issuers agree, and each
------------------------
Noteholder by accepting a Note agrees, that the Indebtedness evidenced by the
Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article X, to the prior payment in full in cash of all
Obligations due in respect of the Senior Indebtedness and that the subordination
is for the benefit of and enforceable by the holders of such Senior
Indebtedness; provided, however, that any payments made by Owens Corning under
the Keep-Well Agreement shall not be subject to this Article X. Only Senior
Indebtedness of the Issuers shall rank senior to the Notes in accordance with
the provisions set forth herein. The Notes shall in all respects rank pari
passu with, or be senior to, all other Indebtedness of each of the Issuers. All
provisions of this Article X shall be subject to Section 10.12.
-------------
Section 10.2. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
or distribution of the assets of either of the Issuers to creditors upon a total
or partial liquidation or a total or partial dissolution of either of the
Issuers or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to either of the Issuers or their property:
(1) holders of Senior Indebtedness of either of the Issuers shall be
entitled to receive payment in full of such Senior Indebtedness before
Noteholders shall be entitled to receive any payment of principal of, premium,
if any, or interest on the Notes; and
(2) until such Senior Indebtedness is paid in full, any distribution
to which Noteholders would be entitled but for this Article X shall be made to
holders of such Senior Indebtedness as their interests may appear, except that
Noteholders may receive (a) Permitted
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Junior Securities and (b) payments and other distributions made from any
defeasance trust created pursuant to Section 8.1 hereof.
-----------
Section 10.3. Default on Senior Indebtedness of the Issuers. The
---------------------------------------------
Issuers may not pay the principal of, premium, if any, or interest on the Notes
or make any deposit pursuant to Section 8.1 and may not repurchase, redeem or
-----------
otherwise retire any Notes (collectively, "pay the Notes") (other than Permitted
Junior Securities and payments and other distributions made from any defeasance
trust created pursuant to Section 8.1 hereof) if (i) any Designated Senior
-----------
Indebtedness of the Issuers is not paid when due or (ii) any other default on
such Designated Senior Indebtedness occurs and the maturity of such Designated
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, (x) the default has been cured or waived and any such acceleration
has been rescinded or (y) such Designated Senior Indebtedness has been paid in
full; provided, however, that the Issuers may pay the Notes without regard to
the foregoing if the Issuers and the Trustee receive written notice approving
such payment from the Representative of such Designated Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) has
occurred and is continuing. During the continuance of any default (other than a
default described in clause (i) or (ii) of the immediately preceding sentence)
with respect to any Designated Senior Indebtedness of the Issuers pursuant to
which the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Issuers may not pay the Notes
for a period (a "Payment Blockage Period") commencing upon the receipt by the
Trustee (with a copy to the Issuers) of written notice (a "Blockage Notice") of
such default from the Representative of the holders of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Issuers from the Person
or Persons who gave such Blockage Notice, (ii) because a Representative of the
holders of such Designated Senior Indebtedness has notified the Trustee that the
default giving rise to such Blockage Notice is no longer continuing or (iii)
because such Designated Senior Indebtedness has been repaid in full in cash).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this Section
-------
10.3), unless the holders of such Designated Senior Indebtedness or the
- ----
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, the Issuers may resume payments on the Notes after such
Payment Blockage Period. The Notes shall not be subject to more than one
Payment Blockage Period in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period. For purposes of this Section 10.3, no Default or Event of Default which
------------
existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis of the commencement
of a subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such Default or Event of Default shall have been cured or waived for a
period of not less than 90 consecutive days.
Section 10.4. Acceleration of Payment of Notes. If payment of the
--------------------------------
Notes is accelerated because of an Event of Default, the Issuers or the Trustee
shall promptly notify the
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Representative of the holders of the Designated Senior Indebtedness of either of
the Issuers of the acceleration.
Section 10.5. When Distribution Must Be Paid Over. If a distribution
-----------------------------------
is made to Noteholders that because of this Article X should not have been made
to them, the Noteholders who receive the distribution shall hold it in trust for
holders of Senior Indebtedness of either of the Issuers and pay it over to them
or their Representative as their interests may appear.
Section 10.6. Subrogation. After all Senior Indebtedness of either
-----------
of the Issuers is paid in full and until the Notes are paid in full, Noteholders
shall be subrogated to the rights of holders of such Senior Indebtedness to
receive distributions applicable to such Senior Indebtedness. A distribution
made under this Article X to holders of such Senior Indebtedness which otherwise
would have been made to Noteholders is not, as between the Issuers and
Noteholders, a payment by the Issuers on such Senior Indebtedness.
Section 10.7. Relative Rights. This Article X defines the relative
---------------
rights of Noteholders and holders of Senior Indebtedness of the Issuers. Nothing
in this Indenture shall:
(1) impair, as between the Issuers and Noteholders, the obligation of
the Issuers, which is absolute and unconditional, to pay principal of, premium,
if any, and interest on the Notes in accordance with their terms; or
(2) prevent the Trustee or any Noteholder from exercising its
available remedies upon a Default, subject to the rights of holders of Senior
Indebtedness of the Issuers to receive distributions otherwise payable to
Noteholders.
Section 10.8. Subordination May Not Be Impaired by Issuers. No right
--------------------------------------------
of any holder of Senior Indebtedness of the Issuers to enforce the subordination
of the Indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by the Issuers or by its failure to comply with this Indenture.
Section 10.9. Rights of Trustee and Paying Agent. Notwithstanding
----------------------------------
Section 10.3, the Trustee or Paying Agent may continue to make payments on the
- ------------
Notes and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives written notice satisfactory to it that payments may not be made under
this Article X. The Issuers, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness may give the notice; provided,
however, that, if the holders of an issue of Senior Indebtedness of the Issuers
have a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of either of the Issuers with the same rights it would have if it
were not Trustee. The Registrar and co-registrar and the Paying Agent may do
the same with like rights. The Trustee shall be entitled to all the rights set
forth in this Article X with respect to any Senior Indebtedness of either of the
Issuers which may at any time be held by it, to the same extent as any other
holder
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of such Senior Indebtedness, and nothing in Article VII shall deprive the
Trustee of any of its rights as such holder. Nothing in this Article X shall
apply to claims of, or payments to, the Trustee under or pursuant to Section
-------
7.7.
- ---
Section 10.10. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness
of either of the Issuers, the distribution may be made and the notice given to
their Representative (if any).
Section 10.11. Article X Not to Prevent Events of Default or Limit
---------------------------------------------------
Right to Accelerate. The failure to make a payment pursuant to the Notes by
- -------------------
reason of any provision in this Article X shall not be construed as preventing
the occurrence of a Default. Nothing in this Article X shall have any effect on
the right of the Noteholders or the Trustee to accelerate the maturity of the
Notes.
Section 10.12. Trust Moneys Not Subordinated. Notwithstanding
-----------------------------
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article VIII by the Trustee
for the payment of principal of, premium, if any, and interest on the Notes
shall not be subordinated to the prior payment of any Senior Indebtedness or
subject to the restrictions set forth in this Article X, and none of the
Noteholders shall be obligated to pay over any such amount to the Issuers or any
holder of Senior Indebtedness of either of the Issuers or any other creditor of
either of the Issuers.
Section 10.13. Trustee Entitled to Rely. Upon any payment or
------------------------
distribution pursuant to this Article X, the Trustee and the Noteholders shall
be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.2
------------
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Noteholders or (iii) upon the Representative for the holders of Senior
Indebtedness of either of the Issuers for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
such Senior Indebtedness and other Indebtedness of either of the Issuers, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article X. In the
event that the Trustee determines, in good faith, that evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness of either
of the Issuers to participate in any payment or distribution pursuant to this
Article X, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article X, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.1 and 7.2 shall be applicable to all actions or
------------ ---
omissions of actions by the Trustee pursuant to this Article X.
Section 10.14. Trustee to Effectuate Subordination. Each Noteholder
-----------------------------------
by accepting a Note authorizes and directs the Trustee on such Noteholder's
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination
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between the Noteholders and the holders of such Senior Indebtedness of either of
the Issuers as provided in this Article X and appoints the Trustee as attorney-
in-fact for any and all such purposes.
Section 10.15. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
- ------------
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Noteholders or the Issuers or any
other Person, money or assets to which any holders of Senior Indebtedness of
either of the Issuers shall be entitled by virtue of this Article X or
otherwise.
Section 10.16. Reliance by Holders of Senior Indebtedness on
---------------------------------------------
Subordination Provisions. Each Noteholder by accepting a Note acknowledges and
- ------------------------
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness of
either of the Issuers, whether such Senior Indebtedness was created or acquired
before or after the issuance of the Notes, to acquire and continue to hold, or
to continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
ARTICLE XI
GUARANTEE
Section 11.1. Guarantee. (a) Each Note Guarantor hereby fully,
---------
unconditionally and irrevocably guarantees, as primary obligor and not merely as
surety, jointly and severally with each other Note Guarantor, to each Holder of
the Notes and the Trustee the full and punctual payment when due, whether at
maturity, by acceleration, by redemption or otherwise, of the Obligations (such
guaranteed Obligations, the "Guaranteed Obligations"). Each Note Guarantor
further agrees (to the extent permitted by law) that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
it, and that it will remain bound under this Article X notwithstanding any
extension or renewal of any Obligation. Each of the Note Guarantors will agree
to pay, on a senior subordinated basis and in addition to the amounts stated
above, any and all expenses (including reasonable counsel fees and expenses)
incurred by the Trustee or the Holders in enforcing any rights under such Note
Guarantor's Note Guarantee.
(b) Each Note Guarantor waives presentation to, demand of payment from
and protest to the Issuers of any of the Obligations and also waives notice of
protest for nonpayment. Each Note Guarantor waives notice of any Default under
the Notes or the Obligations. The obligations of each Note Guarantor hereunder
shall not be affected by (a) the failure of any Holder to assert any claim or
demand or to enforce any right or remedy against the Issuers or any other Person
under this Indenture, the Notes or any other agreement or otherwise; (b) any
extension or renewal of any thereof; (c) any rescission, waiver, amendment or
modification of any of the terms or provisions of this Indenture, the Notes or
any other agreement; (d) the release
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of any security held by any Holder or the Trustee for the Obligations or any of
them; (e) the failure of any Holder to exercise any right or remedy against any
other Note Guarantor; or (f) any change in the ownership of either of the
Issuers.
(c) Each Note Guarantor further agrees that its Note Guarantee herein
constitutes a guarantee of payment when due (and not a guarantee of collection)
and waives any right to require that any resort be had by any Holder to any
security held for payment of the Guaranteed Obligations.
(d) The Guaranteed Obligations shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than payment of the
Guaranteed Obligations in full), including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to any defense of
setoff, counterclaim, recoupment or termination whatsoever or by reason of the
invalidity, illegality or unenforceability of the Guaranteed Obligations or
otherwise. Without limiting the generality of the foregoing, the Guaranteed
Obligations shall not be discharged or impaired or otherwise affected by the
failure of any Holder to assert any claim or demand or to enforce any remedy
under this Indenture, the Notes or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Guaranteed Obligations, or by any other act
or thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of each Note Guarantor or would
otherwise operate as a discharge of such Note Guarantor as a matter of law or
equity.
(e) Each Note Guarantor further agrees that its Note Guarantee herein
shall continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any of the
Obligations is rescinded or must otherwise be restored by any Holder upon the
bankruptcy or reorganization of either of the Issuers or otherwise.
(f) In furtherance of the foregoing and not in limitation of any other
right which any Holder has at law or in equity against each Note Guarantor by
virtue hereof, upon the failure of the Issuers to pay any of the Obligations
when and as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, each Note Guarantor hereby promises to and will, upon
receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in
cash, to the Holders an amount equal to the sum of (i) the unpaid amount of such
Obligations then due and owing and (ii) accrued and unpaid interest on such
Obligations then due and owing (but only to the extent not prohibited by law).
(g) Each Note Guarantor further agrees that, as between such Note
Guarantor, on the one hand, and the Holders, on the other hand, (x) the maturity
of the Guaranteed Obligations may be accelerated as provided in this Indenture
for the purposes of its Note Guarantee herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Guaranteed Obligations and (y) in the event of any such declaration of
acceleration of such Guaranteed Obligations, such Guaranteed Obligations
(whether or not due and payable) shall
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forthwith become due and payable by the Note Guarantor for the purposes of this
Note Guarantee.
(h) Each Note Guarantee is, to the extent and in the manner set forth
in Article XII, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness of such Note Guarantor and is made
subject to such provisions of this Indenture.
Section 11.2. Limitation on Liability; Termination, Release and
-------------------------------------------------
Discharge. (a) The Guaranteed Obligations will be limited to the maximum amount
- ---------
as will, after giving effect to all other contingent and fixed liabilities of
such Note Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Note Guarantor in respect of the Guaranteed
Obligations of such other Note Guarantor or pursuant to its contribution
obligations under this Indenture, result in the Guaranteed Obligations of such
Note Guarantor under its Note Guarantee not constituting a fraudulent conveyance
or fraudulent transfer under federal or state law.
(b) Each Note Guarantor may consolidate with or merge into or sell its
assets to either of the Issuers or another Note Guarantor without limitation.
Each Note Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a corporation, partnership or trust other than
the Issuers or another Note Guarantor (whether or not affiliated with the Note
Guarantor), except that if the surviving corporation of any such merger or
consolidation is a Subsidiary of the Company, such merger, consolidation or sale
shall not be permitted unless (i) the Person formed by or surviving any such
consolidation or merger assumes all the Guaranteed Obligations of such Note
Guarantor pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee in respect of the Notes, this Indenture and the Note
Guarantee, (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (iii) the Issuers deliver to the Trustee an
Officers' Certificate and an Opinion of Counsel addressed to the Trustee with
respect to the foregoing matters. Upon the sale or disposition of a Note
Guarantor (by merger, consolidation, the sale of its Capital Stock or the sale
of all or substantially all of its assets) to a Person (whether or not an
Affiliate of the Note Guarantor) which is not a Subsidiary of the Company, which
sale or disposition is otherwise in compliance with this Indenture (including
Section 3.11), such Note Guarantor will be deemed released from all its
- ------------
Guaranteed Obligations and such Note Guarantee will terminate; provided,
however, that any such termination will occur only to the extent that all
obligations of such Note Guarantor under the Senior Credit Facility and all of
its guarantees of, and under all of its pledges of assets or other security
interests which secure, any other Indebtedness of each of the Issuers will also
terminate upon such release, sale or transfer.
(c) A Note Guarantor will be deemed released and relieved from its
Guaranteed Obligations and its Note Guarantee without any further action
required on the part of the Issuers or such Note Guarantor if, in accordance
with the provisions of this Indenture:
(i) there is a legal defeasance of the Notes;
(ii) there is a sale or other disposition of all or substantially all
of the assets of such Note Guarantor;
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(iii) there is a sale or other disposition of all of the Capital Stock
of such Note Guarantor; or
(iv) such Note Guarantor is designated as an Unrestricted Subsidiary.
Section 11.3. Right of Contribution. Each Note Guarantor that makes
---------------------
a payment or distribution under a Note Guarantee will be entitled to a
contribution from each other Note Guarantor in a pro rata amount, based on the
net assets of each Note Guarantor determined in accordance with GAAP. The
provisions of this Section 11.3 shall in no respect limit the obligations and
------------
liabilities of each Note Guarantor to the Trustee and the Holders and each Note
Guarantor shall remain liable to the Trustee and the Holders for the full amount
guaranteed by such Note Guarantor hereunder.
Section 11.4. No Subrogation. Each Note Guarantor agrees that it
--------------
shall not be entitled to any right of subrogation in respect of any Guaranteed
Obligations until payment in full of all Obligations and all obligations to
which the Obligations are subordinated. If any amount shall be paid to any Note
Guarantor on account of such subrogation rights at any time when all of the
Obligations and all obligations to which the Obligations are subordinated shall
not have been paid in full, such amount shall be held by such Note Guarantor in
trust for the Trustee and the Holders, segregated from other funds of such Note
Guarantor, and shall, forthwith upon receipt by such Note Guarantor, be turned
over to the Trustee in the exact form received by such Note Guarantor (duly
endorsed by such Note Guarantor to the Trustee, if required), to be applied
against the Obligations or obligations to which the Obligations are
subordinated. Each Note Guarantor further agrees that, as between it, on the
one hand, and the Holders and the Trustee, on the other hand, (x) the maturity
of the Guaranteed Obligations may be accelerated as provided in Article VI for
the purposes of such Note Guarantor's Note Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Guaranteed Obligations, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article VI, such Obligations
(whether or not due and payable) shall forthwith become due and payable by such
Note Guarantor for the purposes of this Section 11.4.
------------
Section 11.5. Additional Note Guarantees. The Issuers will cause any
-----------------------------------------
Person that shall become a Note Guarantor (an "Additional Guarantor") to
concurrently Guarantee (an "Additional Guarantee") the Issuers' Obligations
under this Indenture and the Notes by executing a Supplemental Indenture
substantially in the form of Exhibit G, it being understood that such Additional
---------
Guarantee shall be subordinated in right of payment to Senior Indebtedness of
such Additional Guarantor including Guarantees constituting Senior Indebtedness;
provided, however, that each Additional Guarantor will be automatically and
unconditionally released and discharged from its obligations under such
Additional Guarantee only in accordance with Section 11.2 above.
------------
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ARTICLE XII
SUBORDINATION OF THE NOTE GUARANTEES
Section 12.1. Agreement to Subordinate. Each Note Guarantor agrees,
------------------------
and each Noteholder by accepting a Note agrees, that the Guaranteed Obligations
are subordinated in right of payment, to the extent and in the manner provided
in this Article XII, to the prior payment in full in cash of all Senior
Indebtedness of such Note Guarantor and that the subordination is for the
benefit of and enforceable by the holders of such Senior Indebtedness; provided,
however, that any payments made by Owens Corning under the Keep-Well Agreement
shall not be subject to this Article XII. Only Senior Indebtedness of such Note
Guarantor shall rank senior to the Obligations of such Note Guarantor in
accordance with the provisions set forth herein. The Obligations of each Note
Guarantor shall in all respects rank pari passu with, or be senior to, all other
Indebtedness of such Note Guarantor.
Section 12.2. Liquidation, Dissolution, Bankruptcy. Upon any payment
------------------------------------
or distribution of the assets of any Note Guarantor to creditors upon a total or
partial liquidation or a total or partial dissolution of such Note Guarantor or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to such Note Guarantor or its property:
(1) holders of Senior Indebtedness of such Note Guarantor shall be
entitled to receive payment in full of such Senior Indebtedness before
Noteholders shall be entitled to receive any payment pursuant to the Note
Guarantee of such Note Guarantor; and
(2) until the Senior Indebtedness of such Note Guarantor is paid in
full, any distribution to which Noteholders would be entitled but for this
Article XII shall be made to holders of such Senior Indebtedness as their
interests may appear, except that Noteholders may receive (a) Permitted Junior
Securities and (b) payments and other distributions made from any defeasance
trust created pursuant to Section 8.1 hereof.
-----------
Section 12.3. Default on Senior Indebtedness of Note Guarantors.
-------------------------------------------------
Each Note Guarantor may not pay the principal of, premium, if any, or interest
on the Notes or make any deposit pursuant to Section 8.1 and may not repurchase,
-----------
redeem or otherwise retire any Notes (collectively, "pay its Note Guarantee")
(other than Permitted Junior Securities and payments and other distributions
from any defeasance trust created pursuant to Section 8.1 hereof) if (i) any
-----------
Designated Senior Indebtedness of the relevant Note Guarantor is not paid when
due or (ii) any other default on Designated Senior Indebtedness of such Note
Guarantor occurs and the maturity of such Designated Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, (x) the default
has been cured or waived and any such acceleration has been rescinded or (y)
such Designated Senior Indebtedness has been paid in full; provided, however,
that such Note Guarantor may pay its Note Guarantee without regard to the
foregoing if such Note Guarantor and the Trustee receive written notice
approving such payment from the Representative of the Designated Senior
Indebtedness of such Note Guarantor with respect to which either of the events
set forth in clause (i) or (ii) has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the immediately preceding sentence) with respect to any Designated Senior
Indebtedness of such Note Guarantor
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pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, such Note
Guarantor may not pay its Note Guarantee for the Payment Blockage Period
commencing upon the receipt by the Trustee (with a copy to such Note Guarantor)
of a Blockage Notice of such default from the Representative of the holders of
such Designated Senior Indebtedness and ending 179 days thereafter (or earlier
if such Payment Blockage Period is terminated (i) by written notice to the
Trustee and such Note Guarantor from the Person or Persons who gave such
Blockage Notice, (ii) because a Representative of the holders of such Designated
Senior Indebtedness has notified the Trustee that the default giving rise to
such Blockage Notice is no longer continuing or (iii) because such Designated
Senior Indebtedness has been repaid in full in cash). Notwithstanding the
provisions described in the immediately preceding sentence (but subject to the
provisions contained in the first sentence of this Section 12.3), unless the
------------
holders of such Designated Senior Indebtedness of such Note Guarantor or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness such Note Guarantor may resume payments on its Note
Guarantee after the end of such Payment Blockage Period. Each Note Guarantee
shall not be subject to more than one Payment Blockage Period in any consecutive
360-day period, irrespective of the number of defaults with respect to
Designated Senior Indebtedness of a Note Guarantor during such period. For
purposes of this Section 12.3, no Default or Event of Default which existed or
------------
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Designated Senior Indebtedness initiating such Payment
Blockage Period shall be, or be made, the basis of the commencement of a
subsequent Payment Blockage Period by the Representative of such Designated
Senior Indebtedness, whether or not within a period of 360 consecutive days,
unless such default or event of default shall have been cured or waived for a
period of not less than 90 consecutive days.
Section 12.4. Demand for Payment. If a demand for payment is made on
------------------
any Note Guarantor pursuant to Article XI, the Trustee shall promptly notify the
holders of the Designated Senior Indebtedness (or their Representatives) of such
Note Guarantor of such demand.
Section 12.5. When Distribution Must Be Paid Over. If a distribution
-----------------------------------
is made to Noteholders that because of this Article XII should not have been
made to them, the Noteholders who receive the distribution shall hold it in
trust for holders of the relevant Senior Indebtedness of such Note Guarantor and
pay it over to them or their Representative as their interests may appear.
Section 12.6. Subrogation. After all Senior Indebtedness of each
-----------
Note Guarantor is paid in full and until the Notes are paid in full, Noteholders
shall be subrogated to the rights of holders of such Senior Indebtedness to
receive distributions applicable to such Senior Indebtedness. A distribution
made under this Article XII to holders of such Senior Indebtedness which
otherwise would have been made to Noteholders is not, as between each Note
Guarantor and Noteholders, a payment by such Note Guarantor on such Senior
Indebtedness.
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Section 12.7. Relative Rights. This Article XII defines the relative
---------------
rights of Noteholders and holders of Senior Indebtedness of each Note Guarantor.
Nothing in this Indenture shall:
(1) impair, as between each Note Guarantor and the Noteholders, the
obligation of such Note Guarantor, which is absolute and unconditional, to pay
its obligations to the extent set forth in Article XI; or
(2) prevent the Trustee or any Noteholder from exercising its
available remedies upon a default by any Note Guarantor under its obligations,
subject to the rights of holders of Senior Indebtedness of such Note Guarantor
to receive distributions otherwise payable to Noteholders.
Section 12.8. Subordination May Not Be Impaired by Note Guarantors.
----------------------------------------------------
No right of any holder of Senior Indebtedness of any Note Guarantor to enforce
the subordination of the obligations of such Note Guarantor shall be impaired by
any act or failure to act by such Note Guarantor or by its failure to comply
with this Indenture.
Section 12.9. Rights of Trustee and Paying Agent. Notwithstanding
----------------------------------
Section 12.3, the Trustee or Paying Agent may continue to make payments on each
- ------------
Note Guarantee and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives written notice satisfactory to it that payments may not be made under
this Article XII. The Issuers, each Note Guarantor, the Registrar or co-
registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness
of any Note Guarantor may give the notice; provided, however, that, if the
holders of an issue of Senior Indebtedness of any Note Guarantor has a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article XII with respect to any Senior Indebtedness of any Note Guarantor which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in Article VII shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article XII shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.7.
-----------
Section 12.10. Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness
of any Note Guarantor, the distribution may be made and the notice given to
their Representative (if any).
Section 12.11. Article XII Not to Prevent Defaults Under the Note
--------------------------------------------------
Guarantees or Limit Right To Demand Payment. The failure to make a payment
- -------------------------------------------
pursuant to any Note Guarantee by reason of any provision in this Article XII
shall not be construed as preventing the occurrence of a Default under such Note
Guarantee. Nothing in this Article XII shall have any effect on the right of the
Noteholders or the Trustee to make a demand for payment on any Note Guarantor
pursuant to Article XI.
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Section 12.12. Trustee Entitled to Rely. Upon any payment or
------------------------
distribution pursuant to this Article XII, the Trustee and the Noteholders shall
be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.2
------------
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Noteholders or (iii) upon the Representative for the holders of Senior
Indebtedness of any Note Guarantor for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of such
Senior Indebtedness and other indebtedness of such Note Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article XII. In the event that
the Trustee determines, in good faith, that evidence is required with respect to
the right of any Person as a holder of Senior Indebtedness of such Note
Guarantor to participate in any payment or distribution pursuant to this Article
XII, the Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness of such
Note Guarantor held by such Person, the extent to which such Person is entitled
to participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article XII, and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment. The
provisions of Sections 7.1 and 7.2 shall be applicable to all actions or
------------ ----
omissions of actions by the Trustee pursuant to this Article XII.
Section 12.13. Trustee to Effectuate Subordination. Each Noteholder
-----------------------------------
by accepting a Note authorizes and directs the Trustee on such Noteholder's
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Noteholders and the holders of Senior
Indebtedness of any Note Guarantor as provided in this Article XII and appoints
the Trustee as attorney-in-fact for any and all such purposes.
Section 12.14. Trustee Not Fiduciary for Holders of Senior
-------------------------------------------
Indebtedness of Note Guarantors. The Trustee shall not be deemed to owe any
- -------------------------------
fiduciary duty to the holders of Senior Indebtedness of any Note Guarantor and
shall not be liable to any such holders if it shall mistakenly pay over or
distribute to Noteholders or the Issuers or any other Person, money or assets to
which any holders of such Senior Indebtedness shall be entitled by virtue of
this Article XII or otherwise.
Section 12.15. Reliance by Holders of Senior Indebtedness on
---------------------------------------------
Subordination Provisions. Each Noteholder by accepting a Note acknowledges and
- ------------------------
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness of
any Note Guarantor, whether such Senior Indebtedness was created or acquired
before or after the issuance of the Notes, to acquire and continue to hold, or
to continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
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ARTICLE XIII
MISCELLANEOUS
Section 13.1. Trust Indenture Act Controls. If any provision of this
----------------------------
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control. Each Note Guarantor in addition to performing its
Guaranteed Obligations shall perform such other obligations as may be imposed
upon it with respect to this Indenture under the TIA.
Section 13.2. Notices. Any notice or communication shall be in
-------
writing and delivered in person or mailed by first-class mail or facsimile
transmission addressed as follows:
if to the Issuers:
Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Facsimile: (803) 643-1190
Attention: Chief Financial Officer
if to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Administration
The Issuers or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a registered Noteholder shall be
mailed to the Noteholder at the Noteholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 13.3. Communication by Holders with Other Holders.
-------------------------------------------
Noteholders may communicate pursuant to TIA (S) 312(b) with other Noteholders
with respect to their rights under this Indenture or the Notes. The Issuers,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
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Section 13.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Issuers to the Trustee to take or refrain
from taking any action under this Indenture, the Issuers shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
Section 13.5. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
In giving such Opinion of Counsel, counsel may rely as to factual
matters on an Officers' Certificate or on certificates of public officials.
Section 13.6. Rules by Trustee, Paying Agent and Registrar. The
--------------------------------------------
Trustee may make reasonable rules for action by, or a meeting of, Noteholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 13.7. GOVERNING LAW, ETC. (A) THIS INDENTURE (INCLUDING EACH
-------------------
GUARANTEE) AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
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(b) Each of the Issuers and the Note Guarantors hereby (i) agree that
any suit, action or proceeding against them arising out of or relating to this
Indenture or the Notes, as the case may be, may be instituted in any Federal or
state court sitting in The City of New York, (ii) waive to the extent permitted
by applicable law, any objection which it may now or hereafter have to the
laying of venue of any such suit, action or proceeding, and any claim that any
suit, action or proceeding in such a court has been brought in an inconvenient
forum, (iii) irrevocably submit or will submit, as the case may be, to the non-
exclusive jurisdiction of such courts in any suit, action or proceeding, (iv)
agree that final judgment in any such suit, action or proceeding brought in such
a court shall be conclusive and binding and may be enforced in the courts of the
jurisdiction of which they are subject by a suit upon judgment and (v) agree
that service of process by mail to the address specified herein shall constitute
personal service of such process on it in any such suit, action or proceeding.
Section 13.8. No Recourse Against Others. An incorporator, director,
--------------------------
officer, employee, stockholder or controlling person, as such, of either of the
Issuers or any Note Guarantor shall not have any liability for any Obligations
of the Issuers under the Notes, this Indenture or the Note Guarantees or for any
claim based on, in respect of or by reason of such Obligations or their
creation. By accepting a Note, each Noteholder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Notes.
Section 13.9. Successors. All agreements of the Issuers and any Note
----------
Guarantor in this Indenture and the Notes shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 13.10. Multiple Originals. The parties may sign any number
------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
Section 13.11. Severability. In case any provision in this Indenture
------------
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 13.12. Qualification of Indenture. The Issuers shall qualify
--------------------------
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees and expenses for the Issuers, the Trustee and the
Holders) incurred in connection therewith, including, but not limited to, costs
and expenses of qualification of this Indenture and the Notes and printing this
Indenture and the Notes. The Trustee shall be entitled to receive from the
Issuers any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
Section 13.13. Table of Contents; Headings. The table of contents,
---------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
ADVANCED GLASSFIBER YARNS LLC
By: /s/ Robert B. Fisher
--------------------
Name: Robert B. Fisher
Title: President
Attest:
/s/ Catherine Cuisson
- -----------------------
Catherine Cuisson
AGY CAPITAL CORP.
By: /s/ Robert B. Fisher
-------------------
Name: Robert B. Fisher
Title: President
Attest:
/s/ Catherine Cuisson
- -----------------------
Catherine Cuisson
THE BANK OF NEW YORK, AS TRUSTEE
By: /s/ Mary Beth Lewicki
----------------------------
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF FACE OF INITIAL NOTE
[Include the following legend for Global Notes only:]
THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO
HEREINAFTER.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[The following legend shall appear on all Certificated Notes prior to the
Resale Restriction Termination Date:]
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIED WITH THE
FOREGOING RESTRICTIONS AS PROVIDED FOR IN THE INDENTURE.
[The following legend shall appear on all Regulation S Temporary Global
Notes and all other Notes (other than Regulation S Permanent Global Notes)
prior to the Resale Restriction Termination Date:]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY
A-1
<PAGE>
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ADOPTED UNDER THE
SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR"), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S ADOPTED UNDER THE
SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE ISSUERS OR ANY SUBSIDIARIES THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A ADOPTED UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, IN EITHER CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE NOTES OF U.S. $250,000, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, AND THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH REGULATION S ADOPTED UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 ADOPTED UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
ADOPTED UNDER THE SECURITIES ACT.
A-2
<PAGE>
[Include the legend below on all Regulation S Temporary Global Notes:]
THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION S
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT").
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO
RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED
CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE.
No. [___] Principal Amount $[______________]
[If the Note is a Global Note include the following two lines:]
as revised by the Schedule of Increases and
Decreases in Global Note attached hereto
CUSIP NO. ____________
[If the Note is a Regulation S Global Note, delete the reference to CUSIP NO.
and replace it with:]
ISIN NO. ____________
A-3
<PAGE>
9 7/8% Senior Subordinated Notes due 2009
Advanced Glassfiber Yarns LLC and AGY Capital Corp., as joint and
several obligors, promise to pay to [___________], or registered assigns, the
principal sum of [__________________] Dollars, as revised by the Schedule of
Increases and Decreases in Global Note attached hereto, on January 15, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Additional provisions of this Note are set forth on the other side of
this Note.
Advanced Glassfiber Yarns LLC
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
AGY Capital Corp.
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
The Bank of New York,
as Trustee, certifies that this is one of the Notes referred to in the
Indenture.
THE BANK OF NEW YORK
By____________________
Authorized Signatory Date: _____________, 1999
A-4
<PAGE>
FORM OF REVERSE SIDE OF INITIAL NOTE
9 7/8% Senior Subordinated Notes due 2009
1. Interest
--------
Advanced Glassfiber Yarns LLC and AGY Capital Corp. (together with
their successors and assigns under the Indenture hereinafter referred to, being
herein called the "Issuers"), as joint and several obligors, promise to pay
interest on the principal amount of this Note at the rate per annum shown above.
The Issuers will pay interest semiannually on January 15 and July 15
of each year commencing July 15, 1999. Interest on the Notes will accrue from
the most recent date to which interest has been paid on the Notes or, if no
interest has been paid, from and including January 21, 1999. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Issuers shall pay interest on overdue principal and, to the extent
such payments are lawful, interest on overdue installments of interest (without
regard to any applicable grace periods) at the rate of 2.0% per annum in excess
of the rate shown on this Note.
2. Method of Payment
-----------------
By at least 10:00 a.m. (New York City time) on the date on which any
principal of or interest on any Note is due and payable, the Issuers shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such principal, premium, if any, and/or interest. The Issuers will pay interest
(except Defaulted Interest) to the Persons who are registered Holders of Notes
at the close of business on the January 1 or July 1 preceding the interest
payment date even if Notes are cancelled, repurchased or redeemed after the
record date and on or before the interest payment date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Issuers will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. Payments in respect of
Notes represented by a Global Note (including principal, premium, if any, and
interest) will be made by the transfer of immediately available funds to the
accounts specified by the Depository Trust Company. The Issuers will make all
payments in respect of a Certificated Note (including principal, premium, if
any, and interest) by mailing a check to the registered address of each Holder
thereof; provided, however, that payments on the Notes may also be made by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 15 days immediately preceding the relevant due date for
payment.
3. Paying Agent and Registrar
--------------------------
Initially, The Bank of New York will act as Trustee, Paying Agent and
Registrar. The Issuers may appoint and change any Paying Agent, Registrar or
co-registrar without notice to any Noteholder. Either of the Issuers may act as
Paying Agent, Registrar or co-registrar.
A-5
<PAGE>
4. Indenture
---------
The Issuers issued the Notes under an Indenture dated as of January
21, 1999 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), between the Issuers and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
------
(S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all such terms, and
Noteholders are referred to the Indenture and the Act for a statement of those
terms. Each Noteholder by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as amended from time to time.
The Notes are general unsecured senior obligations of the Issuers
unlimited in aggregate principal amount; $150,000,000 in aggregate principal
amount will be initially issued on the Issue Date. This Note is one of the
Initial Notes referred to in the Indenture. The Initial Notes and the Exchange
Notes will be treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on, among other things: Additional
Indebtedness, Restricted Payments, Asset Sales, dividend and other payment
restrictions affecting Restricted Subsidiaries, the sale or issuance of Capital
Stock of Restricted Subsidiaries, layered Indebtedness, Liens, transactions with
Affiliates, Change of Control, conduct of business transactions with Affiliates
and the activities of Capital and payments for consent.
The Issuers may, from time to time, subject to compliance with any
other applicable provisions of this Indenture, without the consent of the
Holders, create and issue pursuant to this Indenture Add On Notes (or the same
except for the payment of interest accruing prior to the issue date of such Add
On Notes or except for the first payment of interest following the issue date of
such Add On Notes), which Add On Notes will be treated, together with any other
Outstanding Notes, as a single issue of securities.
To guarantee the due and punctual payment of the principal, premium,
if any, and interest on the Notes and all other amounts payable by the Issuers
under the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Notes and the Indenture, future Restricted Subsidiaries (except Foreign
Subsidiaries) will unconditionally guarantee, jointly and severally, such
obligations on a senior basis pursuant to the terms of the Indenture.
5. Redemption
----------
Optional Redemption. The Notes will be redeemable, at the Issuers'
option, in whole at any time or in part from time to time, on and after January
15, 2004, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on January 15, of the year
set forth below, plus, in each case, accrued interest to the date of redemption
(subject to the right of Holders of record on a record date to receive interest
due on the related interest payment date that is on or prior to such date of
redemption):
A-6
<PAGE>
YEAR PERCENTAGE
---- ----------
2004..................... 105.063%
2005..................... 103.375%
2006..................... 101.688%
2007 and thereafter...... 100.000%
Optional Redemption upon Public Equity Offerings. In addition, at any
time, or from time to time, on or prior to January 15, 2002 the Issuers may, at
their option, use the net cash proceeds of one or more Public Equity Offerings
(as defined below) to redeem in the aggregate up to 35% of the aggregate
principal amount of the Notes originally issued at a redemption price equal to
110.125% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of redemption (subject to the right of Holders of record on
a record date to receive interest due on the related interest payment date that
is on or prior to such date of redemption); provided, however, that after giving
effect to any such redemption at least 65% of the aggregate principal amount of
the Notes originally issued remains outstanding. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Issuers shall make such redemption not more than 60 days after the consummation
of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company or
Capital pursuant to a registration statement filed with the Commission in
accordance with the Securities Act of 1933, as amended (the "Securities Act"),
or any successor statute.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part and Notes of a
principal amount in excess of $1,000 may be redeemed in part in multiples of
$1,000 only; and provided, further, that if a partial redemption is made with
the proceeds of a Public Equity Offering, selection of the Notes or portions
thereof for redemption shall, subject to the preceding proviso, be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of DTC or a successor depositary), unless
such method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than 60 days before the Redemption
Date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the Redemption Date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Issuers
have deposited with the Paying Agent funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
A-7
<PAGE>
6. Repurchase Provisions
---------------------
(1) Upon the occurrence of a Change of Control, each Holder will have
the right to require that the Issuers purchase all or a portion (in integral
multiples of $1,000) of such Holder's Notes pursuant to the offer described
below (the "Change of Control Offer"), at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase (subject to the right of Holders of record on a record date to receive
interest due on the related interest payment date that is on or prior to such
date of purchase). Within 30 days following the date upon which the Change of
Control occurred, the Company must send, by first-class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 60 days from
the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders electing to have a Note purchased
pursuant to a Change of Control Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third business day prior to the Change of
Control Payment Date.
(2) To the extent all or a portion of the Net Cash Proceeds of any
Asset Sale are not applied within 270 days of such Asset Sale in certain ways
described in the Indenture (the "Net Proceeds Offer Trigger Date"), the Issuers
will make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 20 business days following the date
on which such offer is made (or such longer period as may be required by law)
nor more than 60 days following such Net Proceeds Offer Trigger Date, from all
Holders on a pro rata basis (and on a pro rata basis with the holders of any
other Senior Subordinated Indebtedness with similar provisions requiring the
Issuers to offer to purchase such Senior Subordinated Indebtedness with the
proceeds of Asset Sales), that principal amount of Notes and such other
Indebtedness equal to such unapplied Net Cash Proceeds at a price, in the case
of the Notes, equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest thereon, to the date of purchase
(subject to the right of Holders of record on a record date to receive interest
due on an interest payment date that is on or prior to such date of purchase).
Notwithstanding the foregoing, the Issuers may defer the Net Proceeds Offer
until there is an aggregate amount of unapplied Net Cash Proceeds equal to or in
excess of $5.0 million resulting from one or more Asset Sales (at which time,
the entire amount of unapplied Net Cash Proceeds, and not just the amount in
excess of $5.0 million, shall be applied as required pursuant to this
paragraph).
7. Denominations; Transfer; Exchange
---------------------------------
The Notes are in registered form without coupons in denominations of
principal amount of $1,000 and whole multiples of $1,000. A Holder may transfer
or exchange Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required
A-8
<PAGE>
by law or permitted by the Indenture. The Registrar need not register the
transfer of or exchange (i) any Notes selected for redemption (except, in the
case of a Note to be redeemed in part, the portion of the Note not to be
redeemed) for a period beginning 15 days before the mailing of a notice of Notes
to be redeemed and ending on the date of such mailing or (ii) any Notes for a
period beginning 15 days before an interest payment date and ending on such
interest payment date.
8. Persons Deemed Owners
---------------------
The registered holder of this Note may be treated as the owner of it
for all purposes.
9. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuers at their request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Issuers and not to the Trustee for payment.
10. Discharge Prior to Redemption or Maturity
-----------------------------------------
Subject to certain conditions set forth in the Indenture, the Issuers
at any time may terminate some or all of their obligations under the Notes and
the Indenture if the Issuers deposit with the Trustee cash or U.S. Government
Obligations for the payment of principal and interest on the Notes to redemption
or maturity, as the case may be.
11. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the then Outstanding Notes and (ii)
any Default (other than with respect to nonpayment, or in respect of a provision
that cannot be amended without the written consent of each Noteholder affected)
or noncompliance with any provision may be waived with the written consent of
the Holders of a majority in principal amount of the then Outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Noteholder, the Issuers and the Trustee may amend the Indenture or the Notes
to, among other things, cure any ambiguity, omission, defect or inconsistency,
or to comply with Article IV of the Indenture, or to provide for uncertificated
Notes in addition to or in place of Certificated Notes, or to add guarantees
with respect to the Notes or to secure the Notes, or to add additional covenants
or surrender rights and powers conferred on the Issuers, or to comply with any
request of the Commission in connection with qualifying the Indenture under the
Act, or to make any change that does not adversely affect the rights of any
Noteholder, or to provide for the issuance of Exchange Notes.
A-9
<PAGE>
12. Defaults and Remedies
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes may declare all the
Outstanding Notes to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in the Notes
being due and payable immediately upon the occurrence of such Events of Default.
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the
Outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Noteholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of principal
or interest) if it determines that withholding notice is in their interest.
13. Trustee Dealings with the Issuers
---------------------------------
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with and collect obligations
owed to it by the Issuers or their Affiliates and may otherwise deal with the
Issuers or their affiliates with the same rights it would have if it were not
Trustee.
14. No Recourse Against Others
--------------------------
An incorporator, director, officer, employee, stockholder or
controlling person, as such, of the Issuers or any Note Guarantor shall not have
any liability for any obligations of the Issuers under the Notes or any Note
Guarantees, the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Note, each Noteholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
15. Authentication
--------------
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Note.
16. Abbreviations
-------------
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
A-10
<PAGE>
[Include if this is not a Regulation S Note]
17. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Issuers have caused CUSIP numbers to be
printed on the Notes and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
[Include if this is a Regulation S Note]
17. ISIN Numbers
------------
The Issuers have caused ISIN numbers to be printed on the Notes and
have directed the Trustee to use ISIN numbers in notices of redemption as a
convenience to Noteholders. No representation is made as to the accuracy of
such numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.
18. Governing Law
-------------
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, but without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
The Issuers will furnish to any Noteholder upon written request and
without charge to the Noteholder a copy of the Indenture which has in it the
text of this Note in larger type. Requests may be made to:
Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
A-11
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of the
Issuers. The agent may substitute another to act for him.
______________________________________________________________________________
Date:____________________ Your Signature:___________________
Signature Guarantee:______________________________
(Signature must be guaranteed)
______________________________________________________________________________
Sign exactly as your name appears on the other side of this Note.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
A-12
<PAGE>
[To be attached to Global Notes only:]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been
made:
<TABLE>
<CAPTION>
Date of Exchange Amount of decrease in Principal Amount of increase in Principal Principal Amount of this Global
Amount of this Global Note Amount of this Global Note Note following such decrease or
increase
<S> <C> <C> <C>
- --------------- ------------------------------ ------------------------------- --------------------------------
<CAPTION>
Date of Exchange Signature of authorized
signatory of Trustee or Note Custodian
<S> <C>
- --------------- ---------------------------------------
</TABLE>
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 3.11 or Section 3.18 of the Indenture, check either box:
------------ ------------
[_] [_]
Section 3.11 Section 3.18
------------ ------------
If you want to elect to have only part of this Note purchased by the
Issuers pursuant to Section 3.11 or Section 3.18 of the Indenture, state the
------------ ------------
amount in principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the
other side of the Note)
Signature Guarantee: _______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
A-14
<PAGE>
EXHIBIT B
FORM OF FACE OF EXCHANGE NOTE
[Include the following two paragraphs for Global Notes only:]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
No. [___] Principal Amount $[______________],
as revised by the Schedule of Increases and
Decreases in Global Note attached hereto
CUSIP NO. ____________
B-1
<PAGE>
9 7/8% Senior Subordinated Notes due 2009
Advanced Glassfiber Yarns LLC and AGY Capital Corp., as joint and
several obligors, promise to pay to [______________], or registered assigns, the
principal sum of [_______________] Dollars, as revised by the Schedule of
Increases and Decreases in Global Note attached hereto, on ___, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Additional provisions of this Note are set forth on the other side of
this Note.
Advanced Glassfiber Yarns LLC
By: _____________________________
Name:
Title:
By: _____________________________
Name:
Title:
AGY Capital Corp.
By: _____________________________
Name:
Title:
By: ______________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
The Bank of New York,
as Trustee, certifies that this is one of the Notes referred to in the
Indenture.
THE BANK OF NEW YORK
By______________________
Authorized Signatory Date: [_____________]
B-2
<PAGE>
FORM OF REVERSE SIDE OF INITIAL NOTE
9 7/8% Senior Subordinated Notes due 2009
1. Interest
--------
Advanced Glassfiber Yarns LLC and AGY Capital Corp. (together with
their successors and assigns under the Indenture hereinafter referred to, being
herein called the "Issuers"), as joint and several obligors, promise to pay
interest on the principal amount of this Note at the rate per annum shown above.
The Issuers will pay interest semiannually on January 15 and July 15
of each year commencing July 15, 1999. Interest on the Notes will accrue from
the most recent date to which interest has been paid on the Notes or, if no
interest has been paid, from and including January 21, 1999. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Issuers shall pay interest on overdue principal and, to the extent
such payments are lawful, interest on overdue installments of interest (without
regard to any applicable grace periods) at the rate of 2.0% per annum in excess
of the rate shown on this Note.
2. Method of Payment
-----------------
By at least 10:00 a.m. (New York City time) on the date on which any
principal of or interest on any Note is due and payable, the Issuers shall
irrevocably deposit with the Trustee or the Paying Agent money sufficient to pay
such principal, premium, if any, and/or interest. The Issuers will pay interest
(except Defaulted Interest) to the Persons who are registered Holders of Notes
at the close of business on the January 1 or July 1 preceding the interest
payment date even if Notes are cancelled, repurchased or redeemed after the
record date and on or before the interest payment date. Holders must surrender
Notes to a Paying Agent to collect principal payments. The Issuers will pay
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts. Payments in respect of
Notes represented by a Global Note (including principal, premium, if any, and
interest) will be made by the transfer of immediately available funds to the
accounts specified by the Depository Trust Company. The Issuers will make all
payments in respect of a Certificated Note (including principal, premium, if
any, and interest) by mailing a check to the registered address of each Holder
thereof; provided, however, that payments on the Notes may also be made by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Holder elects payment by wire transfer by giving written
notice to the Trustee or the Paying Agent to such effect designating such
account no later than 15 days immediately preceding the relevant due date for
payment.
3. Paying Agent and Registrar
--------------------------
Initially, The Bank of New York will act as Trustee, Paying Agent and
Registrar. The Issuers may appoint and change any Paying Agent, Registrar or
co-registrar without notice to any Noteholder. Either of the Issuers may act as
Paying Agent, Registrar or co-registrar.
B-3
<PAGE>
4. Indenture
---------
The Issuers issued the Notes under an Indenture dated as of January
21, 1999 (as it may be amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), between the Issuers and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
------
(S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all such terms, and
Noteholders are referred to the Indenture and the Act for a statement of those
terms. Each Noteholder by accepting a Note, agrees to be bound by all of the
terms and provisions of the Indenture, as amended from time to time.
The Notes are general unsecured senior obligations of the Issuers
unlimited in aggregate principal amount; $150,000,000 in aggregate principal
amount will be initially issued on the Issue Date. This Note is one of the
Initial Notes referred to in the Indenture. The Initial Notes and the Exchange
Notes will be treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on, among other things: Additional
Indebtedness, Restricted Payments, Asset Sales, dividend and other payment
restrictions affecting Restricted Subsidiaries, the sale or issuance of Capital
Stock of Restricted Subsidiaries, layered Indebtedness, Liens, transactions with
Affiliates, Change of Control, conduct of business transactions with Affiliates
and the activities of Capital and payments for consent.
The Issuers may, from time to time, subject to compliance with any
other applicable provisions of this Indenture, without the consent of the
Holders, create and issue pursuant to this Indenture Add On Notes (or the same
except for the payment of interest accruing prior to the issue date of such Add
On Notes or except for the first payment of interest following the issue date of
such Add On Notes), which Add On Notes will be treated, together with any other
Outstanding Notes, as a single issue of securities.
To guarantee the due and punctual payment of the principal, premium,
if any, and interest on the Notes and all other amounts payable by the Issuers
under the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Notes and the Indenture, future Restricted Subsidiaries (except Foreign
Subsidiaries) will unconditionally guarantee, jointly and severally, such
obligations on a senior basis pursuant to the terms of the Indenture.
5. Redemption
----------
Optional Redemption. The Notes will be redeemable, at the Issuers'
option, in whole at any time or in part from time to time, on and after January
15, 2004, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on January 15, of the year
set forth below, plus, in each case, accrued interest to the date of redemption
(subject to the right of Holders of record on a record date to receive interest
due on the related interest payment date that is on or prior to such date of
redemption):
B-4
<PAGE>
YEAR PERCENTAGE
---- ----------
2004.................................. 105.063%
2005.................................. 103.375%
2006.................................. 101.688%
2007 and thereafter................... 100.000%
Optional Redemption upon Public Equity Offerings. In addition, at any
time, or from time to time, on or prior to January 15, 2002 the Issuers may, at
their option, use the net cash proceeds of one or more Public Equity Offerings
(as defined below) to redeem in the aggregate up to 35% of the aggregate
principal amount of the Notes originally issued at a redemption price equal to
110.125% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of redemption (subject to the right of Holders of record on
a record date to receive interest due on the related interest payment date that
is on or prior to such date of redemption); provided, however, that after giving
effect to any such redemption at least 65% of the aggregate principal amount of
the Notes originally issued remains outstanding. In order to effect the
foregoing redemption with the proceeds of any Public Equity Offering, the
Issuers shall make such redemption not more than 60 days after the consummation
of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company or
Capital pursuant to a registration statement filed with the Commission in
accordance with the Securities Act of 1933, as amended (the "Securities Act"),
or any successor statute.
In the event that less than all of the Notes are to be redeemed at any
time, selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the Trustee shall deem fair and appropriate; provided, however, that no Notes of
a principal amount of $1,000 or less shall be redeemed in part and Notes of a
principal amount in excess of $1,000 may be redeemed in part in multiples of
$1,000 only; and provided, further, that if a partial redemption is made with
the proceeds of a Public Equity Offering, selection of the Notes or portions
thereof for redemption shall, subject to the preceding proviso, be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of DTC or a successor depositary), unless
such method is otherwise prohibited. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than 60 days before the Redemption
Date to each Holder of Notes to be redeemed at its registered address. If any
Note is to be redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
redeemed. A new Note in a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the Redemption Date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Issuers
have deposited with the Paying Agent funds in satisfaction of the applicable
redemption price pursuant to the Indenture.
B-5
<PAGE>
6. Repurchase Provisions
---------------------
(1) Upon the occurrence of a Change of Control, each Holder will have
the right to require that the Issuers purchase all or a portion (in integral
multiples of $1,000) of such Holder's Notes pursuant to the offer described
below (the "Change of Control Offer"), at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase (subject to the right of Holders of record on a record date to receive
interest due on the related interest payment date that is on or prior to such
date of purchase). Within 30 days following the date upon which the Change of
Control occurred, the Company must send, by first-class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state, among other things, the
purchase date, which must be no earlier than 30 days nor later than 60 days from
the date such notice is mailed, other than as may be required by law (the
"Change of Control Payment Date"). Holders electing to have a Note purchased
pursuant to a Change of Control Offer will be required to surrender the Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third business day prior to the Change of
Control Payment Date.
(2) To the extent all or a portion of the Net Cash Proceeds of any
Asset Sale are not applied within 270 days of such Asset Sale in certain ways
described in the Indenture (the "Net Proceeds Offer Trigger Date"), the Issuers
will make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 20 business days following the date
on which such offer is made (or such longer period as may be required by law)
nor more than 60 days following such Net Proceeds Offer Trigger Date, from all
Holders on a pro rata basis (and on a pro rata basis with the holders of any
other Senior Subordinated Indebtedness with similar provisions requiring the
Issuers to offer to purchase such Senior Subordinated Indebtedness with the
proceeds of Asset Sales), that principal amount of Notes and such other
Indebtedness equal to such unapplied Net Cash Proceeds at a price, in the case
of the Notes, equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest thereon, to the date of purchase
(subject to the right of Holders of record on a record date to receive interest
due on an interest payment date that is on or prior to such date of purchase).
Notwithstanding the foregoing, the Issuers may defer the Net Proceeds Offer
until there is an aggregate amount of unapplied Net Cash Proceeds equal to or in
excess of $5.0 million resulting from one or more Asset Sales (at which time,
the entire amount of unapplied Net Cash Proceeds, and not just the amount in
excess of $5.0 million, shall be applied as required pursuant to this
paragraph).
7. Denominations; Transfer; Exchange
---------------------------------
The Notes are in registered form without coupons in denominations of
principal amount of $1,000 and whole multiples of $1,000. A Holder may transfer
or exchange Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange
B-6
<PAGE>
(i) any Notes selected for redemption (except, in the case of a Note to be
redeemed in part, the portion of the Note not to be redeemed) for a period
beginning 15 days before the mailing of a notice of Notes to be redeemed and
ending on the date of such mailing or (ii) any Notes for a period beginning 15
days before an interest payment date and ending on such interest payment date.
8. Persons Deemed Owners
---------------------
The registered holder of this Note may be treated as the owner of it
for all purposes.
9. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuers at their request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Issuers and not to the Trustee for payment.
10. Discharge Prior to Redemption or Maturity
-----------------------------------------
Subject to certain conditions set forth in the Indenture, the Issuers
at any time may terminate some or all of their obligations under the Notes and
the Indenture if the Issuers deposit with the Trustee cash or U.S. Government
Obligations for the payment of principal and interest on the Notes to redemption
or maturity, as the case may be.
11. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount of the then Outstanding Notes and (ii)
any Default (other than with respect to nonpayment, or in respect of a provision
that cannot be amended without the written consent of each Noteholder affected)
or noncompliance with any provision may be waived with the written consent of
the Holders of a majority in principal amount of the then Outstanding Notes.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Noteholder, the Issuers and the Trustee may amend the Indenture or the Notes
to, among other things, cure any ambiguity, omission, defect or inconsistency,
or to comply with Article IV of the Indenture, or to provide for uncertificated
Notes in addition to or in place of Certificated Notes, or to add guarantees
with respect to the Notes or to secure the Notes, or to add additional covenants
or surrender rights and powers conferred on the Issuers, or to comply with any
request of the Commission in connection with qualifying the Indenture under the
Act, or to make any change that does not adversely affect the rights of any
Noteholder, or to provide for the issuance of Exchange Notes.
B-7
<PAGE>
12. Defaults and Remedies
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes may declare all the
Outstanding Notes to be due and payable immediately. Certain events of
bankruptcy or insolvency are Events of Default which will result in the Notes
being due and payable immediately upon the occurrence of such Events of Default.
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the
Outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Noteholders notice of any continuing Default or
Event of Default (except a Default or Event of Default in payment of principal
or interest) if it determines that withholding notice is in their interest.
13. Trustee Dealings with the Issuers
---------------------------------
Subject to certain limitations set forth in the Indenture, the Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Notes and may otherwise deal with and collect obligations
owed to it by the Issuers or their Affiliates and may otherwise deal with the
Issuers or their affiliates with the same rights it would have if it were not
Trustee.
14. No Recourse Against Others
--------------------------
An incorporator, director, officer, employee, stockholder or
controlling person, as such, of the Issuers or any Note Guarantor shall not have
any liability for any obligations of the Issuers under the Notes or any Note
Guarantees, the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Note, each Noteholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
15. Authentication
--------------
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent acting on its behalf) manually signs the
certificate of authentication on the other side of this Note.
16. Abbreviations
-------------
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian) and U/G/M/A (=Uniform Gift to Minors Act).
B-8
<PAGE>
17. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Issuers have caused CUSIP numbers to be
printed on the Notes and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
18. Governing Law
-------------
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York, but without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
The Issuers will furnish to any Noteholder upon written request and
without charge to the Noteholder a copy of the Indenture which has in it the
text of this Note in larger type. Requests may be made to:
Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
B-9
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on the books of the
Issuers. The agent may substitute another to act for him.
________________________________________________________________________________
Date:____________________ Your Signature:___________________
Signature Guarantee:_____________________________________
(Signature must be guaranteed)
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Note.
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
B-10
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The following increases or decreases in this Global Note have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of authorized
Date of Amount of decrease in Principal Amount of increase in Principal this Global Note following signatory of Trustee or
Exchange Amount of this Global Note Amount of this Global Note such decrease or increase Note Custodian
<S> <C> <C> <C> <C>
________ _______________________________ _______________________________ __________________________ _______________________
</TABLE>
B-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 3.11 or Section 3.18 of the Indenture, check either box:
------------ ------------
[_] [_]
Section 3.11 Section 3.18
------------ ------------
If you want to elect to have only part of this Note purchased by the
Issuers pursuant to Section 3.11 or Section 3.18 of the Indenture, state the
------------ ------------
amount in principal amount (must be integral multiple of $1,000): $
Date: __________ Your Signature ____________________________
(Sign exactly as your name appears on the
other side of the Note)
Signature Guarantee:_______________________________________
(Signature must be guaranteed)
The signature(s) should be guaranteed by an eligible guarantor institution
(banks, stockbrokers, savings and loan associations and credit unions with
membership in an approved signature guarantee medallion program), pursuant to
S.E.C. Rule 17Ad-15.
B-12
<PAGE>
EXHIBIT 4.3
EXECUTION COPY
ADVANCED GLASSFIBER YARNS LLC
9 7/8% SENIOR SUBORDINATED NOTES DUE 2009
REGISTRATION RIGHTS AGREEMENT
New York, New York
January 21, 1999
First Union Capital Markets
Warburg Dillon Read LLC
As Initial Purchasers under the Purchase Agreement
c/o First Union Capital Markets
301 South College Street, TW-10
Charlotte, NC 28288-0606
Ladies and Gentlemen:
This Registration Rights Agreement (the "Agreement") is dated as of
January 21, 1999, by and among Advanced Glassfiber Yarns LLC, a Delaware limited
liability company (the "Company"), and AGY Capital Corp., a Delaware corporation
("Capital" and together with the Company the "Issuers"), First Union Capital
Markets, a division of Wheat First Securities, Inc. and Warburg Dillon Read LLC
(the "Initial Purchasers").
This Agreement is being entered into in connection with a certain note
purchase agreement, dated January 15, 1999, between the Issuers and the Initial
Purchasers (the "Purchase Agreement"), which provides for the issuance and sale
by the Issuers to the Initial Purchasers of $150,000,000 aggregate principal
amount of the Issuers' 9 7/8% Senior Subordinated Notes Due 2009 (the "Notes").
In order to induce the Initial Purchasers to enter into the Purchase Agreement,
the Issuers have agreed to provide the registration rights set forth in this
Agreement for the benefit of the Initial Purchasers and their direct and
indirect transferees. The execution and delivery of this Agreement is a
condition to the obligation of the Initial Purchasers to purchase the Notes
under the Purchase Agreement. The parties hereby agree as follows:
1. Definitions. Capitalized terms used herein without definition
-----------
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
---
regulations of the Commission promulgated thereunder.
"Affiliate" means, with respect to any specified person, any other
---------
person that, directly or indirectly, is in control of, is controlled by, or is
under common control with, such specified person. For purposes of this
definition, control of a person means the power, direct or
<PAGE>
indirect, to direct or cause the direction of the management and policies of
such person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" has the meaning set forth in the preamble hereto.
---------
"Business Day" means any day excluding Saturday, Sunday or any other
------------
day which is a legal holiday under the laws of Charlotte, North Carolina or New
York, New York or is a day on which banking institutions therein located are
authorized or required by law or other governmental action to close.
"Commission" means the Securities and Exchange Commission.
----------
"Consummate" means, with respect to a Registered Exchange Offer, the
----------
occurrence of (a) the filing and effectiveness under the Act of the Exchange
Offer Registration Statement relating to the Exchange Notes to be issued in the
Registered Exchange Offer, (b) the maintenance of such Registration Statement
continuously effective and the keeping of the Registered Exchange Offer open for
a period not less than the minimum period required pursuant to Section 2(c)(ii)
hereof, (c) the Issuers' acceptance for exchange of all Transfer Restricted
Notes duly tendered and not validly withdrawn pursuant to the Registered
Exchange Offer and (d) the delivery of Exchange Notes by the Issuers to the
registrar under the Indenture in the same aggregate principal amount as the
aggregate principal amount of Transfer Restricted Notes duly tendered and not
validly withdrawn by Holders thereof pursuant to the Registered Exchange Offer
and the delivery of such Exchange Notes to such Holders. The term
"Consummation" has a meaning correlative to the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations of the Commission promulgated thereunder.
"Exchange Notes" means debt securities of the Issuers substantially
--------------
identical in all material respects to the Notes (except that the Liquidated
Damages provisions and the transfer restrictions pertaining to the Notes will be
modified or eliminated, as appropriate), to be issued under the Indenture.
"Exchange Offer Registration Period" means the 180-Business Day period
----------------------------------
(or longer, if required by applicable law) following the Consummation of the
Registered Exchange Offer, exclusive of any period during which any stop order
shall be in effect suspending the effectiveness of the Exchange Offer
Registration Statement; provided, however, that in the event that all resales of
-------- -------
Exchange Notes (including, subject to the time periods set forth herein, any
resales by Participating Broker-Dealers) covered by such Exchange Offer
Registration Statement have been made, the Exchange Offer Registration Statement
need not thereafter remain continuously effective for such period.
"Exchange Offer Registration Statement" means a registration statement
-------------------------------------
of the Issuers on an appropriate form under the Act with respect to the
Registered Exchange Offer, all
2
<PAGE>
amendments and supplements to such registration statement, including post-
effective amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference therein.
"Filing Date" has the meaning set forth in Section 2 hereto.
-----------
"Holder" means any holder from time to time of Transfer Restricted
------
Notes or Exchange Notes (including either of the Initial Purchasers).
"Indenture" means the indenture relating to the Notes and the Exchange
---------
Notes, to be dated as of the Closing Date, between the Issuers and The Bank of
New York, as trustee, as the same may be amended, supplemented, waived or
otherwise modified from time to time in accordance with the terms thereof.
"Initial Purchasers" has the meaning set forth in the preamble hereto.
------------------
"Issue Date" means January 21, 1999.
----------
"Issuers" has the meaning set forth in the preamble hereto.
-------
"Liquidated Damages" has the meaning set forth in Section 4 hereto.
------------------
"Losses" has the meaning set forth in Section 8(d) hereto.
------
"Majority Holders" means the Holders of a majority of the aggregate
----------------
principal amount of Transfer Restricted Notes registered under a Registration
Statement.
"Managing Underwriters" means the investment banker or investment
---------------------
bankers and manager or managers that shall administer an underwritten offering
under a Shelf Registration Statement.
"Notes" has the meaning set forth in the preamble hereto.
-----
"Participating Broker-Dealer" means any Holder (which may include any
---------------------------
of the Initial Purchasers) that is a broker-dealer, electing to exchange Notes
acquired for its own account as a result of market-making activities or other
trading activities for Exchange Notes.
"Prospectus" means the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Transfer Restricted Notes covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Purchase Agreement" has the meaning set forth in the preamble hereto.
------------------
3
<PAGE>
"Registered Exchange Offer" means the proposed offer to the Holders to
-------------------------
issue and deliver to such Holders, in exchange for the Notes, a like principal
amount of Exchange Notes.
"Registration Statement" means any Exchange Offer Registration
----------------------
Statement or Shelf Registration Statement that covers any of the Transfer
Restricted Notes (including any guarantees of each thereof) pursuant to the
provisions of this Agreement, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto, and all material
incorporated by reference therein.
"Shelf Registration" means a registration effected pursuant to Section
------------------
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(c)
-------------------------
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
----------------------------
of the Issuers pursuant to the provisions of Section 3 hereof, which covers some
or all of the Transfer Restricted Notes, as applicable, on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Transfer Restricted Notes" means each Note upon original issuance
-------------------------
thereof and at all times subsequent thereto, each Exchange Note as to which
Section 3(a)(iii) and Section 3(a)(iv) apply upon original issuance and at all
times subsequent thereto, until in the case of any such Note or Exchange Note,
as the case may be, the earliest to occur of (i) the date on which such Note has
been exchanged by a person other than a Participating Broker-Dealer for an
Exchange Note (other than with respect to an Exchange Note as to which Section
3(a)(iii) and Section 3(a)(iv) apply), (ii) with respect to Exchange Notes
received by Participating Broker-Dealers in the Registered Exchange Offer, the
date on which such Exchange Note has been sold by such Participating Broker-
Dealer by means of the Prospectus contained in the Exchange Offer Registration
Statement, (iii) a Shelf Registration Statement covering such Note or Exchange
Note, as the case may be, has been declared effective by the Commission and such
Note or Exchange Note, as the case may be, has been disposed of in accordance
with such effective Shelf Registration Statement, (iv) the date on which such
Note or Exchange Note, as the case may be, is disposed of pursuant to Rule 144
under the Act or (v) such Note or Exchange Note, as the case may be, ceases to
be outstanding for purposes of the Indenture.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
-------------------
amended.
"Trustee" means the trustee with respect to the Notes or Exchange
-------
Notes, as applicable, under the Indenture.
2. Registered Exchange Offer; Resales of Exchange Notes by
-------------------------------------------------------
Participating Broker-Dealers; Private Exchange. (a) The Issuers shall prepare
- ----------------------------------------------
and, not later than 60 days from
4
<PAGE>
the Issue Date (or, if such 60th day is not a Business Day, by the first
Business Day thereafter), shall file with the Commission the Exchange Offer
Registration Statement with respect to the Registered Exchange Offer (the date
of such filing hereinafter referred to as the "Filing Date"). The Issuers shall
use their best efforts (i) to cause the Exchange Offer Registration Statement to
be declared effective under the Act within 150 days from the Issue Date (or, if
such 150th day is not a Business Day, by the first Business Day thereafter), and
(ii) to Consummate the Registered Exchange Offer within 30 Business Days from
the date the Exchange Offer Registration Statement becomes effective (or, if
such 30th day is not a Business Day, by the first Business Day thereafter).
(b) The objective of such Registered Exchange Offer is to enable
each Holder electing to exchange Transfer Restricted Notes for Exchange Notes
(assuming that such Holder (x) is not an "affiliate" of the Issuers within the
meaning of the Act, (y) is not a broker-dealer that acquired the Transfer
Restricted Notes in a transaction other than as a part of its market-making or
other trading activities and (z) if such Holder is not a broker-dealer, acquires
the Exchange Notes in the ordinary course of such Holder's business, is not
participating in the distribution of the Exchange Notes and has no arrangements
or understandings with any person to participate in the distribution of the
Exchange Notes) to resell such Exchange Notes from and after their receipt
without any limitations or restrictions under the Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
(c) In connection with the Registered Exchange Offer, the Issuers
shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for acceptance for not
less than 20 Business Days after the date notice thereof is mailed to
Holders;
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York; and
(iv) comply in all material respects with all applicable laws
relating to the Registered Exchange Offer.
(d) The Issuers may suspend the use of the Prospectus for a period
not to exceed 30 days in any six month period or an aggregate of 45 days in any
twelve-month period for valid business reasons, to be determined by the Issuers
in their sole reasonable judgment (not including avoidance of its obligations
hereunder), including, without limitation, the acquisition or divestiture of
assets, public filings with the Commission, pending corporate developments and
similar events; provided that the Issuers promptly thereafter comply with the
--------
requirements of Section 5(k) hereof, if applicable.
5
<PAGE>
(e) As soon as practicable after the Consummation of the Registered
Exchange Offer, the Issuers shall cause the Trustee promptly to authenticate and
deliver to each Holder Exchange Notes equal in principal amount to the Transfer
Restricted Notes of such Holder so accepted for exchange.
(f) The Initial Purchasers and the Issuers acknowledge that, pursuant
to interpretations by the staff of the Commission of Section 5 of the Act, and
in the absence of an applicable exemption therefrom, each Participating Broker-
Dealer is required to deliver a Prospectus in connection with a sale of any
Exchange Notes received by such Participating Broker-Dealer pursuant to the
Registered Exchange Offer in exchange for Transfer Restricted Notes acquired for
its own account as a result of market-making activities or other trading
activities. Accordingly, the Issuers will allow Participating Broker-Dealers
and other persons, if any, with similar prospectus delivery requirements to use
the Prospectus contained in the Exchange Offer Registration Statement in
connection with the resale of Exchange Notes and shall:
(i) include the information set forth in Annex A hereto on the cover
of the Prospectus forming a part of the Exchange Offer Registration
Statement, in Annex B hereto in the forepart of the Exchange Offer
Registration Statement in a section setting forth details of the Registered
Exchange Offer, in Annex C hereto in the underwriting or plan of
distribution section of the Prospectus forming a part of the Exchange Offer
Registration Statement, and in Annex D hereto in the letter of transmittal
delivered pursuant to the Registered Exchange Offer; and
(ii) use all commercially reasonable efforts to keep the Exchange
Offer Registration Statement continuously effective (subject to Section
2(d)) under the Act during the Exchange Offer Registration Period for
delivery of the Prospectus included therein by Participating Broker-Dealers
in connection with sales of Exchange Notes received pursuant to the
Registered Exchange Offer, as contemplated by Section 5(h) below.
(g) In the event that either Initial Purchaser determines that it is
not eligible to participate in the Registered Exchange Offer with respect to the
exchange of Transfer Restricted Notes constituting any portion of an unsold
allotment, upon the effectiveness of the Shelf Registration Statement as
contemplated by Section 3 hereof and at the request of such Initial Purchaser,
the Issuers shall issue and deliver to such Initial Purchaser, or to the party
purchasing Transfer Restricted Notes registered under the Shelf Registration
Statement from such Initial Purchaser, in exchange for such Transfer Restricted
Notes, a like principal amount of Exchange Notes to the extent permitted by
applicable law. The Issuers shall use their reasonable best efforts to cause
the CUSIP Service Bureau to issue the same CUSIP number for such Exchange Notes
as for Exchange Notes issued pursuant to the Registered Exchange Offer.
3. Shelf Registration. (a) If (i) the Company is not permitted to
------------------
file the Exchange Offer Registration Statement or to Consummate the Registered
Exchange Offer because the Registered Exchange Offer is not permitted by
applicable law or Commission policy, (ii) for any
6
<PAGE>
other reason the Registered Exchange Offer is not Consummated within 30 Business
Days of the date the Exchange Offer Registration Statement has become effective,
(iii) an Initial Purchaser so requests with respect to Notes acquired by it
directly from the Issuers on or prior to the 20th Business Day following the
Consummation of the Registered Exchange Offer, (iv) any Holder notifies the
Issuers on or prior to the 20th Business Day following the Consummation of the
registered Exchange Offer that such Holder is not eligible to participate in the
Registered Exchange Offer or the Exchange Notes such Holder would receive would
not be freely tradable, or (v) in the case where an Initial Purchaser
participates in the Registered Exchange Offer or acquires Exchange Notes
pursuant to Section 2(g) hereof, the Initial Purchaser does not receive freely
tradable Exchange Notes in exchange for Notes constituting any portion of an
unsold allotment and such Initial Purchaser notifies the Issuers on or prior to
the 20th Business day following the Consummation of the Registered Exchange
Offer (it being understood that, for purposes of this Section 3, (x) the
requirement that the Initial Purchaser deliver a Prospectus containing the
information required by Items 507 and/or 508 of Regulation S-K under the Act in
connection with sales of Exchange Notes acquired in exchange for such Transfer
Restricted Notes shall result in such Exchange Notes being not "freely tradable"
and (y) the requirement that a Participating Broker-Dealer deliver a Prospectus
in connection with sales of Exchange Notes acquired in the Registered Exchange
Offer in exchange for Transfer Restricted Notes acquired as a result of market-
making activities or other trading activities shall not result in such Exchange
Notes being not "freely tradable"), the following provisions shall apply:
(b) The Issuers shall use their best efforts to file with the
Commission a Shelf Registration Statement prior to the 75th day following the
earliest to occur of (i) the date on which the Issuers determine that they are
not permitted to file the Exchange Offer Registration Statement or to Consummate
the Exchange Offer; (ii) 30 Business Days after the Exchange Offer registration
Statement has been declared effective if the Registered Exchange Offer has not
been Consummated by such date and (iii) the date notice is given pursuant to
Section (a)(iii), (iv) or (v) above (or if such 75th day is not a Business Day,
by the first Business Day thereafter) and shall use its reasonable efforts to
cause the Shelf Registration Statement to be declared effective by the
Commission within 135 days thereafter. With respect to Exchange Notes received
by either Initial Purchaser in exchange for Notes constituting any portion of an
unsold allotment, the Issuers may, if permitted by current interpretations by
the Commission's staff, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required by Regulation S-K
Items 507 and/or 508, as applicable, in satisfaction of its obligations under
this paragraph (b) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration Statement.
(c) The Issuers shall use their best efforts to keep such Shelf
Registration Statement continuously effective (subject to Section 3(d)) in order
to permit the Prospectus forming a part thereof to be usable by Holders until
the earliest of (i) such time as the Notes or Exchange Notes covered by the
Shelf Registration Statement can be sold without any limitations under clauses
(c), (e), (f) and (h) of Rule 144, (ii) two years from the date on which the
Shelf Registration Statement was filed and (iii) such date as of which all the
Transfer Restricted Notes
7
<PAGE>
have been sold pursuant to the Shelf Registration Statement (in any such case,
such period being called the "Shelf Registration Period"). The Issuers shall be
deemed not to have used their best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of Transfer Restricted Notes covered thereby
not being able to offer and sell such notes during that period, unless such
action is (x) required by applicable law or (y) pursuant to Section 3(d) hereof,
and, in either case, so long as the Issuers promptly thereafter comply with the
requirements of Section 5(k) hereof, if applicable.
(d) The Issuers may suspend the use of the Prospectus for a period not
to exceed 30 days in any six month period or an aggregate of 45 days in any
twelve-month period for valid business reasons, to be determined by the Issuers
in their sole reasonable judgment (not including avoidance of its obligations
hereunder), including, without limitation, the acquisition or divestiture of
assets, public filings with the Commission, pending corporate developments and
similar events; provided that the Issuers promptly thereafter comply with the
--------
requirements of Section 5(k) hereof, if applicable.
(e) No Holder of Transfer Restricted Notes may include any of its
Transfer Restricted Notes in any Shelf Registration Statement pursuant to this
Agreement unless and until such Holder furnishes to the Issuers in writing,
within 20 Business Days after receipt of a request therefor, such information as
the Issuers may reasonably request for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein.
No Holder of Transfer Restricted Notes shall be entitled to Liquidated Damages
pursuant to Section 4 hereof unless and until such Holder shall have used its
best efforts to provide all such reasonably requested information. Each Holder
of Transfer Restricted Notes as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to the Issuers all information
required to be disclosed in order to make the information previously furnished
to the Issuers by such Holder not misleading.
4. Liquidated Damages.
------------------
(a) The parties hereto agree that Holders will suffer damages if the
Issuers fail to perform their obligations under Section 2 or Section 3 hereof
and that it would not be feasible to ascertain the extent of such damages.
Accordingly, in the event that (i) the applicable Registration Statement is not
filed with the Commission on or prior to the date specified herein for such
filing, (ii) the applicable Registration Statement has not been declared
effective by the Commission on or prior to the date specified herein for such
effectiveness after such obligation arises, (iii) if the Registered Exchange
Offer is required to be Consummated hereunder, the Registered Exchange Offer has
not been Consummated by the Issuers within the time period set forth in Section
2(a), or (iv) prior to the end of the Exchange Offer Registration Period or the
Shelf Registration Period, the Commission shall have issued a stop order
suspending the effectiveness of the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, or proceedings have been
initiated with respect to the Registration Statement under Section 8(d) or 8(e)
of the Act, (v) the aggregate number of days in any one such suspension period
exceeds the period permitted pursuant to Section 2(d) or 3(d) hereof, as each
8
<PAGE>
may be applicable, or (vi) the number of suspension periods exceeds the number
permitted pursuant to Section 2(d) or 3(d) hereof, as each may be applicable
(each such event referred to in clauses (i) through (vi), a "Registration
Default"), then damages ("Liquidated Damages") will accrue with respect to the
first 90-day period immediately following the occurrence of such Registration
Default in an amount equal to $0.05 per week per $1,000 principal amount of such
Transfer Restricted Notes and will increase by an additional $0.05 per week per
$1,000 principal amount of such Transfer Restricted Notes for each subsequent
90-day period until such Registration Default has been cured, up to an aggregate
maximum amount of Liquidated Damages of $0.30 per week per $1,000 principal
amount of Notes for all Registration Defaults. Following the cure of a
Registration Default, the accrual of Liquidated Damages with respect to such
Registration Default will cease and upon the cure of all Registration Defaults
the accrual of all Liquidated Damages will cease.
(b) The Issuers shall notify the Trustee and paying agent under the
Indenture (or the trustee and paying agent under such other indenture under
which any Transfer Restricted Notes are issued) immediately upon the happening
of each and every Registration Default. The Issuers shall pay the Liquidated
Damages due on the Transfer Restricted Notes by depositing with the paying agent
(which shall not be the Issuers for these purposes) for the Transfer Restricted
Notes, in trust, for the benefit of the Holders thereof, prior to 11:00 A.M. on
the next interest payment date specified in the Indenture (or such other
indenture), sums sufficient to pay the Liquidated Damages then due. The
Liquidated Damages due shall be payable on each interest payment date specified
by the Indenture (or such other indenture) to the record holders entitled to
receive the interest payment to be made on such date. Each obligation to pay
Liquidated Damages shall be deemed to accrue from and include the date of the
applicable Registration Default.
(c) The parties hereto agree that the Liquidated Damages provided for
in this Section 4 constitutes a reasonable estimate of the damages that will be
suffered by holders of Transfer Restricted Notes by reason of the happening of
any Registration Default.
(d) All of the Issuers' obligations set forth in this Section 4 which
are outstanding with respect to any Transfer Restricted Note at the time such
Note ceases to be covered by an effective Registration Statement shall survive
until such time as all such obligations with respect to such security have been
satisfied in full (notwithstanding termination of the Agreement).
5. Registration Procedures. In connection with any Shelf
-----------------------
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Issuers shall furnish to each of the Initial Purchasers,
prior to the filing thereof with the Commission, a copy of any Registration
Statement, and each amendment thereof and each amendment or supplement, if any,
to the Prospectus included therein and shall use its best efforts to reflect in
each such document, when so filed with the Commission, such comments as each of
the Initial Purchasers reasonably may propose.
9
<PAGE>
(b) The Issuers shall ensure that:
(i) any Registration Statement and any amendment thereto and any
Prospectus contained therein and any amendment or supplement thereto
complies in all material respects with the Act;
(ii) any Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and
(iii) any Prospectus forming part of any Registration Statement,
including any amendment or supplement to such Prospectus, does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
provided that no representation or agreement is made hereby with respect to
- --------
information with respect to either of the Initial Purchasers, any Underwriter or
any Holder required to be included in any Registration Statement or Prospectus
pursuant to the Act or provided by either of the Initial Purchasers, any Holder
or any Underwriter specifically for inclusion in any Registration Statement or
Prospectus.
(c) (1) The Issuers shall advise the Initial Purchasers and, in the
case of a Shelf Registration Statement, the Holders of Transfer Restricted Notes
covered thereby, and, if requested by either of the Initial Purchasers or any
such Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment thereto has
been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus included therein or for
additional information.
(2) The Issuers shall advise the Initial Purchasers and, in the
case of a Shelf Registration Statement, the Holders of Transfer Restricted Notes
covered thereby, and, in the case of an Exchange Offer Registration Statement,
any Participating Broker-Dealer that has provided in writing to the Issuers a
telephone or facsimile number and address for notices, and, if requested by
either of the Initial Purchasers or any such Holder or Participating Broker-
Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(ii) of the receipt by the Issuers of any notification with respect
to the suspension of the qualification of the Transfer Restricted Notes
included in any Registration
10
<PAGE>
Statement for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(iii) of the happening of any event that requires the making of any
changes in the Registration Statement or the Prospectus so that, as of such
date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading (which advice
shall be accompanied by an instruction to suspend the use of the Prospectus
until the requisite changes have been made).
(d) The Issuers shall use their best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) The Issuers shall furnish to each Holder of Transfer Restricted
Notes included within the coverage of any Shelf Registration Statement, without
charge, at least one copy of such Shelf Registration Statement and any post-
effective amendment thereto, including financial statements and schedules, and,
if the Holder so requests in writing, all exhibits thereto (including those
incorporated by reference).
(f) The Issuers shall, during the Shelf Registration Period, deliver
to each Holder of Transfer Restricted Notes included within the coverage of any
Shelf Registration Statement, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) included in such Shelf Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Issuers consent to the use of the Prospectus or any amendment
or supplement thereto by each of the selling Holders of Transfer Restricted
Notes in connection with the offering and sale of the Transfer Restricted Notes
covered by the Prospectus or any amendment or supplement thereto.
(g) The Issuers shall furnish to each Participating Broker-Dealer
that so requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by reference
therein and, if the Participating Broker-Dealer so requests in writing, all
exhibits thereto (including those incorporated by reference).
(h) The Issuers shall, during the Exchange Offer Registration
Period, deliver to each Participating Broker-Dealer, without charge, as many
copies of the Prospectus (including each preliminary Prospectus) included in
such Exchange Offer Registration Statement and any amendment or supplement
thereto as such Participating Broker-Dealer may reasonably request; and the
Issuers consent to the use of the Prospectus or any amendment or supplement
thereto by any such Participating Broker-Dealer in connection with the offering
and sale of the Exchange Notes, as provided in Section 2(f) above.
(i) Prior to the Registered Exchange Offer or any other offering of
Transfer Restricted Notes pursuant to any Registration Statement, the Issuers
shall register, qualify or
11
<PAGE>
cooperate with the Holders of Transfer Restricted Notes included therein and
their respective counsel in connection with the registration or qualification of
such Transfer Restricted Notes for offer and sale under the securities or blue
sky laws of such states as any such Holders reasonably request in writing and do
any and all other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Transfer Restricted Notes covered by such
Registration Statement; provided, however, that the neither of the Issuers will
-------- -------
be required to qualify generally to do business in any jurisdiction in which it
is not then so qualified, to file any general consent to service of process or
to take any action which would subject it to general service of process or to
taxation in any such jurisdiction where it is not then so subject.
(j) The Issuers shall cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Transfer Restricted
Notes to be sold pursuant to any Registration Statement free of any restrictive
legends and in denominations and registered in such names as Holders may request
prior to sales of Transfer Restricted Notes pursuant to such Registration
Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 5, the Issuers shall promptly prepare and file a
post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or any other required document so that, as
thereafter delivered to purchasers of the Transfer Restricted Notes included
therein, the Prospectus will not include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(l) The Issuers shall use their reasonable best efforts to cause The
Depository Trust Company ("DTC") on the first Business Day following the
effective date of any Registration Statement hereunder or as soon as possible
thereafter to remove (i) from any existing CUSIP number assigned to the Transfer
Restricted Notes or Exchange Notes, as the case may be, any designation
indicating that such notes are "restricted securities," which efforts shall
include delivery to DTC of a letter executed by the Issuers substantially in the
form of Annex E hereto and (ii) any other stop or restriction on DTC's system
with respect to the Transfer Restricted Notes or Exchange Notes, as the case may
be. In the event the Issuers are unable to cause DTC to take actions described
in the immediately preceding sentence, the Issuers shall take such actions as
the Initial Purchasers may reasonably request to provide, as soon as
practicable, a CUSIP number for the Transfer Restricted Notes or Exchange Notes
registered under such Registration Statement and to cause such CUSIP number to
be assigned to the Transfer Restricted Notes or Exchange Notes (or to the
maximum aggregate principal amount of the securities to which such number may be
assigned).
(m) The Issuers shall use their best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the effective
date of the applicable Registration Statement an earnings statement satisfying
the provisions of Section 11(a) of the Act and Rule 158 promulgated thereunder.
12
<PAGE>
(n) The Issuers shall cause the Indenture to be qualified under the
Trust Indenture Act in a timely manner.
(o) The Issuers may require each Holder of Transfer Restricted Notes
to be sold pursuant to any Shelf Registration Statement to furnish to the
Issuers such information regarding the Holder and the distribution of such
Transfer Restricted Notes as may, from time to time, be reasonably required by
the Act, and the obligations of the Issuers to any Holder hereunder shall be
expressly conditioned on the compliance of such Holder with such request.
(p) The Issuers shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement (i) such information as the Majority Holders provide or, if the
Transfer Restricted Notes are being sold in an underwritten offering, as the
Managing Underwriters and the Majority Holders reasonably agree should be
included therein and provided to the Issuers in writing for inclusion in the
Shelf Registration Statement or Prospectus, and (ii) such information as a
Holder may provide from time to time to the Issuers in writing for inclusion in
a Prospectus or any Shelf Registration Statement concerning such Holder and the
distribution of such Holder's Transfer Restricted Notes and, in either case,
shall make all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after being notified in writing of the matters
to be incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Issuers
shall enter into such agreements (including underwriting agreements) and take
all other customary and appropriate actions as may be reasonably requested in
order to expedite or facilitate the registration or the disposition of any
Transfer Restricted Notes, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification provisions
and procedures no less favorable than those set forth in Section 8 (or such
other provisions and procedures acceptable to the Majority Holders and the
Managing Underwriters, if any, with respect to all parties to be indemnified
pursuant to Section 8).
(r) In the case of any Shelf Registration Statement, the Issuers
shall:
(i) make reasonably available for inspection by the Holders of
Transfer Restricted Notes to be registered thereunder, any Underwriter
participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by the
Holders or any such Underwriter, all relevant financial and other records,
pertinent corporate documents and properties of the Issuers and any of
their subsidiaries;
(ii) make reasonably available its officers, directors and employees
to supply all relevant information reasonably requested by the Holders or
any such Underwriter, attorney, accountant or agent in connection with any
such Registration Statement as is customary for similar due diligence
examinations; provided, however, that any information so provided will be
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deemed confidential at the time of delivery of such information and shall
be kept confidential by the Holders or any such Underwriter,
13
<PAGE>
attorney, accountant or agent, unless (x) disclosure thereof is made in
connection with a court proceeding or required by law; provided that each
--------
Holder and any such Managing Underwriter, attorney, accountant or agent
will, upon learning that disclosure of such information is sought in a
court proceeding or required by law, give reasonable notice to the Issuers
with enough time to allow the Issuers to undertake appropriate action to
prevent disclosure at the Issuers' sole expense, or (y) such information
has previously been made or becomes available to the public generally
through the Issuers or through a third party without an accompanying
obligation of confidentiality;
(iii) make such representations and warranties to the Holders of
Transfer Restricted Notes registered thereunder and the Managing
Underwriters, if any, in form, substance and scope as are customarily made
by issuers to Managing Underwriters and covering matters including, but not
limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Issuers and updates thereof
(which counsel and opinions, in form, scope and substance, shall be
reasonably satisfactory to the Managing Underwriters, if any) addressed to
each selling Holder and the Managing Underwriters, if any, covering such
matters as are customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
Holders and Managing Underwriters;
(v) obtain "cold comfort" letters and updates thereof from the
independent certified public accountants of the Issuers (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Issuers or of any business acquired by the Issuers for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each selling Holder of the Transfer
Restricted Notes covered by such Shelf Registration Statement (provided
such Holder furnishes the accountants with such representations as the
accountants customarily require in similar situations) and the Managing
Underwriters, if any, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with primary
underwritten offerings;
(vi) deliver such documents and certificates as may be reasonably
requested by the Majority Holders and the Managing Underwriters, if any,
including those to evidence compliance with Section 5(i) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Issuers; and
(vii) The foregoing actions set forth in this Section 5(r) shall be
performed at (x) the effectiveness of such Shelf Registration Statement and
each post-effective amendment thereto and (y) each closing under any
underwriting or similar agreement as and to the extent required thereunder.
(s) The Issuers shall, if and to the extent required under the Act
and/or the Trust Indenture Act and the rules and regulations thereunder in order
to register the Transfer Restricted Notes (including any guarantees thereof)
under the Act and qualify the Indenture under the Trust
14
<PAGE>
Indenture Act, cause each guarantor, if any, to sign any Registration Statement
and take all other action necessary to register any such guarantees under the
applicable Registration Statement.
6. Registration Expenses. The Issuers shall bear all fees and
---------------------
expenses (including the fees and expenses, if any, of Cleary, Gottlieb, Steen &
Hamilton, counsel for the Initial Purchasers, incurred in connection with the
Registered Exchange Offer) incurred in connection with the performance of its
obligations under Sections 2, 3, 4 and 5 hereof (other than brokers', dealers'
and underwriters' discounts and commissions and brokers', dealers' and
underwriters' counsel fees) and shall reimburse the Holders for the reasonable
fees and disbursements of one firm or counsel designated by the Majority Holders
to act as counsel for the Holders in connection therewith.
7. Rules 144 and 144A. The Company shall use its best efforts to
------------------
file the reports required to be filed by it under the Act and the Exchange Act
in a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Transfer Restricted Notes,
make publicly available other information so long as necessary to permit sales
of their securities pursuant to Rules 144 and 144A. The Company covenants that
it will take such further action as any Holder of Transfer Restricted Notes may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including the requirements of Rule 144A(d)(4)). The Company will provide
a copy of this Agreement to prospective purchasers of Transfer Restricted Notes
identified to the Company by the Initial Purchasers upon request. Upon the
request of any Holder of Transfer Restricted Notes, the Company shall deliver to
such Holder a written statement as to whether it has complied with such
requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.
8. Indemnification and Contribution.
--------------------------------
(a) (i) In connection with any Registration Statement, the Issuers
agree to indemnify and hold harmless each Holder of Transfer Restricted
Notes covered thereby, the directors, officers, employees and agents of
each such Holder and each person who controls any such Holder within the
meaning of either the Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of
them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement as
originally filed or in any amendment thereof, in any preliminary Prospectus
or Prospectus or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agree to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or
15
<PAGE>
defending any such loss, claim, damage, liability or action; provided,
--------
however, that the Issuers will not be liable in any case to the extent that
-------
any such loss, claim, damage or liability arises out of or is based upon
(A) any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
written information relating to the Holder furnished to the Issuers by or
on behalf of any such Holder specifically for inclusion therein, (B) use of
a Registration Statement or the related Prospectus during a period when a
stop order has been issued in respect of such Registration Statement or any
proceedings for that purpose have been initiated or use of a Prospectus
when use of such Prospectus has been suspended pursuant to Section 5(c);
provided, further, in each case, that Holders received prior notice of such
-------- -------
stop order, initiation of proceedings or suspension or (C) if the Holder is
required to but does not deliver a Prospectus or the then current
Prospectus. This indemnity agreement will be in addition to any liability
which the Issuers may otherwise have.
(ii) The Issuers also agree to indemnify or contribute to Losses, as
provided in Section 8(d), of any Managing Underwriters of Transfer
Restricted Notes registered under a Registration Statement, their officers
and directors and each person who controls such Managing Underwriters on
substantially the same basis as that of the indemnification of the selling
Holders provided in this Section 8(a) and shall, if requested by any
Holder, enter into an underwriting agreement reflecting such agreement, as
provided in Section 5(q) hereof.
(b) Each Holder of Transfer Restricted Notes covered by a
Registration Statement severally agrees to indemnify and hold harmless the
Issuers, their directors, officers, employees and agents and each person who
controls either of the Issuers within the meaning of either the Act or the
Exchange Act to the same extent as the foregoing indemnity from the Issuers to
each such Holder, but only with reference to written information relating to
such Holder furnished to the Issuers by or on behalf of such Holder specifically
for inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any such Holder
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election
16
<PAGE>
to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall have authorized the indemnified
party to employ separate counsel at the expense of the indemnifying party;
provided further, that the indemnifying party shall not be responsible for the
- -------- -------
fees and expenses of more than one separate counsel (together with appropriate
local counsel) representing all the indemnified parties under paragraph (a) or
paragraph (b) above. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Registration Statement which
resulted in such Losses; provided, however, that in no case shall any
-------- -------
Underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the Transfer Restricted Notes purchased by such
Underwriter under the Registration Statement which resulted in such Losses. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, the indemnifying party and the indemnified party shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Issuers shall be deemed to be equal to
the sum of (x) the aggregate principal amount of the Notes and (y) the total
amount of Liquidated Damages which the Issuers were not required to pay as a
result of registering the Transfer Restricted Notes covered by the Registration
Statement which resulted in such Losses. Benefits received by any Holder shall
be deemed to be equal to the value of receiving Transfer Restricted Notes
registered under the Act. Benefits received by any Underwriter shall be deemed
17
<PAGE>
to be equal to the total underwriting discounts and commissions, as set forth on
the cover page of the Prospectus forming a part of the Registration Statement
which resulted in such Losses. Relative fault shall be determined by reference
to, among other things, whether any alleged untrue statement or omission relates
to information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not be
just and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls a Holder within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each
person who controls the Issuers within the meaning of either the Act or the
Exchange Act and each director, officer , employee and agent of the Issuers
shall have the same rights to contribution as the Issuers, subject in each case
to the applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 8 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder, the
Issuers or any of the officers, directors or controlling persons referred to in
Section 8 hereof, and will survive the sale by a Holder of Transfer Restricted
Notes covered by a Registration Statement.
9. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Issuers have not, as of the date
--------------------------
hereof, entered into nor shall they, on or after the date hereof, enter into any
agreement that is inconsistent with the rights granted to the Holders herein or
otherwise conflicts with the provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Issuers have obtained the written
consent of the Majority Holders. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Transfer Restricted Notes are
being sold pursuant to a Shelf Registration Statement or whose Notes are being
exchanged pursuant to an Exchange Offer Registration Statement, as the case may
be, and which does not directly or indirectly affect the rights of other Holders
may be given by such Holders, determined on the basis of Notes being sold rather
than registered. Notwithstanding any of the foregoing, no amendment,
modification, supplement, waiver or consents to any departure from the
provisions of Section 8 hereof shall be effective as against any Holder of
Transfer Restricted Notes unless consented to in writing by such Holder.
18
<PAGE>
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to the Initial Purchasers, as follows:
First Union Capital Markets
301 South College Street, TW-10
Charlotte, NC 28288-0606
Attention: Corporate Finance Department
(ii) if to any other Holder, at the most current address given by
such Holder to the Issuers in accordance with the provisions of this
Section 9(c), which address initially is, with respect to each Holder, the
address of such Holder maintained by the registrar under the Indenture,
with a copy in like manner to the Initial Purchasers; and
(iii) if to the Issuers, as follows:
Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Attention: Catherine Cuisson
All such notices and communications shall be deemed to have been duly
given when received, if delivered by hand or air courier, and when sent, if sent
by first-class mail, telex or telecopier.
The Issuers by notice to the others may designate additional or
different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties,
including, without the need for an express assignment or any consent by the
Issuers thereto, subsequent Holders. The Issuers hereby agree to extend the
benefits of this Agreement to any Holder and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
19
<PAGE>
(g) Governing Law. This agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York applicable to agreements
made and to be performed in said State, without regard to the conflicts of law
rules thereof.
(h) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) Notes Held by the Issuers, etc. Whenever the consent or approval
-------------------------------
of Holders of a specified percentage of principal amount of Transfer Restricted
Notes or Exchange Notes is required hereunder, Transfer Restricted Notes or
Exchange Notes held by the either of the Issuers or their respective Affiliates
(other than subsequent Holders of Transfer Restricted Notes or Exchange Notes if
such subsequent Holders are deemed to be Affiliates solely by reason of their
holdings of such notes) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
20
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Issuer and the Initial Purchasers.
Very truly yours,
ADVANCED GLASSFIBER YARNS LLC
By:/s/ Robert B. Fisher
-----------------------
Name: Robert B. Fisher
Title: President
AGY CAPITAL CORP.
By:/s/ Robert B. Fisher
-----------------------
Name: Robert B. Fisher
Title: President
The foregoing Agreement is hereby
accepted as of the date first written above
FIRST UNION CAPITAL MARKETS,
A DIVISION OF WHEAT FIRST SECURITIES, INC.
By:/s/ Eric Lloyd
---------------------------
Name: Eric Lloyd
Title: Director
WARBURG DILLON READ LLC
By:/s/ Vincent Ly
---------------------------
Name: Vincent Ly
Title: Executive Director
By: /s/ James Stone
--------------------------
Name: James Stone
Title: Director
<PAGE>
EXHIBIT 10.1
PATENT AND KNOW HOW LICENSE AGREEMENT
-------------------------------------
This License Agreement, dated as of September 30, 1998, is among Owens-
Corning Fiberglas Technology, Inc., an Illinois corporation, having its
principal place of business at 7734 West 59th St., Summit, IL 60501 ("OC Tech"),
-------
Owens Corning, a Delaware corporation, having its principal place of business at
One Owens Corning Parkway, Toledo, Ohio 43659 ("Parent" and, together with OC
------
Tech, the "Seller"), and Advanced Glassfiber Yarns LLC, a Delaware limited
------
liability company (the "Company").
-------
WHEREAS, pursuant to an LLC Interest Sale and Purchase Agreement, dated as
of July 31, 1998 (the "SPA"; capitalized terms not defined herein shall have the
---
meanings ascribed to them in the SPA or the Non-Compete Agreement, as
applicable) among Parent, Company, and AGY Holdings, Inc. (as assignee of Glass
Holdings Corp. under an assignment agreement dated
as of September 28th, 1998), AGY Holdings, Inc. agreed to purchase from Seller a
51% membership interest ("Interest") in the Company;
--------
WHEREAS, Seller and its Affiliates have technology (including patents and
technical and business know how) related to the Business, and the parties have
agreed that certain of the rights will be licensed from Seller to Company; and
WHEREAS, Company has technology (including patents and technical and
business know how) related to the Business, certain of which is also related to
Seller's business and the parties have agreed that certain of the rights will be
licensed by Company to Seller.
<PAGE>
NOW, THEREFORE, in consideration of the premises of and the mutual promises
and agreements in the SPA and contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. DEFINITIONS
-----------
As used in this License Agreement, the following defined terms shall have
the meanings indicated below:
(a) "Business Know How" means the know how assigned to Company by the
-----------------
Master Patent and Know How Assignment between the parties.
(b) "Business Products" has the meaning given thereto in the SPA and
-----------------
further includes products made of High Strength Glass (as defined in Seciton
3.1(d) of the Non-Compete Agreement).
(c) "Business Patents" means all of the patents and patent
----------------
applications assigned to Company by, or pursuant to, the Master Patent and Know
How Assignment.
(d) "Business Manufacturing Technology" has the meaning given thereto
---------------------------------
in the SPA.
(e) "Effective Date" means the date first above written.
--------------
(f) "Manufacturing Facilities" means the portions of Seller's
------------------------
facilities at Aiken, South Carolina, Huntingdon, Pennsylvania, and South Hill,
Virginia to be transferred to Company which do not include the portions of the
Aiken and Huntingdon facilities at which Seller manufactures continuous filament
mat or wet process mat.
(g) "Restricted Products" has the meaning given thereto in Section
-------------------
1.2(a) of the Non-Compete Agreement.
2
<PAGE>
(h) "Seller Licensed Know How" means such of Seller's and Seller's
------------------------
Affiliates' technical knowledge and data, formulations, processes, techniques,
drawings and designs, unpatented inventions, operating manuals, manufacturing
and quality control procedures, trade secrets, plans, accumulated experience,
plant and tool design, installation instructions, raw material specifications,
advertising procedures, sales promotion literature, and other know how of any
kind as: (a) is in use, or has been used, or is or was under development for
use, in the Manufacturing Facilities to manufacture Business Products on or
before the Effective Date; (b) is necessary to the use of the Business
Manufacturing Technology; or (c) is necessary to the continued manufacture of
the Business Products using the Business Manufacturing Technology. Seller
Licensed Know How does not include Business Know How, but does include, without
limitation, the know how listed on Schedule C to this Patent and Know How
License Agreement Notwithstanding the foregoing, Seller Licensed Know How does
not include any know how relating to the coating of a glass fiber product with a
conductive material, to the composition of such conductive material, or to any
glass fiber product to be coated with a conductive material, except know how
relating to the graphite coating process employed at the Huntingdon,
Pennsylvania facility before the Effective Date.
(i) "Seller Licensed Patents" means all patents issued as of the
-----------------------
Effective Date and all patents issuing worldwide in the future on patent
applications pending as of the Effective Date, as well as patents issuing
worldwide from later filed continuations, substitutions, or divisionals thereof,
and any reissues thereof, that Seller owns as of the Effective Date, which are
necessary to: (i) the use of the Business Manufacturing Technology; (ii) the
continued manufacture of the Business Products using the Business Manufacturing
Technology; or (iii) the
3
<PAGE>
use or sale of the Business Products, which patents and patent applications are
listed in Schedule A to this Patent and Know How License Agreement.
Notwithstanding the foregoing, Seller Licensed Patents does not include any
patents or patent applications relating to the coating of a glass fiber product
with a conductive material, to the composition of such conductive material, or
to any glass fiber product to be coated with a conductive material, except
patents or patent applications relating to the graphite coating process employed
at the Huntingdon, Pennsylvania facility before the Effective Date.
(j) "Seller Products" means glass fiber products including glass
---------------
fibers, direct roving, conventional roving, sliver, tow or skein, and mats and
veils made from any of the foregoing, and whether or not coated, cut, sized,
bonded, shaped, texturized, cured, lubricated, or treated, including without
limitation all products manufactured by Seller or any Affiliates of Seller
before the Closing Date, but excluding Business Products.
(k) "S Glass" means glass having at least all of the following
-------
constituents in the indicated ranges:
<TABLE>
<CAPTION>
===============================================================
Component Lower Weight % Upper Weight %
---------------------------------------------------------------
<S> <C> <C>
SiO/2/ 63.5 72.0
---------------------------------------------------------------
Al/2/O/3/ 18.0 26.0
---------------------------------------------------------------
MgO 9.0 11.0
---------------------------------------------------------------
Na/2/O 0.0 0.5
===============================================================
</TABLE>
(l) "ZTY Winders" winders used at the Manufacturing Facilities and
-----------
Guelph to wind Zero Twist Yarn products.
4
<PAGE>
(m) "ZTY Winder Technology" has the meaning given thereto in Section
---------------------
3.4 of this Patent and Know How License Agreement.
2. TERM AND TERMINATION
--------------------
2.1 Term
----
Unless otherwise earlier terminated as provided below, this License
Agreement shall remain in effect (i) with respect to the patent license and
sublicense under Sections 3.1 and 3.3, until the expiration of the last to
expire of the Seller Licensed Patents, (ii) with respect to the patent license
and sublicense under Sections 5.1 and 5.3, until the expiration of the last to
expire of the Business Patents, and (iii) with respect to the know how license
under Sections 3.2 and 5.2, perpetually.
2.2 Remedies for Breach
-------------------
(a) If either party commits a material breach of any provision of this
License Agreement and fails to correct such breach within thirty (30) days after
written notice from the other party, neither party shall have the right to
terminate this agreement or to suspend its performance hereunder and this
Agreement shall not be terminable, but such party shall have available all other
legal and equitable remedies to which it may be entitled.
(b) Without limiting the foregoing, each party recognizes that irreparable
injury will result from a breach of any provision of this Agreement not curable
solely by the payment of money damages and that money damages will be inadequate
to fully remedy such injury. Accordingly, in the event of a breach or
threatened breach of one or more of the provisions of this Agreement, either
party, in addition to any other remedies available to it, will be entitled to
one or more preliminary or permanent orders (i) restraining and enjoining any
act which would constitute
5
<PAGE>
a breach, or (ii) compelling performance of any obligations which, if not
performed, would constitute a breach. Nothing contained in Section 2.2(b) is
intended to limit the rights of either party to seek or any court to enter any
lawful form of equitable relief or any available provision of such relief
ordered by the court, other than termination of this Agreement.
2.3 Termination
-----------
Unless otherwise agreed by the parties before such transfer, this Patent
and Know How License Agreement shall terminate immediately upon: (a) the
transfer by the Company of any rights in any or all of the Business Patents,
Business Know How, Seller Licensed Patents or Seller Licensed Know, or any
tangible assets of the Company that incorporate any of the foregoing, to
Compagnie Saint Gobain ("CSG") or any Affiliate thereof (unless Company believed
in good faith, based upon reasonable inquiry, that the transferee entity was not
at the time of the transfer an Affiliate of CSG); or (b) upon the Company
becoming an Affiliate of CSG: (i) by CSG acquiring a majority of the voting
rights or the right to elect a majority of the board of directors of the
Company, Buyer or Porcher Industries; or (ii) through actions directly initiated
or directly facilitated by the Company, Buyer or Porcher Industries. Contingent
upon such termination, and in addition to the license grants in Sections 5.1 and
5.2 of this Patent and Know How License Agreement, Company hereby grants to
Seller a worldwide, paid-up, royalty-free, non-exclusive license under the
Business Patents and the Business Know How to make, have made, use, sell,
import, and offer to sell Restricted Products.
6
<PAGE>
3. SELLER LICENSE GRANTS
---------------------
3.1 Seller Patent License
---------------------
Seller grants to Company a worldwide, paid-up, royalty-free license under
the Seller Licensed Patents to make, have made, use, sell, import, and offer to
sell Business Products and products other than Seller Products. With regard to
Restricted Products, such license is exclusive, and with regard to Business
Products other than Restricted Products, such license is sole (as to Seller and
its Affiliates) for the Term of the Non-Compete Agreement, subject to the
licenses listed in Schedule B of the Non-Compete Agreement and subject to the
need for rights under the Seller Licensed Patents for Seller and/or its
Affiliates to perform their obligations to Company and its Affiliates to
manufacture and supply Business Products, glass marbles, and sliver and to
fabricate and/or repair bushings pursuant to the various agreements pursuant to
the SPA, including without limitation the Guelph Facility Supply Agreement,
Battice Facility Supply Agreement, Glass Marble Supply Agreement, Sliver Supply
Agreement, and Alloy Services Agreement (the "Seller Agreement Obligations"),
and is non-exclusive thereafter. With regard to products other than Restricted
Products, Business Products, and Seller Products, such license is non-exclusive.
3.2 Seller Know How License
-----------------------
Seller grants to Company a worldwide, paid-up, royalty-free license under
the Seller Licensed Know How to make, have made, use, sell, import, and offer to
sell Business Products and products other than Seller Products. With regard to
Restricted Products, such license is exclusive, and with regard to Business
Products other than Restricted Products, such license is sole (as to Seller and
its Affiliates) for the Term of the Non-Compete Agreement, subject to the
7
<PAGE>
licenses listed in Schedule B of the Non-Compete Agreement and subject to the
need for rights under the Seller Licensed Know How for Seller and/or its
Affiliates to perform the Seller Agreement Obligations, and is non-exclusive
thereafter. With regard to products other than Restricted Products, Business
Products, and Seller Products, such license is non-exclusive.
3.3 Company Sublicense Rights
-------------------------
Company shall have the right to sublicense its rights under Sections 3.1
and 3.2, subject to the limitations of Section 3.4, provided that Company shall
not have the right to sublicense its rights to CSG or any Affiliate thereof.
3.4 ZTY Winder Technology
---------------------
Company acknowledges that the technology embodied in the ZTY Winders ("ZTY
---
Winder Technology") is a particularly sensitive and valuable component of the
- -----------------
Seller Licensed Know How, that Seller is particularly concerned that ZTY Winder
Technology not be used by a competitor of Seller in the manufacture of Seller
Products, and that the purchase price of the Business reflects Company's access
to, and use of, the ZTY Winder Technology only for products other than Seller
Products. Similarly, Company is concerned that Seller not use the ZTY Winder
Technology to manufacture Restricted Products. Accordingly, each party shall
have the right to inspect the other party's manufacturing facilities for a
period of five years from the Effective Date. Such inspection rights shall be
as follows:
(i) inspections will be conducted by a neutral third party unaffiliated
with either party and reasonably acceptable to both parties;
(ii) the inspector shall prepare a report on the results of each such
inspection, which reports shall include no information regarding
Company's manufacturing facilities
8
<PAGE>
or operations other than whether ZTY Winder Technology is being, or
has been, employed in the production of Seller Products, and shall
include no information regarding Seller's manufacturing facilities or
operations other than whether ZTY Winder Technology is being, or has
been, employed in the production of Restricted Products, and the
inspector shall supply such reports to both the Company and Seller;
(iii) inspections may be conducted on 72 hours notice, during normal
business hours, no more than one time per calendar year; and
(iv) no inspections may be conducted after five years from the Effective
Date.
Neither Company nor Seller shall initiate any legal proceeding against the other
based on the results of any report within thirty (30) days of the inspector
giving the report to the parties. If by the end of such thirty (30) day period
the party that the inspector has determined to have misused the ZTY Winder
Technology has not satisfied the other party that there was no such misuse or
has not remedied the misuse to the other party's satisfaction, the other party
may then pursue all of its remedies available under this Patent and Know How
License Agreement. The sublicense right of Section 3.3 does not include the
right to sublicense rights in such of the Seller Licensed Patents or Seller
Licensed Know How as relate to the ZTY Winder Technology to any third party
other than an entity which is an Affiliate of the Company on the Effective Date
or a permitted assignee of the Company.
9
<PAGE>
4. DELIVERY OF KNOW HOW
--------------------
4.1 Business Know How At Manufacturing Facilities
---------------------------------------------
Seller intends that all of the Business Know How will be in place at the
Manufacturing Facilities on the Effective Date. Should Company subsequently
determine that any Business Know How is not at the Manufacturing Facilities,
Seller shall promptly deliver to Company such Business Know How as Company
identifies to Seller.
5. COMPANY LICENSE GRANT
---------------------
5.1 Company Patent License
----------------------
Company grants to Seller a worldwide, paid-up, royalty-free, license under
the Business Patents to make, have made, use, sell, import, and offer to sell
products other than Restricted Products and to perform all acts required for
Seller and/or its Affiliates to perform the Seller Agreement Obligations. With
respect to Seller Products, such license is exclusive, and with respect to
products other than Restricted Products and Seller Products, such license is
non-exclusive.
5.2 Business Know How License
-------------------------
Company grants to Seller a worldwide, paid-up, royalty-free, license under
the Business Know How to make, have made, use, sell, import, and offer to sell
products other than Restricted Products and to perform all acts required for
Seller and/or its Affiliates to perform the Seller Agreement Obligations. With
respect to Seller Products, such license is exclusive, and with respect to
products other than Restricted Products and Seller Products, such license is
non-exclusive.
10
<PAGE>
5.3 Seller Sublicense Rights
------------------------
Seller shall have the right to sublicense its rights under Sections 5.1 and
5.2.
5.4 Company's Proprietary Rights to Business Patents and Business Know How
----------------------------------------------------------------------
Except as provided in this Agreement, Company retains all title, patent,
copyrights and other proprietary rights worldwide in the Business Patents and
Business Know How, regardless of the media in which such Business Patents and
Business Know How is embodied, now or in the future. Seller agrees not to
dispute any of Company's ownership rights in the Business Patents and Business
Know How. Seller agrees that it does not have any ownership or proprietary
rights of any kind, express or implied, in the Business Patents and Business
Know How, other than the licenses granted herein.
6. CONFIDENTIALITY
---------------
6.1 Company to Maintain Seller Licensed Know How Confidential
---------------------------------------------------------
Company agrees to maintain the Seller Licensed Know How in confidence using
the same degree of care as Company takes to safeguard its own proprietary
information of the same general nature, but in no event shall Company use less
than a reasonable degree of care, and to refrain from disclosing Seller Licensed
Know How to others. Company agrees that it will not use, except for purposes
expressly licensed under this License Agreement, any Seller Licensed Know How
obtained directly or indirectly from Seller.
6.2 Seller to Maintain Business Know How Confidential
-------------------------------------------------
Seller agrees to maintain the Business Know How in confidence using the
same degree of care as Seller takes to safeguard its own proprietary information
of the same general nature, but in no event shall Seller use less than a
reasonable degree of care, and to refrain from disclosing
11
<PAGE>
Business Know How to others. Seller agrees that it will not use, except for
purposes expressly licensed under this License Agreement, any Business Know How
obtained directly or indirectly from Company.
6.3 Exclusions
----------
(a) The obligations of confidentiality in Section 6.1 shall not apply to
any information which:
(i) was known to Company before the receipt of such information from
Seller, as evidenced by written records or other reliable evidence, and such
information was not directly derived from Seller or Seller Affiliates;
(ii) is or becomes known to the general public through no fault of
Company;
(iii) is received by Company without restriction on its disclosure or
in good faith from a third party purporting to have the right to transmit the
same;
(iv) is independently developed by employees of Company who have had
no access to Seller Licensed Know How; and/or
(v) is required to be disclosed to governmental authorities or
courts as a result of operation of law, regulation, or court order, provided
however, immediate written notice of such request by governmental authorities or
courts must be provided to Seller, all reasonable steps must be taken by Company
to restrict further disclosure of the affected information by such authorities
or court, and information so disclosed shall not be otherwise removed from these
secrecy obligations.
(b) The obligations of confidentiality in Section 6.2 shall not apply to
any information which:
12
<PAGE>
(i) is or becomes known to the general public through no fault of
Seller;
(ii) is received by Seller without restriction on its disclosure or
in good faith from a third party purporting to have the right to transmit the
same;
(iii) is independently developed by employees of Seller who have had
no access to Business Know How and/or
(iv) is required to be disclosed to governmental authorities or
courts as a result of operation of law, regulation, or court order, provided
however, immediate written notice of such request by governmental authorities or
courts must be provided to Seller, all reasonable steps must be taken by Seller
to restrict further disclosure of the affected information by such authorities
or court, and information so disclosed shall not be otherwise removed from these
secrecy obligations.
6.4 Engineering Services
--------------------
Company acknowledges that Seller has ongoing relationships with several
engineering service providers, and that the providers have had access to
proprietary information of Seller other than the Business Know How and the
Seller Licensed Know How. Except for providers currently providing services
relating to the Business Products under contracts which will be assigned to
Company, Company shall not engage the services of any of the providers
identified on Schedule B to this Patent and Know How License Agreement until,
for each such service provider (a) Company gives notice to Seller of Company's
intention to engage the services of the service provider; and (b) Seller enters
into a confidentiality agreement with the designated service provider having
terms and conditions reasonably acceptable to Seller for the protection of
Seller's proprietary information within thirty (30) days of such notice. If
Seller does not respond to such
13
<PAGE>
notice from Company within thirty (30) days, Seller shall be deemed to have
waived the requirements of this Section 6.4.
6.5 Alloy Fabrication Services
--------------------------
Pursuant to the Alloy Services Agreement between Company and Owens Corning
executed on even date herewith, Owens Corning will provide to Company
fabrication services for bushings that incorporate Seller Licensed Know How.
If, as, and when permitted under the Alloy Services Agreement, Company may have
such bushings fabricated by a third party and Company desires to do so, Company
shall give Owens Corning notice of its desire to engage the services of a third
party fabricator, and shall identify the bushing to be fabricated and the
proposed fabricator. Upon execution of a confidentiality agreement between
Seller and the designated fabricator having terms and conditions reasonably
acceptable to Seller for the protection of Owens Corning's proprietary
information embodied in the bushing (substantially in the form of the
Confidentiality Agreement included as Exhibit A to this Patent and Know How
License Agreement) and which shall not be unreasonably delayed, Owens Corning
shall supply to the fabricator manufacturing drawings for the designated
bushing.
6.6 Other Third Party Services
--------------------------
If and when Company wishes to use the services of a third party to design
or fabricate consolidation equipment (such as winders and choppers), furnaces or
melters, in connection with which the third party requires access to Seller
Licensed Know how to perform the services, Company shall give Seller notice of
its desire to engage the services of such third party. Upon execution of a
confidentiality agreement between Seller and the third party having terms and
conditions reasonably acceptable to Seller for the protection of the Seller
Licensed Know how
14
<PAGE>
(substantially in the form of the Confidentiality Agreement included as Exhibit
A to this Patent and Know How License Agreement), and which shall not be
unreasonably delayed, Company may disclose such required Seller Licensed Know
how to such third party. This Section 6.6 is a limited exception to Company's
confidentiality obligation set forth in Section 6.1 hereof.
6.7 Seller Design Services
----------------------
(a) Upon written request, Seller shall provide to the Company engineering,
design and technical services relating to the manufacture of Business Products
upon terms and conditions mutually acceptable to the parties. For as long as
Company is an Affiliate of Seller, Seller shall accord to such requests the same
priority as it accords to such requests by its other Affiliates. Company agrees
to pay Seller at Seller's standard rates then in effect which Seller charges its
licensees for such services, as well as the actual traveling and living expenses
incurred by Seller personnel hereunder.
(b) In the event that Company desires Seller to prepare any specific
designs, drawings, flow sheets, reports, manuals, equipment specifications,
process descriptions, operating procedures, equipment and process control
descriptions, method engineering studies, purchasing studies, engineering
reports or any similar document or report relating to the Seller services, such
document or report shall be furnished within such reasonable time as
circumstances permit, taking into consideration the availability of Seller
personnel and the requirements of Seller with respect to the services of such
personnel, provided that Seller shall not be required to supply any such
materials hereunder that Seller determines in its reasonable judgment to have
been unreasonably requested in light of the intent and purposes of this
Agreement. Company agrees to pay Seller at Seller's standard rates then in
effect which Seller charges its licensees for such services.
15
<PAGE>
(c) Seller shall not be obligated to prepare or furnish any document or
report which would disclose any information which Seller is at the time
prevented from disclosing to Company by reason of government regulations,
contractual obligations or other restrictions of any kind. Furthermore, nothing
in this Agreement shall authorize the disclosure of, or access to, or obligate
Seller to provide or make available, classified or restricted information,
material or know-how of the government of the United States of America.
6.8 Third Party Infringement
------------------------
(a) The parties recognize a common interest in protecting the Business
Patents, the Business Know How, the Seller Licensed Patents and the Seller
Licensed Know How (the "Technology") and the parties' rights under this
Agreement against third parties who may infringe the respective rights of the
parties in the Technology. Accordingly, the parties agree that each of them
will notify the other promptly after learning of facts which the party
reasonably believes may constitute a third party infringement of the rights of
either party in the Technology or the rights of the other party under this
Agreement. Within 30 days after the receipt of each such notice, the parties
and their counsel shall meet and confer with respect to such coordination of
their enforcement efforts with respect to the possible infringement as they may
mutually agree. The parties will make commercially reasonable efforts to
cooperate with each other and to coordinate their respective enforcement
activities, provided that no party will have any right to require the other to
take or refrain from taking any specific action with respect to enforcement.
(b) The parties contemplate that with respect to possible infringement of
the Technology in connection with the production of Business Products or
possible infringement of the Business Patents or Business Know How in connection
with the production of products other than
16
<PAGE>
Business Products and Seller Products ("Company Infringements"), Company will
take the primary role in pursuing these infringement claims. In the event that
Company elects not to proceed with the prosecution of any action with respect to
a possible Company Infringement that can reasonably be expected to have a
material adverse effect on Seller or its interest in the Technology if Company
does not act with respect to the possible Company Infringement, Company will
permit Seller, upon request and at its sole expense, to proceed in Company's
name with the prosecution of any action with respect to stopping the possible
Company infringement; provided that Company will have the right to approve of
any settlement of any such action (which approval will not be unreasonably
withheld or delayed). In the event that Company elects to proceed with the
prosecution of any action with respect to a possible Company Infringement, upon
request by Seller, Company will provide access to Seller to all pleadings and
materials provided in the action to the extent allowed by law and will cooperate
to permit Seller and its representatives, at Seller's expense, to monitor these
proceedings and to make comments to Company with respect to them; provided that
Company will not be obligated to take any specific action in response to these
comments and further provided that Company will not be required to take any
action that would impair its attorney client or attorney work product privileges
or any applicable confidentiality agreement or order of court.
(c) The parties contemplate that with respect to possible infringement of
the Technology in connection with the production of Seller Products or possible
infringement of the Seller Licensed Patents or Seller Licensed Know How in
connection with the production of products other than Business Products and
Seller Products ("Seller Infringements"), Seller will take the primary role in
pursuing these infringement claims. In the event that seller elects not to
proceed
17
<PAGE>
with the prosecution of any action with respect to a possible Seller
Infringement that can reasonably be expected to have a material adverse effect
of Company or its interest in the Technology if Seller does not act with respect
to the possible Seller Infringement, Seller will permit Company, upon request
and at its sole expense, to proceed in Seller's name with the prosecution of any
action with respect to stopping the possible Seller Infringement; provided that
Seller will have the right to approve of any settlement of any such action
(which approval will not be unreasonably withheld or delayed). In the event that
Seller elects to proceed with the prosecution of any action with respect to a
possible Seller Infringement, upon request by Company, Seller will provide
access to Company to all pleadings and material provided in the action to the
extent allowed by law and will cooperate to permit Company and its
representatives, at Company's expense, to monitor these proceedings and to make
comments to Seller with respect to them; provided that Seller will not be
obligated to take any specific action in response to these comments and further
provided that Seller will not be required to take any action that would impair
its attorney client or attorney work product privileges or any applicable
confidentiality agreement or order of court.
(d) No party may settle any infringement prosecution without the consent
of the other party if the interest of the non-prosecuting party in the
Technology or rights of such party under this Agreement would be materially
adversely affected by the proposed settlement.
18
<PAGE>
7. SELLER REPRESENTATIONS, WARRANTIES AND COVENANTS
------------------------------------------------
7.1 Necessary Authority
-------------------
Seller represents and warrants that it owns the Seller Licensed Patents and
Seller Licensed Know How, and has the necessary authority and title to grant the
licenses in Article 3 and to enter into and perform its obligations under this
License Agreement and it has not acted in any way that would interfere with
Company's rights as granted herein except as otherwise disclosed herein or in
the SPA.
7.2 Negation of Implications
------------------------
(a) Disclaimer of Liability
-----------------------
Seller shall not, as a result of the agreements set forth herein, be liable
for any special, incidental, or consequential damages, including, but not
limited to, personal injury, property damage, or shutdown or non-operation of
any facility, however caused or under any theory of liability, whether based in
contract, tort (including negligence), strict liability, patent infringement or
otherwise and regardless of whether either party has been advised of the
possibility of such damage, except to the extent of Seller's gross negligence or
wilful misconduct or as permitted under the SPA.
(b) Third Party Rights, Infringement
--------------------------------
Seller makes no warranties with respect to freedom from alleged
infringement of third party patents or freedom from third party infringers, and
Seller is not under any obligation to hold Company harmless against such alleged
infringement or third party rights nor to enforce its patent rights against
alleged infringers; provided, however, that nothing in the foregoing shall limit
Company's rights under the SPA.
19
<PAGE>
(c) No Warranty of Validity or Patentability
----------------------------------------
Seller does not warrant the validity of the patents or the patentability of
the patent applications included in the Seller Licensed Patents; provided,
however, that nothing in the foregoing shall limit Company's rights under the
SPA.
(d) No Obligation to Maintain Seller Licensed Patents
-------------------------------------------------
Company understands and agrees that Seller has no obligation to maintain in
force any of the Seller Licensed Patents; provided, that prior to permitting any
Seller Licensed Patent to lapse or otherwise terminate, Seller will offer to
Company the right to acquire such Seller Licensed Patent by means of an
assignment of such Seller Licensed Patent to Company. Such patents assigned to
Company shall thereafter be considered to be Business Patents.
(e) No Warranty of Commercial Utility
---------------------------------
Seller makes no representation or warranty as to the commercial utility of
the technology covered by the Seller Licensed Know How or the Seller Licensed
Patents; provided, however, that nothing in the foregoing shall limit Company's
rights under the SPA.
(f) No Other Licenses
-----------------
There is no implied license to Company under any patent or application for
patent not specified herein and there are no understandings, written or oral, of
any nature concerning this License Agreement or the licenses granted herein not
covered by this written License Agreement. No license under any copyright or
trademark of Seller is granted under this License Agreement. No obligation
shall be implied for Seller to deliver any know how to Company other than the
Business Know How. However, nothing in the foregoing shall limit Company's
rights under the SPA.
20
<PAGE>
8. COMPANY REPRESENTATIONS, WARRANTIES, AND COVENANTS
--------------------------------------------------
8.1 Necessary Authority
-------------------
Company represents and warrants that it has authority to enter into this
License Agreement.
8.2 Negation of Implications
------------------------
(a) Disclaimer of Liability
-----------------------
Company shall not, as a results of the agreements set forth herein, be
liable for any special, incidental, or consequential damages, including, but not
limited to, personal injury, property damage, or shutdown or non-operation of
any facility, however caused or under any theory of liability, whether based in
contract, tort (including negligence), strict liability, patent infringement or
otherwise and regardless of whether either party has been advised of the
possibility of such damage, except to the extent of Company's gross negligence
or wilful misconduct or as permitted under the SPA.
(b) Third Party Rights, Infringement
--------------------------------
Company makes no warranties with respect to freedom from alleged
infringement of third party patents or freedom from third party infringers, and
Company is not under any obligation to hold Seller harmless against such alleged
infringement or third party rights nor to enforce its patent rights against
alleged infringers; provided, however, that as of the Effective Date Company
knows of no such infringement and provided further, that nothing in the
foregoing shall limit Seller's rights under the SPA.
21
<PAGE>
(c) No Warranty of Validity or Patentability
----------------------------------------
Company does not warrant the validity of the patents or the patentability
of the patent applications included in the Business Patents; provided, however,
that nothing in the foregoing shall limit Seller's rights under the SPA.
(d) No Obligation to Maintain Business Patents
------------------------------------------
Seller understands and agrees that Company has no obligation to maintain in
force any of the Business Patents; provided, that prior to permitting any
Business Patent to lapse or otherwise terminate, Company will offer to Seller
the right to acquire such Business Patent by means of an assignment of such
Business Patent to Seller. Such patents assigned to Seller shall thereafter be
considered to be Seller Licensed Patents.
(e) No Warranty of Commercial Utility
---------------------------------
Company makes no representation or warranty as to the commercial utility of
the technology covered by the Business Know How or the Business Patents;
provided, however, that nothing in the foregoing shall limit Seller's rights
under the SPA.
(f) No Other Licenses
-----------------
There is no implied license to Seller under any patent or application for
patent not specified herein and there are no understandings, written or oral, of
any nature concerning this License Agreement or the licenses granted herein not
covered by this written License Agreement. No license under any copyright or
trademark of Seller is granted under this License Agreement.
22
<PAGE>
9. MISCELLANEOUS AGREEMENTS OF THE PARTIES
---------------------------------------
9.1 Notices
-------
All communications provided for hereunder shall be in writing and
shall be deemed to be given when delivered in person or by private courier with
receipt, when telefaxed and received, or three (3) days after being deposited in
the United States mail, first-class, registered or certified, return receipt
requested, with postage paid and,
If to Company: Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Fax: 803-643-1526
Attention: General Manager
With a copy to: AGY Holdings, Inc.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336-845-7718
Attention: President
And to: Jefferson Holdings, Inc.
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
If to Owens Corning: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-325-1180
Attention: Secretary
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
23
<PAGE>
If to OC Tech: Owens-Corning Fiberglas Technology, Inc.
7734 West 59th Street
Summit, IL 60501-0907
Fax: 708-563-9096
Attention: Secretary
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such party shall designate by written notice to
the other parties hereto.
9.2 Assignability
-------------
This Agreement shall be binding upon and shall inure to the benefit of both
parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement shall not be assigned by either party
hereto without the express prior written consent of the other party, and any
attempted assignment, without such consents, shall be null and void.
Notwithstanding any nonassignment provisions contained in this Section 9.2,
Company, or any permitted assignee or transferee of Company, may assign or
otherwise transfer all of its rights and/or obligations hereunder (i) to any
entity or entities, or any assignee of such entity or entities, providing
financing for the transactions contemplated by this Agreement or to any entity
or entities providing to Company, Company's Affiliates, or to any such permitted
assignee of Company, financing relating to the Business (collectively, the
"Financing Sources"), (ii) to any entity that is an Affiliate of the Company on
the Effective Date, provided that (x) such Affiliate shall agree with Seller and
its permitted assignees or transferees, if any, in writing to assume the
Company's obligations hereunder and (y) any such assignment to an Affiliate of
the Company
24
<PAGE>
shall not relieve the Company from its obligations hereunder or (iii) to any
entity to which Company, or any assignee or transferee of Company, assigns,
sells, transfers or otherwise conveys (A) all or substantially all of the assets
constituting the Business (a "Complete Assignment") or (B) all or substantially
all of the assets constituting either the Aiken Facility, the Huntington
Facility or the South Hill Facility (a "Partial Assignment") provided that such
entity or Affiliate is not CSG or any Affiliate thereof, and further provided
that such acquiring entity agrees with and acknowledges in writing to Seller and
its permitted assignees or transferees, if any, that this Agreement shall be
binding upon and enforceable against such entity as though such acquiring entity
were Company and that such entity shall perform all of Company's obligations
hereunder. Notwithstanding any nonassignment provisions contained in this
Section 9.2, Seller, or any permitted assignee or transferee of Seller, may
assign or otherwise transfer some or all of its rights and/or obligations
hereunder to any Affiliate of Seller, provided that (x) such Affiliate shall
agree with Company and its permitted assignees or transferees, if any, in
writing to assume the Seller's obligations hereunder and (y) any such assignment
to an Affiliate of the Seller shall not relieve the Seller from its obligations
hereunder. To the extent that assignment and/or transfer of any of the rights,
privileges, and/or obligations is permitted, this Agreement shall be binding on,
and except as otherwise expressly provided, shall inure to the benefit of, the
legal successors, assigns, or representatives of the parties.
9.3 Amendment; Waiver
-----------------
This License Agreement may be amended, supplemented or otherwise modified
only by a written instrument executed by the parties hereto. No waiver by
either party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party
25
<PAGE>
so waiving. Except as provided in the preceding sentence, no action taken
pursuant to this License Agreement, including without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained herein, and in any documents
delivered or to be delivered pursuant to this License Agreement and in
connection with the closing hereunder. The waiver by any party hereto of a
breach of any provision of this License Agreement shall not operate or be
construed as a waiver of any subsequent breach.
9.4 Third Parties
-------------
This License Agreement does not create any rights, claims or benefits
inuring to any person that is not a party hereto nor create or establish any
third party beneficiary hereto.
9.5 Governing Law
-------------
This License Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to the conflicts
of law principles thereof.
9.6 Entire Agreement
----------------
This License Agreement and the Schedules and Exhibits hereto supersede any
prior agreement between the parties with respect to the subject hereof, and
constitute the entire agreement between the parties with respect to the subject
hereof.
9.7 Section Headings
----------------
The section headings contained in this License Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this License
Agreement.
9.8 Severability
------------
26
<PAGE>
If any provision of this License Agreement shall be declared by any court
of competent jurisdiction to be illegal, void or unenforceable, all other
provisions of this License Agreement shall not be affected and shall remain in
full force and effect.
9.9 Counterparts
------------
This License Agreement may be executed in 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.
IN WITNESS WHEREOF, the parties have caused this Patent and Know How
License Agreement to be duly executed as of the Effective Date.
OWENS CORNING
By: /s/ Charles E. Dana
-----------------------
Name: Charles E. Dana
Title: Vice President
OWENS-CORNING FIBERGLAS
TECHNOLOGY, INC.
By: /s/ Charles E. Dana
-----------------------
Name: Charles E. Dana
Title: Representative
ADVANCED GLASSFIBER YARNS LLC
By: /s/ Robert B. Fisher
-----------------------
Name: Robert B. Fisher
Title: General Manager
27
<PAGE>
EXHIBIT 10.2
GLASS MARBLES SUPPLY AGREEMENT
BETWEEN
OWENS CORNING
AND
ADVANCED GLASSFIBER YARNS LLC
Dated as of September 30, 1998
<PAGE>
GLASS MARBLES SUPPLY AGREEMENT
------------------------------
This Glass Marbles Supply Agreement (the "Agreement") is executed on this 30th
---------
day of September, 1998, by and between OWENS CORNING, a Delaware corporation
("Seller"), and ADVANCED GLASSFIBER YARNS LLC, a Delaware limited liability
------
company ("Buyer"), and shall be governed by the following clauses.
-----
1. SALE AND PURCHASE OF PRODUCTS.
-----------------------------
QUANTITIES OF THE PRODUCTS. Subject to the terms and conditions herein set
- --------------------------
forth, Seller agrees to manufacture and sell from Seller's Anderson, South
Carolina facility, and Buyer agrees to purchase and accept, Buyer's requirements
for glass marbles (the "Products"). The Products and the specifications for the
--------
Products (the "Product Specifications") are more fully described in Exhibit A
----------------------
attached hereto and made a part hereof. Buyer agrees that it is purchasing the
Products solely for its own use and that it will not resell the Products to any
third party. Seller agrees that Seller will not, without the express written
consent of Buyer, sell or convey Products to third parties for use in the
manufacture of Business Products (as defined in the Patent and Know How License
Agreement dated the date hereof by and among Owens-Corning Fiberglas Technology,
Inc., Buyer and Seller). Buyer agrees that Buyer will not, without the express
written consent of Seller, purchase or accept the Products from any third party
except as provided in Section 8.1.
2. TERM; CONTRACT YEAR.
-------------------
2.1. TERM. This Agreement shall be effective as of the date of execution
----
and, unless earlier terminated as provided herein, shall continue in
full force and effect for the period of seven years and three months
through and including December 31, 2005 (the "Initial Term"). The
------------
foregoing notwithstanding, should Seller discontinue its marble
production it may terminate this Agreement provided Seller has given
Buyer twenty-four (24) months' prior written notice. This Agreement
is renewable at the option of either party for consecutive terms of
five years unless terminated by Buyer upon twenty-four (24) months
prior written notice. The Initial Term, together with all renewal
periods thereof, is referred to hereinafter as the "Term".
----
2.2. CONTRACT YEAR. For purposes of this Agreement, each of the following
-------------
periods is a "Contract Year".
-------------
2.2.1 FIRST CONTRACT YEAR. The first Contract Year shall be the
-------------------
period from the date hereof until December 31, 1998; and
<PAGE>
2.2.2 SUBSEQUENT CONTRACT YEARS. Subsequent Contract Years shall be
-------------------------
each successive twelve month period beginning January 1 and
ending December 31 during the Term of the Agreement.
3. ESTIMATES; RELEASES; PACKAGING.
------------------------------
3.1. CONTRACT YEAR ESTIMATES. Within 30 days of the execution of this
-----------------------
Agreement and, on or before September 30 of each Contract Year
thereafter during the Term of this Agreement, Buyer shall provide
Seller with Buyer's good-faith estimates of Buyer's requirements for
standard marble Products, by type, and by calendar quarter, for the
next succeeding Contract Year (the "Contract Year Estimates"). Except
-----------------------
to the extent set forth in Section 3.6, such Contract Year Estimates
shall be non-binding. In addition, Seller is not required to
manufacture, sell and deliver to Buyer more than ten percent (10%) of
the Contract Year Estimates in any given month. The maximum Contract
Year Estimates shall in no event be greater than 25 million pounds.
3.2. REFINED ESTIMATES. Commencing January 1, 1999, in addition to
-----------------
Contract Year Estimates required pursuant to paragraph 3.1, Buyer
shall also provide to Seller twelve (12) month non-binding refined
estimates on a quarterly rolling forecast basis (the "Refined
-------
Estimates") of Buyer's estimated requirements for standard marble
---------
Products, by type, and by month. The Refined Estimates shall be
delivered to Seller in the first week of each calendar quarter. The
maximum Refined Estimates shall in no event be greater than 25
million pounds.
3.3. LOT GLASS MARBLES. Buyer shall provide Seller with its non-binding
-----------------
estimated forecast of its requirements for lot marble Products 12
months in advance of the Buyer's anticipated date of shipment of such
lot marble Products to Buyer's designated location. Seller shall
supply any single order of Buyer of up to and including one million
(1,000,000) pounds of lot glass Products provided Buyer gives Seller
a prior notice of such order of no less than three months. In
addition, Seller shall supply any single order of Buyer of up to and
including two million (2,000,000) pounds of lot glass Products
provided Buyer gives Seller a prior notice of such order of no less
than six months. The minimum for each order for lot glass Products
shall be no less than 500,000 pounds. Buyer shall take the delivery
of and pay for all the lot marble Products of any single order as
soon as they are shipped.
3.4. SELLER'S ASSURANCES. If for any reason Seller believes it will be
-------------------
unable to deliver all or any portion of Buyer's Contract Year
Estimates or Refined Estimates, Seller shall immediately notify Buyer
within ten (10) days of the date of receipt of Buyer's respective
estimates. Such notification shall not relieve Seller of any of its
obligations under this Agreement.
2
<PAGE>
3.5. ORDERS FOR THE PRODUCTS/SHIPMENT. Subject to paragraph 3.6, orders
--------------------------------
for the Products shall be made, at Buyer's discretion, by Buyer
issuing signed purchase orders to Seller. The orders shall be
submitted by authorized personnel of Buyer no later than 30 days
prior to the desired date of delivery and shall set forth the
following: a statement identifying the order with this Agreement; the
number by which the order shall be identified; the quantity of the
Products to be delivered; the date of delivery; and invoicing
instructions. Subject to the volume limitations set forth in
paragraph 3.6, there shall be no limitation on the number of orders
issued hereunder. Buyer shall cooperate with Seller in terms of
providing its Contract Year Estimates, Refined Estimates and purchase
orders in a format compatible with the requirements of the
information systems of Seller. Seller shall comply with the terms of
Buyer's purchase order which are consistent with the requirements of
this Section 3.5 and with the Product Specifications.
3.6. MINIMUM AND MAXIMUM VOLUMES. For the Contract Year beginning January
---------------------------
1, 1999 and for each Contract Year thereafter, Buyer agrees to
purchase and Seller agrees to sell no less than 80% of the Contract
Year Estimate ("Minimum Volume") of the Products. Seller shall, at
all times, have a minimum of 30 days' supply of standard marble
Products based on the average day's supply of standard marble
Products for the previous three months as consignment inventory for
Buyer for purchase by Buyer in Seller's Anderson facility
(approximately 10 days) and Buyer's Huntingdon facility
(approximately 20 days), provided Buyer makes sufficient warehouse
space available for such inventory in its Huntingdon facility at no
cost to Seller or pays for the cost of storing such inventory in case
of insufficient warehouse space in its Huntingdon facility.
Seller shall not be obligated to deliver to Buyer Products in any
Contract Year in excess of 120% of the Contract Year Estimate for
such year (the "Maximum Volume"); provided that Seller will use its
reasonable efforts to fill orders in excess of the Maximum Volume and
will promptly notify Buyer of any inability to do so.
3.7. PACKAGING. All packaging materials used by Seller to package
---------
Products ("Packaging Materials") will be returned to Seller's
-------------------
manufacturing facility at Anderson, South Carolina. Seller will
arrange and pay for the freight. It is Buyer's responsibility to have
the loads prepared for shipment and loaded in a timely fashion.
Coordination will be made between Buyer and Seller regarding the
pickup time for returned Packaging Material. Buyer shall reimburse
Seller for the replacement cost of any Packaging Materials not
returned to Seller, or damaged by Buyer beyond "normal wear and
tear".
3.8. SALE OF EQUIPMENT. If within 60 days of the date of execution
-----------------
hereof, Buyer provides written notice to Seller of its election to
purchase upon the termination of this Agreement or when any of the
Marble Machinery (as hereinafter defined) is
3
<PAGE>
no longer used in the production of the Products, Seller shall have
the obligation to sell and Buyer shall have the obligation to buy all
of the equipment and machinery set forth on Schedule A of this
Agreement ("Marble Machinery") at the accounting book value of the
----------------
Marble Machinery at such time. Such accounting book value shall
reflect depreciation based on the United States generally accepted
accounting principles ("GAAP") except with regard to capital
equipment investment pre-approved by the Buyer. If Buyer does not
provide such notice and thereafter at the termination of this
Agreement elects to purchase the Marble Machinery, Seller shall have
the obligation to sell all the equipment and machinery to Buyer at
its fair market value. Notwithstanding the forgoing, if this
Agreement is terminated by Seller, Buyer shall have the right to
purchase the Marble Machinery at the lower of the then accounting
book value or the then market price. Neither Buyer nor Seller shall
have any obligations under this Section 3.8 with regard to capital
investment made by Seller without prior approval from Buyer. Buyer
shall, at Buyer's cost, dismantle and remove such Marble Machinery
within 6 months after the earlier of such termination or Seller's
notice to Buyer of such termination. Buyer shall pay Seller within 30
days after the last shipment of the Products under the Agreement.
3.9. RESTRICTED SUPPLY. The parties contemplate that both Seller and
-----------------
Buyer will use the Products in their manufacturing processes. In the
event that the supply of Products is insufficient to meet both Seller
and Buyer demand, Seller hereby agrees that Seller will, subject to
the Maximum Volume limitations and except as otherwise provided in
Section 11, apply all Products to the satisfaction of Buyer Purchase
Orders before using Products in Seller's processes and before selling
Products to any third party.
4. PRICE FOR THE PRODUCTS.
----------------------
The price for the Products, delivered to Buyer's manufacturing facilities at
Huntingdon, Pennsylvania or South Hill, Virginia or to such other domestic
destination designated by Buyer, shall be as set forth on Exhibit B attached
hereto and made a part hereof. Prices shall be in United States Dollars. In
all events, the Products shall be shipped, at Seller's expense for freight to
Buyer's designated location provided that Buyer shall be responsible for the
marginal increase in shipping costs if delivery is made to destinations other
than Huntingdon, Pennsylvania and South Hill, Virginia. Buyer shall be
responsible for any required customs clearance and all incremental costs and
duties if Seller ships the Products across borders at Buyer's request.
5. TITLE AND RISK OF LOSS.
----------------------
The Products sold pursuant to this Agreement shall be delivered to Buyer as
provided in
4
<PAGE>
paragraphs 3 and 4, and title and risk of loss shall pass to Buyer at the time
the Products leave Seller's control at its facility.
6. TERMS OF PAYMENT.
----------------
Except as provided in Section 3.3, Seller shall invoice Buyer on a monthly basis
for the Products delivered hereunder. Payment of each invoice shall be made by
Buyer within 30 days from the date of Seller's invoice. Seller shall charge
interest equal to the "base rate" of Citibank N.A. as announced from time to
time plus 2.0% per annum beginning on the 31st day after the invoice date if not
then paid in full. Remittance of interest under this section shall be made in
full without any reduction for any withholding or other taxes. If withholding
taxes or other taxes are applicable as prescribed under laws of the payor
country, Buyer shall remit the withholding taxes or other taxes to the proper
governmental agencies in such country on a timely basis and supply Seller with a
withholding tax receipt or other evidence of payment as soon as legally
possible.
7. TAXES, EXCISES AND OTHER CHARGES.
--------------------------------
Except for such taxes which Seller is required by law to collect from Buyer,
each party shall be responsible for payment of such taxes as such party is
required to pay under applicable law, including local, state, federal or foreign
law, and which are based upon or measured by the production, sale,
profitability, transportation, delivery or use of the Products sold and
delivered hereunder. Seller shall show VAT taxes, if applicable, separately on
its invoice.
8. CHANGES, MODIFICATIONS OR SUBSTITUTIONS.
---------------------------------------
8.1. CHANGES OR MODIFICATIONS BY BUYER. If, during the Term of this
---------------------------------
Agreement, Buyer shall modify the design of its products or make any
other changes in such products, or become subject to any other
circumstances such that new or different input materials may be
required for its manufacture of Products, Buyer shall notify Seller
thereof and of the specifications for the new or different Products
Buyer requires, and shall provide such other information with respect
thereto as may reasonably be requested by Seller in order to enable
Seller to carry out the following provisions of this paragraph 8.1.
Seller shall have a period of 120 days from the date of receipt of
Buyer's notice to notify Buyer whether Seller is able to manufacture,
deliver and sell to Buyer the additional or different materials and
for what price. Seller's price for new or different products shall be
as set forth on Exhibit B. Subject to Section 3.6, if Seller is not
able to sell the new or different materials, Buyer shall have the
right to obtain such materials from another vendor.
If Seller notifies Buyer it is able to sell the new or different
Products, Seller shall have a reasonable period to qualify the new or
different materials in Buyer's
5
<PAGE>
manufacturing process. Seller's pricing shall be established when the
new or different products are qualified. When qualified, the new or
different materials shall become Products hereunder and the
specifications for the new or different materials shall be added to
the Product Specifications.
8.2. MODIFICATIONS OR SUBSTITUTIONS BY SELLER. Buyer understands and
----------------------------------------
acknowledges that Seller, from time to time, to improve the
efficiency in the manufacture or use of the Products, may make
changes to, modify or make improvements to the Products, or
substitute newly designed products for the Products, but Seller is
under no obligation of any nature whatsoever to do so. If during the
Term of this Agreement Seller shall propose to make changes,
modifications or improvements to the Products or shall substitute
newly designed products for any of the Products, Seller shall advise
Buyer that the change, improvement, modification or substitution is
contemplated. As soon as practicable thereafter, Seller shall provide
Buyer, free of charge, samples of the proposed changed, modified,
improved or substitute product in sufficient quantity to enable Buyer
to test and qualify such product in Buyer's manufacturing process. In
the event that Seller and Buyer mutually agree that a changed,
modified, improved or substituted product has been sufficiently
tested and reviewed and accepted by both Seller and Buyer, and Buyer
desires to purchase such product, the product shall become a Product
and the specifications shall become Product Specifications hereunder.
9. SELLER'S WARRANTY.
-----------------
9.1. SELLER'S WARRANTY. Seller warrants that the Products when delivered
-----------------
to Buyer shall conform to the Product Specifications and shall be
free and clear of all liens and encumbrances. Any services rendered
in connection with the sale of Products shall be performed in a
workmanlike manner. Seller further warrants that it shall have
complied with all applicable laws, regulations, ordinances and codes
and Seller shall have obtained those permits, licenses, approvals and
certificates reasonably necessary for the manufacture, packaging,
storage and handling the Products at Seller's manufacturing
facilities.
9.2. DISCLAIMER. EXCEPT AS PROVIDED IN PARAGRAPH 9.1 HEREIN, SELLER MAKES
----------
NO OTHER REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE
PRODUCTS OR SERVICES DELIVERED HEREUNDER, WHETHER EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR USE OR PURPOSE, EVEN IF DISCLOSED TO SELLER, AND SELLER
HEREBY DISCLAIMS ANY SUCH OTHER REPRESENTATION OR WARRANTY.
10. LIMITATION OF LIABILITY.
-----------------------
6
<PAGE>
10.1. WARRANTY. Buyer's sole and exclusive remedy and the limit of
--------
Seller's liability for breach of the warranty set forth in paragraph
9.1, whether based upon breach of warranty, negligence, strict
liability, tort, breach of contract or any other theory, shall be,
at Seller's option, (a) replacement of the non-conforming Products,
without charge, F.O.B. Buyer's manufacturing facility; or (b) refund
of the purchase price paid in respect of such non-conforming
Products, plus commercially reasonably charges in connection with
the return or disposition of the non-conforming Products. If Seller
elects to replace the non-conforming Products, it shall do so at no
cost to Buyer within seven days unless the parties agree otherwise.
To effect this sole and exclusive remedy, Buyer must make its claim
for breach of warranty within 12 months of the date of shipment of
the Products, and any such claim not then made shall be irrevocably
waived.
10.2. ALL CLAIMS. Seller's sole liability with respect to the Products or
----------
services or this Agreement, for any and all loss or damage to Buyer,
or any other loss, damage, expense or claim, resulting from any
cause whatsoever (whether based on damaged or non-conforming
Products, irrespective of whether such damages or defects are
discoverable or latent, or Seller's limited warranty shall fail of
its essential purpose, or any other reason), and whether based upon
breach of warranty, negligence, strict liability, tort, breach of
contract or any other theory, shall be limited to and shall in no
event in the aggregate exceed the purchase price of the particular
Products with respect to which losses, damages, expenses or costs
are claimed. Seller shall have no liability to any person other than
Buyer by virtue of the sale of the Products and the other matters
contemplated by this Agreement.
10.3. ENTIRE OBLIGATION; NO CONSEQUENTIAL DAMAGES.
-------------------------------------------
(A) THE FOREGOING IS THE ENTIRE OBLIGATION OF SELLER PURSUANT TO
THIS AGREEMENT. SELLER SHALL NOT BE LIABLE PURSUANT TO THIS
AGREEMENT FOR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT OR
PENAL DAMAGES TO ANY PERSON, WHETHER BASED UPON BREACH OF WARRANTY,
NEGLIGENCE, STRICT LIABILITY, TORT, BREACH OF CONTRACT OR ANY OTHER
THEORY, OR FOR FAILURE TO PERFORM ITS OBLIGATIONS UNDER THIS
AGREEMENT. ADDITIONAL, CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT
OR PENAL DAMAGES SHALL NOT BE RECOVERABLE EVEN IF THE REPLACEMENT OR
REFUND REMEDY FOR SELLER'S BREACH OF ITS LIMITED WARRANTY FAILS OF
ITS ESSENTIAL PURPOSE OR FOR ANY OTHER REASON.
(B) No statement or recommendation made or assistance given by
Seller, or its representatives, either oral or in any literature or
other documentation, to Buyer,
7
<PAGE>
its customers or any other persons in connection with the purchase,
use or installation by Buyer, its customers or any other persons, of
any Products sold hereunder, shall constitute a waiver by Seller of
any provision hereof or affect Seller's liability as herein defined;
and no such statement, recommendation or assistance that is not
expressly required by the provisions of this Agreement shall subject
Seller to any liability of any nature whatsoever.
11. FORCE MAJEURE.
-------------
Neither party shall be liable to the other for delay or failure to perform in
whole or in part, by reason of contingencies or events which: (i) are beyond the
reasonable control of the party whose performance is affected, (ii) are
unforeseeable, and (iii) could not have been reasonably prevented, whether
herein specifically enumerated or not (a "Force Majeure Event"). These
contingencies include, among others, act of God, act of war, revolution, riot,
acts of public enemies, fire, explosion, breakdown of plant, strike, lockout,
labor dispute, casualty or accident, earthquake, flood, cyclone, tornado,
hurricane or other windstorm, or by reason of any law, order, proclamation,
regulation, ordinance, demand, requisition or requirement or any other act of
any governmental authority, foreign or domestic, local, state or federal
(provided that the Force Majeure Event does not arise due to or is connected in
any way with a violation by party hereto of any law, order, proclamation,
regulation, ordinance, demand, requisition or requirement of any governmental
authority) except that contingencies shall not include a downturn in Buyer's
business or general economic downturn. A party so affected by a Force Majeure
Event shall: (i) promptly give written notice to the other party whenever such
contingency or other act becomes reasonably foreseeable (including an estimate
of the expected duration of the Force Majeure Event and its probable impact on
the performance of such party's obligations hereunder); (ii) exercise all
reasonable efforts to continue to perform its obligations hereunder; (iii) use
its commercially reasonable best efforts to overcome or mitigate the effects of
the contingency as promptly as possible and (iv) promptly give written notice to
the other party of the cessation of such contingency. Neither party, however,
shall be required to resolve a strike, lockout or other labor problem in a
manner which it alone does not deem proper and advisable. In no event shall any
Force Majeure Event excuse party's failure to pay when due any monetary
obligation hereunder. In the case of any Force Majeure Event relied on by
Seller, Seller agrees that it shall treat Buyer no less favorably than the most
favorably treated Affiliate or customer of Seller in dealing with or adjusting
to the consequences of such Force Majeure Event and in relation to the
allocation of any Products, the production or availability of which may have
been interrupted or diminished.
Deliveries of the Product omitted due to any Force Majeure Event affecting
Seller or Buyer shall, without liability, reduce by an equivalent quantity the
quantity of Products to be sold and delivered during the period in which the
Force Majeure Event occurred. To determine the quantity of Products that would
have been sold, the parties shall assume that Buyer's most recent Refined
Estimates would have been purchased on a ratable basis.
8
<PAGE>
12. DEFAULT.
-------
Except as otherwise specifically provided in this Agreement, if either party
fails to perform any of the terms of this Agreement, (a) the other party may
defer its performance under this Agreement until the default is cured by the
defaulting party, or (b) at its option, the party may treat such default as a
breach of the entire Agreement and, if such default is not cured within 30 days
after the giving of notice thereof to the defaulting party (or, in the case of
default in payment of monies, within 10 business days), may immediately
terminate this Agreement upon notice to the defaulting party. This Agreement
shall terminate automatically, without necessity of notice, in the event Buyer
or Seller makes an assignment for the benefit of creditors generally, is
adjudicated a bankrupt or in the event of the filing of any voluntary or
involuntary petition in bankruptcy against Buyer or Seller or the appointment of
a receiver for Buyer or Seller or any substantial part of their respective
properties.
13. APPLICABLE LAW.
--------------
Except as provided in paragraph 6, this Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to a
contract executed and performed in such State without giving effect to the
conflicts of law principles thereof.
14. ENTIRE AGREEMENT.
----------------
This Agreement sets forth the entire agreement and understanding of the parties
with respect to the subject matter hereof and supersedes all prior
understandings, negotiations, and dealings between the parties hereto with
respect to this subject matter. No agreement or understanding, oral or written,
in any way purporting to modify the terms hereof shall be binding on either
party hereto unless contained in a written document expressly referring to this
Agreement and duly executed by both parties. There are no representations or
warranties made by one party to the other except as expressly set forth in this
Agreement. In case of a conflict between any of the terms of any purchase order
of Buyer or any acknowledgment by Seller of the purchase order and any of the
terms set forth in this Agreement, the terms of this Agreement shall control.
No additional terms or conditions of sale other than those contained in this
Agreement shall be effective unless approved in writing by an authorized
representative of Seller and Buyer.
15. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement shall be binding upon and shall inure to the benefit of both
parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement shall not be assigned by either party
hereto without the express prior written consent of the other party, and any
attempted assignment, without such consents, shall be null and void.
Notwithstanding any nonassignment provisions contained in this Section 15,
Buyer, or any
9
<PAGE>
permitted assignee or transferee of Buyer, may assign or otherwise transfer all
of its rights and/or obligations hereunder (i) to any entity or entities, or any
assignee of such entity or entities, providing financing for the transactions
contemplated by this Agreement or to any entity or entities providing to Buyer,
Buyer's Affiliates, or to any such permitted assignee of Buyer, financing
relating to the Business (collectively, the "Financing Sources"), (ii) to any
Affiliate of Buyer, provided that (x) such Affiliate shall agree with Seller and
its permitted assignees or transferees, if any, in writing to assume the Buyer's
obligations hereunder and (y) any such assignment to an Affiliate of the Buyer
shall not relieve the Buyer from its obligations hereunder or (iii) to any
entity to which Buyer, or any assignee or transferee of Buyer, assigns, sells,
transfers or otherwise conveys all or substantially all of the assets
constituting the Business (a "Partial Assignment"), provided that such acquiring
entity agrees with and acknowledges in writing to Seller and its permitted
assignees or transferees, if any, that this Agreement shall be binding upon and
enforceable against such entity as though such acquiring entity were Buyer and
that such entity shall perform all of Buyer's obligations hereunder.
Notwithstanding any nonassignment provisions contained in this Section 15,
Seller, or any permitted assignee or transferee of Seller, may assign or
otherwise transfer some or all of its rights and/or obligations hereunder (i) to
any Affiliate of Seller, provided that (x) such Affiliate shall agree with Buyer
and its permitted assignees or transferees, if any, in writing to assume the
Seller's obligations hereunder and (y) any such assignment to an Affiliate of
the Seller shall not relieve the Seller from its obligations hereunder or (ii)
to any entity to which Seller, or any assignee or transferee of Buyer, assigns,
sells, transfers or otherwise conveys any portion of its business which owns,
licenses or uses Business Patents or Business Know How (as each is defined in
the Patent and Know How License Agreement), provided that such acquiring entity
agrees with and acknowledges in writing to Buyer and its permitted assignees or
transferees, if any, that this Agreement shall be binding upon and enforceable
against such entity as though such acquiring entity were Seller and that such
entity shall perform all of Seller's obligations hereunder. To the extent that
assignment and/or transfer of any of the rights, privileges, and/or obligations
is permitted, this Agreement shall be binding on, and except as otherwise
expressly provided, shall inure to the benefit of, the legal successors,
assigns, or representatives of the parties.
16. NOTICES.
-------
All communications provided for hereunder shall be in writing and shall be
deemed to be given when delivered in person or by private courier with receipt,
when telefaxed and received, or three (3) days after being deposited in the
United States mail, first-class, registered or certified, return receipt
requested, with postage paid and,
If to Buyer: Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Fax: 803-643-1526
Attention: General Manager
10
<PAGE>
With a copy to: AGY Holdings, Inc.
c/o Glass Holdings Corp.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336-545-7715
Attention: President
And to: Jefferson Holdings, Inc.
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
If to OC: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such party shall designate by written
notice to the other parties hereto.
17. MISCELLANEOUS.
-------------
17.1. PARAGRAPH HEADINGS; CONSTRUCTION. The paragraph headings contained
--------------------------------
in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
This Agreement is a product of negotiation and shall not be
construed against either party as the drafter.
17.2. SEVERABILITY. If any provision of this Agreement shall be declared
------------
by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be
affected and shall remain in full force and effect.
17.3. AMENDMENT; WAIVER. This Agreement may be amended, supplemented or
-----------------
otherwise modified only by a written instrument executed by the
parties hereto. No waiver by either party of any of the provisions
hereof shall be effective unless explicitly set forth in writing and
executed by the party so waiving. The waiver
11
<PAGE>
by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any
subsequent breach.
17.4. SURVIVAL. The provisions of paragraphs 3.8, 4, 5, 6, 7 and 9
--------
through 17 of this Agreement shall survive any termination or
expiration hereof.
17.5. INDEPENDENT CONTRACTORS. The parties are independent contractors,
-----------------------
and this Agreement does not create a partnership or agency
relationship between the parties, or any other relationship between
the parties except as expressly set forth herein. Neither party has
any right or authority to assume or incur any liability or
obligation on behalf of the other party except to such extent as
may expressly be set forth herein.
17.6. NO THIRD PARTY BENEFICIARIES. This Agreement is entered into
----------------------------
solely for the benefit of the parties hereto and no person other
than the parties hereto, or their permitted successors and assigns,
shall be entitled to exercise any right or enforce any obligation
thereunder.
17.7. CONFIDENTIALITY. Each party shall maintain in confidence the terms
--------------
of this Agreement except as may be otherwise required by law.
17.8. LANGUAGE. This Agreement is to be executed in the English
--------
language.
17.9. PUBLICITY. Each of Buyer and Seller agrees not to use the name or
---------
trademarks or logos of the other party or its divisions or
affiliates in any publicity, packaging, marketing materials or
other promotional activities or materials without the prior written
consent of the other party.
17.10. CONSENT TO JURISDICTION. Each of the parties hereto, irrevocably
-----------------------
submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York located in the borough
of Manhattan in the City of New York, or if such court does not
have jurisdiction, the Supreme Court of the State of New York, New
York County, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction
contemplated hereby. Each of the parties hereto, further agrees
that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth in
paragraph 16 shall be effective service of process for any action,
suit or proceeding in New York with respect to any matters to which
it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of the parties hereto,
irrevocably and unconditionally waives any objections to the laying
of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (a) the United
States District Court for the Southern District of New York or (b)
the Supreme Court of the State of New York, New York County, and
hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action,
12
<PAGE>
suit or proceeding brought in any such court has been brought in an
inconvenient forum.
17.11. COUNTERPARTS. This Agreement may be executed in 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.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by persons authorized to bind their respective companies as of the
date first above written.
OWENS CORNING
By: /s/ Charles E. Dana
---------------------------
Name: Charles E. Dana
Title: Vice President
ADVANCED GLASSFIBER YARNS LLC
By: /s/ Robert B. Fisher
---------------------------
Name: Robert B. Fisher
Title: General Manager
14
<PAGE>
EXHIBIT 10.3
ALLOY SERVICES AGREEMENT
This Alloy Services Agreement is made as of September 30, 1998 by and between
Advanced Glassfiber Yarns LLC (hereinafter "Buyer") and OWENS CORNING, a company
-----
incorporated under the laws of the State of Delaware and having its principal
office at Owens Corning World Headquarters, One Owens Corning Parkway, Toledo,
Ohio 43659 (hereinafter "OC").
--
WITNESSETH
WHEREAS, OC and Buyer have entered into an Amended and Restated Asset
Contribution Agreement, dated July 31, 1998 (the "ACA"), whereby OC has
---
contributed to Buyer a quantity of platinum and rhodium;
WHEREAS, Buyer requires alloying, fabrication and repair services for bushings,
thermocouples and glass melter parts constructed from metal alloys (collectively
referred to as the "Parts"); and
-----
WHEREAS, OC has the expertise to provide these services to Buyer;
NOW, THEREFORE, OC and Buyer agree as follows:
1. ESTABLISHMENT OF ALLOY ACCOUNTS
-------------------------------
A. On the date hereof, OC has established one or more alloy accounts
(the "Accounts") in favor of Buyer evidencing the amounts of platinum
--------
and rhodium in alloy form purchased by Buyer pursuant to the ACA and
to be serviced hereunder. As of an inventory taken on June 19, 1998,
the Accounts show a balance of 838,571 grams of H alloy, 2,573,173
grams of J alloy and 40,743 grams of thermocouple wire alloy.
B. OC will be responsible for maintaining and providing a monthly
transaction summary for the Accounts. OC recognizes that the metals
and alloy represented by the Accounts (other than the leased alloy as
provided in paragraph 4 below) is Buyer property and will not assign
it as collateral for any financing and it remains the sole property of
Buyer even in case of termination of this Agreement.
2. ALLOYING/DE-ALLOYING OF PRECIOUS METALS
---------------------------------------
A. OC agrees to combine for Buyer platinum and rhodium into H alloy, J
alloy, thermocouple wire and other alloys as may be required from time
to time in amounts as agreed upon by OC and Buyer in accordance with
the requirements of Paragraph 2B herein. To direct OC to undertake
alloying services, Buyer shall issue a purchase order to OC's Alloy
Manufacturing Operations in Anderson,
<PAGE>
South Carolina. If Buyer issues an oral purchase order, the oral
purchase order shall be confirmed by Buyer in writing within five (5)
business days of the issue date. OC shall acknowledge receipt of each
purchase order and provide the estimated date of shipment for the
items covered by each purchase order.
B. Any platinum and rhodium to be deposited by Buyer into the Accounts
prior to alloying shall have a purity of 99.95% and 99.90,
respectively.
Alloy metal in combined ingot form manufactured by OC hereunder shall
have an alloyed purity of at least 99.7%. The attached Exhibit 1
provides for an allowance for other elements which shall be acceptable
in the purity levels. OC represents that the platinum, rhodium and
alloy purchased under the ACA and deposited in the Accounts satisfy
the foregoing purity requirements.
C. The fee schedule for alloying services shall be determined for each
calendar year by OC and shall be announced to Buyer as soon before the
beginning of each calendar year as is practicable. The 1998 fee
schedule for alloying is attached to this Alloy Services Agreement as
Exhibit 2. The fees listed on Exhibit 2, paragraph A do not include
inherent metal losses of the alloying process, which OC agrees will be
no more than to be 0.2%. Such inherent metal losses will be charged
against and deducted from the Accounts.
D. All billings for alloying services shall be rendered by OC on a
monthly basis shall be on prevailing OC credit terms, currently net
thirty (30) days. Remittances to OC shall be made in U.S. Dollars by
wire transfer to a bank to be determined by OC. Payment of fees for
alloying services will be subject to an interest charge equal to the
"base rate" of Citibank N.A. as announced from time to time (the "U.S.
----
Prime Rate") plus 2.0% per annum beginning on the 31st day after the
----------
invoice date if not then paid in full.
E. The alloying fees described in this paragraph 2 shall be in addition
to any other charges described in this Alloy Services Agreement.
F. De-Alloying services will be quoted on request.
3. FABRICATION AND/OR REPAIR SERVICES
----------------------------------
A. At the request of Buyer, OC will provide fabrication and/or repair
services for Parts using Buyer's alloys in accordance with OC design
specifications.
B. To direct OC to fabricate and/or repair one or more Parts, Buyer shall
issue a purchase order to OC's Alloy Manufacturing Operations in
Anderson, South Carolina specifying the fabrication or repair services
to be performed by OC. If
-2-
<PAGE>
Buyer issues an oral release, the oral release shall be confirmed by
Buyer in writing within five (5) business days of the issue date. OC
shall acknowledge receipt of each release and provide the estimated
date of shipment for the item(s) in the release. OC shall comply with
the terms of Buyer's purchase order which are consistent with the
requirements of Section 3.A of this Agreement.
C. The fee schedule for fabrication/repair services shall be determined
for each calendar year by OC and shall be announced to Buyer as soon
before the beginning of each calendar year as is practicable. This
will incorporate the forecasted activity level of the Buyer. The fee
schedule for such fabrication and/or repair services shall generate a
forty (40%) margin.
D. Buyer and OC agree that fabrication of Parts will cause a loss of
alloy not exceeding 1% of gross item weight. All such losses shall be
charged against and deducted from the Accounts on a monthly basis.
E. Fees for services to fabricate and/or repair furnace parts, viscometer
parts, finshields, center supports, precision fin adjustors, tip plugs
and other special orders will be quoted by OC on request.
F. OC and Buyer agree that, as of the date of this Alloy Services
Agreement, shipment of Parts, other than those required for initial
plant start-up, will be effected no more than seven (7) weeks from the
date that an order is acknowledged (the "Cycle Time").
----------
Notwithstanding the foregoing, once a month Buyer may place an order
for one Part for shipment within one week. Buyer's orders will be
processed at least on a proportionate basis to OC's own processing
needs.
G. Billings for fabrication and/or repair services shall be rendered by
OC on a monthly basis shall be on prevailing OC credit terms,
currently net thirty (30) days from the day of invoice. Remittances
shall be made in U.S. Dollars by wire transfer or check to a bank to
be determined by OC. Payment of fees for fabrication and/or repair
services will be made by Buyer subject to an interest charge of U.S.
Prime Rate plus 2% per annum beginning on the 31st day after the
invoice date if not then paid in full.
H. Billings for the cost of delivery of Parts to and from the airport for
shipment to or receipt from Buyer (all of which shall be the
responsibility of Buyer) shall be rendered by OC on receipt of armored
car services' billings to OC.
I. OC shall prepare and package Parts for shipment to Buyer in OC
designed and provided reusable containers. Shipments will be made CPT,
destination, airport basis. OC shall assist Buyer in negotiating and
obtaining best terms for freight
-3-
<PAGE>
and insurance. OC reserves the right to change shipping terms with at
least thirty (30) days' prior written notice to Buyer.
J. As soon as practicable after receipt, but in no case exceeding
fourteen (14) days after receipt, Buyer shall return the reusable
containers to OC CIF, OC Manufacturing Facility at Ridgeview, South
Carolina basis. Buyer may at each manufacturing location retain two
(2) empty containers for its future use to return Parts for repair.
K. The fabrication and/or repair and other fees described in this
paragraph 3 shall be in addition to any other charges described in
this Alloy Services Agreement.
L. For returns of used Parts, Buyer shall return such Parts CIF, OC
Manufacturing Facility at Anderson, South Carolina. Buyer shall
package the used Parts in an OC reusable container and Buyer shall
comply with all other instructions provided by OC regarding the return
of the Part.
4. BRIDGE LEASING FOR POOL ACCOUNT
-------------------------------
A. Buyer agrees it is responsible to maintain at all times a balance in
the Accounts to cover 110% of the purchase orders rendered hereunder.
Should Buyer enter an order or orders for Parts which order or orders
result in one or more Accounts having a negative balance after
considering the effect of the order(s), OC shall lease to Buyer the
amount of alloy required to bring such negative Account or Accounts to
a positive balance. In consideration thereof, Buyer agrees to pay to
OC a lease fee in an amount calculated per the applicable formula(s)
set out in subparagraph B below.
B. The applicable formula for lease fee determination for each alloy is
as follows:
J Alloy Formula monthly charges:
<TABLE>
<S> <C>
The sum of (i)
(J alloy leased x 75% Pt ratio) x (Pt mkt. price x lease rate %) x emergency factor) x days in current month
------------------------------------------------------------------------------------
360
and (ii)
(J alloy leased x 25% Rh ratio) x (Rh mkt. price x lease rate %) x emergency factor) x days in current month
------------------------------------------------------------------------------------
360
</TABLE>
-4-
<PAGE>
H Alloy Formula monthly charges:
The sum of (i)
(H alloy leased x 90% Pt ratio) x (Pt mkt. price x lease rate %) x
------------------------------------------------------------------
emergency factor) x days in current month
- ----------------
360
and (ii)
(H alloy leased x 10% Rh ratio) x (Rh mkt. price x lease rate %) x
------------------------------------------------------------------
emergency factor) x days in current month
- ----------------
360
TC Alloy Formula monthly charges:
The sum of (i)
(TC alloy leased x 93.5% Pt ratio) x (Pt mkt. price x lease rate %)
-------------------------------------------------------------------
x emergency factor) x days in current month
- ------------------
360
and (ii)
(TC alloy leased x 6.5% Rh ratio) x (Rh mkt. price x lease rate %) x
--------------------------------------------------------------------
emergency factor) x days in current month
- ----------------
360
Where:
J Leased = Quantity of J alloy leased in grams.
H Leased = Quantity of H alloy leased in grams.
TC Leased = Quantity of TC alloy leased in grams.
Pt Mkt. Price = Closing Price of platinum in U.S. dollars per gram at
the close of business in New York on the Metals Inventory Date in the
month the negative balance occurs as published by Johnson & Matthey
Inc.
Rh Mkt. Price = Closing Price of rhodium in U.S. dollars per gram at
the close of business in New York on the Metals Inventory Date in the
month the negative balance occurs as published by Johnson & Matthey
Inc.
Lease Rate = 15%
Emergency Factor = 1.16
The Metals Inventory Date Schedule for 1998 is attached hereto as Exhibit 3.
The Metals Inventory Date schedule for each subsequent year shall be
communicated in writing as soon before the beginning of each calendar year as is
practicable. Buyer shall participate in the OC's metals inventory process
according to the Metals Inventory Date schedule.
C. The lease fee shall be billed monthly for all months that Buyer's
Accounts are in negative status. All billings for bridge leasing
shall be paid on prevailing OC credit terms, currently net thirty (30)
days, unless expressly modified by this Alloy Services Agreement.
Remittances to OC shall be made in U.S. Dollars by wire transfer to a
bank to be determined by OC. Payments of bridge leasing fees will be
subject to an interest charge equal to the U.S. Prime Rate plus 2.0%
per annum beginning on the 31st day after invoice date if not then
paid in full. The quantity of alloy exceeding 111,000 oz. on the
Metals Inventory Date shall be charged to Buyer using the bridge lease
formula provided in Section 4B based on
-5-
<PAGE>
the ratio of J, H and TC Alloy determined in Paragraph 1.A above. The
quantity below 111,000 oz on the Metals Inventory Date shall be
charged to Seller using the bridge leasing formula provided in Section
4B based on the ratio of J, H and TC Alloy determined.
D. Fees for bridge leasing described in this paragraph 4 shall be in
addition to any other charges described in this Alloy Services
Agreement.
E. Buyer and OC may agree from time to time to change alloy compositions
from those shown in the above formulae, and the appropriate
percentages of platinum and rhodium shall be substituted in the
affected formula to determine the new alloy's lease fee monthly
payment.
F. It is agreed that the bridge leasing provided for in this paragraph 4
is intended only for Buyer's short term unexpected needs. Buyer
agrees that any needs exceeding thirty (30) days shall be satisfied by
Buyer purchasing and depositing in the Accounts additional platinum
and/or rhodium.
5. OC ALLOY POLICIES
-----------------
In addition to the provisions contained herein, the agreements of the
parties represented hereby shall be further subject to OC Alloy Policies AO
A251 and A451 (the "Alloy Policies"), Exhibits 4 and 5 respectively. OC
--------------
reserves the right to amend the Alloy Policies at any time and from time to
time on thirty (30) days' prior written notice. To the extent there is a
conflict between the terms of this Alloy Services Agreement and the Alloy
Policies, the terms of this Alloy Services Agreement shall control.
6. METAL OPERATING LOSSES
----------------------
During the normal course of operating an alloyed part, there will be a
percentage of alloy loss noted after the part is removed. This loss will
be charged against and deducted from the Accounts. The charge for this
loss will be the difference in part weight when shipped out new less the
used part weight when returned. OC shall account to Buyer for any alloys
recovered on Buyer's behalf using the same procedure as OC uses for its
licensees and affiliates.
7. TERM
----
This Alloy Services Agreement shall be effective as of the date of
execution and, unless earlier terminated as provided herein, shall continue
in full force and effect for the period of seven years and three months
through and including December 31, 2005 (the "Initial Term"). This
------------
Agreement is renewable at the option of either party for consecutive terms
of five years unless terminated by either party upon twenty-four (24)
months, prior
-6-
<PAGE>
written notice. The Initial Term, together with all renewal periods
thereof, is referred to hereinafter as the "Term."
----
8. EXCLUSIVITY
-----------
OC shall be Buyer's exclusive provider of alloying services and fabrication
and repair services with regard to Parts which are utilized by Buyer. OC
agrees that it will not provide Parts to any third party who utilizes such
Parts to manufacture Business Products in competition with Buyer.
Exceptions to this limitation shall be made by mutual agreement of both
parties acting reasonably and in good faith.
9. PART DESIGN SECRECY
-------------------
The treatment of OC's and Buyer's proprietary information embodied in the
Parts shall be governed by the provisions of the Patent and Know How
License Agreement dated the date hereof by and between OC and Buyer.
10. INSURANCE
---------
OC agrees to take reasonable precautions where possible to minimize the
risk of loss of precious metals in the Accounts while in the custody of OC.
OC assumes all risk of loss for precious metals, whether in fabricated form
or in the form of pure alloy or precious metals, while located at OC
manufacturing facilities. Buyer assumes all risk of loss at all other
times and regardless of where located for all precious metals in the
Accounts, whether in fabricated form or in the form of pure alloy or
precious metals. Buyer shall remain responsible to procure all appropriate
insurance at its own expense for those losses for which it is responsible.
11. WARRANTY/LIMITATION OF LIABILITY
--------------------------------
A. OC warrants that the Parts when delivered to Buyer shall conform to OC
specifications and shall be free and clear of all liens and
encumbrances. Any services rendered in connection with the alloying
of metals or the fabrication of Parts shall be performed in a
workmanlike manner. OC further warrants that it shall have complied
with all applicable laws, regulations, ordinances and codes and OC
shall have obtained those permits, licenses, approvals and
certificates, reasonably necessary for the manufacture, packaging,
storage and handling the Parts and the provision of such other
services hereunder at OC's manufacturing facilities.
B. EXCEPT AS PROVIDED IN PARAGRAPH 11(A) HEREIN, OC MAKES NO OTHER
REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE SERVICES
DELIVERED HEREUNDER, WHETHER
-7-
<PAGE>
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE OR PURPOSE, EVEN IF
DISCLOSED TO OC, AND OC HEREBY DISCLAIMS ANY SUCH OTHER REPRESENTATION
OR WARRANTY.
C. OC's sole liability with respect to the services provided by OC under
this Alloy Services Agreement, and whether based upon breach of
warranty, negligence, strict liability, tort, breach of contract or
any other theory, shall be limited to and shall in no event in the
aggregate exceed the fees charged hereunder for the services sold
hereunder. OC shall have no liability to any person other than Buyer
by virtue of the sale of the services hereunder and the other matters
contemplated by this Alloy Services Agreement.
D. Buyer's sole and exclusive remedy and the limit of OC's liability for
breach of the warranty set forth in paragraph 11(A), whether based
upon breach of warranty, negligence, strict liability, tort, breach of
contract or any other theory, shall be, at OC's option, (a)
replacement of the non-conforming Parts, without charge, F.O.B.
Buyer's manufacturing facility; or (b) refund of the purchase price
paid in respect of such non-conforming Parts, plus commercially
reasonably charges in connection with the return or disposition of the
non-conforming Parts. If OC elects to replace the non-conforming
Parts, it shall do so at no cost to Buyer within seven days unless the
parties agree otherwise. To effect this sole and exclusive remedy,
Buyer must make its claim for breach of warranty within 12 months of
the date of shipment of the Parts, and any such claim not then made
shall be irrevocably waived.
E. THE FOREGOING IS THE ENTIRE OBLIGATION OF OC PURSUANT TO THIS
AGREEMENT. OC SHALL NOT BE LIABLE PURSUANT TO THIS AGREEMENT FOR ANY
CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT OR PENAL DAMAGES TO ANY
PERSON, WHETHER BASED UPON BREACH OF WARRANTY, NEGLIGENCE, STRICT
LIABILITY, TORT, BREACH OF CONTRACT OR ANY OTHER THEORY, OR FOR
FAILURE TO PERFORM ITS OBLIGATIONS UNDER THIS ALLOY SERVICES
AGREEMENT. ADDITIONAL, CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT
OR PENAL DAMAGES SHALL NOT BE RECOVERABLE EVEN IF THE REPLACEMENT OR
REFUND REMEDY FOR OC'S BREACH OF ITS LIMITED WARRANTY FAILS OF ITS
ESSENTIAL PURPOSE OR FOR ANY OTHER REASON.
F. No statement or recommendation made or assistance given by OC, or its
representatives, either oral or in any literature or other
documentation, to Buyer, its customers or any other persons in
connection with the services provided hereunder, shall constitute a
waiver by OC of any provision hereof or affect OC's
-8-
<PAGE>
liability as herein defined; and no such statement, recommendation or
assistance that is not expressly required by the provisions of this
Alloy Services Agreement shall subject OC to any liability of any
nature whatsoever.
12. NON-ASSIGNABILITY
-----------------
This Alloy Services Agreement shall inure to the benefit of and be binding
on the parties hereto and their respective successors and permitted
assigns. Except as otherwise expressly provided herein, this Agreement
shall not be assigned by either party hereto without the express prior
written consent of the other party, and any attempted assignment, without
such consents, shall be null and void. Notwithstanding any nonassignment
provisions contained in this Section 12, Buyer, or any permitted assignee
or transferee of Buyer, may assign or otherwise transfer some or all of its
rights and/or obligations hereunder (i) to any entity or entities, or any
assignee of such entity or entities, providing financing for the
transactions contemplated by this Agreement or to any entity or entities
providing to Buyer, Buyer's Affiliates, or to any such permitted assignee
of Buyer, financing relating to the Business (collectively, the "Financing
Sources"), (ii) to any Affiliate of Buyer, provided that (x) such Affiliate
shall agree with OC and its permitted assignees or transferees, if any, in
writing to assume the Buyer's obligations hereunder and (y) any such
assignment to an Affiliate of the Buyer shall not relieve the Buyer from
its obligations hereunder or (iii) to any entity to which Buyer, or any
assignee or transferee of Buyer, assigns, sells, transfers or otherwise
conveys (A) all or substantially all of the assets constituting the
Business (a "Complete Assignment") or (B) all or substantially all of the
assets constituting either the Aiken Facility, the Huntingdon Facility or
the South Hill Facility (a "Partial Assignment"), provided that such
acquiring entity agrees with and acknowledges in writing to OC and its
permitted assignees or transferees, if any, that this Agreement shall be
binding upon and enforceable against such entity as though such acquiring
entity were Buyer and that such entity shall perform all of Buyer's
obligations hereunder. Notwithstanding any nonassignment provisions
contained in this Section 12, OC, or any permitted assignee or transferee
of OC, may assign or otherwise transfer some or all of its rights and/or
obligations hereunder (i) to any Affiliate of OC, provided that (x) such
Affiliate shall agree with Buyer and its permitted assignees or
transferees, if any, in writing to assume the OC's obligations hereunder
and (y) any such assignment to an Affiliate of the OC shall not relieve the
OC from its obligations hereunder or (ii) to any entity to which OC, or any
assignee or transferee of Buyer, assigns, sells, transfers or otherwise
conveys any portion of its business which owns, licenses, or uses Business
Patents or Business Know How (as each is defined in the Patent and Know How
License Agreement), provided that such acquiring entity agrees with and
acknowledges in writing to Buyer and its permitted assignees or
transferees, if any, that this Agreement shall be binding upon and
enforceable against such entity as though such acquiring entity were OC and
that such entity shall perform all of OC's obligations hereunder. To the
extent that assignment
-9-
<PAGE>
and/or transfer of any of the rights, privileges, and/or obligations is
permitted, this Agreement shall be binding on, and except as otherwise
expressly provided, shall inure to the benefit of, the legal successors,
assigns, or representatives of the parties.
13. AMENDMENT; WAIVER.
-----------------
This Alloy Services Agreement may be amended, supplemented or otherwise
modified only by a written instrument executed by the parties hereto. No
waiver by either party of any of the provisions hereof shall be effective
unless explicitly set forth in writing and executed by the party so
waiving. Except as provided in the preceding sentence, no action taken
pursuant to this Alloy Services Agreement, including without limitation,
any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained herein. The
waiver by any party hereto of a breach of any provision of this Alloy
Services Agreement shall not operate or be construed as a waiver of any
subsequent breach.
14. NOTICES
-------
All communications provided for hereunder shall be in writing and shall be
deemed to be given when delivered in person or by private courier with
receipt, when telefaxed and received, or three (3) days after being
deposited in the United States mail, first-class, registered or certified,
return receipt requested, with postage paid and,
If to Buyer: Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Fax: 803-643-1526
Attention: General Manager
With a copy to: AGY Holdings, Inc.
c/o Glass Holdings Corp.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336-545-7715
Attention: President
And to: Jefferson Holdings, Inc.
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-325-1180
Attention: President
-10-
<PAGE>
If to OC: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-325-1180
Attention: Larry W. Cullum
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such party shall designate by written
notice to the other parties hereto.
15. TAXES
-----
Buyer shall pay to the proper authority, when and as the same become due
and payable, all taxes, duties, assessments and similar charges which at
any time during the term of this Alloy Services Agreement may be taxed,
assessed or imposed upon Buyer or OC with respect to the services provided
under this Alloy Services Agreement (other than any tax properly imposed by
the laws of any foreign jurisdiction or the United States upon OC, said tax
being in the nature of an income tax and measured by the amount of payments
to be made pursuant to this Agreement).
16. FORCE MAJEURE
-------------
Neither party shall be liable to the other for delay or failure to perform
in whole or in part, by reason of contingencies or events which: (i) are
beyond the reasonable control of the party whose performance is affected,
(ii) are unforeseeable, and (iii) could not have been reasonably prevented,
whether herein specifically enumerated or not (a "Force Majeure Event").
These contingencies include, among others, act of God, act of war,
revolution, riot, acts of public enemies, fire, explosion, breakdown of
plant, strike, lockout, labor dispute, casualty or accident, earthquake,
flood, cyclone, tornado, hurricane or other windstorm, or by reason of any
law, order, proclamation, regulation, ordinance, demand, requisition or
requirement or any other act of any governmental authority, foreign or
domestic, local, state or federal (provided that the Force Majeure Event
does not arise due to or is connected in any way with a violation by party
hereto of any law, order, proclamation, regulation, ordinance, demand,
requisition or requirement of any governmental authority) except that
contingencies shall not include a downturn in Buyer's business or general
economic downturn. A party so affected by a Force Majeure Event shall:
(i) promptly give written notice to the other party whenever such
contingency or other act becomes reasonably foreseeable (including an
estimate of the
-11-
<PAGE>
expected duration of the Force Majeure Event and its probable impact on the
performance of such party's obligations hereunder); (ii) exercise all
reasonable efforts to continue to perform its obligations hereunder; (iii)
use its commercially reasonable best efforts to overcome or mitigate the
effects of the contingency as promptly as possible and (iv) promptly give
written notice to the other party of the cessation of such contingency.
Neither party, however, shall be required to resolve a strike, lockout or
other labor problem in a manner which it alone does not deem proper and
advisable. In no event shall any Force Majeure Event excuse party's failure
to pay when due any monetary obligation hereunder. In the case of any Force
Majeure Event relied on by OC, OC agrees that it shall treat Buyer no less
favorably than the most favorably treated Affiliate or customer of OC in
dealing with or adjusting to the consequences of such Force Majeure Event
and in relation to the allocation of any Products, the production or
availability of which may have been interrupted or diminished.
Deliveries of the Parts omitted due to any Force Majeure Event affecting OC
or Buyer shall, without liability, reduce by an equivalent quantity the
quantity of Parts to be sold and delivered during the period in which the
Force Majeure Event occurred. To determine the quantity of Parts that
would have been sold, the parties shall assume that Buyer's most recent
Refined Estimates would have been purchased on a ratable basis.
17. GOVERNING LAW
-------------
This Alloy Services Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to a contract
executed and performed in such State without giving to the conflicts of law
principles thereof.
18. SEVERABILITY
------------
If any provision of this Alloy Services Agreement shall be declared by any
court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Alloy Services Agreement shall not be affected and
shall remain in full force and effect.
19. DEFAULT
-------
Except as otherwise specifically provided in this Alloy Services Agreement,
if either party fails to perform any of the terms of this Alloy Services
Agreement, (a) the other party may defer its performance under this Alloy
Services Agreement until the default is cured by the defaulting party, or
(b) at its option, the party may treat such default as a breach of the
entire Alloy Services Agreement and, if such default is not cured within 30
days after the giving of notice thereof to the defaulting party (or, in the
case of default in payment of monies, within 10 business days), may
immediately terminate this Alloy Services Agreement upon notice to the
defaulting party. This Alloy Services Agreement shall terminate
automatically, without necessity of notice, in the event Buyer or OC
-12-
<PAGE>
makes an assignment for the benefit of creditors, generally is adjudicated
bankrupt or in the event of the filing of any voluntary or involuntary
petition in bankruptcy against Buyer or OC or the appointment of a receiver
for Buyer or OC or any substantial part of their respective properties.
20. SURVIVAL
--------
The provisions of paragraphs 3G and 11 of this Agreement shall survive any
termination or expiration hereof.
21. SECTION HEADINGS
----------------
The section headings contained in this Alloy Services Agreement are for
reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
22. ENTIRE AGREEMENT
----------------
This Alloy Services Agreement and Exhibits set forth the entire
understanding of the parties hereto, and no modifications or amendments to
this Alloy Services Agreement shall be binding on the parties unless in
writing and signed by the party or parties to be bound by such modification
or amendment.
23. COUNTERPARTS
------------
This Alloy Services Agreement may be executed in 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.
24. PUBLICITY
---------
Each of the Buyer and OC agrees not to use the name or trademarks or logos
of the other party or its divisions or affiliates in any publicity,
packaging, marketing materials, or other promotional activities or
materials without the prior written consent of the other party.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Alloy Services Agreement
to be duly executed as of the date first written above.
OWENS CORNING
By: /s/ Charles E. Dana
--------------------------
Name: Charles Dana
Title: Vice President
ADVANCED GLASSFIBER YARNS LLC
By: /s/ Robert B. Fisher
---------------------------
Name: Robert B. Fisher
Title: General Manager
<PAGE>
EXHIBIT 10.4
NON-COMPETE AGREEMENT
---------------------
This Non-Compete Agreement, dated as of September 30, 1998 (the "Effective
---------
Date"), is among Owens Corning, a Delaware corporation ("Seller"); AGY Holdings
- ---- ------
Corp., a Delaware corporation; and Porcher Industries S.A., a French corporation
(collectively, "Buyer"); and Advanced Glassfiber Yarns, LLC, a Delaware limited
-----
liability company ("Company").
-------
WHEREAS, pursuant to an LLC Interest Sale and Purchase Agreement, dated as
of July 31, 1998 (the "SPA"; capitalized terms not defined herein shall have the
---
meanings ascribed to them in the SPA or the Patent and Know How License
Agreement, as applicable) among Seller, Company, and AGY Holdings, Inc. (as
assignee of Glass Holdings Corp. under an assignment and assumption agreement
dated as of September 30, 1998), AGY Holdings, Inc. agreed to purchase from
Seller a 51% membership interest ("Interest") in the Company; and
--------
WHEREAS, Buyer, Seller, and Company have agreed that under the terms and
conditions set forth below, neither Buyer nor Seller will compete with Company
in the manufacture and sale of certain Business Products.
NOW, THEREFORE, in consideration of the premises of and the mutual promises
and agreements in the SPA and contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. NON-COMPETE
-----------
1.1 Acknowledgment
--------------
Buyer and Seller acknowledge that the object of this Non-Compete Agreement
is to protect the Company and to preserve the value of the Business for the
Company and that the
<PAGE>
execution of this Non-Compete Agreement by Buyer and Seller is a condition
precedent to the consummation of the purchase of the Interest by the Company, is
part of the consideration of the SPA, and is part of the consideration of this
Non-Compete Agreement.
1.2 Seller Covenant Not to Compete
------------------------------
Seller hereby covenants and agrees that neither Seller nor any Affiliate of
Seller will:
(a) for the period ending on the later of five years from the Effective
Date or the first day on which the membership interest in the Company of either
Seller together with its Affiliates, or Buyer, together with its Affiliates, is
less than 5% (the "Non-Compete Term"), manufacture or sell:
(i) Business Products other than:
(x) products which are not mechanically twisted in a secondary
operation and have a linear density of a TEX value of
greater than or equal to 180 g/km;
(y) rubber reinforcement with a linear density of a TEX value of
greater than or equal to 100 g/km and a minimum nominal
filament diameter of 8.89 (micronage values herein shall
refer to maximum or minimum nominal values in common usage
in the industry, in this instance, a G filament); or
(z) products which are not mechanically twisted in a secondary
operation and have a linear density of a TEX value equal to
100 g/km for sale in South America;
(ii) S Glass or any product made of S Glass;
2
<PAGE>
(iii) any twisted and plied combination of polyester and glass
yarns; or
(iv) any air texturized glass fiber yarn having a filament or fiber
diameter having a minimum nominal diameter of less than 12.70(micro),
(collectively, "Restricted Products", provided that Restricted Products shall
-------------------
not be considered to include:
(x) any chopped fiber product made of any material other than S
Glass;
(y) intermediate products used to make products which are not
Business Products; or
(z) any product which incorporates the identified Business
Products with other materials);
(b) for a period of five years from the Effective Date, manufacture or
sell High Strength Glass;
(c) for the Non-Compete Term, own, manage, operate, control, or
participate financially or otherwise, directly or indirectly, in a business
manufacturing or selling Restricted Products; or
(d) for the Non-Compete Term, enter into an agreement with any other
Person to do any of the foregoing (collectively, the "Restricted Activities").
---------------------
The parties acknowledge and agree that any assignment of all or a portion of
Buyer's membership interest in the Company to one or more Financing Sources (as
defined in Section 3.4
3
<PAGE>
of this Non-Compete Agreement) shall in no event terminate this Agreement or
Buyer's or Seller's non-complete obligation as set forth in this Section 1.2.
1.3 Buyer Covenant Not to Compete
-----------------------------
Buyer hereby covenants and agrees that neither Buyer nor any Affiliate of
Buyer that receives, directly or indirectly from the Company, any Seller
Licensed Know How or Business Know How, will engage in any Restricted Activities
for the Non-Compete Term.
1.4 Exceptions
----------
(a) Neither Sections 1.2 and 1.3 nor any other provision of this Non-
Compete Agreement shall be construed to prevent or restrict Buyer or Seller
from, directly or indirectly through any Affiliate:
(i) acquiring any equity or other interest in any entity that
engages, directly or indirectly, in any Restricted Activities (a "Restricted
-----------
Person"), so long as the purchase price for such Restricted Person is less than
- ------
$150,000,000 and the annual revenue of such Restricted Person derived from such
Restricted Activities in the most recent fiscal year prior to the acquisition of
such equity or other interest does not exceed 10% of the total revenue of such
Restricted Person in such fiscal year and Buyer or Seller or such Affiliate of
Buyer or Seller, as the case may be, divests or ceases operation of such portion
of such Restricted Person as is engaged in Restricted Activities within 24
months after such acquisition; or
(ii) acquiring and holding any securities of any Restricted Person
which is publicly owned and traded, but only in an amount not to exceed at any
one time 5% of any class of securities of such Restricted Person.
4
<PAGE>
(b) Company acknowledges that:
(i) Seller and its Affiliates have entered into joint venture
relationships with the parties listed in Schedule A, and that such relationships
shall not be deemed a violation of Section 1.2, provided, however, that if
Seller or its Affiliates have or obtain control of such joint ventures, Seller
or its Affiliates shall require such joint venture to comply with Section 1.2 of
this Non-Compete Agreement, unless such action would breach an existing
contractual obligation of Seller, its Affiliates, or the joint venture; and
(ii) the acquisition of Buyer, Seller or an assignee of Buyer or
Seller by a Restricted Person, whether by purchase of stock or assets or by
merger, shall not be deemed a violation of Section 1.2, as long as: (a) such
Restricted Person shall agree to assume the obligations set forth herein; (b)
such Restricted Person shall divest or cease operation of such portion of such
Restricted Person as is engaged in Restricted Activities within twelve (12)
months after such acquisition and there is no transfer or communication of any
technology, proprietary information, or personnel between the Company and such
portion of such Restricted Person as is engaged in such Restricted Activities;
or (c) substantially all of the assets of such portion of such Restricted Person
as is engaged in Restricted Activities are contributed to the Company on terms
mutually acceptable to Company, Seller and Buyer.
(c) Seller's Affiliates may engage in Restricted Activities solely for the
purpose of fulfilling its obligations under the Guelph Facility Supply
Agreement, the Battice Facility Supply Agreement, and the Transitional Services
Agreement, and that this Non-Compete Agreement shall not be construed to
prohibit Seller's Affiliates performance under those agreements.
5
<PAGE>
(d) Further, Company acknowledges that Seller and its Affiliates have
entered into license agreements with the parties listed in Schedule B, which
license agreements may be construed to license OC patents and/or know how rights
to those parties to make, use, or sell Business Products, and agrees that,
except as indicated on Schedule B, Seller shall have no obligation to seek to
modify such license agreements and the continued license of such rights shall
not be deemed a violation of Section 1.2. Notwithstanding this paragraph 1(d),
no Affiliate of Seller will be permitted to engage in any Restricted Activity
during the term of this Non-Compete Agreement.
1.5 Termination
-----------
Unless otherwise agreed by the parties before such transfer, Seller's
obligations under this Non-Compete Agreement shall terminate immediately upon
the transfer by Company of any rights in any or all of the Business Patents,
Business Know How, Seller Licensed Patents or Seller Licensed Know or any
tangible assets of the Company that incorporate any of the foregoing to CSG or
any Affiliate thereof (unless Company believed in good faith, based upon
reasonable inquiry, that the transferee entity was not at the time of the
transfer an Affiliate of CSG); or (b) upon the Company becoming an Affiliate of
CSG: (i) by CSG acquiring a majority of the voting rights or the right to elect
a majority of the board of directors of the Company, Buyer or Porcher
Industries; or (ii) through actions directly initiated or directly facilitated
by the Company, Buyer or Porcher Industries.
6
<PAGE>
2. INJUNCTIVE RELIEF
-----------------
The provisions of Article 1 are reasonable and necessary to protect the
Company in the conduct and operation of the Business, and Buyer and Seller
acknowledge and agree that damages cannot compensate the Company in the event of
a violation of any of the foregoing covenants. Therefore, Buyer and Seller
agree that in the event of a violation or breach of any covenant set forth in
this Non-Compete Agreement, the Company may institute any action or proceeding
to enforce such covenant at law or in equity, including, but not limited to,
injunctive relief. All provisions of this Non-Compete Agreement constitute a
series of covenants and if any particular provision of this Non-Compete
Agreement is adjudicated invalid or unenforceable, the provision shall be deemed
deleted, and such deletion shall apply only in the particular jurisdiction(s) in
which such adjudication is made; provided, however, to the extent that any
provision hereof is deemed unenforceable because of its scope in terms of time,
territory or business activities, but may be made enforceable by limitations
thereon, such limitations may be made so that the covenant shall be enforceable
to the fullest extent permissible under the laws and public policies applicable
to such jurisdiction(s).
3. GENERAL PROVISIONS
------------------
3.1 Definitions
-----------
As used in this Non-Compete Agreement, the following defined terms shall
have the meanings set forth below.
(a) "Manufacturing Facilities" has the meaning given thereto in the
------------------------
Patent and Know How License Agreement.
(b) "Business Products" has the meaning given thereto in the SPA.
-----------------
7
<PAGE>
(c) "S Glass" has the meaning given thereto in the Patent and Know
-------
How License Agreement.
(d) "High Strength Glass" means glass (i) having a tensile strength
-------------------
at room temperature (x) for a pristine single filament of greater than 675 kpsi
determined in accordance with the OC Procedure as set forth in Schedule C to
this Non-Compete Agreement and (y) for an impregnated strand determined in
accordance with ASTM D2343 of greater than 450 kpsi and (ii) that further meets
at least three of the following criteria:
================================================================================
CRITERION TEST STANDARD VALUE
- --------------------------------------------------------------------------------
Softening point ASTM C-338 greater than 1900 degrees F
- --------------------------------------------------------------------------------
Tensile Modulus at Room ASTM D2101 greater than 12.5 Mpsi
Temperature
- --------------------------------------------------------------------------------
Strain to Failure ASTM D2101 greater than 5.4%
(Elongation at Break)
- --------------------------------------------------------------------------------
Dimensional Stability less than 2.0 x 10E-6 in/in-
(Coefficient of Thermal degrees F
Expansion)
================================================================================
3.2 Notices
--------
All communications provided for hereunder shall be in writing and
shall be deemed to be given when delivered in person or by private courier with
receipt, when telefaxed and received, or three (3) days after being deposited in
the United States mail, first-class, registered or certified, return receipt
requested, with postage paid and,
If to Company: Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Fax: 803-643-1526
Attention: General Manager
8
<PAGE>
With a copy to: AGY Holdings, Inc.
c/o Glass Holdings Corp.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336-545-7715
Attention: President
And to: Jefferson Holdings, Inc.
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
If to Buyer: AGY Holdings, Inc.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336 845-7718
Attn: President
With a copy to: Alston & Bird, LLP
601 Pennsylvania Avenue, NW, North Building
Washington, DC 20004-2601
Fax: 202 508-3333
Attention: Frank M. Connor, III
If to Seller: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such party shall designate by written notice to
the other parties hereto.
9
<PAGE>
3.3 Governing Law
-------------
This Non-Compete Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to the
conflicts of law principles thereof.
3.4 Assignability
-------------
This Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement shall not be assigned by any party
hereto without the express prior written consent of the other parties, and any
attempted assignment, without such consents, shall be null and void.
Notwithstanding any nonassignment provisions contained in this Section 3.4,
Company, or any permitted assignee or transferee of Company, may assign or
otherwise transfer all of its rights and/or obligations hereunder (i) to any
entity or entities, or any assignee of such entity or entities, providing
financing for the transactions contemplated by this Agreement or to any entity
or entities providing to Company, Company's Affiliates, or to any such permitted
assignee of Company, financing relating to the Business (collectively, the
"Financing Sources"), (ii) to any Affiliate of Company, provided that (x) such
Affiliate shall agree with Company and its permitted assignees or transferees,
if any, in writing to assume the Company's obligations hereunder and (y) any
such assignment to an Affiliate of the Company shall not relieve the Company
from its obligations hereunder or (iii) to any entity to which Company, or any
assignee or transferee of Company, assigns, sells, transfers or otherwise
conveys (A) all or substantially all of the assets constituting the Business (a
"Complete Assignment") or (B) all or substantially all of the assets
constituting either the Aiken Facility, the Huntington Facility or the South
Hill Facility (a "Partial Assignment"), and further provided that such entity or
Affiliate is not CSG,
10
<PAGE>
provided that such acquiring entity agrees with and acknowledges in writing to
Buyer and Seller and their permitted assignees or transferees, if any, that this
Agreement shall be binding upon and enforceable against such entity as though
such acquiring entity were Company and that such entity shall perform all of
Company's obligations hereunder. Notwithstanding any nonassignment provisions
contained in this Section 3.4, Buyer or Seller, or any permitted assignee or
transferee of Buyer or Seller, may assign or otherwise transfer some or all of
its rights and/or obligations hereunder to any Affiliate of Buyer or Seller,
provided that (x) such Affiliate shall agree with Seller and Buyer and/or their
permitted assignees or transferees, if any, in writing to assume the Buyer's or
Seller's obligations hereunder and (y) any such assignment to an Affiliate of
the Buyer or Seller shall not relieve the Seller from its obligations hereunder.
To the extent that assignment and/or transfer of any of the rights, privileges,
and/or obligations is permitted, this Agreement shall be binding on, and except
as otherwise expressly provided, shall inure to the benefit of, the legal
successors, assigns, or representatives of the parties.
3.5 Entire Agreement
----------------
This Non-Compete Agreement supersedes any prior agreement between the
parties with respect to the subject hereof, and constitutes the entire agreement
between the parties with respect to the subject hereof.
3.6 Amendment; Waiver
-----------------
This Non-Compete Agreement may be amended, supplemented or otherwise
modified only by a written instrument executed by the parties hereto. No waiver
by either party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. Except as
provided in the preceding sentence, no action taken
11
<PAGE>
pursuant to this Non-Compete Agreement, including without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained herein, and in any documents
delivered or to be delivered pursuant to this Non-Compete Agreement and in
connection with the closing hereunder. The waiver by any party hereto of a
breach of any provision of this Non-Compete Agreement shall not operate or be
construed as a waiver of any subsequent breach.
3.7 Counterparts
------------
This Non-Compete Agreement may be executed in 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 interest.
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Non-Compete Agreement to
be duly executed as of the Effective Date.
AGY HOLDINGS, INC.
By: /s/ Robert Porcher
------------------
Name: Robert Porcher
Title: President
PORCHER INDUSTRIES S.A.
By: /s/ Robert Porcher
------------------
Name: Robert Porcher
Title: President
OWENS CORNING
By: /s/ Charles E. Dana
-------------------
Name: Charles E. Dana
Title: Vice President
ADVANCED GLASSFIBER YARNS, LLC
By: /s/ Robert B. Fisher
--------------------
Name: Robert B. Fisher
Title: General Manager
13
<PAGE>
EXHIBIT 10.5
MANUFACTURING SERVICES AGREEMENT
--------------------------------
MANUFACTURING SERVICES AGREEMENT dated as of September 30, 1998, by and
between Owens Corning, a Delaware corporation ("OC"), and Advanced Glassfiber
Yarns, LLC ("Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, OC has been engaged, in part, in the business of manufacturing
and selling glass fiber yarns and specialty materials (the "Business") at its
facility located in Huntingdon, Pennsylvania (the "Facility").
WHEREAS, Buyer on the date hereof (the "Closing Date") has purchased
substantially all of the assets of OC principally related to the operation of
the Business, except for certain equipment used in the manufacture of continuous
filament mat ("Retained Equipment").
WHEREAS, OC and Buyer have entered into a lease agreement (the "Lease"),
pursuant to which Buyer shall agree to lease the portion of the Huntingdon
property in which such continuous filament mat is manufactured to OC (the
"Leased Premises") on the terms and subject to the conditions set forth therein.
WHEREAS, at OC's request, Buyer has agreed to provide to OC certain
manufacturing services to support the business of OC at the Leased Premises on
the terms and conditions stated herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
covenant and agree as follows:
<PAGE>
ARTICLE I
BASIC SERVICES
SECTION 1.01 Basic Services. In consideration for the payment by OC to
--------------
Buyer of a fee (which amount will be reduced proportionately for any partial
year) (the "Basic Services Fee") the method of computation of which is set forth
in Schedule A hereto, Buyer shall provide the following services in a
professional and workmanlike manner:
(a) Sufficient manufacturing and management capabilities through persons
(operators, supervisors and support personnel) of demonstrated skills and
experience to manufacture through the operation of Retained Equipment on the
Leased Premises OC continuous filament mat products in accordance with OC's
quality standards and specifications at designated manufacturing schedules and
production levels. Further terms are set forth on Schedule A.
(b) Ancillary services relating to the manufacturing process in the
Leased Premises, including but not limited to maintenance, environmental,
building and grounds, general overhead, human resource administration,
information systems, shipping, warehousing, packaging, and material movement.
(c) Such other services not specifically enumerated in (a) or (b) that
were provided by OC to the Retained Equipment line as of the date of this
Agreement.
SECTION 1.02 Additional Services.
-------------------
(a) In addition to the Basic Services, Buyer may, in its reasonable
discretion, provide to OC other services reasonably requested by OC from time to
time.
(b) Buyer shall charge OC a fee (the "Additional Services Fee") for any
such services (the "Additional Services") in an amount which shall be mutually
agreeable to the parties.
(c) Payment by OC to Buyer for all Additional Services shall be made as
follows:
(i) To the extent such Additional Services are provided by third
parties only on or with respect to the Leased Premises, OC shall remit
payment to Buyer within thirty (30) days of OC's receipt of a copy of
such third party's invoice.
(ii) To the extent such Additional Services are provided by third
parties performing such services at both the Leased Premises and at other
portions of the Facility, OC shall remit to Buyer such portion of any
such third party invoice as shall be mutually agreed upon by Buyer and OC
within 30 days of its receipt of such invoice from Buyer.
-2-
<PAGE>
(iii) To the extent such Additional Services are provided by
personnel of Buyer, Buyer shall submit to OC a monthly invoice for all
Additional Services which are provided on a daily or weekly basis, and a
quarterly invoice for all Additional Services which are provided at
intervals of one month or more. OC shall remit the amount of each such
invoice to Buyer within 30 days of its receipt from Buyer.
(iv) Notwithstanding anything to the contrary contained herein,
the Additional Services Fee payable in connection with the delivery of
Additional Services is in addition to and not in lieu of the Basis
Services Fee payable under Section 1.01 above.
(v) The parties acknowledge and agree that the terms of this
Agreement relate solely to the provision of services by Buyer on OC's
behalf at the Leased Premises. Any services other than Services provided
under this Agreement which relate to the Leased Premises are dealt with
separately under the terms of the Lease and Buyer shall not be entitled
to payment or reimbursement for any such services by virtue of the terms
and provisions of this Agreement such that there will be no duplication
of payment for the same services.
(vi) In providing the Additional Services, Buyer covenants and
agrees to use its commercially reasonable efforts to provide and/or
obtain top quality service providers at the lowest possible cost for the
benefit of OC.
(vii) Nothing herein requires OC to obtain any Additional Services
from Buyer or otherwise precludes OC from obtaining such services
directly from any third party or its own employees.
SECTION 1.03 Operations Manager; Other Personnel.
-----------------------------------
(a) At all times during the term of this Agreement, Buyer shall cause
one of its existing employees to act as Operations Manager on a full-time basis
with respect to the services provided by Buyer under this Agreement. Such
employee shall be a manager, reasonably acceptable to OC, who is highly
experienced in all relevant aspects of manufacturing, production, quality
control, OC's continuous filament mat products, shipping, receiving, inventory
control and personnel management. As Operations Manager, such employee shall be
fully responsible on a day-to-day basis for the services provided by Buyer
hereunder. The services performed by the Operations Manager are considered Basic
Services and are not in addition to such services.
(b) It is understood that certain OC employees, specifically, the
platform leader and technical support operation personnel, will be assigned to
work on the Leased Premises for quality assurance purposes and for the oversight
of the manufacturing processes to insure compliance with all OC's product line
and quality specifications and its product mix, scheduling and volume
requirements. These OC employees shall address any issues or concerns that
relate
-3-
<PAGE>
to compliance to the Operations Manager or his/her designee and Buyer agrees to
undertake prompt efforts to satisfy or remediate such issues or concerns. If
necessary or appropriate, the parties understand that the Operations Manager or
his/her designee may direct or authorize such OC employees to assist Buyer's
employees directly to satisfy or remediate any such issues or concerns.
ARTICLE II
EMPLOYEE MATTERS
SECTION 2.01 Buyer's Employees. Buyer shall direct the operation of its
-----------------
staff in all respects and, except as otherwise provided or required herein,
Buyer shall determine, without instruction from OC, the method, means and manner
of utilizing its employees in performing services under this Agreement. Buyer
has the exclusive right to select, retain and discharge its employees, and has
complete authority to set all terms and conditions of employment. In the event
Buyer elects to hire on the Closing Date individuals employed by OC at the
Facility ("Former OC Employees"), such employees shall cease to be employed by
OC and shall be under the sole direction, supervision and management of Buyer as
of the Closing Date.
SECTION 2.02 Compliance with Employer Obligations.
------------------------------------
(a) For the period including and subsequent to the Effective Date (as
herein defined), Buyer shall be responsible for compliance with all federal,
state and local laws, rules and regulations relating to the employment of any
Former OC Employee and any other Buyer personnel involved in performing the
services contemplated herein.
(b) For the period including and subsequent to the Effective Date (as
herein defined), Buyer shall be responsible for all compensation and benefits of
any Former OC Employee and any other Buyer personnel involved in performing the
services contemplated herein (including, without limitation, all federal, state
and local payroll, social security, unemployment, workers' compensation and
similar taxes payable for each such employee), and OC shall have no
responsibility therefor.
SECTION 2.03 Workmen; Labor Harmony. Buyer shall provide workmen and
----------------------
personnel (including supervisory personnel) as required by this Agreement and
otherwise in sufficient number and of proper skill and training for the prompt
and efficient performance of the services in the manner herein provided. The
supervisory personnel shall be experienced and competent and sufficient in
number to ensure compliance with this Agreement. Buyer shall inform OC promptly
regarding any matter, including any labor or other dispute, which may interfere
with the performance of the Agreement or the performances of any other labor,
work or service in or about the Leased Premises and shall cooperate with OC in
disposing of any such dispute. Whenever requested by OC, a written statement
setting forth the names of all supervisors and other employees of Buyer to be
used in the performance of this Agreement or
-4-
<PAGE>
any portion thereof, and an identification of the job assignment, skills and
qualifications of each person shall be furnished by Buyer to OC.
ARTICLE III
ADDITIONAL AGREEMENTS
SECTION 3.01 Product Insurance. Buyer shall at all times maintain
-----------------
insurance covering the Equipment, raw materials, in-process and final Inventory
used or produced pursuant to this Agreement, which product insurance shall be
reasonably satisfactory to OC. In the event that (i) a loss occurs, (ii) Buyer
or Buyer's insurance carrier reimburses OC therefor, and (iii) OC is reimbursed
for such loss by its own insurance carrier or otherwise, OC shall promptly
forward to Buyer or Buyer's insurance carrier, as the case may be, any monies so
received to the extent of the payment made by Buyer or its own insurance carrier
to OC in connection with such loss.
SECTION 3.02 General Liability Insurance. Without limiting in any way
---------------------------
the obligations of Buyer under Section 3.01, OC shall provide such general
liability insurance as set forth in the Lease or as otherwise agreed prior to
the Closing Date. In the event that (i) a loss occurs, (ii) Buyer or Buyer's
insurance carrier reimburses OC therefor, and (iii) OC is reimbursed for such
loss by its own insurance carrier or otherwise, OC shall promptly forward to
Buyer or Buyer's insurance carrier, as the case may be, any monies so received
to the extent of the payment made by Buyer or its own insurance carrier to OC in
connection with such loss.
ARTICLE IV
INDEMNIFICATION
SECTION 4.01 Indemnification, etc. by Buyer. Buyer agrees to indemnify
------------------------------
OC and its directors, officers, employees and agents, and agrees to hold them
harmless, from and against any loss, liability, claim, damage or expense
(including the reasonable fees, charges and disbursements of counsel)
(collectively, "Losses") suffered or incurred by any such indemnified party to
the extent arising from (i) any breach of any agreement or obligation of Buyer
contained in this Agreement, (ii) the gross negligence or willful misconduct of
Buyer or of its directors, officers, employees or agents in connection with
activities undertaken pursuant to and services provided under this Agreement,
(iii) Buyer's failure to comply with any federal, state or municipal law or
regulation applicable to the Leased Premises or Buyer's operations therein, (iv)
any injury to or claim of Buyer's employees or any third party relating to the
Leased Premises or Buyer's operations therein, or (v) any breach of any
agreement entered into by Buyer with any third party or its employees relating
to Buyer's employees, the Leased Premises or the operations therein.
SECTION 4.02 Indemnification by OC. OC agrees to indemnify Buyer and
---------------------
its directors, officers, employees and agents, and agrees to hold them harmless,
from and against
-5-
<PAGE>
any Losses suffered or incurred by any such indemnified party to the extent
arising from (i) any breach of any agreement or obligation of OC contained in
this Agreement, (ii) the gross negligence or willful misconduct of OC or of its
directors, officers, employees or agents for activities undertaken pursuant to
and services provided under this Agreement, or (iii) OC's failure to comply with
any federal, state or municipal law or regulation applicable to the OC employees
located at the Leased Premises or OC's operations therein, (iv) any injury to or
claim of OC's employees, or (v) any breach of any agreement entered into by OC
with any third party or its employees related to OC's employees or OC's
operations on the Leased Premises.
ARTICLE V
EFFECTIVENESS; TERMINATION
SECTION 5.01 Term. This Agreement shall commence on the date hereof
----
(the "Effective Date") and shall continue in effect unless otherwise terminated
as provided in Section 5.02 for so long as OC or its Affiliates (as defined in
the Contribution Agreement between the parties) continues to hold a 49%
Membership Interest in the Buyer's Business.
SECTION 5.02 Early Termination.
-----------------
(a) At any time, OC may terminate this Agreement by giving not less than
one hundred eighty (180) days' prior written notice of such termination to
Buyer.
(b) Notwithstanding the provisions of Section 5.01 or 5.02(a), upon
termination of the Lease for any reason, this Agreement shall automatically
terminate.
SECTION 5.03 Procedures upon Termination; Survival.
-------------------------------------
(a) Promptly following any termination of this Agreement, Buyer shall (i)
deliver to OC all books, records and forms pertaining to OC's continuous
filament mat business then in the possession of Buyer, (ii) furnish OC with a
final accounting of the raw materials, work in progress and finished products
then in inventory relating to the continuous filament mat business at the
Facility, (iii) make available for pick-up by OC any and all unsold raw
materials, work in progress and finished products in the custody of Buyer
relating to the continuous filament mat business and (iv) provide services, to
be delivered either by Buyer or a third party, at the option of Buyer, if
requested by OC sufficient to dismantle and move any Equipment, raw materials,
work in progress and finished products belonging to OC from the Leased Premises
to a location designated by OC, the expenses of such services shall be assumed
by OC provided, however, that if this Agreement is terminated by OC prior to its
-------- -------
Expiration Date (as herein defined) for any reason other than the gross
negligence or willful misconduct of Buyer, these expenses shall be the
responsibility of OC. OC acknowledges and agrees that all services provided to
OC under this Section 5.03(a) shall be at OC's risk without any liability for
Buyer other than in the case of its gross negligence or willful misconduct.
-6-
<PAGE>
(b) Notwithstanding any termination of this Agreement, each party shall
remain liable for all amounts owed by it to the other at the time of such
termination, including amounts payable in respect of the month in which such
termination occurs; provided, however, that any amount payable in respect of
-------- -------
such month shall be calculated on a prorated basis to reflect the date of
termination, except to the extent that the invoicing party demonstrates that
such proration would be commercially unreasonable.
(c) Notwithstanding anything in this Agreement to the contrary, the
agreements contained in Article V shall survive the termination or expiration of
this Agreement.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Relationship of Parties; Independent Contractors. The
------------------------------------------------
relationship of the parties created by this Agreement is that of independent
contractors, and neither party, nor any of its employees, directors, officers or
agents, shall be deemed to be the representative, agent or employee of the other
party for any purpose whatsoever, nor shall they or any of them have any
authority or right to assume or create an obligation of any kind or nature,
expressed or implied, on behalf of the other party, nor to accept service of any
legal process of any kind addressed to, or intended for, the other party.
SECTION 6.02 Notices. All notices and demands of any kind which either
-------
party may be required or desire to serve upon the other under the terms of this
Agreement shall be in writing and shall be served upon the parties by personal
delivery or by certified mail, return receipt requested, at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to Buyer: Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Fax: 803-643-1526
Attention: General Manager
With a copy to: AGY Holdings, Inc.
c/o Glass Holdings Corp.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336-545-7715
Attention: President
And to: Jefferson Holdings, Inc.
One Owens Corning Parkway
-7-
<PAGE>
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
If to OC: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such party shall designate by written notice
to the other parties hereto.
SECTION 6.03 Successor And Assigns. This Agreement shall be binding
---------------------
upon and shall inure to the benefit of both parties and their respective
successors and assigns. Except as otherwise expressly provided herein, this
Agreement shall not be assigned by either party hereto without the express prior
written consent of the other party, and any attempted assignment, without such
consents, shall be null and void. Notwithstanding any nonassignment provisions
contained in this Section 6.03, Buyer, or any permitted assignee or transferee
of Buyer, may assign or otherwise transfer all of its rights and/or obligations
hereunder (i) to any entity or entities, or any assignee of such entity or
entities, providing financing for the transactions contemplated by this
Agreement or to any entity or entities providing to Buyer, Buyer's Affiliates,
or to any such permitted assignee of Buyer, financing relating to the Business
(collectively, the "Financing Sources"), (ii) to any Affiliate of Buyer,
provided that (x) such Affiliate shall agree with OC and its permitted assignees
or transferees, if any, in writing to assume the Buyer's obligations hereunder
and (y) any such assignment to an Affiliate of the Buyer shall not relieve the
Buyer from its obligations hereunder or (iii) to any entity to which Buyer, or
any assignee or transferee of Buyer, assigns, sells, transfers or otherwise
conveys all or substantially all of the assets constituting the Huntingdon
Facility (as such term is defined in the SPA) (a "Partial Assignment"), provided
that such acquiring entity agrees with and acknowledges in writing to OC and its
permitted assignees or transferees, if any, that this Agreement shall be binding
upon and enforceable against such entity as though such acquiring entity were
Buyer and that such entity shall perform all of Buyer's obligations hereunder.
Notwithstanding any nonassignment provisions contained in this Section 6.03, OC,
or any permitted assignee or transferee of OC, may assign or otherwise transfer
some or all of its rights and/or obligations hereunder (i) to any Affiliate of
OC, provided that (x) such Affiliate shall agree with Buyer and its permitted
assignees or transferees, if any, in writing to assume the OC's
-8-
<PAGE>
obligations hereunder and (y) any such assignment to an Affiliate of the OC
shall not relieve the OC from its obligations hereunder or (ii) to any entity to
which OC, or any assignee or transferee of OC, assigns, sells, transfers or
otherwise conveys all or substantially all of the assets constituting the
Business, provided that such acquiring entity agrees with and acknowledges in
writing to Buyer and its permitted assignees or transferees, if any, that this
Agreement shall be binding upon and enforceable against such entity as though
such acquiring entity were OC and that such entity shall perform all of OC's
obligations hereunder. To the extent that assignment and/or transfer of any of
the rights, privileges, and/or obligations is permitted, this Agreement shall be
binding on, and except as otherwise expressly provided, shall inure to the
benefit of, the legal successors, assigns, or representatives of the parties.
SECTION 6.04 Force Majeure Neither party shall be liable to the other
-------------
for delay or failure to perform in whole or in part, by reason of contingencies
or events which: (i) are beyond the reasonable control of the party whose
performance is affected, (ii) are unforeseeable, and (iii) could not have been
reasonably prevented, whether herein specifically enumerated or not (a "Force
Majeure Event"). These contingencies include, among others, act of God, act of
war, revolution, riot, acts of public enemies, fire, explosion, breakdown of
plant, strike, lockout, labor dispute, casualty or accident, earthquake, flood,
cyclone, tornado, hurricane or other windstorm, or by reason of any law, order,
proclamation, regulation, ordinance, demand, requisition or requirement or any
other act of any governmental authority, foreign or domestic, local, state or
federal (provided that the Force Majeure Event does not arise due to or is
connected in any way with a violation by party hereto of any law, order,
proclamation, regulation, ordinance, demand, requisition or requirement of any
governmental authority) except that contingencies shall not include a downturn
in Buyer's business or general economic downturn. A party so affected by a
Force Majeure Event shall: (i) promptly give written notice to the other party
whenever such contingency or other act becomes reasonably foreseeable (including
an estimate of the expected duration of the Force Majeure Event and its probable
impact on the performance of such party's obligations hereunder); (ii) exercise
all reasonable efforts to continue to perform its obligations hereunder; (iii)
use its commercially reasonable best efforts to overcome or mitigate the effects
of the contingency as promptly as possible and (iv) promptly give written notice
to the other party of the cessation of such contingency. Neither party,
however, shall be required to resolve a strike, lockout or other labor problem
in a manner which it alone does not deem proper and advisable. In no event
shall any Force Majeure Event excuse party's failure to pay when due any
monetary obligation hereunder. In the case of any Force Majeure Event relied on
by OC, OC agrees that it shall treat Buyer no less favorably than the most
favorably treated Affiliate or customer of OC in dealing with or adjusting to
the consequences of such Force Majeure Event and in the case of any Force
Majeure Event relied on by Buyer, Buyer agrees that it shall treat OC no less
favorably than the most favorably treated Affiliate or customer of Buyer in
dealing with or adjusting to the consequences of such Force Majeure Event.
SECTION 6.05 Entire Agreement. This Agreement and the Lease are
----------------
intended to be the sole and complete statements of the obligations of the
parties relating to the subject
-9-
<PAGE>
matter hereof and thereof and supersede all previous understandings, agreements,
negotiations and proposals with respect to such subject matters. No provision of
this Agreement shall be deemed waived, amended or modified by either party
unless such waiver, amendment or modification shall be in writing and signed by
a duly authorized officer of the party against whom the waiver, amendment or
modification is sought to be enforced.
SECTION 6.06 Authorization. Each party represents and warrants to the
-------------
other that it is legally free to enter into this Agreement, that its execution
hereof and thereof have been duly authorized and that the terms and conditions
of this Agreement do not conflict with or violate any terms or conditions of any
other agreement or commitment to which such party is a signatory or by which it
is bound.
SECTION 6.07 Confidentiality. Buyer agrees that it will use all
---------------
reasonable efforts to maintain the confidentiality of all non-public business
information belonging to OC that it obtains in performing its obligations
hereunder or under the Lease. Buyer shall agree to have all employees, vendors,
independent contractors or other persons who are exposed to any non-public
business information belonging to OC to execute individual confidentiality
agreements to be supplied by OC. If requested by OC, Buyer agrees to prosecute
all actions necessary to protect all such non-public business information
belonging to OC and Buyer shall promptly notify OC in the event there is any
suspected unauthorized disclosure of such information or breach of this Section
6.07. The obligations of confidentiality herein shall survive for a period of
eight (8) years the expiration or termination of this Agreement. All
obligations contained in this Section 6.07 with respect to any confidential
information shall cease if such confidential information:
(a) is publicly available at the time of its disclosure to the recipient;
(b) is already legally in the possession of the recipient from sources
other than the disclosing entity;
(c) has become publicly available through no fault of the recipient or
its employees; or
(d) is legally obtained by the recipient from sources independent of the
disclosing entity, including information developed by employees or agents of the
recipient who have not had direct or indirect access to the confidential
information provided by the disclosing entity.
SECTION 6.08 Waivers. The failure of either party to require
-------
performance by the other of any provision hereunder shall not affect the right
of such party to enforce the same provision thereafter. Such failure shall not
affect such party's right to enforce any of the other provisions of this
Agreement. The waiver by either party of a breach of any provision hereof
-10-
<PAGE>
shall not be taken or held to be a waiver of any subsequent breach of such
provision or as a waiver of this provision.
SECTION 6.09 Severability. If any part of this Agreement is determined
------------
to be illegal, unenforceable or against public policy, then such part shall be
deemed deleted from this Agreement without affecting or impairing any other
part.
SECTION 6.10 Headings. All Article and Section headings in this
--------
Agreement are for convenience of reference only and are not intended to qualify
the meaning of any provision hereof.
SECTION 6.11 Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same instrument.
SECTION 6.12 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Pennsylvania.
SECTION 6.13 Cooperation. OC and Buyer will cooperate with each other
-----------
in effectuating the purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
OWENS CORNING
By /s/ Charles E. Dana
-----------------------------
Name: Charles E. Dana
Title: Vice President
ADVANCED GLASSFIBER YARNS, LLC
By /s/ Robert B. Fisher
-----------------------------
Name: Robert B. Fisher
Title: General Manager
-11-
<PAGE>
EXHIBIT 10.6
TRADEMARK ASSIGNMENT
--------------------
This Assignment is made on this 30th day of September, 1998 by Owens-
Corning Fiberglas Technology, Inc., an Illinois corporation, having its
principal place of business at 7734 West 59th Street, Summit, Illinois 60501
("OC Tech") and Owens Corning, a Delaware corporation, having its principal
-------
place of business at One Owens Corning Parkway, Toledo, Ohio 43659 ("Owens
-----
Corning" and together, with OC Tech, the "Transferors") in favor of Advanced
- ------- -----------
Glassfiber Yarns, LLC, a Delaware limited liability company ("Assignee").
--------
WHEREAS, pursuant to an LLC Interest Sale and Purchase Agreement, dated as
of July 31, 1998 (the "SPA"), among Owens Corning, Assignee, and AGY Holdings,
---
Inc. (as assignee of Glass Holdings Corp. under an assignment and assumption
agreement dated as of September 30th, 1998), AGY Holdings, Inc. agreed to
purchase from Seller a 51% membership interest ("Interest") in the Company;
--------
WHEREAS, Transferors own all right, title and interest in and to the marks
listed on the attached Schedule A (collectively "the Marks") related to the
-----
Business of the Company (as that term is defined in the SPA), the pending
applications for federal and foreign registration and federal and foreign
registrations therefor and the goodwill developed through the use of the Marks
and the parties have agreed that the foregoing shall be transferred by the
Transferors to the Company;
WHEREAS, pursuant to an Asset Contribution Agreement dated as of July 1,
1998, and an Amended and Restated Asset Contribution Agreement dated as of July
31, 1998 (the "ACA"),
---
<PAGE>
Owens Corning has agreed to, and to cause its affiliates to, sell, assign,
transfer, convey and deliver to the Company the Assets described therein and
principally relating to the Business; and
WHEREAS, pursuant to an Intellectual Property Sale Agreement dated as of
July 1, 1998, (the "IPSA"), OC Tech sold, conveyed and transferred to Owens
----
Corning, its assigns and successors, all of OC Tech's rights, title and interest
in patents, trademarks and know-how relating to the Business; and
WHEREAS, Owens Corning desires to transfer the Marks, any pending
applications for federal and foreign registration and federal and foreign
registrations therefor and the goodwill developed through the use of the Marks,
including any and all such rights that it acquired pursuant to the IPSA, and to
direct OC Tech to transfer to the Company any and all such rights that Owens
Corning acquired pursuant to the IPSA; and
WHEREAS, the Company is desirous of acquiring all of the rights, title, and
interest in and to the Marks, any pending applications for federal and foreign
registration and federal and foreign registrations therefor and the goodwill
developed through the use of the Marks and is entitled to assignment and
transfer of the foregoing; and
WHEREAS, Assignee is also acquiring the entire portion of Owens Corning's
business to which the Marks relate pursuant to the ACA.
NOW, THEREFORE, for the sum of U.S. $1,000.00 (one thousand dollars) and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Transferors hereby sell, assign, transfer and set over to
Assignee, the entire right, title, and interest in and to the Marks, any pending
applications for federal and foreign registration and federal and foreign
registrations therefor and the goodwill of the business symbolized by the
2
<PAGE>
Marks. All rights and privileges, including the right to sue for and receive all
damages from past infringements of the Marks, will be held and enjoyed by
Assignee, its successors, assigns and other legal representatives.
Signed this 30th day of September, 1998.
OWENS-CORNING FIBERGLAS TECHNOLOGY INC.
By: /s/ Charles E. Dana
-------------------
Name: Charles E. Dana
Title: Representative
OWENS CORNING
By: /s/ Charles E. Dana
-------------------
Name: Charles E. Dana
Title: Vice President
3
<PAGE>
EXHIBIT 10.7
MASTER PATENT AND KNOW HOW ASSIGNMENT
-------------------------------------
This Agreement, dated as of September 30, 1998, is among Owens-Corning
Fiberglas Technology, Inc., an Illinois corporation, having its principal place
of business at 7734 West 59th St., Summit, IL 60501 ("OC Tech"), Owens Corning,
-------
a Delaware corporation, having its principal place of business at One Owens
Corning Parkway, Toledo, Ohio 43659 ("Owens Corning" and, together with OC Tech,
-------------
the "Transferors"), and Advanced Glassfiber Yarns, LLC, a Delaware limited
-----------
liability company (the "Company").
-------
WHEREAS, pursuant to an LLC Interest Sale and Purchase Agreement,
dated as of July 31, 1998 (the "SPA"; capitalized terms not defined herein shall
---
have the meanings ascribed to them in the SPA or the Patent and Know How License
Agreement, as applicable) among Owens Corning, Company, and Glass Holdings Corp.
as assigned by Glass Holdings Corp. to AGY Holdings, Inc. by an assignment and
assumption agreement dated as of September 30, 1998, Glass Holdings Corp. agreed
to purchase from Owens Corning a 51% membership interest ("Interest") in the
--------
Company; and
WHEREAS, Transferors (and their affiliates) have technology (including
patents and technical and business know-how) related to the Business of the
Company (as that term is defined in the SPA)(capitalized terms not defined
herein shall have the meanings ascribed to them in the SPA), and the parties
have agreed that certain of the patent and know-how rights shall be transferred
by the Transferors to the Company and that the Company shall license back to
Owens Corning certain rights under the transferred patent and know how rights.
<PAGE>
WHEREAS, pursuant to an Asset Contribution Agreement dated as of July 1,
1998, and an Amended and Restated Asset Contribution Agreement dated as of July
31, 1998 (the "ACA"), Owens Corning has agreed to, and to cause its affiliates
---
to, sell, assign, transfer, convey and deliver to the Company the Assets
described therein and principally relating to the Business; and
WHEREAS, pursuant to an Intellectual Property Sale Agreement dated as of
July 1, 1998, (the "IPSA"), OC Tech agreed to sell, convey and transfer all of
----
OC Tech's rights, title and interest in patents, trademarks and know-how
relating to the Business to Owens Corning, its assigns and successors or to
Owens Corning's designee; and
WHEREAS, Owens Corning desires to transfer the Assigned Patents and
Assigned Know How (as defined below) to the Company, including any and all such
rights that it acquired pursuant to the IPSA, and to direct OC Tech to transfer
to the Company pursuant to the IPSA any and all of OC Tech's rights in the
Assigned Patents and Assigned Know How; and
WHEREAS, the Company is desirous of acquiring all of the rights, title, and
interest in and to the Assigned Patents and the Assigned Know How and is
entitled to assignment and transfer of the Assigned Patent Rights and Assigned
Know How under the ACA and the SPA.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements in the ACA and contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Definitions
-----------
As used in this Assignment, the following defined terms shall have the
meanings indicated below.
2
<PAGE>
(a) "Assigned Patent Rights" means the issued patents and the pending
----------------------
patent applications identified in Schedule A attached hereto and all divisional,
continuation, continuation-in-part, renewal, reissue, reexamination, or other
patent applications based upon the patents and patent applications identified in
Schedule A, and any patents or reexamination certificates issuing from any of
said divisional, continuation, continuation-in-part, renewal, reissue,
reexamination, or other patent applications claiming filing priority from the
patents and patent applications identified in Schedule A.
(b) "Assigned Know How" means such of Transferors' technical knowledge
-----------------
and data, formulations, processes, techniques, drawings and designs, unpatented
inventions, operating manuals, manufacturing and quality control procedures,
trade secrets, plans, models, accumulated experience, plant and tool design,
installation instructions, raw material specifications, and other know how
embodied in, or associated with, the equipment, formulations, and processes
identified on Schedule B of this Assignment, and including Transferors's
underlying copyright in works of authorship embodying the foregoing.
2. Subject to the license rights granted to Transferors under the Patent
and Know How License Agreement, executed on even date herewith, Transferors
hereby assign and transfer to Company all of their right, title, and interest in
and to the Assigned Patent Rights, and all rights and privileges related thereto
including without limitation all rights to sue others for past, present, and
future acts of infringement of the Assigned Patent Rights, and to retain all
revenues received from others for past acts of infringement of the Assigned
Patent Rights.
3
<PAGE>
3. Subject to the license rights granted to Transferors under the Patent
and Know How License Agreement to be entered into pursuant to the SPA,
Transferors hereby assign and transfer to Company all of their right, title, and
interest in and to the Assigned Know How.
4. Transferors hereby authorize and request the appropriate officers in
the United States Patent and Trademark Office and in foreign Patent Offices, as
appropriate, to issue to Company any and all patents that may be granted upon
applications forming a part of the Assigned Patent Rights, and to index this
Assignment against any and all of such patents and patent applications forming a
part of the Assigned Patent Rights.
5. Transferors further agree for themselves, their successors, assigns,
and legally bound predecessors, without further consideration to Transferors but
at Company's expense, to execute any further legal documents, including any
further assignments, such as individual assignments for recordation in the U.S.
and foreign patent offices, which may be in the form attached as Exhibit A, and
to perform all acts, that may be necessary to complete the assignment of
Transferors' interest in and to the Assigned Patent Rights and the Assigned Know
How. In the event of a conflict or inconsistency between the terms and
conditions of this Assignment and the terms and conditions of any such legal
document, and unless otherwise agreed in writing, the terms and conditions of
this Assignment shall be controlling. Consequently the terms and conditions of
this Assignment shall control over those of any other documents assigning any
part of the Assigned Patent Rights and Assigned Know How whether executed on
even date herewith or thereafter.
6. In the event of a conflict or inconsistency between the terms and
conditions of this Assignment and the terms and conditions of the SPA, the terms
and conditions of this Assignment
4
<PAGE>
control; provided, however, that if there is a patent or patent application
listed as being assigned or sold to Company on the schedules of the SPA but not
Schedule A attached hereto, Transferors hereby assign and transfer, to Company,
all of their rights, title and interest, under the terms and conditions of this
Assignment as if it was listed on schedule A attached hereto.
IN WITNESS WHEREOF, the parties have caused this Assignment to be duly
executed as of the date hereof.
OWENS CORNING
By: /s/ Charles E. Dana
-------------------------
Name: Charles E. Dana
Title: Vice President
OWENS-CORNING FIBERGLAS
TECHNOLOGY, INC.
By: /s/ Charles E. Dana
-------------------------
Name: Charles E. Dana
Title: Representative
ADVANCED GLASSFIBER
YARNS, LLC
By: /s/ Robert B. Fisher
-------------------------
Name: Robert B. Fisher
Title: General Manager
5
<PAGE>
EXHIBIT 10.8
BORATES SUPPLY AGREEMENT
BETWEEN
OWENS CORNING
AND
ADVANCED GLASSFIBER YARNS LLC
DATED AS OF SEPTEMBER 30, 1998
<PAGE>
BORATES SUPPLY AGREEMENT
This Borates Supply Agreement (the "Agreement") is executed on this 30th day of
---------
September, 1998, by and between OWENS CORNING, a Delaware corporation
("Seller"), and ADVANCED GLASSFIBER YARNS LLC, a Delaware limited liability
------
company ("Buyer"), and shall be governed by the following clauses.
-----
WHEREAS, Seller has entered into an Agreement (the "Etibank Agreement")
dated January 1, 1998, by and between Etibank and Seller under which Etibank has
agreed to mine, process, sell and deliver * and * (collectively,
"Products") to Seller; and
WHEREAS, Buyer requires certain Borate Products for use in its own
production facilities.
NOW, THEREFORE, Seller and Buyer agree as follows:
1. SALE AND PURCHASE OF PRODUCTS.
-----------------------------
1.1. THE PRODUCTS. Subject to the terms and conditions herein set forth,
------------
Seller agrees to sell, and Buyer agrees to purchase and accept its
requirements for the Products. The Products and the specifications
for the Products (the "Product Specifications") are more fully
----------------------
described in Exhibit A attached hereto and made a part hereof. Buyer
agrees that it is purchasing the Products solely for its own use in
its own facilities and that it will not resell the Products to any
third party.
1.2. NATURE OF OBLIGATION. In the event that Seller is unable purchase or
--------------------
obtain sufficient quantities of one or more Products for Owens Corning
and Buyer for any reason including but not limited to a Force Majeure
Event (as defined in paragraph 11 of this Agreement), the
unavailability or insufficient availability of one or more Products,
termination of the Etibank Agreement (by either party thereto, with or
without cause), unsatisfactory quality of one or more Products,
failure to perform by any person or party other than Seller with
respect to the sale, delivery, shipping or storage of one or more
Products, then, subject to the next succeeding sentence, Seller shall
have no obligation under this Agreement. Notwithstanding the
foregoing, should Seller decide to sever its supply arrangement with
Etibank for any reason, Seller can terminate this Agreement at any
time, provided that it has given Buyer 180 days' written notice prior
to the termination of the arrangement with Etibank. In the event that
Etibank will not allow Seller to resell the Products to Buyer or if
Etibank establishes a marketing arrangement in North America
prohibiting Seller to resell the Products to Buyer,
- -----------
* Omitted pursuant to a request for confidential treatment.
<PAGE>
then Seller can terminate this Agreement. If Seller continues to
purchase the Products from any other supplier or Etibank, Seller
agrees to continue to supply the Products to Buyer under this
Agreement.
1.3. Buyer agrees that Buyer will not, except in case Seller cannot provide
sufficient amount of the Products exceeding the Maximum Volume and
with the express written consent of Seller, purchase or accept the
Products from or approach any third party or Etibank.
1.4. Buyer acknowledges and agrees that Seller, at its sole discretion, may
request Buyer to purchase the Products from ABC, Inc. ("ABC"),
Seller's sole distributor for the Products, provided ABC accepts the
pricing for the Products as provided in Section 4.
2. TERM; CONTRACT YEAR.
-------------------
2.1. TERM. This Agreement shall be effective as of the date of execution
----
and, unless earlier terminated as provided herein, shall continue in
full force and effect for the period of seven years and three months
through and including December 31, 2005. This Agreement shall be
automatically renewed for a period equal to any renewal or extension
of the term of the Etibank Agreement unless terminated by either party
upon 90 days' prior written notice. The initial term, together with
all renewal periods thereof, is referred to hereinafter as the "Term".
----
2.2. CONTRACT YEAR. For purposes of this Agreement, each of the following
-------------
periods is a "Contract Year".
-------------
2.2.1 FIRST CONTRACT YEAR. The first Contract Year shall be the
-------------------
period from the date hereof until December 31, 1998; and
2.2.2 SUBSEQUENT CONTRACT YEARS. Subsequent Contract Years shall be
-------------------------
each successive twelve month period beginning January 1 and
ending December 31 during the Term of the Agreement.
3. ESTIMATES; RELEASES; DELIVERY.
-----------------------------
3.1. BUYER'S CONTRACT YEAR ESTIMATES. Within 30 days of the execution of
-------------------------------
this Agreement and, on or before September 30 of each Contract Year
thereafter during the Term of this Agreement, Buyer shall provide
Seller with Buyer's good-faith estimates of Buyer's requirements for
the Products, by type, and by calendar quarter, for the next
succeeding Contract Year (the "Contract Year Estimates"). Such
-----------------------
Contract Year Estimates shall be subject to the conditions set forth
in
2
<PAGE>
paragraph 1.2 of this Agreement. The aggregate quantity of the
Products set forth in the Contract Year Estimates shall be the maximum
quantities of the Products that Seller is obligated to sell and
deliver to Buyer during the relevant Contract Year and shall be the
minimum quantities of Products that Buyer is obligated to purchase
during the relevant Contract Year. In addition, Seller is not required
to sell and deliver to Buyer more than ten percent (10%) of the
Contract Year Estimates in any given month.
3.2. MAXIMUM VOLUME. Buyer agrees to purchase and Seller agrees to sell a
--------------
maximum quantity of 9,289 tons of * and 7,253 tons of *
("Maximum Volume"). This maximum volume represents the average usage
by Seller of * for the past three years. Buyer can elect to
increase quantities of * and reduce equal quantities of
* subject to availability. Seller agrees to supply Buyer on a
basis of first available quantity. For any quantity exceeding Maximum
Volume, Seller will supply Buyer only after Seller's own needs are
satisfied.
3.3. SELLER'S ASSURANCES. If for any reason Seller believes it will be
-------------------
unable to deliver all or any portion of Buyer's Contract Year
Estimates or Refined Estimates, Seller shall immediately notify Buyer
within ten (10) days of the date of receipt of Buyer's respective
estimates. Such notification shall not relieve Seller of any of its
obligations under this Agreement.
3.4. ORDERS FOR THE PRODUCTS/SHIPMENT. Orders for the Products shall be
--------------------------------
made, at Buyer's discretion, by Buyer issuing signed purchase orders
to Seller. The orders shall be submitted by authorized personnel of
Buyer no later than 30 days' prior to the desired date of delivery and
shall set forth the following: a statement identifying the order with
this Agreement; the number by which the order shall be identified; the
quantity of the Products to be delivered; the date of delivery; and
invoicing instructions. Subject to the volume limitations set forth in
paragraphs 3.1, 3.2 and 3.3 there shall be no limitation on the number
of orders issued hereunder. In the event Buyer places an order which
would exceed its Contract Year Estimate or if Buyer requires a change
in the quantity of more than 10%, type or delivery date of Products to
meet customer requirements, Seller may, but is not obligated to, fill
such order or make such changes. For these purposes, Seller shall
notify Buyer in writing whether it will be able to fill any order
which exceeds Buyer's Contract Year Estimate or which requires a
change in the quantity, type or delivery date of Products within the
10 days following its receipt of such an order.
3.5. DELIVERY. All Products will be sold to Buyer FOB Kings Creek, South
--------
Carolina.
3
<PAGE>
4. PRICE FOR THE PRODUCTS.
----------------------
4.1. The price for the Products sold will equal Seller's cost to purchase,
transport, process and terminal the sold Products (the "Cost")
including a fixed administrative charge of $150,000 to be paid pro-
rata with Product deliveries. If Buyer purchases less than 50% of the
Maximum Volume, the administrative charge will be reduced by 50%.
Prices shall be in United States Dollars. Exhibit B provides a list of
the typical cost items covered under the Cost
4.2. Buyer acknowledges and agrees that Seller will not provide Buyer a
copy of the Etibank Agreement. Seller hereby agrees to provide Buyer
with sufficient proof of the Cost and purchased quantity of the
Products.
5. TITLE AND RISK OF LOSS.
----------------------
The Products sold pursuant to this Agreement shall be delivered to Buyer as
provided in paragraph 4, and title and risk of loss shall pass to Buyer at the
time the Products leave Seller's processor's facility in Kings Creek, South
Carolina.
6. TERMS OF PAYMENT.
----------------
Seller shall invoice Buyer with each delivery of the Products hereunder. Payment
of each invoice shall be made by Buyer within 15 days from the date of Seller's
invoice. Seller shall charge interest equal to the "base rate" of Citibank N.A.
as announced from time to time plus 2.0% per annum beginning on the 16th day
after the invoice date if not then paid in full. Remittance of interest under
this section shall be made in full without any reduction for any withholding or
other taxes. If withholding taxes or other taxes are applicable as prescribed
under laws of the payor country, Buyer shall remit the withholding taxes or
other taxes to the proper governmental agencies in such country on a timely
basis and supply Seller with a withholding tax receipt or other evidence of
payment as soon as legally possible.
7. TAXES, EXCISES AND OTHER CHARGES.
--------------------------------
Except for such taxes which Seller is required by law to collect from Buyer,
each party shall be responsible for payment of such taxes as such party is
required to pay under applicable law, including local, state, federal or foreign
law, and which are based upon or measured by the production, sale,
profitability, transportation, delivery or use of the Products sold and
delivered hereunder. Seller shall show VAT taxes, if applicable, separately on
its invoice.
4
<PAGE>
8. CHANGES, MODIFICATIONS OR SUBSTITUTIONS.
---------------------------------------
Buyer understands and acknowledges that, although there is no obligation to do
so, Etibank, from time to time, to improve the efficiency in the manufacture or
use of the Products, may make changes to, modify or make improvements to the
Products, or substitute newly designed products for the Products. If during the
Term of this Agreement Seller shall propose to make changes, modifications or
improvements to the Products or shall substitute newly designed products for any
of the Products, Seller shall advise Buyer that the change, improvement,
modification or substitution is contemplated. As soon as practicable thereafter,
Seller shall provide Buyer samples of the proposed changed, modified, improved
or substitute product in sufficient laboratory test quantity to enable Buyer to
test and qualify such product in Buyer's manufacturing process. If Etibank
commences commercial manufacture of the changed, modified, improved or
substitute product and the product is qualified by Buyer, the product shall
become a Product and the specifications shall become Product Specifications
hereunder.
9. SELLER'S DISCLAIMER OF WARRANTY.
-------------------------------
BUYER ACKNOWLEDGES THAT ANY SALES MADE TO BUYER HEREUNDER ARE ON AN
ACCOMMODATION BASIS AND SELLER MAKES NO OTHER REPRESENTATION OR
WARRANTY OF ANY KIND WITH RESPECT TO THE PRODUCTS DELIVERED HEREUNDER,
WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR USE OR PURPOSE, EVEN IF
DISCLOSED TO SELLER, AND SELLER HEREBY DISCLAIMS ANY SUCH OTHER
REPRESENTATION OR WARRANTY.
10. LIMITED WARRANTY.
----------------
Seller warrants that the Products sold to Buyer shall be owned by Seller and
shall be free and clear of all liens and encumbrances, and that Seller shall
have complied with all applicable laws, regulations, ordinances and codes
concerning the Products. However, Seller does not warrant that the Products, in
fact, are of a type and quality desired or requested by Buyer, and Buyer's sole
and exclusive remedy for defects in the Products shall be to request that Seller
pursue a claim against Etibank or such other source, shipper or handler of the
Products as may have caused any such defects, at Buyer's own expense.
5
<PAGE>
11. FORCE MAJEURE.
-------------
Neither party shall be liable to the other for delay or failure to perform in
whole or in part, by reason of contingencies or events which: (i) are beyond the
reasonable control of the party whose performance is affected, (ii) are
unforeseeable, and (iii) could not have been reasonably prevented, whether
herein specifically enumerated or not (a "Force Majeure Event"). These
contingencies include, among others, act of God, act of war, revolution, riot,
acts of public enemies, fire, explosion, breakdown of plant, strike, lockout,
labor dispute, casualty or accident, earthquake, flood, cyclone, tornado,
hurricane or other windstorm, or by reason of any law, order, proclamation,
regulation, ordinance, demand, requisition or requirement or any other act of
any governmental authority, foreign or domestic, local, state or federal
(provided that the Force Majeure Event does not arise due to or is connected in
any way with a violation by party hereto of any law, order, proclamation,
regulation, ordinance, demand, requisition or requirement of any governmental
authority) except that contingencies shall not include a downturn in Buyer's
business or general economic downturn. A party so affected by a Force Majeure
Event shall: (i) promptly give written notice to the other party whenever such
contingency or other act becomes reasonably foreseeable (including an estimate
of the expected duration of the Force Majeure Event and its probable impact on
the performance of such party's obligations hereunder); (ii) exercise all
reasonable efforts to continue to perform its obligations hereunder; (iii) use
its commercially reasonable best efforts to overcome or mitigate the effects of
the contingency as promptly as possible and (iv) promptly give written notice to
the other party of the cessation of such contingency. Neither party, however,
shall be required to resolve a strike, lockout or other labor problem in a
manner which it alone does not deem proper and advisable. In no event shall any
Force Majeure Event excuse party's failure to pay when due any monetary
obligation hereunder. In the case of any Force Majeure Event relied on by
Seller, Seller agrees that it shall treat Buyer no less favorably than the most
favorably treated Affiliate or customer of Seller in dealing with or adjusting
to the consequences of such Force Majeure Event and in relation to the
allocation of any Products, the production or availability of which may have
been interrupted or diminished.
Deliveries of the Product omitted due to any Force Majeure Event affecting
Seller or Buyer shall, without liability, reduce by an equivalent quantity the
quantity of Products to be sold and delivered during the period in which the
Force Majeure Event occurred. To determine the quantity of Products that would
have been sold, the parties shall assume that Buyer's most recent Refined
Estimates would have been purchased on a ratable basis.
12. DEFAULT.
-------
Except as otherwise specifically provided in this Agreement, if either party
fails to perform any of the terms of this Agreement, (a) the other party may
defer its performance under this Agreement until the default is cured by the
defaulting party, or (b) at its option, the party may treat such default as a
breach of the entire Agreement and, if such default is not cured within 30 days
after the giving of notice thereof to the defaulting party (or, in the case of
default in payment of monies, within 10 business days), may immediately
terminate this Agreement upon
6
<PAGE>
notice to the defaulting party. This Agreement shall terminate automatically,
without necessity of notice, in the event Buyer or Seller makes an assignment
for the benefit of creditors generally, is adjudicated bankrupt or in the event
of the filing of any voluntary or involuntary petition in bankruptcy against
Buyer or Seller or the appointment of a receiver for Buyer or Seller or any
substantial part of their respective properties.
13. APPLICABLE LAW.
--------------
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of New York applicable to a contract executed and performed in such
State without giving effect to the conflicts of law principles thereof.
14. ENTIRE AGREEMENT.
----------------
This Agreement sets forth the entire agreement and understanding of the parties
with respect to the subject matter hereof and supersedes all prior
understandings, negotiations, and dealings between the parties hereto with
respect to this subject matter. No agreement or understanding, oral or written,
in any way purporting to modify the terms hereof shall be binding on either
party hereto unless contained in a written document expressly referring to this
Agreement and duly executed by both parties. There are no representations or
warranties made by one party to the other except as expressly set forth in this
Agreement. In case of a conflict between any of the terms of any purchase order
of Buyer or any acknowledgment by Seller of the purchase order and any of the
terms set forth in this Agreement, the terms of this Agreement shall control. No
additional terms or conditions of sale other than those contained in this
Agreement shall be effective unless approved in writing by an authorized
representative of Seller and Buyer.
15. SUCCESSORS AND ASSIGNS.
----------------------
This Agreement shall be binding upon and shall inure to the benefit of both
parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement shall not be assigned by either party
hereto without the express prior written consent of the other party, and any
attempted assignment, without such consents, shall be null and void.
Notwithstanding any nonassignment provisions contained in this Section 15,
Buyer, or any permitted assignee or transferee of Buyer, may assign or otherwise
transfer some or all of its rights and/or obligations hereunder (i) to any
entity or entities, or any assignee of such entity or entities, providing
financing for the transactions contemplated by this Agreement or to any entity
or entities providing to Buyer, Buyer's Affiliates, or to any such permitted
assignee of Buyer, financing relating to the Business (collectively, the
"Financing Sources"), (ii) to any Affiliate of
7
<PAGE>
Buyer, provided that (x) such Affiliate shall agree with Seller and its
permitted assignees or transferees, if any, in writing to assume the Buyer's
obligations hereunder and (y) any such assignment to an Affiliate of the Buyer
shall not relieve the Buyer from its obligations hereunder or (iii) to any
entity to which Buyer, or any assignee or transferee of Buyer, assigns, sells,
transfers or otherwise conveys (A) all or substantially all of the assets
constituting the Business (a "Complete Assignment") or (B) all or substantially
all of the assets constituting either the Aiken Facility, the Huntingdon
Facility or the South Hill Facility (a "Partial Assignment"), provided that such
acquiring entity agrees with and acknowledges in writing to Seller and its
permitted assignees or transferees, if any, that this Agreement shall be binding
upon and enforceable against such entity as though such acquiring entity were
Buyer and that such entity shall perform all of Buyer's obligations hereunder.
Notwithstanding any nonassignment provisions contained in this Section 15,
Seller, or any permitted assignee or transferee of Seller, may assign or
otherwise transfer some or all of its rights and/or obligations hereunder (i) to
any Affiliate of Seller, provided that (x) such Affiliate shall agree with Buyer
and its permitted assignees or transferees, if any, in writing to assume the
Seller's obligations hereunder and (y) any such assignment to an Affiliate of
the Seller shall not relieve the Seller from its obligations hereunder or (ii)
to any entity to which Seller, or any assignee or transferee of Buyer, assigns,
sells, transfers or otherwise conveys any portion of its business which owns,
licenses, or uses Business Patents or Business Know How (as each is defined in
the Patent and Know How License Agreement), provided that such acquiring entity
agrees with and acknowledges in writing to Buyer and its permitted assignees or
transferees, if any, that this Agreement shall be binding upon and enforceable
against such entity as though such acquiring entity were Seller and that such
entity shall perform all of Seller's obligations hereunder. To the extent that
assignment and/or transfer of any of the rights, privileges, and/or obligations
is permitted, this Agreement shall be binding on, and except as otherwise
expressly provided, shall inure to the benefit of, the legal successors,
assigns, or representatives of the parties.
16. NOTICES.
-------
All communications provided for hereunder shall be in writing and shall be
deemed to be given when delivered in person or by private courier with receipt,
when telefaxed and received, or three (3) days after being deposited in the
United States mail, first-class, registered or certified, return receipt
requested, with postage paid and,
If to Buyer: Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Fax: 803-643-1526
Attention: General Manager
8
<PAGE>
With a copy to: AGY Holdings, Inc.
c/o Glass Holdings Corp.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336-545-7715
Attention: President
And to: Jefferson Holdings, Inc.
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
If to OC: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-7230
Attention: VP Sourcing: Dick Hottinger
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such party shall designate by written
notice to the other parties hereto.
17. MISCELLANEOUS.
-------------
17.1. PARAGRAPH HEADINGS; CONSTRUCTION. The paragraph headings contained
--------------------------------
in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
This Agreement is a product of negotiation and shall not be construed
against either party as the drafter.
17.2. SEVERABILITY. If any provision of this Agreement shall be declared
------------
by any court of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this Agreement shall not be
affected and shall remain in full force and effect.
9
<PAGE>
17.3. AMENDMENT; WAIVER. This Agreement may be amended, supplemented or
-----------------
otherwise modified only by a written instrument executed by the
parties hereto. No waiver by either party of any of the provisions
hereof shall be effective unless explicitly set forth in writing and
executed by the party so waiving. The waiver by any party hereto of
a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
17.4. SURVIVAL. The provisions of paragraphs 4, 5, 6, 7 and 9 through 17
--------
of this Agreement shall survive any termination or expiration
hereof.
17.5. INDEPENDENT CONTRACTORS. The parties are independent contractors,
-----------------------
and this Agreement does not create a partnership or agency
relationship between the parties, or any other relationship between
the parties except as expressly set forth herein. Neither party has
any right or authority to assume or incur any liability or
obligation on behalf of the other party except to such extent as may
expressly be set forth herein.
17.6. NO THIRD PARTY BENEFICIARIES. This Agreement is entered into solely
----------------------------
for the benefit of the parties hereto and no person other than the
parties hereto, or their permitted successors and assigns, shall be
entitled to exercise any right or enforce any obligation thereunder.
17.7. CONFIDENTIALITY. Each party shall maintain in confidence the terms
--------------
of this Agreement except as may be otherwise required by law.
17.8. LANGUAGE. This Agreement is to be executed in the English language.
--------
17.9. PUBLICITY. Each of Buyer and Seller agrees not to use the name or
---------
trademarks or logos of the other party or its divisions or
affiliates in any publicity, packaging, marketing materials or other
promotional activities or materials without the prior written
consent of the other party.
17.10. CONSENT TO JURISDICTION. Each of the parties hereto, irrevocably
-----------------------
submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York located in the borough
of Manhattan in the City of New York, or if such court does not have
jurisdiction, the Supreme Court of the State of New York, New York
County, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated
hereby. Each of the parties hereto, further agrees that service of
any process, summons, notice or document by U.S. registered mail to
such party's respective address set forth in paragraph 16 shall be
effective service of process for any action, suit or proceeding in
New York with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding
sentence. Each of the parties hereto, irrevocably and
unconditionally waives any objections to the laying
10
<PAGE>
of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (a) the United
States District Court for the Southern District of New York or (b)
the Supreme Court of the State of New York, New York County, and
hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an
inconvenient forum.
17.11. COUNTERPARTS. This Agreement may be executed in 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.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by persons authorized to bind their respective companies as of the
date first above written.
OWENS CORNING
By: /s/ Charles E. Dana
-----------------------------
Name: Charles E. Dana
Title: Vice President
ADVANCED GLASSFIBER YARNS LLC
By: /s/ Robert B. Fisher
-----------------------------
Name: Robert B. Fisher
Title: General Manager
12
<PAGE>
EXHIBIT 10.9
TRANSITIONAL SERVICES AGREEMENT
-------------------------------
This Transitional Services Agreement (the "Agreement") is made and
---------
entered into as of September 30, 1998 (the "Effective Date"), by and among Owens
--------------
Corning, a Delaware corporation ("OC"), and Advanced Glassfiber Yarns LLC, a
--
Delaware limited liability company (the "Company").
-------
RECITALS
--------
WHEREAS, OC and Company have entered into that certain Amended and
Restated Asset Contribution Agreement dated as of July 31, 1998 (the
"Contribution Agreement"), whereby OC contributed to the Company its business of
----------------------
manufacturing and selling glass fiber yarns and specialty materials at its
facilities located in Aiken, South Carolina, Huntingdon, Pennsylvania and South
Hill, Virginia (the "Business") in exchange for all of the membership interest
--------
in the Company and other consideration;
WHEREAS, OC, the Company and Glass Holdings Corp. have entered into
that certain LLC Interest Sale and Purchase Agreement dated as of July 31, 1998
(the "SPA"), whereby OC agreed to sell a 51% interest in the Company to AGY
---
Holdings, Inc.; and
WHEREAS, each party hereto desires to continue to provide to the other
party selected services, and each party is willing to do so on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:
1. Provision of Transitional Services.
----------------------------------
(a) Subject to the terms and conditions of this Agreement and
during the Transition Period (as defined herein), OC will provide the
Company (for the Business):
(i) the corporate services described in Appendix A,
which is attached to and made part of this Agreement (hereinafter
referred to individually as a "Service" and collectively as the
-------
"Corporate Services");
------------------
(ii) the information systems services described in
Appendix B, which is attached to and made part of this Agreement
<PAGE>
(hereinafter referred to individually as a "Service," and
collectively as the "IS Services").
-----------
(iii) and such other services not specifically
enumerated on Appendix A or B provided by OC to the Business as
of the date hereof (hereinafter referred to individually as a
"Service" and, together with the Corporate Services, the IS
-------
Services and the services referenced in 1(b), the "Services").
--------
(b) Subject to the terms and conditions of this Agreement and
during the Term (as defined herein), the Company will provide OC with
the services described in Appendix C.
2. Method of Provision of Services. Each party agrees to provide to the other
-------------------------------
party the Services at the current level, scope and manner at which such Services
have been provided by OC or its Composites Systems Business to the Business or
to the Aiken mat line facility as of the date of this Agreement. Neither party
shall be under an obligation to expand or modify the level, scope or manner of
the Services provided. All Services shall be provided in a professional
workmanlike manner and,in the case of OC, shall be of a quality at least equal
to that provided by OC to its most favored Affiliate.
3. Discontinuation of Services. Either party may elect to discontinue
---------------------------
receiving any Service under this Agreement by giving the other party at least
twenty (20) days' advance written notice of its election to discontinue such
Service or Services.
4. Disclaimer of Warranty. THE SERVICES HEREUNDER ARE PROVIDED ON AN "AS IS"
----------------------
BASIS. EACH PARTY HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTIES OF ANY
KIND, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
5. Limitation of Liability.
-----------------------
(a) No party will be liable to the other party for any
incidental, consequential, special or punitive damages of any kind or
nature, including without limitation loss of data, services, profits,
revenue, business and service interruption in connection with, or
related to, the performance of this Agreement, or arising out of the
Services rendered hereunder, whether such liability is asserted on the
basis of contract (including, without limitation, the breach of this
Agreement or any termination of this Agreement), tort (including
negligence or
-2-
<PAGE>
strict liability), or otherwise, even if any other party has been warned of
the possibility of any such loss or damage in advance.
(b) Except as provided in Paragraph 5(a) and except in the event of
reckless or willful misconduct (whether or not the party is negligent) or
gross negligence, neither party shall be liable to the other party for any
claims, liabilities, damages, losses, costs, expenses (including, but not
limited to, settlements, judgments, court costs and reasonable legal fees),
fines and penalties, arising out of any actual or alleged injury, loss or
damage of any nature whatsoever suffered by such other party in providing
or failing to provide the Services to the Company. Notwithstanding anything
to the contrary contained herein, if either party commits an error with
respect to or incorrectly performs or fails to perform any Service, at the
other party's request, the erring party shall use reasonable efforts to
correct such error, reperform or perform such Service; provided, that
--------
neither party shall have any obligation to recreate any lost or destroyed
data to the extent the same cannot be cured by the reperformance of the
Service in question.
6. Price and Payment for Services. Each party shall invoice the other on a
------------------------------
monthly basis for services rendered in the preceding calendar month. Each
invoice shall be sufficiently detailed to substantiate all amounts and Services
charged. The prices that will be paid for the Services under this Agreement
during the Term, will be as follows:
(a) For the Services, the Company shall pay to OC a fee equal to OC's
costs to provide the Services as described in Appendix A.
(b) For the IS Services, the Company shall pay to OC a fee equal to
OC's costs to provide the IS Services as described in Appendix B.
(c) For the Services rendered by the Company to OC, OC shall pay a
fee equal to the Company's costs to provide such Services as described in
Appendix C.
(d) For any other Service needed by either party from the other, a
fee equal to that party's costs to provide such Service shall be charged.
(e) For any Service rendered by a third party on behalf of a party,
the party receiving the Services shall pay to the party providing the
Services the fee equal to the fee charged by such third party, without
mark-up.
-3-
<PAGE>
(f) Each party shall invoice the other party on a monthly basis and
the invoiced party shall pay such invoiced amount net thirty (30) days from
the date of such invoice except to the extent that any item on such invoice
is disputed by the other party in good faith. Such disputed fees shall be
paid by the other party upon the mutually satisfactory resolution of such
dispute.
To the extent monthly fees and charges are computed on the basis of
budgeted or historic annual cost, such monthly fees shall promptly be
adjusted upon a known reduction in the actual cost of the related Service;
provided, however, that no adjustment shall be made with respect to any fee
-------- -------
for a Service in the first three months in which such Service is performed.
7. Term and Termination.
--------------------
7.1 Term. This Agreement shall become effective upon the date hereof and
----
will continue until and including December 31, 1999 (the "Term"), unless earlier
----
terminated in accordance with the terms of this Agreement. Benefits
Administration Services listed in Section 2 of Appendix A and Information
Systems Services listed in Section 1 of Appendix B shall be provided through
December 31, 1999. All other Services shall terminate on March 31, 1999 unless
either party elects to extend the receipt of such Services for a period of three
(3) months by providing the other party with twenty (20) days' notice prior to
March 31, 1999.
7.2 Default and Remedies.
--------------------
(a) Event of Default. A party will be in default hereunder (an
----------------
"Event of Default") if (i) such party commits a material breach of any term
or condition of this Agreement and such failure continues uncured for
thirty (30) days following receipt of written notice thereof from the other
party; (ii) there is a filing of an involuntary case for the entry of
relief against such party under any bankruptcy, insolvency or similar law
for the relief of debtors and such case remains undismissed for thirty (30)
days or more; (iii) a trustee or receiver is appointed for such party or
its assets or any substantial part thereof; or (iv) such party files a
voluntary petition under any bankruptcy, insolvency or similar law of the
relief of debtors.
(b) Remedies.
--------
(i) Upon an Event of Default hereunder, the non-defaulting party
may exercise any or all of the following remedies: (A) declare
immediately due and payable all fees for Services rendered
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<PAGE>
under this Agreement; (B) decline to provide any Service or Services;
and/or (C) terminate this Agreement as provided herein.
(ii) In the event of any default by the party providing Services
hereunder, the party receiving the Services may terminate this
Agreement and/or decline to pay any and fees for the Services subject
to the Default.
(iii) In addition to the remedies set forth in subsection (i) or
(ii), above and subject to the terms and conditions of this Agreement,
a non-defaulting party will have all other rights and remedies
available at law or equity.
8. Indemnification. Each party will indemnify and hold the other party and
---------------
its shareholders, directors, officers, employees and agents harmless from and
against any and all obligations, liabilities, claims and demands, expenses and
costs (including reasonable attorneys' fees) for any loss or damage to property
or injury to persons which may be asserted against such party by third parties
by reason, or as a result, of any acts or omissions of the indemnifying party,
including, but not limited to, claims arising out of the negligence of the
indemnifying party in connection with, or related to, the performance of this
Agreement.
9. Confidentiality.
---------------
9.1 Confidential Information. Each party acknowledges that, in
------------------------
connection with the performance of this Agreement, it may receive certain
confidential or proprietary information and materials of the other party
("Confidential Information"). Confidential Information includes, without
------------------------
limitation, (a) all trade secrets and similar information, the disclosure of
which might destroy or impair the competitive advantage of a party; (b) any
nonpublic information regarding a party's financial condition, business plans,
operations or strategies; and (c) any other non-public information that a party
uses reasonable efforts to protect from disclosure to third parties.
9.2 Confidentiality. OC and the Company each hereby agree: (a) to
---------------
hold and maintain in strict confidence all Confidential Information of the other
party; and (b) not to use any Confidential Information except as permitted by
this Agreement or necessary for a party to perform its obligations under this
Agreement. Each party will use at least the same degree of care to protect the
other party's Confidential Information as it uses to protect its own
Confidential Information of like importance, and in no event will such degree of
care be less than reasonable due care. The obligations
-5-
<PAGE>
of confidentiality shall survive for a period of eight (8) years beyond the
expiration or termination of this Agreement.
9.3 Exceptions. Notwithstanding the foregoing, the parties agree
----------
that Confidential Information will not include any information that: (a) is
generally known or becomes part of the public domain through no fault of the
party receiving such information or that the disclosing party authorizes the
receiving party in writing to disclose, copy or use under this Agreement; (b) is
rightfully received by a party without breach of this Agreement from a third
party which is not bound by any restriction on disclosure; (c) is furnished by
the disclosing party to another third party without having imposed upon such
third party any similar restriction on disclosure; or (d) is independently
developed by the receiving party without any use of the Confidential Information
of the disclosing party.
10. General Provisions.
------------------
10.1 Notices. All communications provided for hereunder shall be in
-------
writing and shall be deemed to be given when delivered in person or by private
courier with receipt, when telefaxed and received, and,
If to Company: Advanced Glassfiber Yarns LLC
Highway 301
Aiken, South Carolina
Fax:
Attention:
If to OC: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
10.2 Force Majeure. Neither party shall be liable to the other for
-------------
delay or failure to perform in whole or in part, by reason of contingencies or
events which: (i) are beyond the reasonable control of the party whose
performance is affected; (ii) are
-6-
<PAGE>
unforeseeable; and (iii) could not have been reasonably prevented, whether
herein specifically enumerated or not (a "Force Majeure Event"). These
contingencies include, among others, act of God, act of war, revolution, riot,
acts of public enemies, fire, explosion, breakdown of plant, strike, lockout,
labor dispute, casualty or accident, earthquake, flood, cyclone, tornado,
hurricane or other windstorm, or by reason of any law, order, proclamation,
regulation, ordinance, demand, requisition or requirement or any other act of
any governmental authority, foreign or domestic, local, state or federal
(provided that the Force Majeure Event does not arise due to or is connected in
any way with a violation by party hereto of any law, order, proclamation,
regulation, ordinance, demand, requisition or requirement of any governmental
authority) except that contingencies shall not include a downturn in the
Business or general economic downturn. A party so affected by a Force Majeure
Event shall: (i) promptly give written notice to the other party whenever such
contingency or other act becomes reasonably foreseeable (including an estimate
of the expected duration of the Force Majeure Event and its probable impact on
the performance of such party's obligations hereunder); (ii) exercise all
reasonable efforts to continue to perform its obligations hereunder; (iii) use
its commercially reasonable best efforts to overcome or mitigate the effects of
the contingency as promptly as possible and (iv) promptly give written notice to
the other party of the cessation of such contingency. Neither party, however,
shall be required to resolve a strike, lockout or other labor problem in a
manner which it alone does not deem proper and advisable. In no event shall any
Force Majeure Event excuse a party's failure to pay when due any monetary
obligation hereunder. In the case of any Force Majeure Event relied on by OC, OC
agrees that it shall treat the Company no less favorably than the most favorably
treated Affiliate or customer of OC in dealing with or adjusting to the
consequences of such Force Majeure Event and in relation to the performance of
any Service, the performance of which may have been interrupted or diminished.
10.3 Waiver, Modification. Any waiver of any right or default
--------------------
hereunder will be effective only in the instance given and will not operate as
or imply a waiver of any other or similar right or default on any subsequent
occasion. No waiver or modification of this Agreement or of any provision hereof
will be effective unless in writing and signed by the party against whom such
waiver or modification is sought to be enforced.
10.4 Assignment. This Agreement shall be binding upon and shall inure
----------
to the benefit of both parties and their respective successors and assigns.
Except as otherwise expressly provided herein, this Agreement shall not be
assigned by either party hereto without the express prior written consent of the
other party, and any attempted assignment, without such consents, shall be null
and void. Notwithstanding any nonassignment provisions contained in this Section
10.4, the Company, or any
-7-
<PAGE>
permitted assignee or transferee of the Company, may assign or otherwise
transfer all of its rights and/or obligations hereunder (i) to any entity or
entities providing to the Company, the Company's Affiliates, or to any such
permitted assignee of the Company, financing relating to the Business
(collectively, the "Financing Sources"), (ii) to any Affiliate (as defined in
the Contribution Agreement of the Company, provided that (x) such Affiliate
shall agree with OC and its permitted assignees or transferees, if any, in
writing to assume the Company's obligations hereunder and (y) any such
assignment to an Affiliate of the Company shall not relieve the Company from its
obligations hereunder or (iii) to any entity to which the Company, or any
assignee or transferee of the Company, assigns, sells, transfers or otherwise
conveys all or substantially all of the assets constituting the Business,
provided that such acquiring entity agrees with and acknowledges in writing to
OC and its permitted assignees or transferees, if any, that this Agreement shall
be binding upon and enforceable against such entity as though such acquiring
entity were the Company and that such entity shall perform all of the Company's
obligations hereunder. Notwithstanding any nonassignment provisions contained in
this Section 10.4, OC, or any permitted assignee or transferee of OC, may assign
or otherwise transfer some or all of its rights and/or obligations hereunder (i)
to any Affiliate of OC, provided that (x) such Affiliate shall agree with the
Company and its permitted assignees or transferees, if any, in writing to assume
the OC's obligations hereunder and (y) any such assignment to an Affiliate of
the OC shall not relieve the OC from its obligations hereunder or (ii) to any
entity to which OC, or any assignee or transferee of OC, assigns, sells,
transfers or otherwise conveys all or substantially all of the assets
constituting its business, provided that such acquiring entity agrees with and
acknowledges in writing to the Company and its permitted assignees or
transferees, if any, that this Agreement shall be binding upon and enforceable
against such entity as though such acquiring entity were OC and that such entity
shall perform all of OC's obligations hereunder. To the extent that assignment
and/or transfer of any of the rights, privileges, and/or obligations is
permitted, this Agreement shall be binding on, and except as otherwise expressly
provided, shall inure to the benefit of the legal successors, assigns, or
representatives of the parties.
10.5 Governing Law. This Agreement will be governed by and construed
-------------
in accordance with the internal laws of the State of New York, excluding that
body of law related to choice of laws.
10.6 Severability. In the event any provision of this Agreement (or
------------
portion thereof) is determined by a court of competent jurisdiction to be
invalid, illegal or otherwise unenforceable, then such provision will, to the
extent permitted by the court, not be voided but will instead be construed to
give effect to its intent to the maximum extent permissible under applicable law
and the remainder of this Agreement will remain in full force and effect
according to its terms.
-8-
<PAGE>
10.7 Sections and Headings. The headings contained herein are for the
---------------------
convenience of reference only and are not intended to define, limit, expand or
describe the scope or intent of any clause or provision of this Agreement.
10.8 Entire Agreement. This Agreement, together with all exhibits
----------------
hereto, constitutes the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior negotiations and
understandings between the parties, both oral and written, regarding such
subject matter.
10.9 Counterparts. This Agreement may be signed in counterparts and
------------
all signed copies of this Agreement will together constitute one original of
this Agreement.
10.10 Construction. This Agreement will be fairly interpreted in
------------
accordance with its terms and without any strict construction in favor of or
against either of the parties.
10.11 Legal Expenses. The prevailing party in any legal action brought
--------------
by one party against the other and arising out of this Agreement will be
entitled, in addition to any other rights and remedies available to it at law or
in equity, to reimbursement for its reasonable costs and expenses (including
court costs and reasonable fees for attorneys and expert witnesses) incurred
with respect to bringing and maintaining any such action.
IN WITNESS WHEREOF, the duly authorized representatives of each of the
parties hereto have executed this Agreement effective as of the day and year
first written above.
OWENS CORNING
By: /s/ Charles E. Dana
-----------------------------
Name:
Title:
ADVANCED GLASSFIBER YARNS LLC
By: /s/ Robert B. Fisher
-----------------------------
Name:
Title:
-9-
<PAGE>
EXHIBIT 10.10
SUPPORT SERVICES AGREEMENT
THIS SUPPORT SERVICES AGREEMENT (the "Agreement") is made as of September
30, 1998 (the "Effective Date"), between Advanced Glassfiber Yarns, LLC
("COMPANY"), a Delaware limited liability company with its principal place of
business located at 2556 Wagner Road, Aiken, South Carolina 29801, and Owens
Corning ("OC"), a Delaware corporation with its principal place of business
located at One Owens Corning Parkway, Toledo, Ohio 43659.
WHEREAS COMPANY was formed to conduct the glass fiber specialty product
manufacturing business formerly conducted by OC in Aiken, South Carolina,
Huntingdon, Pennsylvania, and South Hill, Virginia (the "Business");
WHEREAS, pursuant to an LLC Interest Sale and Purchase Agreement, dated as
of July 31, 1998 (the "SPA") among OC, COMPANY and AGY Holdings, Incorporated
(as assignee of Glass Holdings Corporation under an assignment agreement dated
as of September 28, 1998), AGY Holdings, Incorporated agreed to purchase a 51%
membership interest in COMPANY;
WHEREAS COMPANY desires the assistance of OC for engineering, design and
technical services relating to the Business; and
WHEREAS OC is capable of providing such services, is committed to the
success of COMPANY, wishes to meet COMPANY's needs for such services and
otherwise to treat COMPANY as a favored Affiliate and as a customer of OC's
service operations, and desires to provide high quality services to COMPANY.
<PAGE>
NOW THEREFORE, in consideration of the premises of and mutual promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, COMPANY and OC (the "Parties")
hereby agree as follows:
1. DEFINITIONS.
-----------
All terms not herein defined shall have the same meaning as that provided
in the LLC Interest Sale and Purchase Agreement, dated July 31, 1998 (the
"SPA").
2. PROVISION OF SERVICES.
---------------------
2.1 Scope of Services. Subject to the terms and conditions of this
-----------------
Agreement, OC agrees to provide to COMPANY engineering, design and technical
services (collectively hereafter the "Services") relating to the manufacture of
Business Products. Such Services shall include services in connection with:
(a) the design of a large melter (as further specified in Section 2.2
below);
(b) replacement of a Batch Weigh System for the Aiken, South Carolina
facility (as further specified in Section 2.3 below);
(c) Aiken furnace rebuilds (as further specified in Section 2.4
below);
(d) technical and design assistance in the areas of furnace, bushing
and consolidation equipment design, ergonomics engineering,
reliability engineering organization ("REO"), and testing
services;
(e) maintenance and support of the CB 83 Chopper at the Huntingdon,
Pennsylvania facility (as further specified in Section 2.5
below); and
2
<PAGE>
(f) such other services as the Parties may mutually agree.
2.2 Large Melter Design. OC will design for COMPANY a large melter
-------------------
suitable for manufacturing Business Products on cost and schedule terms to be
agreed; provided, however, that: (i) the cost shall be sufficient to cover OC's
internal and out of pocket costs; and (ii) the schedule will be as expeditious
as reasonably possible and, unless otherwise agreed upon by the parties, the
design of such melter is to be completed within two years of the Effective Date.
2.3 TI 990 Batch Weigh System Replacement. OC will provide for COMPANY a
-------------------------------------
turnkey implementation of a TI 990 Batch Weigh System Replacement for the Aiken,
South Carolina facility at OC's current projected cost of two hundred and forty-
two thousand dollars ($242,000); provided, however, that such current cost
projection is only an estimate and may increase or decrease by up to ten percent
(10%). Unless otherwise agreed upon by the parties, this project shall commence
during the 1999 second calendar quarter.
2.4 Aiken Furnace Rebuilds. OC will rebuild or provide rebuilds for Aiken
----------------------
furnaces 3D, 3E and 2D on approximately the following schedule: (i) 3D to
commence during the 1998 third calendar quarter; (ii) 3E to commence during the
1998 fourth calendar quarter; and (iii) 2D to commence during the 1999 second
calendar quarter. Such rebuilds shall be provided to Company on a capital cost
basis which is currently projected to be eight hundred and ten thousand dollars
($810,000); provided, however, that such current cost projection is only an
estimate and may increase or decrease by up to ten percent (10%).
2.5 CB 83 Chopper. COMPANY acknowledges that the CB 83 Chopper at the
-------------
Huntingdon, Pennsylvania facility embodies OC's Confidential Information, and OC
is concerned that such Confidential Information not be disclosed to third
parties. COMPANY
3
<PAGE>
further acknowledges that maintenance, support, and spare part fabrication
services for the CB 83 by third parties would necessarily entail disclosure of
such Confidential Information. OC and COMPANY therefore agree that all
maintenance and support services for the CB 83 (including fabrication and supply
of all spare parts) shall be provided by: (i) OC; (ii) COMPANY, subject to the
confidentiality provisions of Article 6 below; or (iii) third party providers
subject to Section 2.6.2 below. COMPANY hereby grants to OC a right of first
refusal to purchase the CB 83 in the event that COMPANY determines to sell the
CB 83.
2.6 Limitations on OC's Obligations.
-------------------------------
2.6.1 Personnel Limitations. COMPANY acknowledges that OC may not
---------------------
always be capable of providing certain of the Services requested by COMPANY, in
that OC is transferring personnel to COMPANY, or may divest its composites
business or otherwise cease its involvement in the composites industry, and for
this and other reasons may not always have appropriate personnel to perform
certain of the Services. Therefore, except for the Services specified in
Sections 2.2 and 2.3, OC is under no obligation to provide requested Services.
2.6.2 Use of Third Party Providers and Former OC Employees. In the
----------------------------------------------------
event that OC is unable to provide requested Services because of OC's lack of
suitable personnel, or for service of the CB 83 Chopper pursuant to Section 2.5
above, COMPANY may engage the services of third party providers and/or former
employees of OC, subject to the following restrictions:
(a) COMPANY shall first enter into, and supply to OC an executed copy
of, a Confidentiality Agreement substantially in the form
attached as Exhibit B to this Agreement;
4
<PAGE>
(b) former employees of OC shall not be released from their
obligation to preserve the confidentiality of OC proprietary
information of which they have knowledge except to the extent
reasonably necessary to provide the Services for which they are
engaged by COMPANY;
(c) any OC proprietary information communicated from former
employees of OC to COMPANY shall be subject to the
confidentiality provisions of the Patent and Know How License
Agreement to be entered into under the SPA (the "License
Agreement");
(d) unless otherwise agreed by the Parties, this provision shall
not entitle COMPANY to access to OC proprietary information to
which COMPANY is not otherwise entitled pursuant to the License
Agreement; and
(e) COMPANY's use of third party providers shall be subject to the
provisions of Section 6.6 of the License Agreement.
2.6.3 Priority. For as long as COMPANY is an Affiliate of OC, OC
--------
shall accord to COMPANY at least the same priority as OC gives in rendering
services to its other most favored Affiliates and licensees. Notwithstanding
the foregoing, OC acknowledges that COMPANY shall have a heightened need for the
Services during the six (6) month period following the Effective Date (the
"Transition Period") and OC is committed to facilitating COMPANY's success
during the Transition Period, as well as thereafter. OC therefore agrees to use
commercially reasonable efforts, consistent with OC's internal operations, to
respond to COMPANY's requests for Services during the Transition Period, and to
give higher priority to
5
<PAGE>
rendering the Services requested by COMPANY than those of OC's other Affiliates
and licensees.
2.6.4 Written Work Product. In the event that COMPANY desires OC to
--------------------
prepare any specific designs, drawings, flow sheets, reports, manuals, equipment
specifications, process descriptions, operating procedures, equipment and
process control descriptions, method engineering studies, purchasing studies,
engineering reports or any similar document or report relating to the Services,
such document or report shall be furnished as promptly as circumstances permit,
provided that OC shall not be required to supply any such materials hereunder
that OC determines in its reasonable judgment to have been unreasonably
requested in light of the intent and purposes of this Agreement.
2.6.5 Restricted Information. OC shall not be obligated to prepare
----------------------
or furnish any document or report which would disclose any information which OC
is at the time prevented from disclosing to COMPANY by reason of government
regulations, obligations arising from contracts with third parties which are not
Affiliates of OC, or other restrictions of any kind imposed upon OC by a third
party which is not an Affiliate of OC. Furthermore, nothing in this Agreement
shall authorize the disclosure of, or access to, or obligate OC to provide or
make available, classified or restricted information, material or know-how of
the government of the United States of America.
2.6.6 No Obligation to Grant a License. Except as provided in
--------------------------------
Article 5 of this Agreement, nothing herein shall obligate OC to license or
otherwise transfer any technology to COMPANY.
6
<PAGE>
2.7 COMPANY Services. The Parties contemplate that COMPANY may have or
----------------
develop technical service capabilities of interest to OC, and agree that OC may
request services from COMPANY on the same terms as those applying to the
Services.
3. WORK ORDERS AND FEES.
--------------------
3.1 Work Orders. Individual requests for Services to be performed under
-----------
this Agreement shall be defined by a Work Order prepared substantially in the
form of Exhibit A. Each Work Order shall include a description of the Services
requested, specifications, pricing, delivery and completion schedule, payment
schedule, special terms and conditions applicable to the specific project, a
Statement of Work, and testing and acceptance criteria. Each Work Order,
together with this Agreement, is a separate contract governed by the terms and
conditions of this Agreement that will be effective as of the date signed by
authorized representatives of both COMPANY and OC. If any explicit terms of the
Work Order (including the Statement of Work) conflict with the terms of this
Agreement, such explicit terms of the Work Order will take precedence.
3.2 Changes to Work Orders. If COMPANY requests or OC recommends changes
----------------------
during performance of a Work Order, OC shall provide COMPANY with a written
change order proposal setting forth: (i) a description of the proposed changes;
(ii) the impact on pricing; (iii) the impact on the project schedule; and (iv) a
revised Statement of Work. COMPANY may accept or reject any such change order
proposal. A change order proposal shall be considered rejected if COMPANY does
not accept the change order proposal within ten business days after receipt of
the change order proposal. If accepted, change orders will be effective upon
execution
7
<PAGE>
of the change order proposal by COMPANY. Notwithstanding the foregoing, OC and
COMPANY may make minor, non-material modifications to the specifications in the
Work Order provided (i) such modifications do not limit, diminish or
substantially affect the scope of the Services or any work product to be
provided in connection therewith; and (ii) and OC shall promptly notify COMPANY
in writing of such modification and vice-versa.
3.3 Fees. Except as the Parties may mutually agree pursuant to an
----
individual Work Order, COMPANY agrees to pay OC for the Services at OC's
standard rates then in effect which OC charges to its most favored Affiliates or
licensees for such Services, as well as all reasonable, actual traveling and
living expenses incurred by OC's personnel in connection with providing the
Services. Such fees shall be paid according to the payment schedule defined in
the relevant Work Order. Notwithstanding the foregoing, but subject to Sections
2.2, 2.3 and 2.4, COMPANY shall pay OC for Services provided during the
Transition Period on the same cost basis on which OC accounts for its internal
capital projects. If OC engages the services of third parties to provide
requested Services, OC shall charge COMPANY for reimbursement of the charges of
such third parties, without surcharge.
4. COOPERATION. The Parties agree that representatives of each Party shall
-----------
meet every six (6) months, beginning in January, 1999, to discuss each Party's
technical developments during the preceding six (6) month period. Such
discussions shall be conducted pursuant to an agenda to be agreed by the parties
at least three (3) weeks before each such meeting. Neither Party shall be
required to disclose information about its developments in any more detail than
is reasonably necessary to inform the other Party of the general nature and
practical applications of
8
<PAGE>
any such developments to the manufacture of Business Products. Such meetings are
intended to inform each Party of technical developments that may be of interest
for potential licensing or provision of related Services. Neither Party shall be
obligated to supply more detailed information, to license any technology related
to any disclosed development, or to provide Services related to any disclosed
development. Each Party may submit a report annually to COMPANY's Board of
Directors on the respective Party's assessment of the conduct and results of the
meetings held during the preceding year.
5. INTELLECTUAL PROPERTY. Except as the Parties may otherwise agree, OC shall
---------------------
own all right, title and interest in and to any intellectual property including,
but not limited to, copyrights, patents, and trade secrets, created by OC in the
performance of Services for COMPANY. The foregoing intellectual property rights
include, but are not limited to: (i) all rights to register, or to renew any
registration(s) or letter(s) patent for, such intellectual property; and (ii)
all causes of action related to such intellectual property rights, including the
right to sue for past damages. COMPANY agrees to execute and deliver any and
all documents that OC reasonably determines may be necessary or desirable to
perfect OC's ownership of any intellectual property rights hereunder. COMPANY
shall not attempt to register any such intellectual property with the U.S.
Copyright Office, the U.S. Patent and Trademark Office, or in any foreign
counterparts to those U.S. offices. Notwithstanding anything explicit or
implied to the contrary in this Agreement, all intellectual property created by
OC in the rendering of Services under this Agreement shall constitute Seller
Licensed Know How and/or Seller Licensed Patents, as appropriate, under the
License Agreement and be governed by the terms and
9
<PAGE>
provisions of the License Agreement which shall govern COMPANY's and OC's use of
and rights to such intellectual property. The parties agree that COMPANY's use
of such intellectual property shall be royalty-free.
6. CONFIDENTIALITY.
---------------
6.1 Confidential Information. As used herein, Confidential Information
------------------------
shall mean any and all information of a confidential or proprietary nature
disclosed to or otherwise acquired or observed by either Party or its employees,
agents or representatives (each individually referred to as a "Recipient")
either directly or indirectly from the other Party ("Discloser"), including, but
not limited to, any information regarding either Party's research, development,
patents, software, technical data, know-how, trade secrets, knowledge, designs,
drawings, specifications, concepts, data, reports, methods, processes,
documentation, methodology, pricing, marketing plans, customer lists, salaries
or business affairs.
6.2 Restrictions on Use and Disclosure. Recipient shall maintain the
----------------------------------
Discloser's Confidential Information in confidence using the same degree of care
as Recipient takes to safeguard its own confidential information of the same
general nature, but in no event shall Recipient use less than a reasonable
degree of care, and shall refrain from disclosing the Discloser's Confidential
Information to others. Except as otherwise provided herein, Recipient shall not
use, except for purposes expressly licensed under this Agreement, any
Confidential Information obtained directly or indirectly from Discloser.
6.3 Exclusions The obligations of confidentiality in Section 6.2 shall
----------
not apply to any information which:
10
<PAGE>
6.3.1 is or becomes known to the general public through no fault of
Recipient;
6.3.2 is received by Recipient without restriction on its disclosure
or in good faith from a third party purporting to have the right to transmit the
same;
6.3.3 is independently developed by employees of Recipient who have
had no access to the Confidential Information; and/or
6.3.4 is required to be disclosed to governmental authorities or
courts as a result of a court order, provided however, immediate written notice
of any request by governmental authorities or courts for the disclosure of
Confidential Information must be provided to Discloser, all reasonable steps
must be taken by Recipient to restrict further disclosure of the affected
information by such authorities or court, and information so disclosed shall not
be otherwise removed from these secrecy obligations.
7. WARRANTY/LIMITATION OF LIABILITY
--------------------------------
7.1 OC Representations and Warranties. OC represents and warrants that:
---------------------------------
7.1.1 The Services and any work product provided thereunder when
delivered to COMPANY shall conform to the specifications set out in the relevant
Work Order and shall be free and clear of all liens and encumbrances;
7.1.2 All Services shall be performed in a workmanlike manner;
7.1.3 OC shall have complied with all applicable laws, regulations,
ordinances and codes and OC shall have obtained those permits, licenses,
approvals and certificates, reasonably necessary for the provision of the
Services hereunder; and
11
<PAGE>
7.1.4 To the best of OC's knowledge, any work product to be provided
by OC hereunder shall not infringe any proprietary rights of any third parties.
7.2 OC Disclaimer. EXCEPT AS PROVIDED IN SECTION 7.1 HEREIN, OC MAKES NO
-------------
OTHER REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE SERVICES OR ANY
WORK PRODUCT DELIVERED HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE OR
PURPOSE, EVEN IF DISCLOSED TO OC, AND OC HEREBY DISCLAIMS ANY SUCH OTHER
REPRESENTATION OR WARRANTY.
7.3 OC Indemnification Obligation. OC shall defend, indemnify and hold
-----------------------------
harmless COMPANY, its Affiliates, and all of their officers, directors,
employees, agents, successors and assigns (a "COMPANY Indemnified Party") from
and against any and all liability, loss, damages, judgments, costs or expenses
(including reasonable attorneys' fees and court costs) which the COMPANY
Indemnified Party may incur, suffer or be required to pay based on a claim that
any work product provided by OC hereunder infringes any third party proprietary
rights, provided that COMPANY: (i) gives OC prompt written notice of any such
claim; (ii) allows OC to direct the defense and settlement of the claim; and
(iii) provides OC with the authority, information and assistance that OC deems
reasonably necessary for the defense and settlement of the claim.
Notwithstanding the foregoing, OC shall have no liability for any infringement
claim to the extent it is based on: (a) a modification of the OC work product
other than by OC or its authorized agents; (b) use of OC work product by COMPANY
beyond the scope of this Agreement or the specifications for such work product
identified in any relevant
12
<PAGE>
Work Order; or (c) specifications or technology provided by COMPANY for the
development of the OC work product or related Services.
7.4 Limitation of OC Liability. Except as provided in Section 7.3 above,
--------------------------
OC's sole liability with respect to the Services provided by OC under this
Agreement, and whether based upon breach of warranty, negligence, strict
liability, tort, breach of contract or any other theory, shall be limited to and
shall in no event in the aggregate exceed the fees charged hereunder for the
relevant Services. OC shall have no liability to any person other than COMPANY
by virtue of the sale of the Services hereunder and the other matters
contemplated by this Agreement.
7.5 Limitation of COMPANY's Remedies. Except as provided in Section 7.3,
--------------------------------
COMPANY's sole and exclusive remedy and the limit of OC's liability for breach
of the warranties set forth in Section 7.1 above, whether based upon breach of
warranty, negligence, strict liability, tort, breach of contract or any other
theory, shall be, at OC's option, (a) replacement of the non-conforming work
product, without charge, F.O.B. COMPANY's facility; or (b) refund of the
purchase price paid in respect of such non-conforming work product or associated
Services, plus commercially reasonably charges in connection with the return or
disposition of the non-conforming work product. If OC elects to replace the
non-conforming work product, it shall do so at no cost to COMPANY. To effect
this sole and exclusive remedy, COMPANY must make its claim for breach of
warranty within 12 months of the date of commercial operation of the work
product, and any such claim not then made shall be irrevocably waived.
7.6 Limitation of Consequential Damages. THE FOREGOING IS THE ENTIRE
-----------------------------------
OBLIGATION OF OC PURSUANT TO THIS AGREEMENT. OC SHALL NOT BE LIABLE
13
<PAGE>
PURSUANT TO THIS AGREEMENT FOR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT
OR PENAL DAMAGES TO ANY PERSON, WHETHER BASED UPON BREACH OF WARRANTY,
NEGLIGENCE, STRICT LIABILITY, TORT, BREACH OF CONTRACT OR ANY OTHER THEORY, OR
FOR FAILURE TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT. ADDITIONAL,
CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT OR PENAL DAMAGES SHALL NOT BE
RECOVERABLE EVEN IF THE REPLACEMENT OR REFUND REMEDY FOR OC'S BREACH OF ITS
LIMITED WARRANTY FAILS OF ITS ESSENTIAL PURPOSE OR FOR ANY OTHER REASON.
7.7 No Waiver. No statement or recommendation made or assistance given by
---------
OC, or its representatives, either oral or in any literature or other
documentation, to COMPANY, its customers or any other persons in connection with
the Services, shall constitute a waiver by OC of any provision hereof or affect
OC's liability as herein defined; and no such statement, recommendation or
assistance that is not expressly required by the provisions of this Agreement
shall subject OC to any liability of any nature whatsoever.
7.8 COMPANY's Indemnification Obligations. COMPANY shall defend,
-------------------------------------
indemnify and hold harmless OC, its Affiliates, and all of their officers,
directors, employees, agents, successors and assigns (an "OC Indemnified Party")
from and against any and all liability, loss, damages, judgments, costs or
expenses (including reasonable attorneys' fees and court costs) which the OC
Indemnified Party may incur, suffer or be required to pay based on a claim that
any modification or addition by COMPANY, its agents or contractors to the OC
work product infringes any third party proprietary rights, provided that OC:
(i) gives COMPANY prompt
14
<PAGE>
written notice of any such claim; (ii) allows COMPANY to direct the defense and
settlement of the claim; and (iii) provides COMPANY with the authority,
information and assistance that COMPANY deems reasonably necessary for the
defense and settlement of the claim. Notwithstanding the foregoing, COMPANY
shall have no liability hereunder to the extent such claims could have arisen
independent of such modifications or additions.
7.9 Additional Indemnities. Notwithstanding anything in this Article 7 to
----------------------
the contrary, OC and COMPANY each agree to indemnify, defend and hold harmless
the other, its Affiliates, and all of their officers, directors, employees,
agents, successors, and assigns from any and all losses, liabilities, damages
and claims (including taxes) and all related costs and expenses (including
reasonable legal fees and disbursements and costs of investigation, litigation,
settlement, judgment, interest and penalties) (the "Losses") and threatened
Losses arising from or in connection with any of the following: (i) the death
or bodily injury of any agent, employee, business invitee, or business visitor
or other person caused by the tortious conduct of the indemnitor; or (ii) the
damage, loss, or destruction of any real or tangible personal property caused by
the tortious conduct of the indemnitor.
8. TERM AND TERMINATION.
--------------------
8.1 Term. Unless otherwise earlier terminated as provided below, the term
----
of this Agreement shall be for five (5) years beginning as of the Effective Date
(the "Initial Term"), unless earlier terminated as provided herein. Thereafter,
this Agreement shall automatically be renewed for periods of one (1) year (a
"Renewal Term") unless either Party provides written
15
<PAGE>
notice to the other Party of its intent to terminate the Agreement thirty (30)
days prior to the expiration of the then preceding Initial Term or Renewal Term.
8.2 Termination. Either Party may terminate this Agreement upon thirty
-----------
(30) days advance written notice to the other Party in the event the other Party
materially breaches any of its obligations under this Agreement and does not
cure such breach with the thirty (30) day period or such other period upon which
the parties may agree. COMPANY may terminate this Agreement upon thirty (30)
days advance written notice to OC in the event that OC: (i) divests its
ownership interest in COMPANY; (ii) divests its composites business; or (iii)
otherwise ceases its involvement in the composites industry. OC may terminate
this Agreement upon thirty (30) days advance written notice to OC in the event
of a change in control of COMPANY.
8.3. Obligations Upon Termination. Upon termination of this Agreement for
----------------------------
any reason, each Party shall promptly return to the other Party, or certify the
destruction of, all copies of the other Party's Confidential Information.
9. MISCELLANEOUS
-------------
9.1 Notices. All communications provided for hereunder shall be in
--------
writing and shall be deemed to be given when delivered in person or by private
courier with receipt, when telefaxed and received, or three (3) days after being
deposited in the United States mail, first-class, registered or certified,
return receipt requested, with postage paid and,
If to COMPANY: Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Fax: 803-643-1526
Attn: The General Manager
16
<PAGE>
With a copy to: AGY Holdings, Inc.
c/o Glass Holdings Corp.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336-545-7715
Attention: President
And to: Jefferson Holdings, Inc.
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
If to Owens Corning: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-325-1180
Attention: Secretary
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such Party shall designate by written notice to
the other parties hereto.
9.2 Assignability. This Agreement shall be binding upon and shall inure
-------------
to the benefit of both Parties and their respective successors and assigns.
Except as otherwise expressly provided herein, this Agreement shall not be
assigned by either Party hereto without the express prior written consent of the
other Party, and any attempted assignment, without such consents, shall be null
and void. Notwithstanding any nonassignment provisions contained in this
Section 9.2, COMPANY, or any permitted assignee or transferee of COMPANY, may
assign or otherwise transfer all of its rights and/or obligations hereunder (i)
to any entity or entities, or any
17
<PAGE>
assignee of such entity or entities, providing financing for the transactions
contemplated by the SPA or to any entity or entities providing to COMPANY,
COMPANY's Affiliates, or to any such permitted assignee of COMPANY, financing
relating to the operations of COMPANY (collectively, the "Financing Sources"),
(ii) to any entity that is an Affiliate of the COMPANY on the Effective Date,
provided that (x) such Affiliate shall agree with OC and its permitted assignees
or transferees, if any, in writing to assume the COMPANY's obligations hereunder
and (y) any such assignment to an Affiliate of the COMPANY shall not relieve the
COMPANY from its obligations hereunder or (iii) to any entity to which COMPANY,
or any assignee or transferee of COMPANY, assigns, sells, transfers or otherwise
conveys (A) all or substantially all of the assets constituting the Business (a
"Complete Assignment") or (B) all or substantially all of the assets
constituting either the Aiken Facility, the Huntington Facility or the South
Hill Facility (a "Partial Assignment") provided that such entity or Affiliate is
not Compagnie Saint Gobain or any Affiliate thereof, and further provided that
such acquiring entity agrees with and acknowledges in writing to OC and its
permitted assignees or transferees, if any, that this Agreement shall be binding
upon and enforceable against such entity as though such acquiring entity were
COMPANY and that such entity shall perform all of COMPANY's obligations
hereunder. Notwithstanding any nonassignment provisions contained in this
Section 9.2, OC, or any permitted assignee or transferee of OC, may assign or
otherwise transfer some or all of its rights and/or obligations hereunder to (a)
any Affiliate of OC, provided that (x) such Affiliate shall agree with COMPANY
and its permitted assignees or transferees, if any, in writing to assume OC's
obligations hereunder and (y) any such assignment to an Affiliate of OC shall
not relieve OC from its obligations hereunder, or (b) any entity to which OC, or
any assignee or
18
<PAGE>
transferee of OC, assigns, sells, transfers or otherwise conveys all or
substantially all of the assets constituting (i) the business which owns OC's
interest in COMPANY, or (ii) OC's composites business and/or the Granville, Ohio
facility, provided that such acquiring entity agrees with and acknowledges in
writing to COMPANY and its permitted assignees or transferees, if any, that this
Agreement shall be binding upon and enforceable against such entity as though
such acquiring entity were OC and that such entity shall perform all of OC's
obligations hereunder. To the extent that assignment and/or transfer of any of
the rights, privileges, and/or obligations is permitted, this Agreement shall be
binding on, and except as otherwise expressly provided, shall inure to the
benefit of, the legal successors, assigns, or representatives of the Parties.
9.3 Amendment; Waiver. This Agreement may be amended, supplemented or
-----------------
otherwise modified only by a written instrument executed by the Parties hereto.
No waiver by either Party of any of the provisions hereof shall be effective
unless explicitly set forth in writing and executed by the Party so waiving.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any Party, shall be deemed to constitute a waiver by the Party taking such
action of compliance with any representations, warranties, covenants or
agreements contained herein, and in any documents delivered or to be delivered
pursuant to this Agreement and in connection with the closing hereunder. The
waiver by any Party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
9.4 Third Parties. This Agreement does not create any rights, claims or
-------------
benefits inuring to any person that is not a party hereto nor create or
establish any third party beneficiary hereto.
19
<PAGE>
9.5 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of New York without giving effect to the
conflicts of law principles thereof.
9.6 Entire Agreement. This Agreement and the Exhibit hereto supersede
----------------
any prior agreement between the Parties with respect to the subject hereof, and
constitute the entire agreement between the Parties with respect to the subject
hereof.
9.7 Headings. The article and section headings contained in this
--------
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
9.8 Severability. If any provision of this Agreement shall be declared
------------
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
9.9 Counterparts. This Agreement may be executed in 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.
9.10 Relationship of the Parties. Nothing contained in this Agreement
---------------------------
shall be construed to: (i) give either Party the power to direct or control the
day-to-day activities of the other; (ii) create a partnership, joint venture, or
economic interest group between the Parties; or (iii) allow either Party to
create or assume any obligation on behalf of the other Party for any purpose
whatsoever, except as specifically provided for in this Agreement.
9.11 Survival. The rights and obligations contained in Section 2.5,
--------
Section 2.6.2, Articles 5, 6, and 7, Section 8.4, Section 9.5 and this Section
9.11 shall survive termination or expiration of this Agreement.
20
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Support Services Agreement
to be duly executed as of the Effective Date.
OWENS CORNING
By: /s/ Charles E. Dana
-----------------------
Name: Charles E. Dana
Title: Vice President
ADVANCED GLASSFIBER YARNS, LLC
By: /s/ Robert B. Fisher
------------------------
Name: Robert B. Fisher
Title: General Manager
21
<PAGE>
EXHIBIT 10.11
SOFTWARE LICENSE AGREEMENT
--------------------------
This Software License Agreement (the "Agreement") is made as of September
30, 1998 (the "Effective Date"), between Owens Corning ("OC"), a Delaware
corporation with its principal place of business located at One Owens Corning
Parkway, Toledo, Ohio 43659, and Advanced Glassfiber Yarns, LLC ("COMPANY"), a
Delaware limited liability COMPANY with its principal place of business located
at 2556 Wagner Road, Aiken, South Carolina 29801.
WHEREAS COMPANY was formed to conduct the glass fiber specialty product
manufacturing business formerly conducted by OC in Aiken, South Carolina,
Huntingdon, Pennsylvania, and South Hill, Virginia (the "Business");
WHEREAS, pursuant to an LLC Interest Sale and Purchase Agreement, dated as
of July 31, 1998, as amended, (the "SPA") among OC, COMPANY and AGY Holdings,
Incorporated (as assignee of Glass Holdings Corp. under an Assignment and
Assumption Agreement dated September 30, 1998), AGY Holdings, Incorporated
agreed to purchase a 51% membership interest in COMPANY;
WHEREAS, OC and its Affiliates have proprietary software related to the
Business, and the parties have agreed that certain of the rights will be
licensed by OC to COMPANY.
NOW, THEREFORE, in consideration of the premises of and the mutual promises
and agreements in the SPA and contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1
<PAGE>
1. DEFINITIONS
-----------
Capitalized terms not defined herein shall have the meanings ascribed to
them in the SPA.
As used in this Agreement, the following defined terms shall have the
meanings indicated below:
(a) "Existing Third Party Software" means all third party software in use
-----------------------------
at the Manufacturing Facility for purposes of the Business as of the Effective
Date.
(b) "Manufacturing Facilities" means the portions of OC's facilities at
------------------------
Aiken, South Carolina, Huntingdon, Pennsylvania, and South Hill, Virginia to be
transferred to COMPANY which do not include the portions of the Aiken and
Huntingdon facilities at which OC manufactures continuous filament mat or wet
process mat.
(c) "OC Software" means: (i) all OC proprietary software in use at the
-----------
Manufacturing Facilities for purposes of the Business as of the Effective Date,
including the software identified in Schedule A to this Agreement, consisting of
a series of instructions or statements in machine-readable object code form;
(ii) all revisions or updates provided by OC to COMPANY, if any; and (iii) all
manuals, handbooks and other written materials relating thereto provided by OC
to COMPANY, if any (the "Documentation").
2. RIGHTS TO OC SOFTWARE
---------------------
2.1 License Grant. Subject to the terms and conditions set forth herein,
-------------
OC grants to COMPANY a non-exclusive, royalty-free, perpetual license to use the
OC Software in support of the operation of the Business at the Manufacturing
Facilities and such other locations as
2
<PAGE>
COMPANY may designate subject to OC's prior written approval, which approval
shall not be unreasonably withheld. The foregoing license shall include the
right to sublicense to COMPANY's Affiliates; provided, however, that (i) COMPANY
-------- -------
shall not have the right to sublicense its rights to Compagnie Saint Gobain or
any Affiliate thereof; (ii) all permitted sublicensees must agree in writing to
be bound by the terms and conditions of this Agreement; and (iii) all
sublicenses shall be subject to OC's consent, which consent shall not be
unreasonably withheld.
2.2 Revisions and Upgrades. Each party shall promptly provide the other
----------------------
party with a copy of any revisions or upgrades to the OC Software that it
develops; provided, however, that neither party shall have any obligation to
-------- -------
develop such revisions or upgrades.
3. LIMITATIONS ON USE.
------------------
3.1 COMPANY may make no more than one copy of the OC Software for backup
purposes only; provided, however, that in the event OC no longer retains a copy
-------- -------
of the OC Software, COMPANY may make multiple copies of the OC Software as
necessary to maintain and support the software.
3.2 COMPANY may not, directly or indirectly, decompile, disassemble,
reverse engineer or otherwise attempt to derive source code for the OC Software,
or copy or adapt the OC Software for purposes other than correcting errors or
bugs in the OC Software or maintaining the OC Software after OC has abandoned
regular support and servicing of the OC Software, directly or through a third
party service provider, without the prior written consent of OC, which consent
may be withheld at OC's sole discretion.
3
<PAGE>
3.3 Except as provided in Section 2.1 above, COMPANY may not sell, assign,
lease, sublicense, give or otherwise transfer, disclose or grant access to the
OC Software or any copy thereof (including copies into RAM) to any other party
other than an Affiliate of COMPANY, without the written consent of OC.
3.4 COMPANY shall not modify, enhance, create derivative works or
otherwise change or attempt to change the OC Software without OC's prior written
consent.
3.5 COMPANY agrees that a modification or enhancement to the OC Software
developed by COMPANY with or without advice or support by OC or by OC for
COMPANY, whether or not reimbursed by COMPANY and whether or not developed in
conjunction with COMPANY's employees, agents, or contractors, shall be the
exclusive property of OC. COMPANY further agrees that modified or enhanced
versions of the OC Software fall under the other terms and conditions of this
Agreement.
4. THIRD PARTY SOFTWARE.
--------------------
4.1 OC shall endeavor to obtain for the benefit of COMPANY all rights
necessary to the Existing Third Party Software in order that COMPANY may
continue to use such Existing Third Party Software (i) in the same manner and
(ii) at the same locations as such software was used by OC as of the Effective
Date and all other locations from which the Company operates. In the event
COMPANY is not a direct licensee of the Existing Third Party Software at such
time as OC discontinues use of the software, OC shall use commercially
reasonable efforts to obtain a transfer of any rights OC may have in the
software to COMPANY at COMPANY's sole expense.
4
<PAGE>
4.2 Subject to OC's consent under Sections 3.2 and 3.4 above, to the
extent COMPANY may require revisions to the OC Software, COMPANY shall first
look to any third party service provider responsible for maintaining such
software pursuant to a service contract with OC, and if no such third party
service provider has been designated, shall look to OC for assistance in
developing such revisions. In the event OC cannot or does not agree to assist
COMPANY with such revisions, COMPANY may seek the assistance of a third party
service provider, provided that such third party service provider shall agree
(i) to be bound by the confidentiality provisions of Article 7 of this
Agreement, and (ii) to assign all of its intellectual property and proprietary
rights in any such revision to OC.
5. TERM AND TERMINATION
--------------------
5.1 Term. This Agreement shall remain in effect perpetually unless
-----
earlier terminated as provided below.
5.2 Remedies for Breach
-------------------
5.2.1 If either party commits a material breach of any provision of
this License Agreement and fails to correct such breach within thirty (30) days
after written notice from the other party, neither party shall have the right to
terminate this agreement or to suspend its performance hereunder and this
Agreement shall not be terminable, but such party shall have available all other
legal and equitable remedies to which it may be entitled.
5.2.2 Without limiting the foregoing, each party recognizes that
irreparable injury will result from a breach of any provision of this Agreement
not curable solely by the payment of money damages and that money damages will
be inadequate to fully remedy such
5
<PAGE>
injury. Accordingly, in the event of a breach or threatened breach of one or
more of the provisions of this Agreement, including, but not limited to, the
confidentiality provisions of Article 7, either party, in addition to any other
remedies available to it, will be entitled to one or more preliminary or
permanent orders (i) restraining and enjoining any act which would constitute a
breach, or (ii) compelling performance of any obligations which, if not
performed, would constitute a breach. Nothing contained in this Section 5.2.2 is
intended to limit the rights of either party to seek or any court to enter any
lawful form of equitable relief or any available provision of such relief
ordered by the court, other than termination of this Agreement.
5.3 Termination. This Agreement shall terminate immediately upon the
-----------
transfer of any or all of the assets of the COMPANY to Compagnie Saint Gobain or
any Affiliate thereof, or upon the COMPANY becoming an Affiliate of Compagnie
Saint Gobain. Immediately upon termination of this Agreement, COMPANY shall
cease using the OC Software and return all copies of the OC Software to OC or
destroy them. Within thirty (30) days from the date of termination, COMPANY
shall provide OC with a written statement certifying that all copies of the OC
Software have been returned to OC or destroyed.
6. OWNERSHIP RIGHTS
----------------
Any reference to sale or purchase notwithstanding, title to the OC Software
and all copies thereof shall be and remain in OC, and no title to or ownership
of the OC Software or any portion thereof is conveyed or transferred to COMPANY.
COMPANY acknowledges that the OC Software contains confidential and proprietary
information and trade secrets of OC whether or not the OC Software, or any
portion thereof, is or may be copyrighted or copyrightable and/or
6
<PAGE>
patented or patentable, and that disclosure of the OC Software to COMPANY is on
the basis of the confidential relationship between COMPANY and OC under this
Agreement.
7. CONFIDENTIALITY
---------------
COMPANY acknowledges that the OC Software is supplied in the strictest
confidence and contains valuable trade secrets of OC. COMPANY hereby agrees to
maintain the OC Software in confidence using the same degree of care as COMPANY
takes to safeguard its own proprietary information and trade secrets of the same
general nature, but in no event shall COMPANY use less than a reasonable degree
of care, and to refrain from publishing or disclosing the OC Software to others
(except as expressly provided in Section 2.1 above). COMPANY shall disclose
the confidential information contained in the OC Software only to those
employees and agents of COMPANY that have a reasonable need to use the OC
Software in connection with the purposes of this Agreement. COMPANY shall
promptly report to COMPANY any unauthorized disclosure or use of the OC Software
of which it becomes aware and shall take such further steps as may reasonably be
requested by OC to prevent unauthorized use thereof.
8. PROPRIETARY NOTICES
-------------------
COMPANY shall not remove, alter or modify any proprietary rights notice(s)
included on or associated with the OC Software.
7
<PAGE>
9. OC'S REPRESENTATIONS AND WARRANTIES.
-----------------------------------
9.1 OC represents and warrants that it has the necessary authority and
title to grant the license in Section 2 and to enter into and perform its
obligations under this Agreement and it has not acted in any way that would
interfere with COMPANY's rights as granted herein except as otherwise disclosed
herein or in the SPA.
9.2 COMPANY ACKNOWLEDGES THAT OC DELIVERS THE OC SOFTWARE "AS IS."
EXCEPT AS PROVIDED IN SECTION 9.1, OC MAKES NO WARRANTIES WHATSOEVER WITH
RESPECT TO THE OC SOFTWARE, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES OF
MERCHANTABILITY. OC EXPRESSLY DISCLAIMS ANY WARRANTIES REGARDING THE ABILITY OF
THE OC SOFTWARE TO OPERATE PROPERLY THROUGH AND AFTER THE CHANGING OF THE
CALENDAR YEAR TO 2000.
10. OC INDEMNIFICATION OBLIGATIONS.
------------------------------
10.1 OC Software. OC shall defend, indemnify and hold harmless COMPANY,
-----------
its Affiliates, and all of their officers, directors, employees, agents,
successors and assigns (a "COMPANY Indemnified Party") from and against any and
all liability, loss, damages, judgments, costs or expenses (including reasonable
attorneys' fees and court costs) which the COMPANY Indemnified Party may incur,
suffer or be required to pay based on a claim that the OC Software infringes any
third party proprietary rights, provided that COMPANY: (i) gives OC prompt
written notice of any such claim; (ii) allows OC to direct the defense and
settlement
8
<PAGE>
of the claim; and (iii) provides OC with the authority, information and
assistance that OC deems reasonably necessary for the defense and settlement of
the claim. Notwithstanding the foregoing, OC shall have no liability for any
infringement claim to the extent it is based on: (a) a modification of the OC
Software other than by OC or its authorized agents; (b) use of the OC Software
beyond the scope of this Agreement or the specifications for such OC Software
identified in any relevant documentation; or (c) specifications or technology
provided by COMPANY for the development of the OC Software.
10.2 Existing Third Party Software. OC shall defend, indemnify and hold
-----------------------------
harmless a COMPANY Indemnified Party from and against any and all liability,
loss, damages, judgments, costs or expenses (including reasonable attorneys'
fees and court costs) which the COMPANY Indemnified Party may incur, suffer or
be required to pay arising from a challenge by any third party based on
COMPANY's use of Existing Third Party Software, provided that COMPANY: (i)
gives OC prompt written notice of any such claim; (ii) allows OC to direct the
defense and settlement of the claim; and (iii) provides OC with the authority,
information and assistance that OC deems reasonably necessary for the defense
and settlement of the claim. In the event of any such challenge, OC shall, in
its sole discretion and at its sole cost, either (i) obtain for COMPANY the
right to continue using such Existing Third Party Software; or (ii) replace such
Existing Third Party Software with software that performs substantially the same
functions. Notwithstanding the foregoing, with respect to such Existing Third
Party Software for which COMPANY is a party to a license with the third party
software provider, OC shall have no obligation to indemnify COMPANY for any
breach of COMPANY's obligations under such third party license.
9
<PAGE>
11. LIMITATION OF LIABILITY.
-----------------------
EXCEPT FOR A BREACH OF SECTIONS 3, 6, 10 OR 12, IN NO EVENT SHALL ANY
PARTY, AS A RESULT OF THE AGREEMENT SET FORTH HEREIN, BE LIABLE FOR ANY SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, PERSONAL
INJURY, PROPERTY DAMAGE, OR SHUTDOWN OR NON-OPERATION OF ANY FACILITY, HOWEVER
CAUSED OR UNDER ANY THEORY OF LIABILITY, WHETHER BASED IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY, PATENT INFRINGEMENT OR OTHERWISE AND
REGARDLESS OF WHETHER EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE, EXCEPT TO THE EXTENT OF A PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OR AS PERMITTED UNDER THE SPA.
12. COMPANY INDEMNIFICATION OBLIGATIONS
-----------------------------------
COMPANY shall defend, indemnify, and hold harmless OC, its Affiliates, and
all of their officers, directors, employees, agents, successors and assigns (an
"OC Indemnified Party") from and against any and all liability, loss, damages,
judgments, costs or expenses (including reasonable attorneys' fees and court
costs) which the OC Indemnified Party may incur, suffer, or be required to pay
based on a claim that COMPANY's use of the OC Software other than as
contemplated by this Agreement infringes any third party proprietary rights,
provided that OC: (i) give COMPANY prompt written notice of any such claim; (ii)
allows COMPANY to direct the defense and settlement of the claim; and (iii)
provides COMPANY with the authority,
10
<PAGE>
information, and assistance that COMPANY deems reasonably necessary for the
defense and settlement of the claim.
13. MAINTENANCE AND SUPPORT. Maintenance and support services being provided
-----------------------
by a third party service provider as of the Effective Date for the OC Software
and Existing Third Party Software shall continue to be provided to COMPANY under
the same terms and conditions as such services were provided to OC, at COMPANY's
cost (it being understood that COMPANY shall be under no obligation to obtain or
continue such maintenance or support services after OC has discontinued use of
such third party services). In the event COMPANY requires additional services
from third party service providers, including, but not limited to, training,
COMPANY shall obtain such additional services at COMPANY's own incremental cost.
COMPANY at its option may request that OC provide training services, such
services to be provided pursuant to the Support Services Agreement dated as of
September 30, 1998. To the extent any OC Software is not currently being
maintained and supported by a third party service provider, OC shall use
commercially reasonable efforts to provide assistance to COMPANY to correct
errors in such OC Software pursuant to the provisions of the parties'
Transitional Services Agreement dated September 30, 1998 and the Support
Services Agreement dated September 30, 1998.
14 MISCELLANEOUS AGREEMENTS OF THE PARTIES
---------------------------------------
14.1 Notices. All communications provided for hereunder shall be in
--------
writing and shall be deemed to be given when delivered in person or by private
courier with receipt, when
11
<PAGE>
telefaxed and received, or three (3) days after being deposited in the United
States mail, first-class, registered or certified, return receipt requested,
with postage paid and,
If to Company: Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
Fax: 803-643-1526
Attention: General Manager
With a copy to: AGY Holdings, Inc.
c/o Glass Holdings Corp.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Fax: 336-545-7715
Attention: President
If to Owens Corning: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-325-1180
Attention: Secretary
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such party shall designate by written notice to
the other parties hereto.
14.2 Assignability. This Agreement shall be binding upon and shall inure
-------------
to the benefit of the parties and their respective successors and assigns.
Except as otherwise expressly provided herein, this Agreement shall not be
assigned by any party hereto without the express prior written consent of the
other parties, and any attempted assignment, without such consents, shall be
null and void. Notwithstanding any nonassignment provisions contained in this
Section
12
<PAGE>
14.2, COMPANY, or any permitted assignee or transferee of COMPANY, may assign or
otherwise transfer all of its rights and/or obligations hereunder (i) to any
entity or entities, or any assignee of such entity or entities, providing
financing for the transactions contemplated by the SPA or to any entity or
entities providing to COMPANY, COMPANY's Affiliates, or to any such permitted
assignee of COMPANY, financing relating to the Business (collectively, the
"Financing Sources"), (ii) to any Affiliate of COMPANY, provided that (x) such
Affiliate shall agree with COMPANY and its permitted assignees or transferees,
if any, in writing to assume the COMPANY's obligations hereunder and (y) any
such assignment to an Affiliate of the COMPANY shall not relieve COMPANY from
its obligations hereunder or (iii) to any entity to which COMPANY, or any
assignee or transferee of COMPANY, assigns, sells, transfers or otherwise
conveys (A) all or substantially all of the assets constituting the Business (a
"Complete Assignment") or (B) all or substantially all of the assets
constituting either the Aiken Facility, the Huntington Facility or the South
Hill Facility (a "Partial Assignment"), and further provided that such entity or
Affiliate is not Compagnie Saint Gobain, provided that such acquiring entity
agrees with and acknowledges in writing to OC and its permitted assignees or
transferees, if any, that this Agreement shall be binding upon and enforceable
against such entity as though such acquiring entity were COMPANY and that such
entity shall perform all of COMPANY's obligations hereunder. Notwithstanding any
nonassignment provisions contained in this Section 14.2, OC or any permitted
assignee or transferee of OC, may assign or otherwise transfer some or all of
its rights and/or obligations hereunder to any Affiliate of OC, provided that
(x) such Affiliate shall agree in writing to assume OC's obligations hereunder
and (y) any such assignment to an Affiliate of OC shall not relieve OC from its
obligations hereunder. To the
13
<PAGE>
extent that assignment and/or transfer of any of the rights, privileges, and/or
obligations is permitted, this Agreement shall be binding on, and except as
otherwise expressly provided, shall inure to the benefit of, the legal
successors, assigns, or representatives of the parties.
14.3 Amendment; Waiver. This Agreement may be amended, supplemented or
-----------------
otherwise modified only by a written instrument executed by the parties hereto.
No waiver by either party of any of the provisions hereof shall be effective
unless explicitly set forth in writing and executed by the party so waiving.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained herein, and in any documents delivered or to be delivered
pursuant to this Agreement and in connection with the closing hereunder. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
14.4 Third Parties. This Agreement does not create any rights, claims or
--------------
benefits inuring to any person that is not a party hereto nor create or
establish any third party beneficiary hereto.
14.5 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of New York without giving effect to the
conflicts of law principles thereof.
14.6 Entire Agreement. This Agreement and the Schedules and Exhibits
-----------------
hereto supersede any prior agreement between the parties with respect to the
subject hereof, and constitute the entire agreement between the parties with
respect to the subject hereof.
14
<PAGE>
14.7 Section Headings. The section headings contained in this Agreement
-----------------
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
14.8 Severability. If any provision of this Agreement shall be declared
-------------
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
14.9 Counterparts. This Agreement may be executed in 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.
14.10 Survival. All obligations with respect to confidentiality,
--------
indemnification, governing law and survival shall survive termination of this
Agreement.
IN WITNESS WHEREOF, the parties have caused this Software License Agreement
to be duly executed as of the Effective Date.
OWENS CORNING
By: /s/ Charles E. Dana
------------------------
Name: Charles E. Dana
Title: Vice President
ADVANCED GLASSFIBER YARNS, LLC
By: /s/ Robert B. Fisher
-------------------------
Name: Robert B. Fisher
Title: General Manager
<PAGE>
EXHIBIT 10.12
EXECUTION COPY
KEEP-WELL AGREEMENT
(AMENDED AND RESTATED)
This Amended and Restated Keep-Well Agreement dated as of September 30,
1998 between Owens Corning, a Delaware corporation ("Owens Corning"), and
Advanced Glassfiber Yarns, LLC (the "Company") amends and restates in its
entirety, the Keep-Well Agreement of even date herewith between Owens Corning
and the Company and sets forth the binding agreement of the parties.
Preliminary Statement
- ---------------------
On the date hereof, the Company is entering into a series of transactions
as a result of which the ownership of the Company shall change from being 49%
owned by Jefferson Holdings, Inc., a wholly-owned subsidiary of Owens Corning,
and 51% by Owens Corning to being owned 49% by Jefferson Holdings and 51% by AGY
Holdings, Inc., a wholly-owned subsidiary of Glass Holdings Corp. In connection
with such change of ownership, the Company is entering into a Credit Agreement
dated as of September 30, 1998 for loans to be made to the Company by the banks
and financial institutions named therein as Lenders (the "Senior Credit
Agreement"), and the Company is entering into a Senior Subordinated Credit
Agreement dated as of September 30, 1998 for bridge loans to be made by the
banks and the financial institutions named therein as Lenders (the "Subordinated
Credit Agreement"). In order to facilitate the contemplated transactions defined
in the Subordinated Credit Agreement as the "JV Transactions", Owens Corning has
agreed to enter into this Agreement to support the credit of the Company.
Defined terms used in this Agreement which are not separately defined herein
shall have the meanings ascribed thereto in the Subordinated Credit Agreement,
except that if a term not otherwise defined herein is used in this Agreement
with respect to any Subordinated Indebtedness other than the Bridge Notes, such
term shall have the meaning ascribed thereto in the agreement or instrument
governing such Subordinated Indebtedness.
1. Support for Liquidity. Subject to the conditions and the specific
---------------------
limits of time and amount set forth herein, Owens Corning agrees to support the
liquidity of the Company in order to permit the Company to pay interest when and
as due in respect of the Bridge Loans, the Exchange Notes and the Take-Out
Securities or other subordinated indebtedness issued under or to refinance the
subordinated indebtedness under the Subordinated Credit Agreement (collectively,
the "Subordinated Indebtedness") and, as available after satisfaction of the
foregoing, the Senior Indebtedness. In the event (i) the Company shall not have
liquid resources to meet its obligations to pay interest on the Subordinated
Indebtedness on any Interest Payment Date or at maturity (whether by prepayment,
acceleration or otherwise) of the Subordinated Indebtedness (including interest
that becomes due or is past due on such date), in either case occurring during
the term of this Agreement or (ii) the Company shall not have liquid resources
to meet its obligations to pay interest on the Senior Indebtedness on any
Interest Payment Date
<PAGE>
as defined in the Senior Credit Agreement (a "Senior Interest Payment Date"), or
at maturity of the Senior Indebtedness (whether by prepayment, acceleration or
otherwise) of the Senior Indebtedness (including interest due or past due on any
such date), in either case occurring during the term of this Agreement, then the
Company shall give notice to Owens Corning either within ten Business Days prior
or ten Business Days after the relevant Interest Payment Date, Senior Interest
Payment Date or maturity date (as the case may be), specifying in such notice
(i) the amount of the interest payment or payments due and the amount of
liquidity required by the Company to make (or the amount of the deficiency
incurred in relation to) such interest payment or payments and (ii) the relevant
Interest Payment Date or maturity date. Such notice is referred to herein as a
"Deficiency Notice".
2. Advance of Member Loans. Within five days following receipt of a
-----------------------
Deficiency Notice, Owens Corning shall advance and pay to the Company in cash
the amount of the aggregate deficiency so notified to Owens Corning; provided,
however, that in the case of a deficiency relating to Senior Indebtedness that
occurs (or is continuing) in respect of a Senior Interest Payment Date which is
neither an Interest Payment Date nor a maturity date with respect to any
Subordinated Indebtedness, no advance in respect of such deficiency shall be
payable and such deficiency shall (unless cured) carry forward until the fifth
day following the next Interest Payment Date (or maturity date on which interest
is payable on Subordinated Indebtedness). Then on or within five Business Days
after such Interest Payment Date (or maturity date), Owens Corning shall advance
the aggregate deficiency (up to the maximum amount available) provided, however,
that the aggregate amount of any advance made in respect of interest due or
accrued with respect to Senior Indebtedness shall not exceed an amount equal to
$5,000,000 minus the amount paid on such date in respect of interest on
Subordinated Indebtedness; provided, further, that such $5,000,000 limit shall
be apportioned to correspond to the apportionment of the maximum amount as
provided in paragraph 6 hereof if the Bridge Notes are refinanced in part and
shall be increased to correspond to the increase of maximum amount if interest
is payable on a semi-annual basis in respect of refinanced Subordinated
Indebtedness as provided in paragraph 6 hereof. Such advance by Owens Corning
shall constitute an unsecured and subordinated loan to the Company by Owens
Corning in its capacity as an indirect member of the Company (a "Member Loan").
The proceeds of Member Loans shall be applied first to the payment of accrued
interest on Subordinated Indebtedness and then, only after all interest accrued
and payable on Subordinated Indebtedness has been paid in full, to the payment
of accrued interest on Senior Indebtedness. Any proceeds of a Member Loan in
excess of accrued interest payable on Subordinated Indebtedness shall be applied
to the payment of accrued interest then payable on the Senior Indebtedness.
Proceeds of each Member Loan shall be used only for payment of an interest
deficiency; any proceeds of a Member Loan in excess of any current deficiency of
interest payable on Subordinated Indebtedness and Senior Indebtedness shall be
returned to Owens Corning.
3. Terms of Member Loans. Each Member Loan shall be evidenced by a
---------------------
promissory note of the Company with the following terms. Each Member Loan shall
bear interest at an interest rate equal to the highest non-default rate
applicable from time to time under
-2-
<PAGE>
the Senior Credit Agreement (but in no event greater than ten percent per
annum). Interest shall accrue and be rolled up on the last day of each calendar
quarter; provided, however, that interest shall accrue, and compound, but shall
not be payable on a current basis until after the repayment in full of all
amounts outstanding under the Senior Credit Agreement and all amounts that
comprise Subordinated Indebtedness, whether in respect of principal, interest,
interest on overdue payments or otherwise, and whether or not currently payable.
During the period of deferral of interest payments, interest shall accrue and
compound on the last day of each calendar quarter by a deemed advance of an
additional Member Loan in the amount accrued. Each Member Loan and the accrued
interest thereon shall be due on demand; provided, however, that no demand shall
be made and no payment shall be made in respect of any Member Loan until after
the repayment in full of all amounts outstanding under the Senior Credit
Agreement and of all amounts that comprise Subordinated Indebtedness, whether in
respect of principal, interest, interest on overdue payments or otherwise, and
whether or not currently payable. Furthermore, no payment shall be made on the
Member Loans (including interest thereon) and no enforcement or remedial action
(including the enforcement of any rights of subrogation) shall be taken with
respect to the Member Loans (including interest thereon) until (i) the Senior
Credit Agreement and the Subordinated Credit Agreement have been terminated and
(ii) 91 days have elapsed after the Senior Indebtedness and the Subordinated
Indebtedness have been paid in full. The Company covenants and agrees that it
will not make any distributions to members, other than distributions permitted
to be made pursuant to the provisions of Section 4.7(b)(iii) and (iv) of the LLC
Operating Agreement, at any time when any amount of Member Loans is outstanding.
4. Subordination. Owens Corning covenants and agrees that the Member
--------------
Loans shall be subordinated in right of payment to the prior payment in full of
all amounts payable in respect of the Senior Credit Agreement, of all amounts
that comprise Subordinated Indebtedness and all indebtedness of the Company
within the meaning of the term "Indebtedness" as defined in the Senior Credit
Agreement (the "Company Indebtedness"). Upon any payment or distribution
following the dissolution, liquidation or reorganization of the Company, all
Company Indebtedness shall first be paid in full in cash before Owens Corning
shall be entitled to receive any payment in respect of the Member Loans, and any
payment to which Owens Corning would be entitled except for this subordination
shall be made to the creditors or holders of Company Indebtedness to which the
Member Loans are hereby subordinated. Upon the maturity of any Company
Indebtedness, when due or accelerated, all such Company Indebtedness shall first
be paid in full in cash before any payment is made to Owens Corning in respect
of the Member Loans. No direct or indirect payment shall be made to Owens
Corning in respect of the Member Loans if at the time of such payment, there
exists a default or event of default as defined in the document governing any
such Company Indebtedness.
5. Assignment. The Company may not assign, pledge, transfer, convey or
----------
suffer to exist any lien on or with respect to, this Agreement without the prior
written consent of Owens Corning, the holders of not less than a majority of the
aggregate principal amount of Subordinated Indebtedness then outstanding and the
Required Lenders (as defined in the Senior Credit Agreement).
-3-
<PAGE>
6. Amendment. Subject to the next succeeding sentence, this Agreement may
---------
be amended, modified or waived, and consents may be given in respect thereof, at
any time by written agreement of the Company and Owens Corning; provided, that
--------
the Company and Owens Corning shall provide the designated representatives of
the Lenders of the Senior Indebtedness and the holders of Subordinated
Indebtedness then outstanding (including any indenture trustee acting in respect
of Exchange Notes or Take-Out Securities) written notice of any such amendment,
modification, waiver or consent at least 30 days prior to the effectiveness
thereof. Without the prior written consent of the Required Lenders (as defined
in the Senior Credit Agreement) and of the holders of a majority of the
aggregate principal amount of the Required Lenders (as defined in the Senior
Credit Agreement) and the Subordinated Indebtedness then outstanding, neither
this Agreement nor any provision hereof (i) may be amended, modified, or waived,
nor may any consent be granted in respect thereof, in any respect material and
adverse to the holders of such Senior Indebtedness or Subordinated Indebtedness
or (ii) may be terminated.
7. Limitation of Term and Amount. The obligation of Owens Corning to make
-----------------------------
advances of Member Loans shall be limited to a maximum aggregate amount of
$65,000,000, and a maximum annual amount of $5,000,000 in respect of the year
ending on December 31, 1998 and $20,000,000 in each twelve-month period
thereafter; the aggregate and annual maximum amounts available for the remainder
of the term or the remainder of the then current year shall be reduced by
$5,000,000 on the date ten Business Days after each Interest Payment Date;
provided, however, that if the Bridge Loan is refinanced in part, then the
amount of support available hereunder shall be allocated between the respective
issues of Subordinated Indebtedness in proportion to the respective principal
amounts thereof outstanding (and on the assumption (solely for this allocation
and without affecting the payment rights of Senior Indebtedness) that all
support will be available for Subordinated Indebtedness). Following any
refinancing the step-down of support shall be effective as to the respective
refinanced portions of the Subordinated Indebtedness ten Business Days after
each interest payment date applicable to each such refinanced amount and, if the
interest is payable on any Subordinated Indebtedness on semi-annual dates, then
the step down apportioned to the refinanced amount shall be on the basis of a
$10,000,000 reduction every six months. If the Bridge Loan is refinanced in
part, and the maximum support amount is allocated as aforesaid, then the maximum
support allocable to each portion of refinanced Subordinated Indebtedness on any
Interest Payment Date shall be the maximum amount payable on that date by Owens
Corning, and such allocated amount shall be made first to any deficiency then
payable on Subordinated Indebtedness with the balance (if any) of such allocated
maximum amount then applied in respect of a deficiency on Senior Indebtedness.
On the date ten Business Days after December 31, 2001 the obligation of Owens
Corning hereunder shall terminate. The obligations of Owens Corning shall be
limited to advances for the purpose and in the amount of interest accrued
(whether at the contract rate or the default rate) which cannot be paid from
resources of the Company (or cannot be satisfied by the issuance of PIK Notes)
or has not been paid when due, including interest accrued and payable prior to
any scheduled Interest Payment Date or following such Interest Payment Date .
Within these limits of time, amount and purpose, Owens Corning shall make
advances of Member Loans to support the liquidity of the Company as provided
herein.
-4-
<PAGE>
8. Keep-Well Undertaking. This Agreement is a keep-well undertaking in the
---------------------
form of a commitment to advance Member Loans. This Agreement does not constitute
a guaranty of the payment of any obligation, indebtedness or liability of the
Company. When and if the Bridge Loan is refinanced, Owens Corning agrees to
issue a separate Agreement (or amend this Agreement so that it will apply) in
favor of the respective agents or representatives of the Senior and Subordinated
Indebtedness to be outstanding after such refinancing and to negotiate in good
faith the provisions for assignment hereof, without materially increasing (or
decreasing) or materially extending (or reducing) the financial obligations of
Owens Corning, to reflect the agency or trustee representation and other
provisions of the refinancing for the Subordinated Indebtedness.
9. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
OWENS CORNING
By: /s/ Michael Miller
-----------------------------
Name:
Title:
ADVANCED GLASSFIBER YARNS, LLC
By: /s/ Catherine Cuisson
-----------------------------
Name:
Title: CFO
-5-
<PAGE>
EXHIBIT 10.13
- --------------------------------------------------------------------------------
$315,000,000
CREDIT AGREEMENT
among
ADVANCED GLASSFIBER YARNS LLC,
as Borrower,
ITS DOMESTIC SUBSIDIARIES
FROM TIME TO TIME PARTIES HERETO
as Guarantors,
THE LENDERS PARTIES HERETO
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
Dated as of September 30, 1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS................................................................. 1
Section 1.1 Defined Terms..................................................... 1
Section 1.2 Other Definitional Provisions..................................... 26
Section 1.3 Accounting Terms.................................................. 27
ARTICLE II THE LOANS; AMOUNT AND TERMS................................................ 27
Section 2.1 Revolving Loans................................................... 27
Section 2.2A Tranche A Term Loan.............................................. 29
Section 2.2B Tranche B Term Loan.............................................. 31
Section 2.3 Swingline Loan Subfacility........................................ 32
Section 2.4 Letter of Credit Subfacility...................................... 34
Section 2.5 Fees.............................................................. 37
Section 2.6 Commitment Reductions............................................. 38
Section 2.7 Prepayments....................................................... 38
Section 2.8 Minimum Principal Amount of Tranches.............................. 41
Section 2.9 Default Rate and Payment Dates.................................... 41
Section 2.10 Conversion Options............................................... 42
Section 2.11 Computation of Interest and Fees................................. 42
Section 2.12 Pro Rata Treatment and Payments.................................. 43
Section 2.13 Non-Receipt of Funds by the Agent................................ 43
Section 2.14 Inability to Determine Interest Rate............................. 44
Section 2.15 Illegality....................................................... 45
Section 2.16 Requirements of Law.............................................. 45
Section 2.17 Indemnity........................................................ 46
Section 2.18 Taxes............................................................ 47
Section 2.19 Indemnification; Nature of Issuing Lender's Duties............... 49
Section 2.20 Defaulting Lenders............................................... 50
ARTICLE III REPRESENTATIONS AND WARRANTIES............................................ 51
Section 3.1 Financial Condition............................................... 51
Section 3.2 No Change......................................................... 52
Section 3.3 Corporate Existence; Compliance with Law.......................... 52
Section 3.4 Corporate Power; Authorization; Enforceable Obligations........... 52
Section 3.5 No Legal Bar; No Default.......................................... 53
Section 3.6 No Material Litigation............................................ 53
Section 3.7 Investment Company Act............................................ 53
Section 3.8 Margin Regulations................................................ 53
Section 3.9 ERISA............................................................. 53
Section 3.10 Environmental Matters............................................ 54
Section 3.11 Purpose of Loans................................................. 55
Section 3.12 Subsidiaries..................................................... 55
Section 3.13 Ownership........................................................ 55
Section 3.14 Indebtedness..................................................... 55
Section 3.15 Taxes............................................................ 56
Section 3.16 Intellectual Property............................................ 56
Section 3.17 Solvency......................................................... 56
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 3.18 Investments.............................................................. 56
Section 3.19 Location of Collateral................................................... 56
Section 3.20 No Burdensome Restrictions............................................... 57
Section 3.21 Brokers'Fees............................................................. 57
Section 3.22 Labor Matters............................................................ 57
Section 3.23 Accuracy and Completeness of Information................................. 57
Section 3.24 Representations and Warranties from Acquisition Agreements............... 57
Section 3.25 Year 2000 Issue.......................................................... 58
Section 3.26 Entire Business.......................................................... 58
ARTICLE IV CONDITIONS PRECEDENT............................................................... 58
Section 4.1 Conditions to Closing Date and Initial Revolving Loans and Term Loans
made in connection with the Acquisition................................. 58
Section 4.2 Conditions to All Extensions of Credit.................................... 64
ARTICLE V AFFIRMATIVE COVENANTS............................................................... 65
Section 5.1 Financial Statements...................................................... 66
Section 5.2 Certificates; Other Information........................................... 67
Section 5.3 Payment of Obligations.................................................... 67
Section 5.4 Conduct of Business and Maintenance of Existence.......................... 68
Section 5.5 Maintenance of Property; Insurance........................................ 68
Section 5.6 Inspection of Property; Books and Records; Discussions.................... 69
Section 5.7 Notices................................................................... 69
Section 5.8 Environmental Laws........................................................ 70
Section 5.9 Financial Covenants....................................................... 71
Section 5.10 Additional Guarantors.................................................... 73
Section 5.11 Compliance with Law...................................................... 73
Section 5.12 Pledged Assets........................................................... 73
Section 5.13 Interest Rate Protection Agreements...................................... 74
Section 5.14 Year 2000 Compliance..................................................... 74
ARTICLE VI NEGATIVE COVENANTS................................................................. 74
Section 6.1 Indebtedness.............................................................. 74
Section 6.2 Liens..................................................................... 76
Section 6.3 Guaranty Obligations...................................................... 76
Section 6.4 Nature of Business........................................................ 76
Section 6.5 Consolidation, Merger, Sale or Purchase of Assets, etc.................... 76
Section 6.6 Advances, Investments and Loans........................................... 77
Section 6.7 Ownership of Subsidiaries; Restrictions................................... 78
Section 6.8 Fiscal Year; Organizational Documents; Material Contracts................. 78
Section 6.9 Limitation on Restricted Actions.......................................... 78
Section 6.10 Restricted Payments...................................................... 79
Section 6.11 Prepayments of Indebtedness, etc......................................... 79
Section 6.12 Sale Leasebacks.......................................................... 80
Section 6.13 No Further Negative Pledges.............................................. 80
ARTICLE VII EVENTS OF DEFAULT................................................................. 80
Section 7.1 Events of Default......................................................... 80
Section 7.2 Acceleration; Remedies.................................................... 83
ARTICLE VIII THE AGENT........................................................................ 84
Section 8.1 Appointment............................................................... 84
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 8.2 Delegation of Duties.................................................. 84
Section 8.3 Exculpatory Provisions................................................ 84
Section 8.4 Reliance by Agent..................................................... 85
Section 8.5 Notice of Default..................................................... 85
Section 8.6 Non-Reliance on Agent and Other Lenders............................... 85
Section 8.7 Indemnification....................................................... 86
Section 8.8 Agent in Its Individual Capacity...................................... 86
Section 8.9 Successor Agent....................................................... 86
ARTICLE IX MISCELLANEOUS.................................................................. 87
Section 9.1 Amendments, Waivers and Release of Collateral......................... 87
Section 9.2 Notices............................................................... 89
Section 9.3 No Waiver; Cumulative Remedies........................................ 90
Section 9.4 Survival of Representations and Warranties............................ 90
Section 9.5 Payment of Expenses and Taxes......................................... 90
Section 9.6 Successors and Assigns; Participations; Purchasing Lenders............ 91
Section 9.7 Adjustments; Set-off.................................................. 94
Section 9.8 Table of Contents and Section Headings................................ 95
Section 9.9 Counterparts.......................................................... 95
Section 9.10 Effectiveness........................................................ 95
Section 9.11 Severability......................................................... 95
Section 9.12 Integration.......................................................... 95
Section 9.13 Governing Law........................................................ 95
Section 9.14 Consent to Jurisdiction and Service of Process....................... 96
Section 9.15 Arbitration.......................................................... 96
Section 9.16 Confidentiality...................................................... 97
Section 9.17 Acknowledgments...................................................... 98
Section 9.18 Waivers of Jury Trial................................................ 98
ARTICLE X GUARANTY........................................................................ 98
Section 10.1 The Guaranty......................................................... 98
Section 10.2 Bankruptcy........................................................... 99
Section 10.3 Nature of Liability.................................................. 99
Section 10.4 Independent Obligation............................................... 100
Section 10.5 Authorization........................................................ 100
Section 10.6 Reliance............................................................. 100
Section 10.7 Waiver............................................................... 100
Section 10.8 Limitation on Enforcement............................................ 102
Section 10.9 Confirmation of Payment.............................................. 102
</TABLE>
iii
<PAGE>
SCHEDULES
- ---------
Schedule 1.1(a) Account Designation Letter
Schedule 1.1(a)(i) Acquisition Expenses
Schedule 1.1(b) Joint Venture Contracts
Schedule 1.1(c) Liens
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2A(d) Form of Tranche A Term Note
Schedule 2.2B(d) Form of Tranche B Term Note
Schedule 2.3(d) Form of Swingline Note
Schedule 2.10 Form of Notice of Conversion/Extension
Schedule 2.18 Section 2.18 Certificate
Schedule 3.6 Litigation
Schedule 3.9 ERISA
Schedule 3.10 Environmental Matters
Schedule 3.12 Subsidiaries
Schedule 3.16 Intellectual Property
Schedule 3.19(a) Location of Real Property
Schedule 3.19(b) Location of Collateral
Schedule 3.19(c) Chief Executive Offices
Schedule 3.22 Labor Matters
Schedule 4.1(b) Form of Secretary's Certificate
Schedule 4.1(i-A) Form of Solvency Certificate
Schedule 5.5(b) Insurance
Schedule 5.10 Form of Joinder Agreement
Schedule 6.1(b) Indebtedness
Schedule 9.2 Schedule of Lenders' Lending Offices
Schedule 9.6(c) Form of Commitment Transfer Supplement
iv
<PAGE>
CONFORMED COPY
CREDIT AGREEMENT, dated as of September 30, 1998, among ADVANCED GLASSFIBER
YARNS LLC, a Delaware limited liability company (the "Borrower"), those Domestic
--------
Subsidiaries of the Borrower identified as a "Guarantor" on the signature pages
hereto and such other Domestic Subsidiaries of the Borrower as may from time to
time become a party hereto (collectively, the "Guarantors"), the several banks
----------
and other financial institutions as may from time to time become parties to this
Agreement (collectively, the "Lenders"; and individually, a "Lender"), and FIRST
------- ------
UNION NATIONAL BANK, a national banking association, as agent for the Lenders
hereunder (in such capacity, the "Agent").
-----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower has requested that the Lenders make loans and other
financial accommodations to the Borrower in the amount of up to $315,000,000, as
more particularly described herein;
WHEREAS, the Lenders have agreed to make such loans and other financial
accommodations to the Borrower on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
-------------
As used in this Agreement, terms defined in the preamble to this Agreement
have the meanings therein indicated, and the following terms have the following
meanings:
"Account Designation Letter" shall mean the Notice of Account Designation
--------------------------
Letter dated the Closing Date from the Borrower to the Agent substantially in
the form attached hereto as Schedule 1.1(a).
---------------
"Acquired Business" shall mean the glass yarn and specialty materials
-----------------
business of Owens Corning and all assets and liabilities related thereto
contributed to the Borrower pursuant to the Acquisition Documents.
"Acquisition Agreements" shall mean (i) the LLC Interest Sale and Purchase
----------------------
Agreement (the "LLC Purchase Agreement"), dated as of July 31, 1998, among Owens
----------------------
Corning, the Borrower, and Glass Holdings, (ii) the Amended and Restated Asset
Contribution Agreement, dated as of July 31, 1998, between Owens Corning and the
Borrower, (iii) the NVOC Asset
<PAGE>
Purchase Agreement, dated as of the Closing Date, between N.V. Owens Corning
S.A., a Belgian corporation, and the Borrower, (iv) the OCC Asset Purchase
Agreement, dated as of the Closing Date, between Owens-Corning Canada Inc., a
Canadian corporation, and the Borrower, as the same may from time to time be
amended, supplemented or otherwise modified in accordance with the terms hereof
and thereof.
"Acquisition Documents" shall mean the Acquisition Agreements, including
---------------------
the exhibits and schedules thereto, and all agreements, documents and
instruments executed and delivered pursuant thereto or in connection therewith.
"Acquisition" shall mean the purchases, contributions and other
-----------
acquisitions of assets contemplated by the Acquisition Documents.
"Additional Credit Party" shall mean each Person that becomes a Guarantor
-----------------------
by execution of a Joinder Agreement in accordance with Section 5.10.
"Affiliate" shall mean as to any Person, any other Person (excluding any
---------
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
a Person shall be deemed to be "controlled by" a Person if such Person
possesses, directly or indirectly, power either (a) to vote 10% or more of the
securities having ordinary voting power for the election of directors of such
Person or (b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Agent" shall have the meaning set forth in the first paragraph of this
-----
Agreement and any successors in such capacity.
"Agreement" shall mean this Credit Agreement, as amended, modified or
---------
supplemented from time to time in accordance with its terms.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
-------------------
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Rate" shall mean, at any time, the rate of interest per annum publicly
----------
announced from time to time by First Union at its principal office in Charlotte,
North Carolina as its prime rate. Each change in the Prime Rate shall be
effective as of the opening of business on the day such change in the Prime Rate
occurs. The parties hereto acknowledge that the rate announced publicly by First
Union as its Prime Rate is an index or base rate and shall not necessarily be
its lowest or best rate charged to its customers or other banks; and "Federal
-------
Funds Effective Rate" shall mean, for any day, the weighted average of the rates
- --------------------
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published on the next succeeding Business Day, the average of the quotations for
the day of such transactions received by the Agent from three federal funds
brokers of recognized standing selected by it. If for any reason the Agent shall
have determined (which determination shall be conclusive in the absence of
manifest error) that it is unable to ascertain the Federal Funds Effective Rate,
for any reason, including the inability or
-2-
<PAGE>
failure of the Agent to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the opening of business on the date of such
change.
"Alternate Base Rate Loans" shall mean Loans that bear interest at an
-------------------------
interest rate based on the Alternate Base Rate.
"Applicable Percentage" shall mean, for any day, the rate per annum set
---------------------
forth below opposite the applicable Level then in effect, it being understood
that the Applicable Percentage for (i) Revolving Loans which are Alternate Base
Rate Loans shall be the percentage set forth under the column "Alternate Base
Rate Margin for Revolving Loans", (ii) Revolving Loans which are LIBOR Rate
Loans shall be the percentage set forth under the column "LIBOR Rate Margin for
Revolving Loans and Letter of Credit Fee", (iii) the Commitment Fee shall be the
percentage set forth under the column "Commitment Fee", (iv) Tranche A Term
Loans which are Alternate Base Rate Loans shall be the percentage set forth
under the column "Alternate Base Rate Margin for Tranche A Term Loans", (v)
Tranche A Term Loans which are LIBOR Rate Loans shall be the percentage set
forth under the column "LIBOR Rate Margin for Tranche A Term Loans", (vi)
Tranche B Term Loans which are Alternate Base Rate Loans shall be the percentage
set forth under the column "Alternate Base Rate Margin for Tranche B Term
Loans", (vii) Tranche B Term Loans which are LIBOR Rate Loans shall be the
percentage set forth under the column "LIBOR Rate Margin for Tranche B Term
Loans" and (viii) the Letter of Credit Fee shall be the percentage set forth
under the column "LIBOR Rate Margin for Revolving Loans and Letter of Credit
Fee":
-3-
<PAGE>
<TABLE>
<CAPTION>
LIBOR Rate
Alternate Margin for
Base Rate Revolving Loans, Alternate
Margin for Tranche A Term Base Rate LIBOR Rate
Revolving Loans Margin for Margin for
Leverage Tranche A and Letter of Commitment Tranche B Tranche B
Level Ratio Term Loans Credit Fee Fee Term Loans Term Loans
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I greater than or equal to
5.0 to 1.0 1.75% 3.00% 0.50% 2.50% 3.75%
II greater than or equal to
4.5 to 1.0 but less than 1.50% 2.75% 0.50% 2.25% 3.50%
5.0 to 1.0
III greater than or equal to
4.0 to 1.0 but less than 1.25% 2.50% 0.50% 2.25% 3.50%
4.5 to 1.0
IV greater than or equal to
3.5 to 1.0 but less than 1.00% 2.25% 0.50% 2.25% 3.50%
4.0 to 1.0
V greater than or equal to
3.0 to 1.0 but less than 0.75% 2.00% 0.375% 2.25% 3.50%
3.5 to 1.0
VI less than 3.0 to 1.0 0.50% 1.75% 0.375% 2.25% 3.50%
</TABLE>
The Applicable Percentage shall, in each case, be determined and adjusted
quarterly on the date five (5) Business Days after the date on which the Agent
has received from the Borrower the quarterly financial information and
certifications required to be delivered to the Agent and the Lenders in
accordance with the provisions of Sections 5.1(b) and 5.2(b) (each an "Interest
--------
Determination Date"). Such Applicable Percentage shall be effective from such
- ------------------
Interest Determination Date until the next such Interest Determination Date.
The initial Applicable Percentages on the Closing Date shall be based on Level
II. Subsequent to the Closing Date, the Applicable Percentages shall not be
less than the interest rates for Level II until the first Interest Determination
Date occurring after March 31, 1999. After the Closing Date, if the Borrower
shall fail to provide the quarterly financial information and certifications in
accordance with the provisions of Sections 5.1(b) and 5.2(b), the Applicable
Percentages from such Interest Determination Date shall, on the date five (5)
Business Days after the date by which the Borrower was so required to provide
such financial information and certifications to the Agent and the Lenders, be
based on Level I until such time as such information and certifications are
provided, whereupon the Level shall be determined by the then current Leverage
Ratio. For purposes hereof, the Leverage Ratio shall be determined in
accordance with Section 5.9(a).
"Asset Disposition" shall mean the disposition of any or all of the assets
-----------------
(including, without limitation, the Capital Stock of a Subsidiary or any
ownership interest in a joint venture) of the Borrower or any Subsidiary whether
by sale, lease, transfer or otherwise. The term "Asset Disposition" (i) shall
include any "Asset Sale" under the Subordinated Debt Documentation and (ii)
shall not include (a) Specified Sales, (b) the sale, lease or transfer of assets
permitted by Section 6.5(a)(iii) or (iv) hereof, or (c) any Equity Issuance.
-4-
<PAGE>
"Bankruptcy Code" shall mean the Bankruptcy Code in Title 11 of the United
---------------
States Code, as amended, modified, succeeded or replaced from time to time.
"BGF" shall mean BGF Industries, Inc., a Delaware corporation and wholly
---
owned Subsidiary of Glass Holdings.
"Borrower" shall have the meaning set forth in the first paragraph of this
--------
Agreement.
"Borrowing Date" shall mean, in respect of any Loan, the date such Loan is
--------------
made.
"Business" shall have the meaning set forth in Section 3.10.
--------
"Business Day" shall mean a day other than a Saturday, Sunday or other day
------------
on which commercial banks in Charlotte, North Carolina or New York, New York are
authorized or required by law to close; provided, however, that when used in
-------- -------
connection with a rate determination, borrowing or payment in respect of a LIBOR
Rate Loan, the term "Business Day" shall also exclude any day on which banks in
London, England are not open for dealings in Dollar deposits in the London
interbank market.
"Capital Expenditures" shall mean all expenditures which in accordance with
--------------------
GAAP would be classified as capital expenditures, including without limitation,
Capital Lease Obligations.
"Capital Lease" shall mean any lease of property, real or personal, the
-------------
obligations with respect to which are required to be capitalized on a balance
sheet of the lessee in accordance with GAAP.
"Capital Lease Obligations" shall mean the capitalized lease obligations
-------------------------
relating to a Capital Lease determined in accordance with GAAP.
"Capital Stock" shall mean (i) in the case of a corporation, capital stock,
-------------
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other interest or participation that confers on
a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" 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 twelve months from the date of acquisition ("Government Obligations"), (ii)
----------------------
U.S. dollar denominated (or foreign currency fully hedged) time deposits,
certificates of deposit, Eurodollar time deposits and Eurodollar certificates of
deposit of (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 from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof (any such bank
-5-
<PAGE>
being an "Approved Bank"), in each case with maturities of not more than 364
-------------
days from the date of acquisition, (iii) commercial paper and variable or fixed
rate notes issued by any Approved Bank (or by the parent company thereof) or any
variable rate notes issued by, or guaranteed by any domestic corporation rated
A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent
thereof) or better by Moody's and maturing within six months of the date of
acquisition, (iv) repurchase agreements with a bank or trust company (including
a Lender) or a recognized securities dealer having capital and surplus in excess
of $500,000,000 for direct obligations issued by or fully guaranteed by the
United States of America, (v) obligations of any state of the United States or
any political subdivision thereof for the payment of the principal and
redemption price of and interest on which there shall have been irrevocably
deposited Government Obligations maturing as to principal and interest at times
and in amounts sufficient to provide such payment, and (vi) auction preferred
stock rated in the highest short-term credit rating category by S&P or Moody's.
"Closing Date" shall mean the date of this Agreement.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral" shall mean a collective reference to the collateral which is
-----------
identified in, and at any time will be covered by, the Security Documents.
"Collateral Assignment of Contract Rights" shall mean the Collateral
----------------------------------------
Assignment of Contract Rights dated as of the Closing Date between the Borrower
and the Agent, as amended, modified or supplemented from time to time in
accordance with its terms.
"Commitment" shall mean the Revolving Commitment, the LOC Commitment, the
----------
Swingline Commitment, the Tranche A Term Loan Commitment and the Tranche B Term
Loan Commitment, individually or collectively, as appropriate.
"Commitment Fee" shall have the meaning set forth in Section 2.5(a).
--------------
"Commitment Percentage" shall mean the Revolving Commitment Percentage, the
---------------------
LOC Commitment Percentage, the Tranche A Term Loan Commitment Percentage and/or
the Tranche B Term Loan Commitment Percentage, as appropriate.
"Commitment Period" shall mean the period from and including the Closing
-----------------
Date to but not including the Revolving Commitment Termination Date.
"Commitment Transfer Supplement" shall mean a Commitment Transfer
------------------------------
Supplement, substantially in the form of Schedule 9.6(c).
---------------
"Commonly Controlled Entity" shall mean an entity, whether or not
--------------------------
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
-6-
<PAGE>
"Consolidated Cash Tax Payments" shall mean, for any period, the aggregate
------------------------------
of all taxes of the Borrower and its Subsidiaries on a consolidated basis
determined in accordance with GAAP applied on a consistent basis and all
distributions made to the LLC Members by the Borrower for the payment of income
taxes, for such period, to the extent the same are paid in cash during such
period. The applicable period shall be for the four consecutive quarters ending
as of the date of computation.
"Consolidated EBITDA" shall mean, for any period, Consolidated Net Income
-------------------
plus the sum of (i) Consolidated Interest Expense plus interest expense not
- ---- ----
payable in cash and amortization of debt discount and premium, for such period,
plus, to the extent the following items are deducted in calculating Consolidated
Net Income, (ii) all provisions for any Federal, state, local and foreign
income, value added, ad valorem and similar taxes for such period, plus (iii)
----
depreciation, amortization and nonrecurring noncash charges for such period,
plus (iv) losses (or minus gains) on the sale or disposition of assets outside
-----
the ordinary course of business for such period, plus (v) restructuring charges
----
or other non-recurring items or expenses incurred in connection with the
Acquisition (A) up to the amounts and for the fiscal quarters as set forth on
Schedule 1.1(a)(i) and (B) as agreed to by the Agent up to an aggregate amount
- ------------------
not to exceed $2,000,000 for the fiscal quarters ending on or prior to September
30, 1999, for such period, of the Borrower and its Subsidiaries on a
consolidated basis as determined in accordance with GAAP applied on a consistent
basis. Except as otherwise specified, the applicable period shall be for the
four consecutive quarters ending as of the date of determination.
"Consolidated Fixed Charges" shall mean, for any period, the sum of (i)
--------------------------
Consolidated Interest Expense for such period plus (ii) Consolidated Scheduled
----
Funded Debt Payments for the next four fiscal quarters following the end of such
period plus (iii) consolidated Capital Expenditures (in excess of $10,000,000)
----
for the four fiscal quarters most recently ending (without duplication of items
in clause (ii)) plus (iv) Consolidated Cash Tax Payments for such period of the
Borrower and its Subsidiaries on a consolidated basis determined in accordance
with GAAP applied on a consistent basis. Except as otherwise specified, the
applicable period shall be for the four consecutive quarters ending as of the
date of computation. For purposes of the definition of "Consolidated Fixed
Charges", investments in Foreign Subsidiaries shall be deemed Capital
Expenditures described in clause (iii) above.
"Consolidated Funded Debt" shall mean, on any date of calculation, Funded
------------------------
Debt of the Borrower and its Subsidiaries on a consolidated basis.
"Consolidated Interest Expense" shall mean, for any period, all interest
-----------------------------
expense (excluding interest expense not payable in cash and amortization of debt
discount and premium), including the interest component under Capital Leases for
such period of the Borrower and its Subsidiaries on a consolidated basis
determined in accordance with GAAP applied on a consistent basis. Except as
otherwise specified, the applicable period shall be for the four consecutive
quarters ending as of the date of computation.
"Consolidated Net Income" shall mean, for any period, the net income
-----------------------
(excluding extraordinary items) of the Borrower and its Subsidiaries on a
consolidated basis determined in accordance with GAAP applied on a consistent
basis for such period. Except as otherwise
-7-
<PAGE>
specified, the applicable period shall be for the four consecutive quarters
ending as of the date of computation.
"Consolidated Net Worth" shall mean total stockholders' equity for the
----------------------
Borrower and its Subsidiaries on a consolidated basis as determined at a
particular date in accordance with GAAP applied on a consistent basis.
"Consolidated Scheduled Funded Debt Payments" shall mean, on any date of
-------------------------------------------
determination, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the sum of all scheduled payments of principal on
Consolidated Funded Debt to be made (including the principal component of
payments due on Capital Leases); it being understood that scheduled payments on
Consolidated Funded Debt shall not include optional prepayments or the mandatory
prepayments required pursuant to Section 2.7.
"Continuing Director" shall have the meaning set forth in Section 7.1(h).
-------------------
"Contractual Obligation" shall mean, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Credit Documents" shall mean this Agreement, each of the Notes, any
----------------
Joinder Agreement, the Letters of Credit, LOC Documents and the Security
Documents.
"Credit Party" shall mean any of the Borrower or the Guarantors.
------------
"Credit Party Obligations" shall mean, without duplication, (i) all of the
------------------------
obligations of the Credit Parties to the Lenders (including the Issuing Lender)
and the Agent, whenever arising, under this Agreement, the Notes or any of the
other Credit Documents (including, but not limited to, any interest accruing
after the occurrence of a filing of a petition of bankruptcy under the
Bankruptcy Code with respect to any Credit Party, regardless of whether such
interest is an allowed claim under the Bankruptcy Code) and (ii) all liabilities
and obligations, whenever arising, owing from the Borrower or any of its
Subsidiaries to any Lender, or any Affiliate of a Lender, arising under any
Hedging Agreement (if and only if the Lender and the Borrower expressly provide
in the documents evidencing any such Hedge Agreement that such liabilities and
obligations shall be classified as "Credit Party Obligations" hereunder).
"Debt Issuance" shall mean the issuance of any Indebtedness for borrowed
-------------
money by the Borrower or any of its Subsidiaries (excluding any Equity Issuance
or any Indebtedness of the Borrower and its Subsidiaries permitted to be
incurred pursuant to Section 6.1 hereof).
"Default" shall mean any of the events specified in Section 7.1, whether or
-------
not any requirement for the giving of notice or the lapse of time, or both, or
any other condition, has been satisfied.
"Default Rate" shall have the meaning set forth in Section 2.9(b).
------------
-8-
<PAGE>
"Defaulting Lender" shall mean, at any time, any Lender that, at such time
-----------------
(a) has failed to make a Loan required pursuant to the term of this Credit
Agreement, including the funding of a Participation Interest in accordance with
the terms hereof, (b) has failed to pay to the Agent or any Lender an amount
owed by such Lender pursuant to the terms of this Credit Agreement, (c) has been
deemed insolvent or has become subject to a bankruptcy or insolvency proceeding
or to a receiver, trustee or similar official or (d) has failed to perform any
of its obligations under this Agreement or any other Credit Document within the
time specified herein or therein or, if no time is so specified, within 5
Business Days of notice by the Agent of such failure to perform.
"Dollars" and "$" shall mean dollars in lawful currency of the United
------- -
States of America.
"Domestic Lending Office" shall mean, initially, the office of each Lender
-----------------------
designated as such Lender's Domestic Lending Office shown on Schedule 9.2; and
------------
thereafter, such other office of such Lender as such Lender may from time to
time specify to the Agent and the Borrower as the office of such Lender at which
Alternate Base Rate Loans of such Lender are to be made.
"Domestic Subsidiary" shall mean any Subsidiary that is organized and
-------------------
existing under the laws of the United States or any state or commonwealth
thereof or under the laws of the District of Columbia.
"Eligible Assignee" shall mean (i) a Lender; (ii) any Affiliate of a Lender
-----------------
or any fund that invests in bank loans and is managed by an investment advisor
to a Lender; and (iii) any bank, financial institution, finance company,
investment fund, insurance company, or other lending entity having capital and
surplus in excess of $100,000,000
"Environmental Laws" shall mean any and all applicable foreign, Federal,
------------------
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority or other
Requirement of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health or the
environment, as are now or may at any time be in effect during the term of this
Agreement.
"Equity Issuance" shall mean any issuance by the Borrower or any Subsidiary
---------------
to any Person which is not a Credit Party of (a) shares of its Capital Stock,
(b) any shares of its Capital Stock pursuant to the exercise of options or
warrants or (c) any shares of its Capital Stock pursuant to the conversion of
any debt securities to equity. The term "Equity Issuance" shall not include any
Asset Disposition, any Debt Issuance or the issuance of common stock of the
Borrower's Subsidiaries to its officers, directors or employees in connection
with stock offering plans and other benefit plans of such Subsidiaries.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurodollar Reserve Percentage" shall mean for any day, the percentage
-----------------------------
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency
-9-
<PAGE>
reserves) in respect of Eurocurrency liabilities, as defined in Regulation D of
such Board as in effect from time to time, or any similar category of
liabilities for a member bank of the Federal Reserve System in New York City.
"Event of Default" shall mean any of the events specified in Section 7.1;
----------------
provided, however, that any requirement for the giving of notice or the lapse of
- -------- -------
time, or both, or any other condition, has been satisfied.
"Excess Cash Flow" shall mean, with respect to any fiscal year period of
----------------
the Borrower and its Subsidiaries on a consolidated basis, an amount equal to
(a) Consolidated EBITDA for such period minus (b) consolidated Capital
Expenditures for such period minus (c) Consolidated Interest Expense for such
-----
period minus (d) Consolidated Cash Tax Payments paid during such period minus
----- -----
(e) Consolidated Scheduled Funded Debt Payments made during such period plus (f)
----
Net Cash Proceeds of Asset Dispositions outside the ordinary course of business
except to the extent such Net Cash Proceeds are used to prepay the Loans
pursuant to Section 2.7(b)(iii).
"Extension of Credit" shall mean, as to any Lender, the making of a Loan by
-------------------
such Lender or the issuance of, or participation in, a Letter of Credit by such
Lender.
"Federal Funds Effective Rate" shall have the meaning set forth in the
----------------------------
definition of "Alternate Base Rate".
"Fee Letter" shall mean the letter agreement dated July 31, 1998 addressed
----------
to BGF and Owens Corning from the Agent, as amended, modified or otherwise
supplemented.
"First Union" shall mean First Union National Bank, a national banking
-----------
association.
"Fixed Charge Coverage Ratio" shall mean the ratio of (i) Consolidated
---------------------------
EBITDA to (ii) Consolidated Fixed Charges.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
------------------
Subsidiary.
"FQ1 Financials" shall mean the consolidated statements of income and of
--------------
cash flows of the Acquired Business for the first fiscal quarter of 1998,
reviewed by Arthur Anderson & Co. and prepared in accordance with the
assumptions and methodologies used in preparation of the annual audited
financial statements of the Acquired Business for the fiscal year ended 1997 and
giving effect to the Acquisition as if it had occurred on January 1, 1998 and
taking into account expense adjustments, as applicable, for selling, general and
administrative expenses and for expenses incurred pursuant to the Joint Venture
Contracts.
"FQ2 Financials" shall mean the consolidated statements of income and of
--------------
cash flows of the Acquired Business for the second fiscal quarter of 1998,
reviewed by Arthur Anderson & Co. and prepared in accordance with the
assumptions and methodologies used in preparation of the FQ1 Financials.
-10-
<PAGE>
"FQ3 Financials" shall mean the consolidated statements of income and of
--------------
cash flows of the Acquired Business for the third fiscal quarter of 1998,
reviewed by Price Waterhouse Coopers and prepared in accordance with the
assumptions and methodologies used in preparation of the FQ1 Financials and FQ2
Financials.
"Funded Debt" shall mean, with respect to any Person, without duplication,
-----------
(a) all Indebtedness of such Person other than Indebtedness of the types
referred to in clause (e), (f), (g), (i) and (m) of the definition of
"Indebtedness" set forth in this Section 1.1, (b) all Funded Debt of others of
the type referred to in clause (a) above secured by (or for which the holder of
such Funded Debt has an existing right, contingent or otherwise, to be secured
by) any Lien on, or payable out of the proceeds of production from, Property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, the amount of such Funded Debt being deemed to be the lesser
of the fair market value of such Property or the amount of Funded Debt so
secured, (c) all Guaranty Obligations of such Person with respect to Funded Debt
of the type referred to in clause (a) above of another Person and (d) Funded
Debt of the type referred to in clause (a) above of any partnership or
unincorporated joint venture in which such Person is legally obligated but only
to the extent such Person is obligated therefor.
"GAAP" shall mean generally accepted accounting principles in effect in the
----
United States of America applied on a consistent basis, subject, however, in the
------- -------
case of determination of compliance with the financial covenants set out in
Section 5.9 to the provisions of Section 1.3.
"GHC Sub" shall mean AGY Holdings, Inc., a Delaware corporation, and wholly
-------
owned Subsidiary of Glass Holdings.
"Glass Holdings" shall mean Glass Holdings, Corp., a Delaware corporation.
--------------
"Government Acts" shall have the meaning set forth in Section 2.19.
---------------
"Governmental Authority" shall mean any nation or government, any state or
----------------------
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranty Obligation" shall mean, as to any Person (the "guaranteeing
------------------- ------------
person"), any obligation of (a) the guaranteeing person or (b) another Person
- ------
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor") in any
------------------- ---------------
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
-11-
<PAGE>
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
-------- -------
term Guaranty Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guaranty Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guaranty Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such Guaranty
Obligation shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good faith.
"Guarantor" shall mean any of the Domestic Subsidiaries identified as a
---------
"Guarantor" on the signature pages hereto and the Additional Credit Parties
which execute a Joinder Agreement, together with their successors and permitted
assigns.
"Guaranty" shall mean the guaranty of the Guarantors set forth in Article
--------
X.
"Hedging Agreements" shall mean, with respect to any Person, any agreement
------------------
entered into to protect such Person against fluctuations in interest rates, or
currency or raw materials values, including, without limitation, any interest
rate swap, cap or collar agreement or similar arrangement between such Person
and one or more counterparties, any foreign currency exchange agreement,
currency protection agreements, commodity purchase or option agreements or other
interest or exchange rate or commodity price hedging agreements.
"Indebtedness" shall mean, with respect to any Person, without duplication,
------------
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
Property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (d) all obligations of such Person issued or assumed as the
deferred purchase price of Property or services purchased by such Person (other
than trade debt incurred in the ordinary course of business and due within six
months of the incurrence thereof) which would appear as liabilities on a balance
sheet of such Person, (e) all obligations of such Person under take-or-pay or
similar arrangements or under commodities agreements (excluding the Joint
Venture Contracts), (f) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on, or payable out of the proceeds of production from,
Property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, the amount of such Indebtedness being deemed
to be the lesser of the fair market value of such Property or the amount of
Indebtedness so secured, (g) all Guaranty Obligations of such Person with
respect to Indebtedness of another Person, (h) the principal portion of all
obligations of such Person under Capital Leases, (i) all obligations of such
Person under Hedging Agreements, (j) the maximum amount of all standby letters
of credit issued or bankers' acceptances facilities created for the account of
such Person and, without duplication, all drafts drawn thereunder (to the extent
unreimbursed), (k) all preferred Capital Stock issued by such Person and which
by the terms thereof could be (at the request of the holders thereof or
otherwise) subject to
-12-
<PAGE>
mandatory sinking fund payments, redemption or other acceleration prior to the
Maturity Date, (l) the principal balance outstanding under any synthetic lease,
tax retention operating lease, off-balance sheet loan or similar off-balance
sheet financing product, and (m) the Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner or a
joint venturer to the extent such Person is legally obligated therefor.
"Insolvency" shall mean, with respect to any Multiemployer Plan, the
----------
condition that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"Insolvent" shall mean being in a condition of Insolvency.
---------
"Intercreditor Agreement" shall mean the Assignment and Assumption and
-----------------------
Intercreditor Agreement, relating to the Keep-Well Agreement, to be entered into
by and among the Borrower, Owens Corning, the Agent, on behalf of the Lenders
and First Union Investors, Inc. and Warburg Dillon Read LLC, as co-agents, on
behalf of the lenders of the Subordinated Debt, as such agreement may be
amended, modified or supplemented from time to time in accordance with the terms
hereof and thereof.
"Interest Coverage Ratio" shall mean the ratio of (i) Consolidated EBITDA
-----------------------
to (ii) Consolidated Interest Expense.
"Interest Payment Date" shall mean (a) as to any Alternate Base Rate Loan
---------------------
or Swingline Loan, the last day of each March, June, September and December and
on the applicable Maturity Date, (b) as to any LIBOR Rate Loan having an
Interest Period of three months or less, the last day of such Interest Period,
and (c) as to any LIBOR Rate Loan having an Interest Period longer than three
months, each day which is three months after the first day of such Interest
Period and the last day of such Interest Period.
"Interest Period" shall mean, with respect to any LIBOR Rate Loan,
---------------
(i) initially, the period commencing on the Borrowing Date or
conversion date, as the case may be, with respect to such LIBOR Rate Loan
and ending one, two, three or six months thereafter, as selected by the
Borrower in the notice of borrowing or notice of conversion given with
respect thereto; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such LIBOR Rate Loan
and ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Agent not less than three Business
Days prior to the last day of the then current Interest Period with respect
thereto;
provided that the foregoing provisions are subject to the following:
--------
(A) if any Interest Period pertaining to a LIBOR Rate Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension
-13-
<PAGE>
would be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Business Day;
(B) any Interest Period pertaining to a LIBOR Rate loan 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 relevant calendar month;
(C) if the Borrower shall fail to give notice as provided above,
the Borrower shall be deemed to have selected an Alternate Base Rate
Loan to replace the affected LIBOR Rate Loan;
(D) any Interest Period in respect of any Loan that would
otherwise extend beyond the applicable Maturity Date and, further with
regard to the Term Loans, no Interest Period shall extend beyond any
principal amortization payment date unless the portion of such Term
Loan consisting of Alternate Base Rate Loans together with the portion
of such Term Loan consisting of LIBOR Rate Loans with Interest Periods
expiring prior to or concurrently with the date such principal
amortization payment date is due, is at least equal to the amount of
such principal amortization payment due on such date; and
(E) no more than ten (10) LIBOR Rate Loans may be in effect at
any time. For purposes hereof, LIBOR Rate Loans with different
Interest Periods shall be considered as separate LIBOR Rate Loans,
even if they shall begin on the same date and have the same duration,
although borrowings, extensions and conversions may, in accordance
with the provisions hereof, be combined at the end of existing
Interest Periods to constitute a new LIBOR Rate Loan with a single
Interest Period.
"Issuing Lender" shall mean First Union.
--------------
"Issuing Lender Fees" shall have the meaning set forth in Section 2.5(c).
-------------------
"Jefferson" shall mean Jefferson Holdings, Inc., a Delaware corporation.
---------
"Joinder Agreement" shall mean a Joinder Agreement substantially in the
-----------------
form of Schedule 5.10, executed and delivered by an Additional Credit Party in
-------------
accordance with the provisions of Section 5.10.
"Joint Venture Contracts" shall mean those contracts listed on Schedule
----------------------- --------
1.1(b) and all amendments, modifications, supplements, extensions and renewals
- ------
thereof.
"Keep-Well Agreement" shall mean the Keep-Well Agreement to be entered into
-------------------
by Owens Corning in favor of the Borrower providing for the making of loans by
Owens Corning to the Borrower to enable the Borrower to pay interest hereunder
in the event the Borrower has insufficient cash on hand to make such payments of
interest when due, in form and substance
-14-
<PAGE>
satisfactory to the Agent, as such agreement may be amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof.
"Lender" shall have the meaning set forth in the first paragraph of this
------
Agreement.
"Letters of Credit" shall mean any letter of credit issued by the Issuing
-----------------
Lender for the account of the Borrower pursuant to the terms hereof, as such
Letters of Credit may be amended, modified, extended, renewed or replaced from
time to time.
"Letter of Credit Fee" shall have the meaning set forth in Section 2.5(b).
--------------------
"Leverage Ratio" shall mean the ratio of (i) Consolidated Funded Debt to
--------------
(ii) Consolidated EBITDA.
"LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period
-----
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
A.M. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "LIBOR" shall mean, for any LIBOR Rate Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
-------- -------
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates (rounded upwards, if necessary, to the
nearest 1/100 of 1%). If, for any reason, neither of such rates is available,
then "LIBOR" shall mean the rate per annum at which, as determined by the Agent,
Dollars in an amount comparable to the Loans then requested are being offered to
leading banks at approximately 11:00 A.M. London time, two (2) Business Days
prior to the commencement of the applicable Interest Period for settlement in
immediately available funds by leading banks in the London interbank market for
a period equal to the Interest Period selected.
"LIBOR Lending Office" shall mean, initially, the office of each Lender
--------------------
designated as such Lender's LIBOR Lending Office shown on Schedule 9.2; and
------------
thereafter, such other office of such Lender as such Lender may from time to
time specify to the Agent and the Borrower as the office of such Lender at which
the LIBOR Rate Loans of such Lender are to be made.
"LIBOR Rate" shall mean a rate per annum (rounded upwards, if necessary, to
----------
the next higher 1/100th of 1%) determined by the Agent pursuant to the following
formula:
LIBOR Rate = LIBOR
------------------------------------------
1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan" shall mean Loans the rate of interest applicable to which
---------------
is based on the LIBOR Rate.
-15-
<PAGE>
"Lien" shall mean 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 Capital Lease having
substantially the same economic effect as any of the foregoing).
"LLC Members" shall mean, collectively, Jefferson and GHC Sub, and,
-----------
individually, either of them.
"LLC Operating Agreement" shall mean the Amended and Restated Limited
-----------------------
Liability Operating Agreement for the Borrower, dated as of the Closing Date, by
and between GHC Sub and Jefferson.
"Loan" shall mean a Revolving Loan, a Swingline Loan and/or the Term Loans,
----
as appropriate.
"LOC Commitment" shall mean the commitment of the Issuing Lender to issue
--------------
Letters of Credit and with respect to each Lender, the commitment of such Lender
to purchase participation interests in the Letters of Credit up to such Lender's
LOC Committed Amount as specified in Schedule 2.1(a), as such amount may be
---------------
reduced from time to time in accordance with the provisions hereof.
"LOC Commitment Percentage" shall mean, for each Lender, the percentage
-------------------------
identified as its LOC Commitment Percentage on Schedule 2.1(a), as such
---------------
percentage may be modified in connection with any assignment made in accordance
with the provisions of Section 9.6(c).
"LOC Committed Amount" shall mean, collectively, the aggregate amount of
--------------------
all of the LOC Commitments of the Lenders to issue and participate in Letters of
Credit as referenced in Section 2.4 and, individually, the amount of each
Lender's LOC Commitment as specified in Schedule 2.1(a).
---------------
"LOC Documents" shall mean, with respect to any Letter of Credit, such
-------------
Letter of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (i) the rights and obligations of
the parties concerned or (ii) any collateral security for such obligations.
"LOC Obligations" shall mean, at any time, the sum of (i) the maximum
---------------
amount which is, or at any time thereafter may become, available to be drawn
under Letters of Credit then outstanding, assuming compliance with all
requirements for drawings referred to in such Letters of Credit plus (ii) the
----
aggregate amount of all drawings under Letters of Credit honored by the Issuing
Lender but not theretofore reimbursed.
"Mandatory Borrowing" shall have the meaning set forth in Section
-------------------
2.3(b)(ii) or Section 2.4(e), as the context may require.
-16-
<PAGE>
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
business, operations, property or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower
or any Guarantor to perform its obligations, when such obligations are required
to be performed, under this Agreement, any of the Notes or any other Credit
Document, (c) the business, operations, property or condition (financial or
otherwise) of the Acquired Business through and including the Closing Date or
(d) the validity or enforceability of this Agreement, any of the Notes or any of
the other Credit Documents or the rights or remedies of the Agent or the Lenders
hereunder or thereunder.
"Material Contract" shall mean any written contract or other written
-----------------
arrangement, to which the Borrower or any of its Subsidiaries is a party as to
which the breach, nonperformance, cancellation or failure to renew by any party
thereto could reasonably be expected to have a Material Adverse Effect.
"Materials of Environmental Concern" shall mean any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Maturity Date" shall mean (i) with respect to the Tranche A Term Loan, the
-------------
last scheduled quarterly payment date for the Tranche A Term Loan set forth in
Section 2.2A(b), (ii) with respect to the Tranche B Term Loan, the last
scheduled quarterly payment date for the Tranche B Term Loan set forth in
Section 2.2B(b) and (iii) with respect to the Revolving Loans or any Swingline
Loan, the Revolving Commitment Termination Date.
"Member Negative Pledge Agreement" shall mean the Negative Pledge Agreement
--------------------------------
dated as of the Closing Date given by Jefferson to the Agent, as the same may
from time to time be amended, supplemented or otherwise modified in accordance
with the terms hereof and thereof.
"Member Pledge Agreement" shall mean the Member Pledge Agreement dated as
-----------------------
of the Closing Date given by GHC Sub to the Agent, as the same may from time to
time be amended, supplemented or otherwise modified in accordance with the terms
hereof and thereof.
"Moody's" shall mean Moody's Investors Service, Inc. and its successors and
-------
assigns.
"Mortgage Instruments" shall have the meaning set forth in Section 4.1(e).
--------------------
"Mortgage Policies" shall have the meaning set forth in Section 4.1(e).
-----------------
"Mortgaged Properties" shall have the meaning set forth in Section 4.1(e).
--------------------
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
------------------
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean the aggregate cash proceeds received by the
-----------------
Borrower or any Subsidiary in respect of any Asset Disposition, Equity Issuance
or Debt Issuance, net of (a)
-17-
<PAGE>
direct costs (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) (b) repayment of Indebtedness that would be
required in connection with any Asset Disposition contemplated as part of the
purchase price or otherwise related to such disposed assets, (c) appropriate
amounts to be provided by the Borrower or a Subsidiary, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with an
Asset Disposition and retained by the Borrower or such Subsidiary, as the case
may be, after such Asset Disposition, including, without limitation, pension and
benefit liabilities, liabilities related to environmental matters or liabilities
under any indemnification obligations associated with such Asset Disposition
except that such reserves shall become Net Cash Proceeds when released and (d)
taxes paid or payable as a result thereof; it being understood that "Net Cash
Proceeds" shall include, without limitation, (i) any cash received upon the sale
or other disposition of any non-cash consideration received by the Borrower or
any Subsidiary in any Asset Disposition, Equity Issuance or Debt Issuance and
(ii) any "Net Cash Proceeds" under the Subordinated Debt Documentation.
"Non-Compete Agreement" shall mean that Non-Compete Agreement dated as of
---------------------
the Closing Date, by and among Groupe Porcher Industries, Glass Holdings, Owens
Corning and the Borrower.
"Note" or "Notes" shall mean the Revolving Notes, the Swingline Note and/or
---- -----
the Term Notes, collectively, separately or individually, as appropriate.
"Notice of Borrowing" shall mean the written notice of borrowing as
-------------------
referenced and defined in Section 2.1(b)(i) or 2.3(b)(i), as appropriate.
"Notice of Conversion" shall mean the written notice of extension or
--------------------
conversion as referenced and defined in Section 2.10.
"Obligations" shall mean, collectively, Loans and LOC Obligations.
-----------
"Owens Corning" shall mean Owens Corning, a Delaware corporation.
-------------
"Participant" shall have the meaning set forth in Section 9.6(b).
-----------
"Participation Interest" shall mean the purchase by a Lender of a
----------------------
participation interest in Swingline Loans as provided in Section 2.3(b)(ii) or
in Letters of Credit as provided in Section 2.4.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Business" shall mean the business conducted by the Borrower and
------------------
its Subsidiaries as of the Closing Date and any business reasonably related
thereto.
-18-
<PAGE>
"Permitted Investments" shall mean:
---------------------
(i) cash and Cash Equivalents;
(ii) receivables owing to the Borrower or any of its Subsidiaries
or any receivables and advances to suppliers, in each case if created,
acquired or made in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms;
(iii) investments in and loans to any Credit Parties;
(iv) loans and advances to officers, directors, employees and
Affiliates in an aggregate amount not to exceed (i) from the Closing Date
through and including December 31, 1999, $4,000,000 at any time outstanding
and (ii) thereafter, $2,000,000 at any time outstanding;
(v) investments (including debt obligations) received in
connection with the bankruptcy or reorganization of suppliers and customers
and in settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(vi) investments, acquisitions or transactions permitted under
Section 6.5(b);
(vii) investments in Foreign Subsidiaries engaged in a Permitted
Business in an aggregate amount not to exceed $30,000,000;
(viii) additional loan advances and/or investments of a nature not
contemplated by the foregoing clauses hereof, provided that such loans,
--------
advances and/or investments made pursuant to this clause (viii) shall not
exceed an aggregate amount of $7,500,000; and
(ix) investments in non-cash consideration to the extent permitted
by Section 6.5(a)(v).
As used herein, "investment" means all investments, in cash or by delivery
----------
of property made, directly or indirectly in, to or from any Person, whether by
acquisition of shares of Capital Stock, property, assets, indebtedness or other
obligations or securities or by loan advance, capital contribution or otherwise.
"Permitted Liens" shall mean:
---------------
(i) Liens created by or otherwise existing, under or in connection
with this Agreement or the other Credit Documents in favor of the Lenders;
(ii) Liens in favor of a Lender hereunder in connection with
Hedging Agreements, but only (A) to the extent such Liens secure
obligations under Hedging
-19-
<PAGE>
Agreements with any Lender, or any Affiliate of a Lender, (B) to the extent
such Liens are on the same collateral as to which the Agent on behalf of
the Lenders also has a Lien and (C) if such provider and the Lenders shall
share pari passu in the collateral subject to such Liens;
---- -----
(iii) purchase money Liens securing purchase money indebtedness and
Liens arising under Capital Leases (and refinancings thereof) to the extent
permitted under Section 6.1(c);
(iv) Liens for taxes, assessments, charges or other governmental
levies not yet due or as to which the period of grace (not to exceed 60
days), if any, related thereto has not expired or which are being contested
in good faith by appropriate proceedings, provided that adequate reserves
--------
with respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP (or, in the case
of Subsidiaries with significant operations outside of the United States of
America, generally accepted accounting principles in effect from time to
time in their respective jurisdictions of incorporation);
(v) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, contractor's, subcontractor's or other like Liens arising in
the ordinary course of business which are not overdue for a period of more
than 60 days or which are being contested in good faith by appropriate
proceedings;
(vi) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(vii) deposits to secure the performance of bids, trade contracts,
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(viii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers (including sellers of
goods) and other Liens imposed by law or pursuant to customary reservations
or retentions of title arising in the ordinary course of business, provided
--------
that such Liens secure only amounts not yet due and payable or, if due and
payable, are unfiled and no other action has been taken to enforce the same
or are being contested in good faith by appropriate proceedings for which
adequate reserves determined in accordance with GAAP have been established
(and as to which the Property subject to any such Lien is not yet subject
to foreclosure, sale or loss on account thereof);
(ix) Liens in connection with attachments or judgments (including
judgment or appeal bonds) provided that the judgments secured shall, within
--------
30 days after the entry thereof, have been discharged or execution thereof
stayed pending appeal, or shall have been discharged within 30 days after
the expiration of any such stay;
-20-
<PAGE>
(x) (a) easements (including, without limitation, reciprocal
easement agreements and utility agreements), rights-of-way, covenants,
consents, reservations, encroachments, variations and other restrictions,
charges or encumbrances (whether or not recorded) affecting the use of
property, which do not materially detract from the value of such property
or impair the use thereof and (b) any other Lien or exception to coverage
described in mortgagee policies of title insurance issued in favor of and
accepted by the Agent with respect to the Mortgaged Properties;
(xi) leases or subleases granted to others not interfering in any
material respect with the business of any Credit Party;
(xii) any interest of title of a lessor under, and Liens arising from
UCC financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by this
Credit Agreement;
(xiii) Liens deemed to exist in connection with Investments in
repurchase agreements permitted under Section 6.6;
(xiv) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions;
(xv) Liens securing Indebtedness not to exceed $2,500,000 in an
aggregate principal amount outstanding at any time;
(xvi) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any Lien
referred to in the foregoing clauses; provided that such extension, renewal
--------
or replacement Lien shall be limited to all or a part of the Property which
secured the Lien so extended, renewed or replaced (plus improvements on
such Property); and
(xvii) Liens existing as of the Closing Date and set forth on
Schedule 1.1(c); provided that (a) no such Lien shall at any time be
--------------- --------
extended to or cover any Property other than the Property subject thereto
on the Closing Date and (b) the principal amount of the Indebtedness
secured by such Liens shall not be extended, renewed, refunded or
refinanced.
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plan" shall mean, at any particular time, any employee benefit plan which
----
is covered by Title IV of ERISA and in respect of which the Borrower or a
Commonly Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
-21-
<PAGE>
"Pledge Agreement" shall mean the Pledge Agreement dated as of the Closing
----------------
Date given by the Borrower and the other Credit Parties to the Agent, as the
same may from time to time be amended, supplemented or otherwise modified in
accordance with the terms hereof and thereof.
"Prime Rate" shall have the meaning set forth in the definition of
----------
Alternate Base Rate.
"Pro Forma Basis" shall mean, with respect to any transaction, that such
---------------
transaction shall be deemed to have occurred as of the first day of the four-
fiscal quarter period ending as of the end of the fiscal quarter most recently
ended prior to the date of such transaction with respect to which the Agent has
received the financial information required under Section 5.1. As used herein,
"transaction" means any merger or consolidation or acquisition as referenced in
-----------
Section 6.5(b).
"Properties" shall have the meaning set forth in Section 3.10(a).
----------
"Property" shall mean any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Purchasing Lenders" shall have the meaning set forth in Section 9.6(c).
------------------
"Recovery Event" shall mean the receipt by the Borrower or any of its
--------------
Subsidiaries of any cash insurance proceeds or condemnation award payable by
reason of theft, loss, physical destruction or damage, taking or similar event
with respect to any of their respective property or assets.
"Register" shall have the meaning set forth in Section 9.6(d).
--------
"Reorganization" shall mean, with respect to any Multiemployer Plan, the
--------------
condition that such Plan is in reorganization within the meaning of such term as
used in Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
----------------
4043(c) of ERISA, other than those events as to which the thirty-day notice
period is waived under PBGC Reg. (S)4043.
"Required Lenders" shall mean (i) Lenders holding in the aggregate not less
----------------
than 51% of all Revolving Loans and LOC Obligations then outstanding at such
time plus the aggregate unused Revolving Commitments at such time (treating for
----
purposes hereof in the case of Swingline Loans and LOC Obligations, in the case
of the Swingline Lender and the Issuing Lender, only the portion of the
Swingline Loans and the LOC Obligations of the Swingline Lender and the Issuing
Lender, respectively, which is not subject to the Participation Interests of the
other Lenders and, in the case of the Lenders other than the Swingline Lender
and the Issuing Lender, the Participation Interests of such Lenders in Swingline
Loans and LOC Obligations hereunder as direct Obligations), (ii) Lenders holding
in the aggregate not less than 51% of all Tranche A Term Loans then outstanding
at such time and (iii) Lenders holding in the aggregate not less than 51% of all
Tranche B Term Loans then outstanding at such time; provided, however, that if
-------- -------
any Lender shall be a Defaulting Lender at such time, then there shall be
excluded from the
-22-
<PAGE>
determination of Required Lenders, Obligations (including Participation
Interests) owing to such Defaulting Lender and such Defaulting Lender's
Commitments, or after termination of the Commitments, the principal balance of
the Obligations owing to such Defaulting Lender.
"Requirement of Law" shall mean, as to any Person, the Certificate of
------------------
Incorporation and By-laws or other organizational or governing documents of such
Person, and each law, treaty, rule or regulation or determination of an
arbitrator or a court or other 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" shall mean, as to any Credit Party, the President,
-------------------
Chief Executive Officer, Chief Financial Officer or General Manager thereof.
"Restricted Payment" shall mean (a) any dividend or other distribution,
------------------
direct or indirect, on account of any shares of any class of Capital Stock of
the Borrower or any of its Subsidiaries, now or hereafter outstanding, (b) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding,
(c) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of Capital
Stock of the Borrower or any of its Subsidiaries, now or hereafter outstanding,
or (d) any payment or prepayment of principal of, premium, if any, or interest
on, redemption, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, the Subordinated Debt.
"Revolving Commitment" shall mean, with respect to each Lender, the
--------------------
commitment of such Lender to make Revolving Loans in an aggregate principal
amount at any time outstanding up to such Lender's Revolving Committed Amount as
specified in Schedule 2.1(a), as such amount may be reduced from time to time in
---------------
accordance with the provisions hereof.
"Revolving Commitment Percentage" shall mean, for each Lender, the
-------------------------------
percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a),
---------------
as such percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 9.6(c).
"Revolving Commitment Termination Date" shall mean September 30, 2004.
-------------------------------------
"Revolving Committed Amount" shall mean, collectively, the aggregate amount
--------------------------
of all Revolving Commitments as referenced in Section 2.1(a), as such amount may
be reduced from time to time in accordance with the provisions hereof, and,
individually, the amount of each Lender's Revolving Commitment as specified on
Schedule 2.1(a).
- ---------------
"Revolving Loans" shall have the meaning set forth in Section 2.1.
---------------
"Revolving Note" or "Revolving Notes" shall mean the promissory notes of
-------------- ---------------
the Borrower in favor of each of the Lenders evidencing the Revolving Loans
provided pursuant to Section
-23-
<PAGE>
2.1(e), individually or collectively, as appropriate, as such promissory notes
may be amended, modified, supplemented, extended, renewed or replaced from time
to time.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw
---
Hill, Inc., and its successors and assigns.
"Security Agreement" shall mean the Security Agreement dated as of the
------------------
Closing Date given by the Borrower and the other Credit Parties to the Agent, as
amended, modified or supplemented from time to time in accordance with its
terms.
"Security Documents" shall mean the Security Agreement, the Pledge
------------------
Agreement, the Member Pledge Agreement, the Member Negative Pledge Agreement,
the Collateral Assignment of Contract Rights, the Keep-Well Agreement, the
Intercreditor Agreement, any Mortgage Instrument and such other documents
executed and delivered in connection with the attachment and perfection of the
Agent's security interests and liens arising thereunder, including, without
limitation, UCC financing statements and patent and trademark filings.
"Single Employer Plan" shall mean any Plan which is not a Multiemployer
--------------------
Plan.
"Specified Sales" shall mean (a) the sale, transfer, lease or other
---------------
disposition of inventory and materials in the ordinary course of business and
(b) the sale, transfer or other disposition of Permitted Investments described
in clause (i) of the definition thereof.
"Subordinated Debt" shall mean (a) the Bridge Notes due 2008 (the "Bridge
-----------------
Notes") in the principal amount of $150,000,000 issued by the Borrower and AGY
Capital Corp. pursuant to the Senior Subordinated Credit Agreement among the
Borrower, AGY Capital Corp., the subsidiary guarantors from time to time party
thereto, the lenders from time to time party thereto and First Union Investors,
Inc. and Warburg Dillon Read LLC, as co-agents, dated as of the Closing Date
(the "Senior Subordinated Credit Agreement") and (b) any refinancing thereof in
------------------------------------
accordance with the terms hereof.
"Subordinated Debt Documentation" shall mean the agreements, indentures,
-------------------------------
notes and other documentation and instruments evidencing the Subordinated Debt.
"Subsidiary" shall mean, as to any Person, a corporation, partnership,
----------
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall
refer to a Subsidiary or Subsidiaries of the Borrower.
-24-
<PAGE>
"Supply and Services Agreements" shall mean the Glass Marbles Supply
------------------------------
Agreement, the Alloy Services Agreement and the Borates Supply Agreement, each
dated as of the Closing Date, by and between Owens Corning and the Borrower.
"Swingline Commitment" shall mean the commitment of the Swingline Lender to
--------------------
make Swingline Loans in an aggregate principal amount at any time outstanding up
to the Swingline Committed Amount, and the commitment of the Lenders to purchase
participation interests in the Swingline Loans as provided in Section
2.3(b)(ii), as such amounts may be reduced from time to time in accordance with
the provisions hereof.
"Swingline Committed Amount" shall mean the amount of the Swingline
--------------------------
Lender's Swingline Commitment as specified in Section 2.3(a).
"Swingline Lender" shall mean First Union, in its capacity as such.
----------------
"Swingline Loan" or "Swingline Loans" shall have the meaning set forth in
-------------- ---------------
Section 2.3(a).
"Swingline Note" shall mean the promissory note of the Borrower in favor of
--------------
the Swingline Lender evidencing the Swingline Loans provided pursuant to Section
2.3(d), as such promissory note may be amended, modified, supplemented,
extended, renewed or replaced from time to time.
"Taxes" shall have the meaning set forth in Section 2.18.
-----
"Term Loans" shall mean the Tranche A Term Loan and the Tranche B Term
----------
Loan.
"Term Notes" shall mean the Tranche A Term Notes and the Tranche B Term
----------
Notes.
"Tranche" shall mean the collective reference to LIBOR Rate Loans whose
-------
Interest Periods begin and end on the same day. A Tranche may sometimes be
referred to as a "Eurodollar Tranche".
"Tranche A Term Loan" shall have the meaning set forth in Section 2.2A(a).
-------------------
"Tranche A Term Loan Commitment" shall mean, with respect to each Lender,
------------------------------
the commitment of such Lender to make its portion of the Tranche A Term Loan in
a principal amount equal to such Lender's Tranche A Term Loan Commitment
Percentage of the Tranche A Term Loan Committed Amount (and for purposes of
making determinations of Required Lenders hereunder after the Closing Date, the
principal amount outstanding on the Tranche A Term Loan).
"Tranche A Term Loan Commitment Percentage" shall mean, for any Lender, the
-----------------------------------------
percentage identified as its Tranche A Term Loan Commitment Percentage on
Schedule 2.1(a), as such percentage may be modified in connection with any
- ---------------
assignment made in accordance with the provisions of Section 9.6.
-25-
<PAGE>
"Tranche A Term Loan Committed Amount" shall have the meaning set forth in
------------------------------------
Section 2.2A(a).
"Tranche A Term Note" or "Tranche A Term Notes" shall mean the promissory
------------------- --------------------
notes of the Borrower in favor of each of the Lenders evidencing the portion of
the Tranche A Term Loan provided pursuant to Section 2.2A(d), individually or
collectively, as appropriate, as such promissory notes may be amended, modified,
restated, supplemented, extended, renewed or replaced from time to time.
"Tranche B Term Loan" shall have the meaning set forth in Section 2.2B(a).
-------------------
"Tranche B Term Loan Commitment" shall mean, with respect to each Lender,
------------------------------
the commitment of such Lender to make its portion of the Tranche B Term Loan in
a principal amount equal to such Lender's Tranche B Term Loan Commitment
Percentage of the Tranche B Term Loan Committed Amount (and for purposes of
making determinations of Required Lenders hereunder after the Closing Date, the
principal amount outstanding on the Tranche B Term Loan).
"Tranche B Term Loan Commitment Percentage" shall mean, for any Lender, the
-----------------------------------------
percentage identified as its Tranche B Term Loan Commitment Percentage on
Schedule 2.1(a), as such percentage may be modified in connection with any
- ---------------
assignment made in accordance with the provisions of Section 9.6.
"Tranche B Term Loan Committed Amount" shall have the meaning set forth in
------------------------------------
Section 2.2B(a).
"Tranche B Term Note" or "Tranche B Term Notes" shall mean the promissory
------------------- --------------------
notes of the Borrower in favor of each of the Lenders evidencing the portion of
the Tranche B Term Loan provided pursuant to Section 2.2B(d), individually or
collectively, as appropriate, as such promissory notes may be amended, modified,
restated, supplemented, extended, renewed or replaced from time to time.
"Transfer Effective Date" shall have the meaning set forth in each
-----------------------
Commitment Transfer Supplement.
"2.18 Certificate" shall have the meaning set forth in Section 2.18.
----------------
"Type" shall mean, as to any Loan, its nature as an Alternate Base Rate
----
Loan, LIBOR Rate Loan or Swingline Loan, as the case may be.
"Year 2000 Compliant" shall have the meaning set forth in Section 3.25.
-------------------
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes or other
Credit Documents or any certificate or other document made or delivered
pursuant hereto.
-26-
<PAGE>
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 1.3 ACCOUNTING TERMS.
----------------
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 GAAP applied on a basis consistent with the most recent audited
consolidated financial statements of the Borrower delivered to the Lenders;
provided that, if the Borrower notifies the Agent that it wishes to amend any
- --------
covenant in Section 5.9 (including, without limitation, for the purposes of the
definition of "Applicable Percentage" set forth in Section 1.1) to eliminate the
effect of any change in GAAP on the operation of such covenant (or if the Agent
notifies the Borrower that the Required Lenders wish to amend Section 5.9 for
such purpose), then the Borrower's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective, until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to the Borrower and the Required Lenders.
The Borrower shall deliver to the Agent and each Lender at the same time as
the delivery of any annual or quarterly financial statements given in accordance
with the provisions of Section 5.1, (i) a description in reasonable detail of
any material change in the application of accounting principles employed in the
preparation of such financial statements from those applied in the most recently
preceding quarterly or annual financial statements as to which no objection
shall have been made in accordance with the provisions above and (ii) a
reasonable estimate of the effect on the financial statements on account of such
changes in application.
ARTICLE II
THE LOANS; AMOUNT AND TERMS
SECTION 2.1 REVOLVING LOANS.
---------------
(a) Revolving Commitment. During the Commitment Period, subject
--------------------
to the terms and conditions hereof, each Lender severally agrees to make
revolving credit loans ("Revolving Loans") to the Borrower from time to
---------------
time for the purposes hereinafter set forth; provided, however, that (i)
-------- -------
with regard to each Lender individually, the sum of such Lender's share of
outstanding Revolving Loans plus such Lender's Revolving Commitment
----
Percentage of Swingline Loans plus such Lender's LOC Commitment
----
-27-
<PAGE>
Percentage of LOC Obligations shall not exceed such Lender's Revolving
Commitment Percentage of the aggregate Revolving Committed Amount, and (ii)
with regard to the Lenders collectively, the sum of the aggregate amount of
outstanding Revolving Loans plus Swingline Loans plus LOC Obligations shall
---- ----
not exceed the aggregate Revolving Committed Amount then in effect. For
purposes hereof, the aggregate amount available hereunder shall be SEVENTY-
FIVE MILLION DOLLARS ($75,000,000) (as such aggregate maximum amount may be
reduced from time to time as provided in Section 2.6, the "Revolving
---------
Committed Amount"). Revolving Loans may consist of Alternate Base Rate
----------------
Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower may
request, and may be repaid and reborrowed in accordance with the provisions
hereof. LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending
Office and Alternate Base Rate Loans at its Domestic Lending Office.
Notwithstanding any provision herein to the contrary, (x) the initial LIBOR
borrowing under Section 2.1 shall be made as a LIBOR Rate Loan having an
Interest Period of fourteen (14) days and (y) subsequent to such initial
LIBOR borrowing but prior to the closing of the initial syndication of the
Commitment and the Loans to the Lenders, all LIBOR Rate Loans under Section
2.1 shall be made or continued, at the Borrower's election, as LIBOR Rate
Loans having an Interest Period of fourteen (14) days. All LIBOR Rate
Loans having an Interest Period of fourteen (14) days shall bear interest
at the same rate as LIBOR Rate Loans having an Interest Period of one
month.
(b) Revolving Loan Borrowings.
-------------------------
(i) Notice of Borrowing. The Borrower shall request a Revolving
-------------------
Loan borrowing by written notice (or telephone notice promptly
confirmed in writing which confirmation may be by fax) to the Agent
not later than 11:00 A.M. (Charlotte, North Carolina time) on the
Business Day prior to the date of requested borrowing in the case of
Alternate Base Rate Loans, and on the third Business Day prior to the
date of the requested borrowing in the case of LIBOR Rate Loans. Each
such request for borrowing shall be irrevocable and shall specify (A)
that a Revolving Loan is requested, (B) the date of the requested
borrowing (which shall be a Business Day), (C) the aggregate principal
amount to be borrowed and (D) whether the borrowing shall be comprised
of Alternate Base Rate Loans, LIBOR Rate Loans or a combination
thereof, and if LIBOR Rate Loans are requested, the Interest Period(s)
therefor. A form of Notice of Borrowing (a "Notice of Borrowing") is
-------------------
attached as Schedule 2.1(b)(i). If the Borrower shall fail to specify
------------------
in any such Notice of Borrowing (I) an applicable Interest Period in
the case of a LIBOR Rate Loan, then such notice shall be deemed to be
a request for an Interest Period of one month, or (II) the type of
Revolving Loan requested, then such notice shall be deemed to be a
request for an Alternate Base Rate Loan hereunder. The Agent shall
give notice to each Lender promptly upon receipt of each Notice of
Borrowing, the contents thereof and each such Lender's share thereof.
(ii) Minimum Amounts. Each Revolving Loan borrowing shall be in
---------------
a minimum aggregate amount of $5,000,000 and integral multiples of
$1,000,000 in
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<PAGE>
excess thereof (or the remaining amount of the Revolving Committed
Amount, if less).
(iii) Advances. Each Lender will make its Revolving Commitment
--------
Percentage of each Revolving Loan borrowing available to the Agent for
the account of the Borrower at the office of the Agent specified in
Schedule 9.2, or at such other office as the Agent may designate in
------------
writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date
specified in the applicable Notice of Borrowing in Dollars and in
funds immediately available to the Agent. Such borrowing will then be
made available to the Borrower by the Agent by crediting the account
of the Borrower on the books of such office with the aggregate of the
amounts made available to the Agent by the Lenders and in like funds
as received by the Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be
---------
due and payable in full on the Revolving Commitment Termination Date.
(d) Interest. Subject to the provisions of Section 2.9, Revolving
--------
Loans shall bear interest as follows:
(i) Alternate Base Rate Loans. During such periods as
-------------------------
Revolving Loans shall be comprised of Alternate Base Rate Loans, each
such Alternate Base Rate Loan shall bear interest at a per annum rate
equal to the sum of the Alternate Base Rate plus the Applicable
----
Percentage; and
(ii) LIBOR Rate Loans. During such periods as Revolving Loans
----------------
shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan
shall bear interest at a per annum rate equal to the sum of the LIBOR
Rate plus the Applicable Percentage.
----
Interest on Revolving Loans shall be payable in arrears on each Interest
Payment Date.
(e) Revolving Notes. Each Lender's Revolving Commitment Percentage
---------------
of the Revolving Loans shall be evidenced by a duly executed promissory
note of the Borrower to such Lender in substantially the form of Schedule
--------
2.1(e).
---
SECTION 2.2A TRANCHE A TERM LOAN.
-------------------
(a) Tranche A Term Loan. Subject to the terms and conditions hereof
-------------------
and in reliance upon the representations and warranties set forth herein,
each Lender severally agrees to make available to the Borrower on the
Closing Date such Lender's Tranche A Term Loan Commitment Percentage of a
term loan in Dollars (the "Tranche A Term Loan") in the aggregate principal
-------------------
amount of ONE HUNDRED FIFTEEN MILLION DOLLARS ($115,000,000) (the "Tranche
-------
A Term Loan Committed Amount") for the purposes hereinafter set forth. The
----------------------------
Tranche A Term Loan may consist of Alternate Base Rate Loans or LIBOR Rate
Loans, or a combination thereof, as the Borrower may request. The Borrower
shall request the initial Tranche A Term Loan borrowing by
-29-
<PAGE>
written notice (or telephone notice promptly confirmed in writing which
confirmation may be by fax) to the Agent not later than 11:00 A.M.
(Charlotte, North Carolina time) on the Business Day prior to the date of
requested borrowing. Amounts repaid on the Tranche A Term Loan may not be
reborrowed. LIBOR Rate Loans shall be made by each Lender at its LIBOR
Lending Office and Alternate Base Rate Loans at its Domestic Lending
Office. Notwithstanding any provision herein to the contrary, (x) the LIBOR
borrowing under Section 2.2A shall be made as a LIBOR Rate Loan having an
Interest Period of fourteen (14) days and (y) subsequent to such initial
LIBOR borrowing but prior to the closing of the initial syndication of the
Commitment and the Loans to the Lenders, all LIBOR Rate Loans under Section
2.2A shall be continued, at the Borrower's election, as LIBOR Rate Loans
having an Interest Period of fourteen (14) days. All LIBOR Rate Loans
having an Interest Period of fourteen (14) days shall bear interest at the
same rate as LIBOR Rate Loans having an Interest Period of one month.
(b) Repayment of Tranche A Term Loan. The principal amount of the
--------------------------------
Tranche A Term Loan shall be repaid in twenty-four (24) consecutive fiscal
quarterly installments, unless accelerated sooner pursuant to Section 7.2,
commencing on December 31, 1998 and ending on September 30, 2004 payable as
follows:
Payment Date Amount
------------ ------
December 31, 1998 $2,875,000
March 31, 1999 $2,875,000
June 30, 1999 $2,875,000
September 30, 1999 $2,875,000
December 31, 1999 $4,312,500
March 31, 2000 $4,312,500
June 30, 2000 $4,312,500
September 30, 2000 $4,312,500
December 31, 2000 $4,312,500
March 31, 2001 $4,312,500
June 30, 2001 $4,312,500
September 30, 2001 $4,312,500
December 31, 2001 $5,750,000
March 31, 2002 $5,750,000
June 30, 2002 $5,750,000
September 30, 2002 $5,750,000
December 31, 2002 $5,750,000
March 31, 2003 $5,750,000
June 30, 2003 $5,750,000
September 30, 2003 $5,750,000
December 31, 2003 $5,750,000
March 31, 2004 $5,750,000
June 30, 2004 $5,750,000
September 30, 2004 $5,750,000
-30-
<PAGE>
(c) Interest on the Tranche A Term Loan. Subject to the
-----------------------------------
provisions of Section 2.9, the Tranche A Term Loan shall bear interest as
follows:
(i) Alternate Base Rate Loans. During such periods as the
-------------------------
Tranche A Term Loan shall be comprised of Alternate Base Rate Loans,
each such Alternate Base Rate Loan shall bear interest at a per
annum rate equal to the sum of the Alternate Base Rate plus the
----
Applicable Percentage; and
(ii) LIBOR Rate Loans. During such periods as the Tranche
----------------
A Term Loan shall be comprised of LIBOR Rate Loans, each such LIBOR
Rate Loan shall bear interest at a per annum rate equal to the sum
of the LIBOR Rate plus the Applicable Percentage.
----
Interest on the Tranche A Term Loan shall be payable in
arrears on each Interest Payment Date.
(d) Tranche A Term Notes. Each Lender's Tranche A Term Loan
--------------------
Commitment Percentage of the Tranche A Term Loan outstanding as of the
Closing Date shall be evidenced by a duly executed promissory note of the
Borrower to such Lender in substantially the form of Schedule 2.2A(d).
----------------
SECTION 2.2B TRANCHE B TERM LOAN.
-------------------
(a) Tranche B Term Loan. Subject to the terms and conditions
-------------------
hereof and in reliance upon the representations and warranties set forth
herein, each Lender severally agrees to make available to the Borrower on
the Closing Date such Lender's Tranche B Term Loan Commitment Percentage of
a term loan in Dollars (the "Tranche B Term Loan") in the aggregate
-------------------
principal amount of ONE HUNDRED TWENTY-FIVE MILLION DOLLARS ($125,000,000)
(the "Tranche B Term Loan Committed Amount") for the purposes hereinafter
------------------------------------
set forth. The Tranche B Term Loan may consist of Alternate Base Rate Loans
or LIBOR Rate Loans, or a combination thereof, as the Borrower may request.
The Borrower shall request the initial Tranche B Term Loan borrowing by
written notice (or telephone notice promptly confirmed in writing which
confirmation may be by fax) to the Agent not later than 11:00 A.M.
(Charlotte, North Carolina time) on the Business Day prior to the date of
requested borrowing. Amounts repaid on the Tranche B Term Loan may not be
reborrowed. LIBOR Rate Loans shall be made by each Lender at its LIBOR
Lending Office and Alternate Base Rate Loans at its Domestic Lending
Office. Notwithstanding any provision herein to the contrary, (x) the LIBOR
borrowing under Section 2.2B shall be made as a LIBOR Rate Loan having an
Interest Period of fourteen (14) days and (y) subsequent to such initial
LIBOR borrowing but prior to the closing of the initial syndication of the
Commitment and the Loans to the Lenders, all LIBOR Rate Loans under Section
2.2B shall be continued, at the Borrower's election, as LIBOR Rate Loans
having an Interest Period of fourteen (14) days. All LIBOR Rate Loans
having an Interest Period of fourteen (14) days shall bear interest at the
same rate as LIBOR Rate Loans having an Interest Period of one month.
-31-
<PAGE>
(b) Repayment of Tranche B Term Loan. The principal amount of the
--------------------------------
Tranche B Term Loan shall be repaid in twenty-eight (28) consecutive fiscal
quarterly installments, unless accelerated sooner pursuant to Section 7.2,
commencing on December 31, 1998 and ending on September 30, 2005.
Installments one (1) through twenty-four (24), inclusive, shall each be in
the amount of $312,500 and installments twenty-five (25) through twenty-
eight (28), inclusive, shall each be in the amount of $29,375,000.
(c) Interest on the Tranche B Term Loan. Subject to the
-----------------------------------
provisions of Section 2.9, the Tranche B Term Loan shall bear interest as
follows:
(i) Alternate Base Rate Loans. During such periods as the
-------------------------
Tranche B Term Loan shall be comprised of Alternate Base Rate Loans,
each such Alternate Base Rate Loan shall bear interest at a per annum
rate equal to the sum of the Alternate Base Rate plus the Applicable
----
Percentage; and
(ii) LIBOR Rate Loans. During such periods as the Tranche
----------------
B Term Loan shall be comprised of LIBOR Rate Loans, each such LIBOR
Rate Loan shall bear interest at a per annum rate equal to the sum of
the LIBOR Rate plus the Applicable Percentage.
----
Interest on the Tranche B Term Loan shall be payable in
arrears on each Interest Payment Date.
(d) Tranche B Term Notes. Each Lender's Tranche B Term Loan
--------------------
Commitment Percentage of the Tranche B Term Loan outstanding as of the
Closing Date shall be evidenced by a duly executed promissory note of the
Borrower to such Lender in substantially the form of Schedule 2.2B(d).
----------------
SECTION 2.3 SWINGLINE LOAN SUBFACILITY.
--------------------------
(a) Swingline Commitment. During the Commitment Period, subject
--------------------
to the terms and conditions hereof, the Swingline Lender, in its individual
capacity, agrees to make certain revolving credit loans to the Borrower
(each a "Swingline Loan" and, collectively, the "Swingline Loans") for the
-------------- ---------------
purposes hereinafter set forth; provided, however, (i) the aggregate amount
-------- -------
of Swingline Loans outstanding at any time shall not exceed TEN MILLION
DOLLARS ($10,000,000) (the "Swingline Committed Amount"), and (ii) the sum
--------------------------
of the aggregate amount of outstanding Revolving Loans plus Swingline Loans
----
plus LOC Obligations shall not exceed the aggregate Revolving Committed
----
Amount then in effect. Swingline Loans hereunder may be repaid and
reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Borrowings.
-------------------------
(i) Notice of Borrowing and Disbursement. The Swingline
------------------------------------
Lender will make Swingline Loans available to the Borrower on any
Business Day upon request made by the Borrower not later than 12:00
Noon (Charlotte, North
-32-
<PAGE>
Carolina time) on such Business Day. A notice of request for Swingline
Loan borrowing shall be made in the form of Schedule 2.1(b)(i) with
------------------
appropriate modifications. Swingline Loan borrowings hereunder shall
be made in minimum amounts of $100,000 and in integral amounts of
$100,000 in excess thereof.
(ii) Repayment of Swingline Loans. Each Swingline Loan borrowing
----------------------------
shall be due and payable on the Revolving Commitment Termination Date.
The Swingline Lender may, at any time, in its sole discretion, by
written notice to the Borrower and the Agent, demand repayment of its
Swingline Loans by way of a Revolving Loan borrowing, in which case
the Borrower shall be deemed to have requested a Revolving Loan
borrowing comprised entirely of Alternate Base Rate Loans in the
amount of such Swingline Loans; provided, however, that, in the
-------- -------
following circumstances, any such demand shall also be deemed to have
been given one Business Day prior to each of (i) the Revolving
Commitment Termination Date, (ii) the occurrence of any Event of
Default described in Section 7.1(e), (iii) upon acceleration of the
Credit Party Obligations hereunder, whether on account of an Event of
Default described in Section 7.1(e) or any other Event of Default, and
(iv) the exercise of remedies in accordance with the provisions of
Section 7.2 hereof (each such Revolving Loan borrowing made on account
of any such deemed request therefor as provided herein being
hereinafter referred to as a "Mandatory Borrowing"). Each Lender
-------------------
hereby irrevocably agrees to make such Revolving Loans promptly upon
any such request or deemed request on account of each Mandatory
Borrowing in the amount and in the manner specified in the preceding
sentence and on the same such date notwithstanding (I) the amount of
---------------
Mandatory Borrowing may not comply with the minimum amount for
borrowings of Revolving Loans otherwise required hereunder, (II)
whether any conditions specified in Section 4.2 are then satisfied,
(III) whether a Default or an Event of Default then exists, (IV)
failure of any such request or deemed request for Revolving Loans to
be made by the time otherwise required in Section 2.1(b)(i), (V) the
date of such Mandatory Borrowing, or (VI) any reduction in the
Revolving Committed Amount or termination of the Revolving Commitments
immediately prior to such Mandatory Borrowing or contemporaneously
therewith. In the event that any Mandatory Borrowing cannot for any
reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to the Borrower), then each
Lender hereby agrees that it shall forthwith purchase (as of the date
the Mandatory Borrowing would otherwise have occurred, but adjusted
for any payments received from the Borrower on or after such date and
prior to such purchase) from the Swingline Lender such participations
in the outstanding Swingline Loans as shall be necessary to cause each
such Lender to share in such Swingline Loans ratably based upon its
respective Revolving Commitment Percentage (determined before giving
effect to any termination of the Commitments pursuant to Section 7.2),
provided that (A) all interest payable on the Swingline Loans shall be
--------
for the account of the Swingline Lender until the date as of which the
respective participation is purchased, and (B) at the time any
purchase of participations pursuant to this sentence is actually made,
the
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<PAGE>
purchasing Lender shall be required to pay to the Swingline Lender
interest on the principal amount of such participation purchased for
each day from and including the day upon which the Mandatory Borrowing
would otherwise have occurred to but excluding the date of payment for
such participation, at the rate equal to, if paid within two (2)
Business Days of the date of the Mandatory Borrowing, the Federal
Funds Effective Rate, and thereafter at a rate equal to the Alternate
Base Rate.
(c) Interest on Swingline Loans. Subject to the provisions of
---------------------------
Section 2.9, Swingline Loans shall bear interest at a per annum rate equal
to the Alternate Base Rate plus the Applicable Percentage for Revolving
----
Loans that are Alternate Base Rate Loans. Interest on Swingline Loans shall
be payable in arrears on each Interest Payment Date.
(d) Swingline Note. The Swingline Loans shall be evidenced by
--------------
a duly executed promissory note of the Borrower to the Swingline Lender in
the original amount of the Swingline Committed Amount and substantially in
the form of Schedule 2.3(d).
---------------
SECTION 2.4 LETTER OF CREDIT SUBFACILITY.
----------------------------
(a) Issuance. Subject to the terms and conditions hereof and of
--------
the LOC Documents, if any, and any other terms and conditions which the
Issuing Lender may reasonably require, during the Commitment Period the
Issuing Lender shall issue, and the Lenders shall participate in, Letters
of Credit for the account of the Borrower from time to time upon request in
a form acceptable to the Issuing Lender; provided, however, that (i) the
-------- -------
aggregate amount of LOC Obligations shall not at any time exceed THIRTY
MILLION DOLLARS ($30,000,000) (the "LOC Committed Amount"), (ii) the sum of
--------------------
the aggregate amount of Revolving Loans plus Swingline Loans plus LOC
---- ----
Obligations shall not at any time exceed the aggregate Revolving Committed
Amount then in effect, (iii) all Letters of Credit shall be denominated in
U.S. Dollars and (iv) Letters of Credit shall be issued for the purpose of
supporting tax-advantaged variable rate demand note financing and for other
lawful corporate purposes and may be issued as standby letters of credit,
including in connection with workers' compensation and other insurance
programs, and trade letters of credit. Except as otherwise expressly
agreed upon by all the Lenders, no Letter of Credit shall have an original
expiry date more than twelve (12) months from the date of issuance;
provided, however, so long as no Default or Event of Default has occurred
-------- -------
and is continuing and subject to the other terms and conditions to the
issuance of Letters of Credit hereunder, the expiry dates of Letters of
Credit may be extended annually or periodically from time to time on the
request of the Borrower or by operation of the terms of the applicable
Letter of Credit to a date not more than twelve (12) months from the date
of extension; provided, further, that no Letter of Credit, as originally
-------- -------
issued or as extended, shall have an expiry date extending beyond the
Revolving Commitment Termination Date. Each Letter of Credit shall comply
with the related LOC Documents. The issuance and expiry date of each
Letter of Credit shall be a Business Day. Any Letters of Credit issued
hereunder shall be in a minimum original face amount of $50,000 or such
other amount as agreed by the Agent and the Borrower. There will be no
more than twelve (12) Letters of Credit outstanding at any time or such
other amount as agreed
-34-
<PAGE>
by the Agent and the Borrower. First Union shall be the Issuing Lender on
all Letters of Credit issued after the Closing Date.
(b) Notice and Reports. The request for the issuance of a Letter of
------------------
Credit shall be submitted to the Issuing Lender at least four (4) Business
Days prior to the requested date of issuance. The Issuing Lender will
promptly upon request provide to the Agent for dissemination to the Lenders
a detailed report specifying the Letters of Credit which are then issued
and outstanding and any activity with respect thereto which may have
occurred since the date of any prior report, and including therein, among
other things, the account party, the beneficiary, the face amount, expiry
date as well as any payments or expirations which may have occurred. The
Issuing Lender will further provide to the Agent promptly upon request
copies of the Letters of Credit. The Issuing Lender will provide to the
Agent promptly upon request a summary report of the nature and extent of
LOC Obligations then outstanding.
(c) Participations. Each Lender upon issuance of a Letter of Credit,
--------------
shall be deemed to have purchased without recourse a risk participation
from the Issuing Lender in such Letter of Credit and the obligations
arising thereunder and any collateral relating thereto, in each case in an
amount equal to its LOC Commitment Percentage of the obligations under such
Letter of Credit and shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and be obligated to pay to
the Issuing Lender therefor and discharge when due, its LOC Commitment
Percentage of the obligations arising under such Letter of Credit. Without
limiting the scope and nature of each Lender's participation in any Letter
of Credit, to the extent that the Issuing Lender has not been reimbursed as
required hereunder or under any LOC Document, each such Lender shall pay to
the Issuing Lender its LOC Commitment Percentage of such unreimbursed
drawing in same day funds on the day of notification by the Issuing Lender
of an unreimbursed drawing pursuant to the provisions of subsection (d)
hereof. The obligation of each Lender to so reimburse the Issuing Lender
shall be absolute and unconditional and shall not be affected by the
occurrence of a Default, an Event of Default or any other occurrence or
event. Any such reimbursement shall not relieve or otherwise impair the
obligation of the Borrower to reimburse the Issuing Lender under any Letter
of Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any Letter of
-------------
Credit, the Issuing Lender will promptly notify the Borrower and the Agent.
The Borrower shall reimburse the Issuing Lender on the day of drawing under
any Letter of Credit (either with the proceeds of a Swingline Loan or
Revolving Loan obtained hereunder or otherwise) in same day funds as
provided herein or in the LOC Documents. If the Borrower shall fail to
reimburse the Issuing Lender as provided herein, the unreimbursed amount of
such drawing shall bear interest at the Default Rate. Unless the Borrower
shall immediately notify the Issuing Lender and the Agent of its intent to
otherwise reimburse the Issuing Lender, the Borrower shall be deemed to
have requested a Swingline Loan, or if and to the extent Swingline Loans
shall not be available, a Revolving Loan in the amount of the drawing as
provided in subsection (e) hereof, the proceeds of which will be used to
satisfy the reimbursement obligations. The Borrower's reimbursement
obligations hereunder
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<PAGE>
shall be absolute and unconditional under all circumstances irrespective of
any rights of set-off, counterclaim or defense to payment the Borrower may
claim or have against the Issuing Lender, the Agent, the Lenders, the
beneficiary of the Letter of Credit drawn upon or any other Person,
including without limitation any defense based on any failure of the
Borrower to receive consideration or the legality, validity, regularity or
unenforceability of the Letter of Credit. The Issuing Lender will promptly
notify the other Lenders of the amount of any unreimbursed drawing and each
Lender shall promptly pay to the Agent for the account of the Issuing
Lender in Dollars and in immediately available funds, the amount of such
Lender's LOC Commitment Percentage of such unreimbursed drawing. Such
payment shall be made on the day such notice is received by such Lender
from the Issuing Lender if such notice is received at or before 2:00 P.M.
(Charlotte, North Carolina time), otherwise such payment shall be made at
or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day
next succeeding the day such notice is received. If such Lender does not
pay such amount to the Issuing Lender in full upon such request, such
Lender shall, on demand, pay to the Agent for the account of the Issuing
Lender interest on the unpaid amount during the period from the date of
such drawing until such Lender pays such amount to the Issuing Lender in
full at a rate per annum equal to, if paid within two (2) Business Days of
the date of drawing, the Federal Funds Effective Rate and thereafter at a
rate equal to the Alternate Base Rate. Each Lender's obligation to make
such payment to the Issuing Lender, and the right of the Issuing Lender to
receive the same, shall be absolute and unconditional, shall not be
affected by any circumstance whatsoever and without regard to the
termination of this Agreement or the Commitments hereunder, the existence
of a Default or Event of Default or the acceleration of the Credit Party
Obligations hereunder and shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Repayment with Revolving Loans. On any day on which the Borrower
------------------------------
shall have requested, or been deemed to have requested, (i) a Swingline
Loan borrowing to reimburse a drawing under a Letter of Credit, the
Swingline Lender shall make the Swingline Loan advance pursuant to the
terms of the request or deemed request in accordance with the provisions
for Swingline Loan advances hereunder, or (ii) a Revolving Loan to
reimburse a drawing under a Letter of Credit, the Agent shall give notice
to the Lenders that a Revolving Loan has been requested or deemed requested
in connection with a drawing under a Letter of Credit, in which case a
Revolving Loan borrowing comprised entirely of Alternate Base Rate Loans
(each such borrowing, a "Mandatory Borrowing") shall be immediately made
--------------------
(without giving effect to any termination of the Commitments pursuant to
Section 7.2) pro rata based on each Lender's respective Revolving
--- ----
Commitment Percentage (determined before giving effect to any termination
of the Commitments pursuant to Section 7.2) and in the case of both clauses
(i) and (ii) the proceeds thereof shall be paid directly to the Issuing
Lender for application to the respective LOC Obligations. Each Lender
hereby irrevocably agrees to make such Revolving Loans immediately upon any
such request or deemed request on account of each Mandatory Borrowing in
the amount and in the manner specified in the preceding sentence and on the
same such date notwithstanding (i) the amount of Mandatory Borrowing may
---------------
not comply with the minimum amount for borrowings of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in
Section 4.2 are then
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<PAGE>
satisfied, (iii) whether a Default or an Event of Default then exists, (iv)
failure for any such request or deemed request for Revolving Loan to be
made by the time otherwise required in Section 2.1(b), (v) the date of such
Mandatory Borrowing, or (vi) any reduction in the Revolving Committed
Amount after any such Letter of Credit may have been drawn upon; provided,
--------
however, that in the event any such Mandatory Borrowing should be less than
-------
the minimum amount for borrowings of Revolving Loans otherwise provided in
Section 2.1(b)(ii), the Borrower shall pay to the Agent for its own account
an administrative fee of $500. In the event that any Mandatory Borrowing
cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower), then
each such Lender hereby agrees that it shall forthwith fund (as of the date
the Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to such
purchase) its Participation Interests in the outstanding LOC Obligations;
provided, further, that in the event any Lender shall fail to fund its
-------- -------
Participation Interest on the day the Mandatory Borrowing would otherwise
have occurred, then the amount of such Lender's unfunded Participation
Interest therein shall bear interest payable to the Issuing Lender upon
demand, at the rate equal to, if paid within two (2) Business Days of such
date, the Federal Funds Effective Rate, and thereafter at a rate equal to
the Alternate Base Rate.
(f) Modification, Extension. The issuance of any supplement,
-----------------------
modification, amendment, renewal, or extension to any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Lender shall have
-----------------------------
the Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP may be
---
incorporated therein and deemed in all respects to be a part thereof.
SECTION 2.5 FEES.
----
(a) Commitment Fee. In consideration of the Revolving
--------------
Commitment, the Borrower agrees to pay to the Agent for the ratable benefit
of the Lenders a commitment fee (the "Commitment Fee") in an amount equal
--------------
to the Applicable Percentage per annum on the average daily unused amount
of the aggregate Revolving Committed Amount. For purposes of computing the
Commitment hereunder, Swingline Loans and LOC Obligations shall be
considered usage under the aggregate Revolving Committed Amount. The
Commitment Fee shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter for the prior calendar
quarter.
(b) Letter of Credit Fees. In consideration of the LOC
---------------------
Commitments, the Borrower agrees to pay to the Issuing Lender a fee (the
"Letter of Credit Fee") equal to the Applicable Percentage per annum on
--------------------
the average daily maximum amount available to be drawn under each Letter of
Credit from the date of issuance to the date of expiration. In addition to
such Letter of Credit Fee, the Issuing Lender may charge, and retain for
its
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<PAGE>
own account without sharing by the other Lenders, an additional facing fee
of one-fourth of one percent (1/4%) per annum on the average daily maximum
amount available to be drawn under each such Letter of Credit issued by it.
The Issuing Lender shall promptly pay over to the Agent for the ratable
benefit of the Lenders (including the Issuing Lender) the Letter of Credit
Fee. The Letter of Credit Fee shall be payable quarterly in arrears on the
15th day following the last day of each calendar quarter for the prior
calendar quarter.
(c) Issuing Lender Fees. In addition to the Letter of Credit
-------------------
Fees payable pursuant to subsection (b) hereof, the Borrower shall pay to
the Issuing Lender for its own account without sharing by the other Lenders
the reasonable and customary charges from time to time of the Issuing
Lender with respect to the amendment, transfer, administration,
cancellation and conversion of, and drawings under, such Letters of Credit
(collectively, the "Issuing Lender Fees").
-------------------
(d) Administrative Fee. The Borrower agrees to pay to the Agent
------------------
the annual administrative fee as described in the Fee Letter.
SECTION 2.6 COMMITMENT REDUCTIONS.
---------------------
(a) Voluntary Reductions. The Borrower shall have the right to
--------------------
terminate or permanently reduce the unused portion of the Revolving
Committed Amount at any time or from time to time upon not less than three
Business Days' prior notice to the Agent (which shall notify the Lenders
thereof as soon as practicable) of each such termination or reduction,
which notice shall specify the effective date thereof and the amount of any
such reduction which shall be in a minimum amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof and shall be irrevocable and
effective upon receipt by the Agent, provided that no such reduction or
--------
termination shall be permitted if after giving effect thereto, and to any
prepayments of the Revolving Loans made on the effective date thereof, the
sum of the then outstanding aggregate principal amount of the Revolving
Loans plus Swingline Loans plus LOC Obligations would exceed the aggregate
---- ----
Revolving Committed Amount then in effect.
(b) Mandatory Reductions. On any date that the Revolving Loans
--------------------
are required to be prepaid pursuant to the terms of Section 2.7(b) (ii),
(iii), (iv), (v), and (vi), the Revolving Committed Amount shall be
automatically permanently reduced by the amount of such required prepayment
and/or reduction.
(c) Revolving Commitment Termination Date. The Revolving
-------------------------------------
Commitment, the LOC Commitment and the Swingline Commitment shall
automatically terminate on the Revolving Commitment Termination Date.
SECTION 2.7 PREPAYMENTS.
-----------
(a) Optional Prepayments. The Borrower shall have the right to
--------------------
prepay Loans in whole or in part from time to time; provided, however, that
-------- -------
each partial prepayment of Revolving Loans and Term Loans shall be in a
minimum principal amount of $5,000,000
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<PAGE>
and integral multiples of $1,000,000 in excess thereof and each prepayment
of Swingline Loans shall be in a minimum principal amount of $100,000 (or
if the outstanding principal balance of the Swingline Loans is less than
$100,000, such lesser amount) and integral multiples of $100,000 in excess
thereof. The Borrower shall give three Business Days' irrevocable notice in
the case of LIBOR Rate Loans and one Business Day's irrevocable notice in
the case of Alternate Base Rate Loans, to the Agent (which shall notify the
Lenders thereof as soon as practicable). Subject to the foregoing terms,
amounts prepaid under this Section 2.7(a) shall be applied as the Borrower
may elect; provided that if the Borrower fails to specify the application
--------
of an optional prepayment then such prepayment shall be applied first to
Revolving Loans and then pro rata to the remaining principal installments
--- ----
of the Term Loans, in each case first to Alternate Base Rate Loans and then
to LIBOR Rate Loans in direct order of Interest Period maturities. All
prepayments under this Section 2.7(a) shall be subject to Section 2.17, but
otherwise without premium or penalty. Interest on the principal amount
prepaid shall be payable on the next occurring Interest Payment Date that
would have occurred had such loan not been prepaid or, at the request of
the Agent, interest on the principal amount prepaid shall be payable on any
date that a prepayment is made hereunder through the date of prepayment.
Amounts prepaid on the Swingline Loan and the Revolving Loans may be
reborrowed in accordance with the terms hereof. Amounts prepaid on the Term
Loans may not be reborrowed.
(b) Mandatory Prepayments.
---------------------
(i) Revolving Committed Amount. If at any time the sum of the
--------------------------
aggregate principal amount of outstanding Revolving Loans plus
----
Swingline Loans plus LOC Obligations shall exceed the aggregate
----
Revolving Committed Amount then in effect, the Borrower immediately
shall prepay the Revolving Loans and (after all Revolving Loans have
been repaid) cash collateralize the LOC Obligations, in an amount
sufficient to eliminate such excess.
(ii) Excess Cash Flow. Within ninety (90) days after the end of
----------------
each fiscal year (commencing with the fiscal year ending December 31,
1999), the Borrower shall prepay the Term Loans in an amount equal to
(x) fifty percent (50%) of Excess Cash Flow earned during such prior
fiscal year less (y) the amount of any optional prepayments of the
Term Loans or (to the extent accompanied by a permanent reduction in
the Revolving Committed Amount) the Revolving Loans during such prior
fiscal year. Any payments of Excess Cash Flow shall be applied as set
forth in clause (vii) below. Notwithstanding the foregoing to the
contrary, the prepayment of Loans from Excess Cash Flow shall not be
required for any prior fiscal year if the Leverage Ratio for the four
fiscal quarters ending on the last day of such fiscal year is less
than 3.5 to 1.0.
(iii) Asset Dispositions. Upon any Asset Disposition (except in
------------------
connection with a Recovery Event), the Borrower shall prepay the
Loans in an aggregate amount equal to the Net Cash Proceeds derived
from such Asset Disposition to the extent such Net Cash Proceeds are
not used to purchase or otherwise acquire replacement assets or
property within 90 days prior to or 180
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<PAGE>
days after receipt of such cash proceeds (or such shorter period as
specified in the Subordinated Debt Documentation) (such prepayment to
be applied as set forth in clause (vii) below).
(iv) Debt Issuances. Immediately upon receipt by any Credit
--------------
Party of proceeds from any Debt Issuance (other than the issuance of
the Subordinated Debt), the Borrower shall prepay the Loans in an
aggregate amount equal to one-hundred percent (100%) of the Net Cash
Proceeds of such Debt Issuance to the Lenders (such prepayment to be
applied as set forth in clause (vii) below).
(v) Issuances of Equity. Immediately upon receipt by a
-------------------
Credit Party of proceeds from any Equity Issuance (other than equity
contributed by the LLC Members), the Borrower shall prepay the Loans
in an aggregate amount equal to: (A) seventy-five percent (75%) of the
Net Cash Proceeds of such Equity Issuance if the Leverage Ratio for
the four fiscal quarters ending on the last day of the fiscal quarter
most recently ended for which the Agent shall have received the
compliance certificate described in Section 5.2(b) shall be greater
than or equal to 3.5 to 1.0 and (B) fifty percent (50%) of the Net
Cash Proceeds of such Equity Issuance if the Leverage Ratio for the
four fiscal quarters ending on the last day of the fiscal quarter most
recently ended for which the Agent shall have received the compliance
certificate described in Section 5.2(b) shall be less than 3.5 to 1.0
(such prepayment to be applied as set forth in clause (vii) below).
(vi) Recovery Event. To the extent of cash proceeds received
--------------
in connection with a Recovery Event, the Borrower shall prepay the
Loans in an aggregate amount equal to one-hundred percent (100%) of
such cash proceeds to the Lenders to the extent such cash proceeds are
not used (A) to repair such damaged assets within 180 days after
receipt of such cash proceeds or property or (B) to purchase or
otherwise acquire replacement assets or property, provided that such
purchase or acquisition is committed within 180 days after receipt of
such cash proceeds and consummated within 270 days thereof (or such
shorter period as specified in the Subordinated Debt Documentation)
(such prepayment to be applied as set forth in clause (vii) below).
Notwithstanding anything to the contrary contained herein, after the
occurrence and during the continuation of an Event of Default, the
Required Lenders shall have the option to require such cash proceeds
to be applied immediately to prepay the Loans in accordance with
clause (vii) below.
(vii) Application of Mandatory Prepayments. All amounts
------------------------------------
required to be paid pursuant to this Section 2.7(b) shall be applied
as follows: (A) with respect to all amounts prepaid pursuant to
Section 2.7(b)(i), to Revolving Loans and (after all Revolving Loans
have been repaid) to a cash collateral account in respect of LOC
Obligations and (B) with respect to all amounts prepaid pursuant to
Sections 2.7(b)(ii) through (vi), (1) first pro rata to the Term Loans
----- --- ----
(ratably to the remaining principal installments thereof) and (2)
second to the Revolving Loans and (after all Revolving Loans have been
------
repaid) to a cash collateral account in
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<PAGE>
respect of LOC Obligations. One or more holders of the Tranche B Term
Loans may decline to accept a mandatory prepayment under Sections
2.7(b)(ii), (iii), (iv), (v) or (vi) to the extent there are
sufficient Tranche A Term Loans outstanding to be paid with such
prepayment, in which case 50% of such declined prepayments shall be
allocated pro rata among the Tranche A Term Loans and the Tranche B
Term Loans held by Lenders accepting such prepayments and the
remaining 50% of such declined payment shall be returned to the
Borrower. Within the parameters of the applications set forth above,
prepayments shall be applied first to Alternate Base Rate Loans and
then to LIBOR Rate Loans in direct order of Interest Period
maturities. All prepayments under this Section 2.7(b) shall be subject
to Section 2.17 and be accompanied by interest on the principal amount
prepaid through the date of prepayment.
SECTION 2.8 MINIMUM PRINCIPAL AMOUNT OF TRANCHES.
------------------------------------
All borrowings, payments and prepayments in respect of Revolving Loans and
Term Loans shall be in such amounts and be made pursuant to such elections so
that after giving effect thereto the aggregate principal amount of the Revolving
Loans and Term Loans comprising any Tranche shall not be less than $5,000,000 or
a whole multiple of $1,000,000 in excess thereof.
SECTION 2.9 DEFAULT RATE AND PAYMENT DATES.
------------------------------
(a) If all or a portion of the principal amount of any Loan which
is a LIBOR Rate Loan shall not be paid when due or continued as a LIBOR
Rate Loan in accordance with the provisions of Section 2.10 (whether at the
stated maturity, by acceleration or otherwise), such overdue principal
amount of such Loan shall be converted to an Alternate Base Rate Loan at
the end of the Interest Period applicable thereto.
(b) If all or a portion of (i) the principal amount of any Loan,
(ii) any interest payable thereon, or (iii) any fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall bear interest at a
rate per annum (the "Default Rate") which is (x) in the case of overdue
principal, the rate that would otherwise be applicable thereto assuming
Level I interest rate margins (as appearing in the definition of
"Applicable Percentage") were then in effect, plus 2% or (y) in the case of
----
overdue interest (to the extent permitted by applicable law), fees or other
amounts, the Alternate Base Rate, plus the highest Applicable Percentage
----
for Term Loans which are Alternate Base Rate Loans, plus 2%, in each case
----
from the date of such non-payment until such amount is paid in full (after
as well as before judgment). Upon the occurrence and during the
continuance of any other Event of Default hereunder, the principal of and,
to the extent permitted by law, interest on the Loans and any other amounts
owing hereunder or under the other Credit Documents shall bear interest,
payable on demand, at the Default Rate (after as well as before judgment).
(c) Interest on each Loan shall be payable in arrears on each
Interest Payment Date, provided that interest accruing pursuant to
paragraph (b) of this Section 2.9 shall be payable from time to time on
demand.
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<PAGE>
SECTION 2.10 CONVERSION OPTIONS.
------------------
(a) The Borrower may, in the case of Revolving Loans and the
Term Loans, elect from time to time to convert Alternate Base Rate Loans to
LIBOR Rate Loans, by giving the Agent at least three Business Days' prior
irrevocable written notice of such election. A form of Notice of
Conversion/ Extension is attached as Schedule 2.10. If the date upon which
-------------
an Alternate Base Rate Loan is to be converted to a LIBOR Rate Loan is not
a Business Day, then such conversion shall be made on the next succeeding
Business Day and during the period from such last day of an Interest Period
to such succeeding Business Day such Loan shall bear interest as if it were
an Alternate Base Rate Loan. All or any part of outstanding Alternate Base
Rate Loans may be converted as provided herein, provided that (i) no Loan
--------
may be converted into a LIBOR Rate Loan when any Default or Event of
Default has occurred and is continuing and (ii) partial conversions shall
be in an aggregate principal amount of $5,000,000 or a whole multiple of
$1,000,000 in excess thereof.
(b) Any LIBOR Rate Loans may be continued as such upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the notice provisions contained in Section 2.10(a); provided,
--------
that no LIBOR Rate Loan may be continued as such when any Default or Event
of Default has occurred and is continuing, in which case such Loan shall be
automatically converted to an Alternate Base Rate Loan at the end of the
applicable Interest Period with respect thereto. If the Borrower shall fail
to give timely notice of an election to continue a LIBOR Rate Loan, or the
continuation of LIBOR Rate Loans is not permitted hereunder, such LIBOR
Rate Loans shall be automatically converted to Alternate Base Rate Loans at
the end of the applicable Interest Period with respect thereto.
SECTION 2.11 COMPUTATION OF INTEREST AND FEES.
--------------------------------
(a) Interest payable hereunder with respect to Alternate Base
Rate Loans shall be calculated on the basis of a year of 365 days (or 366
days, as applicable) for the actual days elapsed. All other fees, interest
and all other amounts payable hereunder shall be calculated on the basis of
a 360 day year for the actual days elapsed. The Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a
LIBOR Rate on the Business Day of the determination thereof. Any change in
the interest rate on a Loan resulting from a change in the Alternate Base
Rate shall become effective as of the opening of business on the day on
which such change in the Alternate Base Rate shall become effective. The
Agent shall as soon as practicable notify the Borrower and the Lenders of
the effective date and the amount of each such change.
(b) Each determination of an interest rate by the Agent pursuant
to any provision of this Agreement shall be conclusive and binding on the
Borrower and the Lenders in the absence of manifest error. The Agent shall,
at the request of the Borrower, deliver to the Borrower a statement showing
the computations used by the Agent in determining any interest rate.
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<PAGE>
SECTION 2.12 PRO RATA TREATMENT AND PAYMENTS.
-------------------------------
Each borrowing of Revolving Loans and any reduction of the Revolving
Commitments shall be made pro rata according to the respective Commitment
--- ----
Percentages of the Lenders. Each payment under this Agreement or any Note shall
be applied, first, to any fees then due and owing by the Borrower pursuant to
Section 2.5, second, to interest then due and owing in respect of the Notes of
the Borrower and, third, to principal then due and owing hereunder and under the
Notes of the Borrower. Each payment on account of any fees pursuant to Section
2.5 shall be made pro rata in accordance with the respective amounts due and
--- ----
owing (except as to the portion of the Letter of Credit retained by the Issuing
Lender and the Issuing Lender Fees). Each payment (other than prepayments) by
the Borrower on account of principal of and interest on the Revolving Loans and
on the Term Loans shall be made pro rata according to the respective amounts due
--- ----
and owing in accordance with Section 2.7 hereof. Each optional prepayment on
account of principal of the Loans shall be applied, to such of the Loans as the
Borrower may designate (to be applied pro rata among the Lenders); provided,
--- ---- --------
that prepayments made pursuant to Section 2.15 shall be applied in accordance
with such section. Each mandatory prepayment on account of principal of the
Loans shall be applied in accordance with Section 2.7(b). All payments
(including prepayments) to be made by the Borrower on account of principal,
interest and fees shall be made without defense, set-off or counterclaim (except
as provided in Section 2.18(b)) and shall be made to the Agent for the account
of the Lenders at the Agent's office specified on Schedule 9.2 in Dollars and in
------------
immediately available funds not later than 1:00 P.M. (Charlotte, North Carolina
time) on the date when due. The Agent shall distribute such payments to the
Lenders entitled thereto promptly upon receipt in like funds as received. If
any payment hereunder (other than payments on the LIBOR Rate Loans) becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension. If any payment on a LIBOR Rate Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day.
SECTION 2.13 NON-RECEIPT OF FUNDS BY THE AGENT.
---------------------------------
(a) Unless the Agent shall have been notified in writing by a
Lender prior to the date a Loan is to be made by such Lender (which notice
shall be effective upon receipt) that such Lender does not intend to make
the proceeds of such Loan available to the Agent, the Agent may assume that
such Lender has made such proceeds available to the Agent on such date, and
the Agent may in reliance upon such assumption (but shall not be required
to) make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent, the Agent
shall be able to recover such corresponding amount from such Lender. If such
Lender does not pay such corresponding amount forthwith upon the Agent's
demand therefor, the Agent will promptly notify the Borrower, and the
Borrower shall immediately pay such corresponding amount to the Agent. The
Agent shall also be entitled to recover from the Lender or the
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Borrower, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made
available by the Agent to the Borrower to the date such corresponding
amount is recovered by the Agent at a per annum rate equal to (i) from the
Borrower at the applicable rate for the applicable borrowing pursuant to
the Notice of Borrowing and (ii) from a Lender at the Federal Effective
Funds Rate.
(b) Unless the Agent shall have been notified in writing by the
Borrower, prior to the date on which any payment is due from it hereunder
(which notice shall be effective upon receipt) that the Borrower does not
intend to make such payment, the Agent may assume that such Borrower has
made such payment when due, and the Agent may in reliance upon such
assumption (but shall not be required to) make available to each Lender on
such payment date an amount equal to the portion of such assumed payment to
which such Lender is entitled hereunder, and if the Borrower has not in
fact made such payment to the Agent, such Lender shall, on demand, repay to
the Agent the amount made available to such Lender. If such amount is
repaid to the Agent on a date after the date such amount was made available
to such Lender, such Lender shall pay to the Agent on demand interest on
such amount in respect of each day from the date such amount was made
available by the Agent to such Lender to the date such amount is recovered
by the Agent at a per annum rate equal to the Federal Funds Effective Rate.
(c) A certificate of the Agent submitted to the Borrower or any
Lender with respect to any amount owing under this Section 2.13 shall be
conclusive in the absence of manifest error.
SECTION 2.14 INABILITY TO DETERMINE INTEREST RATE.
------------------------------------
Notwithstanding any other provision of this Agreement, if (i) the Agent
shall reasonably determine (which determination shall be conclusive and binding
absent manifest error) that, by reason of circumstances affecting the relevant
market, reasonable and adequate means do not exist for ascertaining LIBOR for
such Interest Period, or (ii) the Required Lenders shall reasonably determine
(which determination shall be conclusive and binding absent manifest error) that
the LIBOR Rate does not adequately and fairly reflect the cost to such Lenders
of funding LIBOR Rate Loans that the Borrower has requested be outstanding as a
LIBOR Tranche during such Interest Period, the Agent shall forthwith give
telephone notice of such determination, confirmed in writing, to the Borrower,
and the Lenders at least two Business Days prior to the first day of such
Interest Period. Unless the Borrower shall have notified the Agent upon receipt
of such telephone notice that it wishes to rescind or modify its request
regarding such LIBOR Rate Loans, any Loans that were requested to be made as
LIBOR Rate Loans shall be made as Alternate Base Rate Loans and any Loans that
were requested to be converted into or continued as LIBOR Rate Loans shall be
converted into Alternate Base Rate Loans. Until any such notice has been
withdrawn by the Agent, no further Loans shall be made as, continued as, or
converted into, LIBOR Rate Loans for the Interest Periods so affected.
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SECTION 2.15 ILLEGALITY.
----------
Notwithstanding any other provision of this Agreement, if the adoption of
or any change in any Requirement of Law or in the interpretation or application
thereof by the relevant Governmental Authority to any Lender shall make it
unlawful for such Lender or its LIBOR Lending Office to make or maintain LIBOR
Rate Loans as contemplated by this Agreement or to obtain in the interbank
eurodollar market through its LIBOR Lending Office the funds with which to make
such Loans, (a) such Lender shall promptly notify the Agent and the Borrower
thereof, (b) the commitment of such Lender hereunder to make LIBOR Rate Loans or
continue LIBOR Rate Loans as such shall forthwith be suspended until the Agent
shall give notice that the condition or situation which gave rise to the
suspension shall no longer exist, and (c) such Lender's Loans then outstanding
as LIBOR Rate Loans, if any, shall be converted on the last day of the Interest
Period for such Loans or within such earlier period as required by law as
Alternate Base Rate Loans. The Borrower hereby agrees promptly to pay any
Lender, upon its demand, any additional amounts necessary to compensate such
Lender for actual and direct costs (but not including anticipated profits)
reasonably incurred by such Lender in making any repayment in accordance with
this Section including, but not limited to, any interest or fees payable by such
Lender to lenders of funds obtained by it in order to make or maintain its LIBOR
Rate Loans hereunder; provided, however, that the liability of the Borrower
-------- -------
shall be limited to costs incurred within 180 days prior to the receipt of such
notice. A certificate as to any additional amounts payable pursuant to this
Section submitted by such Lender, through the Agent, to the Borrower shall be
conclusive in the absence of manifest error. Each Lender agrees to use
reasonable efforts (including reasonable efforts to change its LIBOR Lending
Office) to avoid or to minimize any amounts which may otherwise be payable
pursuant to this Section; provided, however, that such efforts shall not cause
-------- -------
the imposition on such Lender of any additional costs or legal or regulatory
burdens deemed by such Lender in its sole discretion to be material.
SECTION 2.16 REQUIREMENTS OF LAW.
-------------------
(a) If the adoption of or any change in any Requirement of Law
or in the interpretation or application thereof or compliance by any Lender
with any request or directive (whether or not having the force of law) from
any central bank or other Governmental Authority made subsequent to the
date hereof:
(i) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit or any
application relating thereto, any LIBOR Rate Loan made by it, or
change the basis of taxation of payments to such Lender in
respect thereof (except for changes in the rate of tax on the
overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the
account of, advances, loans or other extensions of credit by, or
any other acquisition of funds by, any office of such Lender
which is not otherwise included in the determination of the LIBOR
Rate hereunder; or
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(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender of making or maintaining LIBOR Rate Loans or the Letters of Credit
or to reduce any amount receivable hereunder or under any Note, then, in
any such case, the Borrower shall promptly pay such Lender, upon its
demand, any additional amounts necessary to compensate such Lender for such
additional cost or reduced amount receivable which such Lender reasonably
deems to be material as determined by such Lender with respect to its LIBOR
Rate Loans or Letters of Credit; provided, however, that the liability of
-------- -------
the Borrower shall be limited to costs incurred within 180 days of such
demand. A certificate as to any additional amounts payable pursuant to
this Section submitted by such Lender, through the Agent, to the Borrower
shall be conclusive in the absence of manifest error. Each Lender agrees
to use reasonable efforts (including reasonable efforts to change its
Domestic Lending Office or LIBOR Lending Office, as the case may be) to
avoid or to minimize any amounts which might otherwise be payable pursuant
to this paragraph of this Section; provided, however, that such efforts
-------- -------
shall not cause the imposition on such Lender of any additional costs or
legal or regulatory burdens deemed by such Lender to be material.
(b) If any Lender shall have reasonably determined that the
adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance by
such Lender or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of
law) from any central bank or Governmental Authority made subsequent to the
date hereof does or shall have the effect of reducing the rate of return on
such Lender's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies
with respect to capital adequacy) by an amount reasonably deemed by such
Lender to be material, then from time to time, within fifteen (15) days
after demand by such Lender, the Borrower shall pay to such Lender such
additional amount as shall be certified by such Lender as being required to
compensate it for such reduction. Such a certificate as to any additional
amounts payable under this Section submitted by a Lender (which certificate
shall include a description of the basis for the computation), through the
Agent, to the Borrower shall be conclusive absent manifest error.
(c) The agreements in this Section 2.16 shall survive the
termination of this Agreement and payment of the Notes and all other
amounts payable hereunder.
SECTION 2.17 INDEMNITY.
---------
The Borrower hereby agrees to indemnify each Lender and to hold such Lender
harmless from any funding loss or expense which such Lender actually sustains or
incurs as a consequence of (a) default by the Borrower in payment of the
principal amount of or interest on any Loan by such Lender in accordance with
the terms hereof, (b) default by the Borrower in accepting a borrowing after the
Borrower has given a notice in accordance with the terms hereof, (c) default
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by the Borrower in making any prepayment after the Borrower has given a notice
in accordance with the terms hereof, and/or (d) the making by the Borrower of a
prepayment of a LIBOR Rate Loan, or the conversion thereof, on a day which is
not the last day of the Interest Period with respect thereto, in each case
including, but not limited to, any such loss or expense arising from interest or
fees payable by such Lender to lenders of funds obtained by it in order to
maintain its LIBOR Rate Loans hereunder. A certificate as to any additional
amounts payable pursuant to this Section submitted by any Lender, through the
Agent, to the Borrower (which certificate must be delivered to the Agent within
thirty days following such default, prepayment or conversion) shall be
conclusive in the absence of manifest error. The agreements in this Section
shall survive termination of this Agreement and payment of the Notes and all
other amounts payable hereunder.
SECTION 2.18 TAXES.
-----
(a) All payments made by the Borrower hereunder or under any
Note will be, except as provided in Section 2.18(b), made free and clear
of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever
nature now or hereafter imposed by any Governmental Authority or by any
political subdivision or taxing authority thereof or therein with respect
to such payments (but excluding any tax imposed on or measured by the net
income or profits of a Lender or the Agent pursuant to the laws of the
jurisdiction in which it is organized or the jurisdiction in which the
principal office or applicable lending office of such Lender or the Agent
is located or any subdivision thereof or therein and also excluding
franchise taxes, doing business taxes or minimum taxes imposed on it in
such jurisdiction) and all interest, penalties or similar liabilities with
respect thereto (all such non-excluded taxes, levies, imposts, duties,
fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to
-----
pay the full amount of such Taxes, and such additional amounts as may be
necessary so that every payment of all amounts due under this Agreement or
under any Note, after withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein or in such
Note. The Borrower will furnish to the Agent as soon as practicable after
the date the payment of any Taxes is due pursuant to applicable law
certified copies (to the extent reasonably available and required by law)
of tax receipts evidencing such payment by the Borrower. The Borrower
agrees to indemnify and hold harmless each Lender, and reimburse such
Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) agrees to deliver to the
Borrower and the Agent on or prior to the Closing Date, or in the case of a
Lender that is an assignee or transferee of an interest under this
Agreement pursuant to Section 9.6(d) (unless the respective Lender was
already a Lender hereunder immediately prior to such assignment or
transfer), on the date of such assignment or transfer to such Lender, (i)
if the Lender is a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying such Lender's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or
(ii) if
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the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of
the Code, either Internal Revenue Service Form 1001 or 4224 as set forth in
clause (i) above, or (x) a certificate substantially in the form of
Schedule 2.18 (any such certificate, a "2.18 Certificate") and (y) two
------------- ----------------
accurate and complete original signed copies of Internal Revenue Service
Form W-8 (or successor form) certifying such Lender's entitlement to an
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition,
each Lender agrees that it will deliver upon the Borrower's request updated
versions of the foregoing, as applicable, whenever the previous
certification has become obsolete or inaccurate in any material respect,
together with such other forms as may be required in order to confirm or
establish the entitlement of such Lender to a continued exemption from or
reduction in United States withholding tax with respect to payments under
this Agreement and any Note. Each Lender shall, promptly upon the
reasonable request of the Borrower to that effect, deliver to the Borrower
such other forms or documentation as may be required from time to time by
any applicable law, treaty, rule or regulation in order to establish such
Lender's tax status for withholding purposes. Notwithstanding anything to
the contrary contained in Section 2.18(a), but subject to the immediately
succeeding sentence, (x) each Borrower shall be entitled, to the extent it
is required to do so by law, to deduct or withhold Taxes imposed by the
United States (or any political subdivision or taxing authority thereof or
therein) from interest, fees or other amounts payable hereunder for the
account of any Lender which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes to the extent that such Lender has not provided to the Borrower
U.S. Internal Revenue Service Forms that establish a complete exemption
from such deduction or withholding and (y) the Borrower shall not be
obligated pursuant to Section 2.18(a) hereof to gross-up payments to be
made to a Lender in respect of Taxes imposed by the United States if (I)
such Lender has not complied with the requirements of this Section 2.18(b)
or (II) the obligation to withhold existed on the date such Lender became a
party to this Agreement. Notwithstanding anything to the contrary
contained in the preceding sentence or elsewhere in this Section 2.18, the
Borrower agrees to pay additional amounts and to indemnify each Lender in
the manner set forth in Section 2.18(a) (without regard to the identity of
the jurisdiction requiring the deduction or withholding) in respect of any
amounts deducted or withheld by it as described in the immediately
preceding sentence as a result of any changes after the Closing Date in any
applicable law, treaty, governmental rule, regulation, guideline or order,
or in the interpretation thereof, relating to the deducting or withholding
of Taxes.
(c) Each Lender agrees to use reasonable efforts (including reasonable
efforts to change its Domestic Lending Office or LIBOR Lending Office, as
the case may be) to avoid or to minimize any amounts which might otherwise
be payable pursuant to this Section; provided, however, that such efforts
-------- -------
shall not cause the imposition on such Lender of any additional costs or
legal or regulatory burdens deemed by such Lender in its sole discretion to
be material.
(d) If the Borrower pays any additional amount pursuant to this
Section 2.18 with respect to a Lender, such Lender shall use reasonable
efforts to obtain a refund of tax or credit against its tax liabilities on
account of such payment; provided that such Lender
--------
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<PAGE>
shall have no obligation to use such reasonable efforts if it believes in
good faith, in its sole discretion, that claiming a refund or credit would
cause material adverse tax consequences to it. In the event that such
Lender receives such a refund or credit, such Lender shall pay to the
Borrower an amount that such Lender reasonably determines is equal to the
net tax benefit obtained by such Lender as a result of such payment by the
Borrower. In the event that no refund or credit is obtained with respect to
the Borrower's payments to such Lender pursuant to this Section 2.18, then
such Lender shall upon request provide a certification that such Lender has
not received a refund or credit for such payments. Nothing contained in
this Section 2.18 shall require a Lender to disclose or detail the basis of
its calculation of the amount of any tax benefit or any other amount or the
basis of its determination referred to in the proviso to the first sentence
of this Section 2.18 to the Borrower or any other party.
(e) The agreements in this Section 2.18 shall survive the
termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
SECTION 2.19 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
--------------------------------------------------
(a) In addition to its other obligations under Section 2.4, the
Borrower hereby agrees to protect, indemnify, pay and save each Issuing
Lender harmless from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of
Credit or (ii) the failure of the Issuing Lender to honor a drawing under a
Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions, herein called
"Government Acts").
---------------
(b) As between the Borrower and the Issuing Lender, the Borrower
shall assume all risks of the acts, omissions or misuse of any Letter of
Credit by the beneficiary thereof. The Issuing Lender shall not be
responsible: (i) for the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection with
the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (iii) for failure of the beneficiary of a
Letter of Credit to comply fully with conditions required in order to draw
upon a Letter of Credit; (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (v) for
errors in interpretation of technical terms; (vi) for any loss or delay in
the transmission or otherwise of any document required in order to make a
drawing under a Letter of Credit or of the proceeds thereof; and (vii) for
any consequences arising from causes beyond the control of the Issuing
Lender, including, without limitation, any Government Acts. None of the
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above shall affect, impair, or prevent the vesting of the Issuing Lender's
rights or powers hereunder.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
the Issuing Lender, under or in connection with any Letter of Credit or the
related certificates, if taken or omitted in good faith (except in the case
of gross negligence or willful misconduct), shall not put such Issuing
Lender under any resulting liability to the Borrower. It is the intention
of the parties that this Agreement shall be construed and applied to
protect and indemnify the Issuing Lender against any and all risks involved
in the issuance of the Letters of Credit, all of which risks are hereby
assumed by the Borrower (except for the gross negligence or willful
misconduct of the Issuing Lender), including, without limitation, any and
all risks of the acts or omissions, whether rightful or wrongful, of any
Government Authority. The Issuing Lender shall not, in any way, be liable
for any failure by the Issuing Lender or anyone else to pay any drawing
under any Letter of Credit as a result of any Government Acts or any other
cause beyond the control of the Issuing Lender.
(d) Nothing in this Section 2.19 is intended to limit the
reimbursement obligation of the Borrower contained in Section 2.4(d)
hereof. The obligations of the Borrower under this Section 2.19 shall
survive the termination of this Agreement. No act or omissions of any
current or prior beneficiary of a Letter of Credit shall in any way affect
or impair the rights of the Issuing Lender to enforce any right, power or
benefit under this Agreement.
(e) Notwithstanding anything to the contrary contained in this
Section 2.19, the Borrower shall have no obligation to indemnify any
Issuing Lender in respect of any liability incurred by such Issuing Lender
arising out of the gross negligence or willful misconduct of the Issuing
Lender (including action not taken by an Issuing Lender), as determined by
a court of competent jurisdiction.
SECTION 2.20 DEFAULTING LENDERS.
------------------
(a) Generally. In addition to the rights and remedies that may
---------
be available to the Agent or the Borrower under this Agreement or
applicable law, if at any time a Lender is a Defaulting Lender such
Defaulting Lender's right to participate in the administration of the
Loans, this Agreement and the other Credit Documents, including without
limitation, any right to vote in respect of, to consent to or to direct any
action or inaction of the Agent or to be taken into account in the
calculation of the Required Lenders, shall be suspended during the pendency
of such failure or refusal. If a Lender is a Defaulting Lender because it
has failed to make timely payment to the Agent of any amount required to be
paid to the Agent hereunder (without giving effect to any notice or cure
periods), in addition to other rights and remedies which the Agent or the
Borrower may have under the immediately preceding provisions or otherwise,
the Agent shall be entitled (i) to collect interest from such Defaulting
Lender on such delinquent payment for the period from the date on which the
payment was due until the date on which the payment is made at the Federal
Funds Effective Rate, (ii) to withhold or setoff and to apply in
satisfaction of the
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defaulted payment and any related interest, any amounts otherwise payable
to such Defaulting Lender under this Agreement or any other Credit Document
until such defaulted payment and related interest has been paid in full and
such default no longer exists and (iii) to bring an action or suit against
such Defaulting Lender in a court of competent jurisdiction to recover the
defaulted amount and any related interest. Any amounts received by the
Agent in respect of a Defaulting Lender's Loans shall not be paid to such
Defaulting Lender and shall be held uninvested by the Agent and either
applied against the purchase price of such Loans under the following
subsection (b) or paid to such Defaulting Lender upon the default of such
Defaulting Lender being cured.
(b) Purchase of Defaulting Lender's Commitment. Any Lender who is not
------------------------------------------
a Defaulting Lender shall have the right, but not the obligation, in its
sole discretion, to acquire all of a Defaulting Lender's Commitment. If
more than one Lender exercises such right, each such Lender shall have the
right to acquire such proportion of such Defaulting Lender's Commitment on
a pro rata basis. Upon any such purchase, the Defaulting Lender's interest
in the Loans and its rights hereunder (but not its liability in respect
thereof or under the Credit Documents or this Agreement to the extent the
same relate to the period prior to the effective date of the purchase)
shall terminate on the date of purchase, and the Defaulting Lender shall
promptly execute all documents reasonably requested to surrender and
transfer such interest to the purchaser thereof subject to and in
accordance with the requirements set forth in Section 9.6, including an
appropriate Commitment Transfer Supplement. The purchase price for the
Commitment of a Defaulting Lender shall be equal to the amount of the
principal balance of the Loans outstanding and owed by the Borrower to the
Defaulting Lender. Prior to payment of such purchase price to a Defaulting
Lender, the Agent shall apply against such purchase price any amounts
retained by the Agent pursuant to the last sentence of the immediately
preceding subsection (a). The Defaulting Lender shall be entitled to
receive amounts owed to it by the Borrower under the Credit Documents which
accrued prior to the date of the default by the Defaulting Lender, to the
extent the same are received by the Agent from or on behalf of the
Borrower. There shall be no recourse against any Lender or the Agent for
the payment of such sums except to the extent of the receipt of payments
from any other party or in respect of the Loans.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Extensions of Credit herein provided for, the Borrower hereby represents and
warrants to the Agent and to each Lender that:
SECTION 3.1 FINANCIAL CONDITION.
-------------------
The balance sheets and the related statements of income and of cash flows
of the Acquired Business for fiscal years 1995, 1996 and 1997 audited by Arthur
Andersen & Co. are complete and correct and present fairly the financial
condition of the Acquired Business as of such dates.
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The balance sheets and the related statements of income and of cash flows of the
Acquired Business for fiscal years 1993 and 1994 reviewed by Arthur Andersen &
Co. are complete and correct and present fairly the financial condition of the
Acquired Business as of such dates. All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as disclosed
therein).
SECTION 3.2 NO CHANGE.
---------
Since December 31, 1997 (and after delivery of annual audited financial
statements in accordance with Section 5.1(a), from the date of the most recently
delivered annual audited financial statements) there has been no development or
event which has had or could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
----------------------------------------
Each of the Borrower and its Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the requisite power and authority and the legal right to
own and operate all its material property, to lease the material property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified to conduct business 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 except to the extent that
the failure to so qualify or be in good standing could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
-------------------------------------------------------
Each of the Borrower and the other Credit Parties has full power and
authority and the legal right to make, deliver and perform the Credit Documents
to which it is party and has taken all necessary limited liability company or
corporate action to authorize the execution, delivery and performance by it of
the Credit Documents to which it is party. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery or performance of any Credit Document
by the Borrower or the other Credit Parties (other than those which have been
obtained) or with the validity or enforceability of any Credit Document against
the Borrower or the other Credit Parties (except such filings as are necessary
in connection with the perfection of the Liens created by such Credit Documents)
except for consents or authorizations of any Governmental Authority, the failure
of which to possess or obtain could not reasonably be expected to have a
Material Adverse Effect. Each Credit Document to which it is a party has been
duly executed and delivered on behalf of the Borrower or the other Credit
Parties, as the case may be. Each Credit Document to which it is a party
constitutes a legal, valid and binding obligation of the Borrower or the other
Credit Parties, as the case may be, enforceable against the Borrower or such
other Credit Party, as the case may be, in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
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insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
SECTION 3.5 NO LEGAL BAR; NO DEFAULT.
------------------------
The execution, delivery and performance of the Credit Documents, the
borrowings thereunder and the use of the proceeds of the Loans will not violate
any Requirement of Law or any Material Contract of the Borrower or its
Subsidiaries (except those as to which waivers or consents have been obtained),
and will not result in, or require, the creation or imposition of any Lien on
any of its or their respective properties or revenues pursuant to any
Requirement of Law or any Material Contract other than the Liens arising under
or contemplated in connection with the Credit Documents. Neither the Borrower
nor any of its Subsidiaries is in default under or with respect to any of its
Material Contracts. No Default or Event of Default has occurred and is
continuing.
SECTION 3.6 NO MATERIAL LITIGATION.
----------------------
Except as set forth in Schedule 3.6, no litigation, investigation or
------------
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best knowledge of the Borrower, threatened by or against the Borrower or
any of its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to the Credit Documents or any Loan or any of the
transactions contemplated hereby, or (b) which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.7 INVESTMENT COMPANY ACT.
----------------------
Neither the Borrower nor any Credit Party is an "investment company", or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 3.8 MARGIN REGULATIONS.
------------------
No part of the proceeds of any Loan hereunder will be used directly or
indirectly for any purpose which violates, or which would be inconsistent with,
the provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. The Borrower
and its Subsidiaries taken as a group do not own "margin stock" except as
identified in the financial statements referred to in Section 3.1 and the
aggregate value of all "margin stock" owned by the Borrower and its Subsidiaries
taken as a group does not exceed 25% of the value of their assets.
SECTION 3.9 ERISA.
-----
Except as set forth in Schedule 3.9, neither a Reportable Event nor an
------------
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or
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deemed made with respect to any Plan, and to the Borrower's knowledge, each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code, except to the extent that any such occurrence or failure to comply
would not reasonably be expected to have a Material Adverse Effect. No
termination of a Single Employer Plan has occurred resulting in any liability
that has remained underfunded, and no Lien in favor of the PBGC or a Plan has
arisen, during such five-year period which could reasonably be expected to have
a Material Adverse Effect. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits by an amount which, as determined in
accordance with GAAP, could reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any Commonly Controlled Entity is currently
subject to any liability for a complete or partial withdrawal from a
Multiemployer Plan which could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.10 ENVIRONMENTAL MATTERS.
---------------------
Except as set forth on Schedule 3.10, and with the exception of matters
-------------
that have been resolved or are not reasonably expected to give rise to a
Material Adverse Effect:
(a) To the best knowledge of the Borrower, the facilities and
properties owned, leased or operated by the Borrower or any of its
Subsidiaries (the "Properties") do not contain any Materials of
----------
Environmental Concern in amounts or concentrations which constitute a
current violation of any Environmental Law.
(b) To the best knowledge of the Borrower, the Properties and all
operations of the Borrower and/or its Subsidiaries at the Properties are in
compliance, and have in the last five years been in compliance, in all
material respects with all applicable Environmental Laws, and there is no
contamination at, under or about the Properties requiring remediation under
any Environmental Law or violation of any Environmental Law with respect to
the Properties or the business operated by the Borrower or any of its
Subsidiaries (the "Business").
--------
(c) Neither the Borrower nor any of its Subsidiaries has received any
outstanding unresolved written or actual notice of violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to
any of the Properties or the Business, nor does the Borrower or any of its
Subsidiaries have knowledge or reason to believe that any such notice will
be received or is being threatened.
(d) To the best knowledge of the Borrower, Materials of Environmental
Concern have not been transported or disposed of from the Properties in
violation of, or in a manner or to a location which could reasonably be
expected to give rise to material liability under any Environmental Law,
nor have any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of the Properties in material
violation of any applicable Environmental Law.
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(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be
named as a party with respect to the Properties or the Business, nor are
there any unresolved consent decrees or other unresolved decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect
to the Properties or the Business.
(f) To the best knowledge of the Borrower, there has been no
unresolved release or threat of release of Materials of Environmental
Concern at or from the Properties, or arising from or related to the
operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in material
violation of or in amounts or in a manner that could reasonably be expected
to give rise to material liability under Environmental Laws.
SECTION 3.11 PURPOSE OF LOANS.
----------------
The proceeds of the Loans will be used to finance the Acquisition in part,
including, without limitation, by the payment of a dividend by the Borrower to
the LLC Members on the Closing Date and the closing costs and expenses related
thereto and for general corporate purposes, including working capital and
letters of credit.
SECTION 3.12 SUBSIDIARIES.
------------
Set forth on Schedule 3.12 is a complete and accurate list of all
-------------
Subsidiaries of the Borrower as of the Closing Date. Information on the
attached Schedule includes state of incorporation; the number of shares of each
class of Capital Stock or other equity interests outstanding; the number and
percentage of outstanding shares of each class of stock; and the number and
effect, if exercised, of all outstanding options, warrants, rights of conversion
or purchase and similar rights. The outstanding Capital Stock and other equity
interests of all Subsidiaries is validly issued, fully paid and non-assessable
and is owned, free and clear of all Liens (other than those arising under or
contemplated in connection with the Credit Documents).
SECTION 3.13 OWNERSHIP.
---------
Each of the Borrower and its Subsidiaries is the owner of, and has good and
marketable title to, or a valid leasehold interest in, all of its respective
assets, except as may be permitted pursuant Section 6.13 hereof, and none of
such assets is subject to any Lien other than Permitted Liens.
SECTION 3.14 INDEBTEDNESS.
------------
Except as otherwise permitted under Section 6.1, the Borrower and its
Subsidiaries have no Indebtedness.
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SECTION 3.15 TAXES.
-----
Each of the Borrower and its Subsidiaries has filed, or caused to be filed,
all tax returns (federal, state, local and foreign) required to be filed and
paid (a) all amounts of taxes shown thereon to be due (including interest and
penalties) and (b) all other taxes, fees, assessments and other governmental
charges (including mortgage recording taxes, documentary stamp taxes and
intangibles taxes) owing by it, except for such taxes (i) which are not yet
delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. Neither the Borrower nor any of its Subsidiaries is aware
as of the Closing Date of any proposed tax assessments against it or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.16 INTELLECTUAL PROPERTY.
---------------------
Each of the Borrower and its Subsidiaries owns, or has the legal right to
use, all trademarks, tradenames, copyrights, technology, know-how and processes
necessary for each of them to conduct its business as currently conducted and as
the Acquired Business was historically conducted by Owens Corning. Set forth on
Schedule 3.16 is a list of all Intellectual Property owned by each of the
- -------------
Borrower and its Subsidiaries or that the Borrower or any of its Subsidiaries
has the right to use. Except as provided on Schedule 3.16, no claim has been
-------------
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does the Borrower or any of its Subsidiaries know of
any such claim, and, to the knowledge of the Borrower or any of its
Subsidiaries, the use of such Intellectual Property by the Borrower or any of
its Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that in the aggregate, could not reasonably be expected
to have a Material Adverse Effect. Schedule 3.16 may be updated from time to
-------------
time by the Borrower to include new Intellectual Property by giving written
notice thereof to the Agent.
SECTION 3.17 SOLVENCY.
--------
The fair saleable value of each Credit Party's assets, measured on a going
concern basis, exceeds all probable liabilities, including those to be incurred
pursuant to this Credit Agreement. None of the Credit Parties (a) has
unreasonably small capital in relation to the business in which it is or
proposes to be engaged or (b) has incurred, or believes that it will incur after
giving effect to the transactions contemplated by this Credit Agreement, debts
beyond its ability to pay such debts as they become due.
SECTION 3.18 INVESTMENTS.
-----------
All investments of each of the Borrower and its Subsidiaries are Permitted
Investments.
SECTION 3.19 LOCATION OF COLLATERAL.
----------------------
Set forth on Schedule 3.19(a) is a list of the Properties of the Borrower
----------------
and its Subsidiaries with street address, county and state where located. Set
forth on Schedule 3.19(b) is
----------------
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a list of all locations where any tangible personal property of the Borrower and
its Subsidiaries is located, including county and state where located. Set forth
on Schedule 3.19(c) is the chief executive office and principal place of
----------------
business of each of the Borrower and its Subsidiaries. Schedule 3.19(a), 3.19(b)
---------------- -------
and 3.19(c) may be updated from time to time by the Borrower to include new
-------
properties or locations by giving written notice thereof to the Agent.
SECTION 3.20 NO BURDENSOME RESTRICTIONS.
--------------------------
None of the Borrower or any of its Subsidiaries is a party to any agreement
or instrument or subject to any other obligation or any charter or corporate
restriction or any provision of any applicable law, rule or regulation which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.21 BROKERS' FEES.
-------------
None of the Borrower or any of its Subsidiaries has any obligation to any
Person in respect of any finder's, broker's, investment banking or other similar
fee in connection with any of the transactions contemplated under the Credit
Documents other than the closing and other fees payable pursuant to this Credit
Agreement or payable in connection with the Acquisition.
SECTION 3.22 LABOR MATTERS.
-------------
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower or any of its Subsidiaries as of the
Closing Date, other than as set forth in Schedule 3.22 hereto, and none of the
-------------
Borrower or any of its Subsidiaries (i) has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years prior to
the Closing Date, other than as set forth in Schedule 3.22 hereto or (ii) has
-------------
knowledge of any potential or pending strike, walkout or work stoppage.
SECTION 3.23 ACCURACY AND COMPLETENESS OF INFORMATION.
----------------------------------------
All factual information heretofore, contemporaneously or hereafter
furnished by or on behalf of the Borrower or any of its Subsidiaries to the
Agent or any Lender for purposes of or in connection with this Agreement or any
other Credit Document, or any transaction contemplated hereby or thereby, is or
will be true and accurate in all material respects and not incomplete by
omitting to state any material fact necessary to make such information not
misleading. There is no fact now known to the Borrower or any of its
Subsidiaries which has, or could reasonably be expected to have, a Material
Adverse Effect which fact has not been set forth herein, in the financial
statements of the Borrower and its Subsidiaries furnished to the Agent and/or
the Lenders, or in any certificate, opinion or other written statement made or
furnished by the Borrower to the Agent and/or the Lenders.
SECTION 3.24 REPRESENTATIONS AND WARRANTIES FROM ACQUISITION
-----------------------------------------------
AGREEMENTS.
- ----------
As of the Closing Date, each of the representations and warranties made in
the Acquisition Agreements by each of the parties thereto is true and correct in
all material respects.
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SECTION 3.25 YEAR 2000 ISSUE.
---------------
Any reprogramming and related testing required to permit the proper
functioning of the Credit Parties' computer systems in and following the year
2000 will be completed in all material respects prior to September 1, 1999 (that
is, the Credit Parties will be "Year 2000 Compliant"), and the cost to the
Credit Parties of such reprogramming and testing will not result in a Default or
Event of Default or a Material Adverse Effect. Except for such reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of the Credit Parties and their Subsidiaries are
and, with ordinary course upgrading and maintenance, will continue for the term
of this Agreement to be, adequate for the conduct of its business.
SECTION 3.26 ENTIRE BUSINESS.
----------------
The assets transferred to the Borrower pursuant to the Acquisition
Documents, together with the rights and services made available to the Borrower
pursuant to the Joint Venture Contracts constitute all assets, properties and
rights necessary to conduct the Acquired Business in all material respects as
currently conducted and as historically conducted by Owens Corning.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS TO CLOSING DATE AND INITIAL REVOLVING LOANS AND
----------------------------------------------------------
TERM LOANS MADE IN CONNECTION WITH THE ACQUISITION.
- --------------------------------------------------
This Agreement shall become effective upon, and the obligation of each
Lender to make the initial Revolving Loans and Term Loans on the Closing Date is
subject to, the satisfaction of the following conditions precedent:
(a) Execution of Agreement. The Agent shall have received (i)
----------------------
counterparts of this Agreement, executed by a duly authorized officer of
each party hereto, (ii) for the account of each Lender, Revolving Notes,
Tranche A Term Notes and Tranche B Term Notes and for the account of the
Swingline Lender, a Swingline Note and (iii) counterparts of the Security
Agreement, the Member Negative Pledge Agreement, the Member Pledge
Agreement and the Pledge Agreement, in each case conforming to the
requirements of this Agreement and executed by duly authorized officers of
the Credit Parties or other Person, as applicable.
(b) Authority Documents. The Agent shall have received the following:
-------------------
(i) Certificate of Formation/Articles of Incorporation. Copies
--------------------------------------------------
of the certificate of formation, articles of incorporation or other
charter documents, as applicable, of each Credit Party certified to be
true and complete as of a recent date by the appropriate governmental
authority of the state of its incorporation.
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(ii) Resolutions. Copies of resolutions of the managing members
-----------
or the board of directors, as applicable, of each Credit Party
approving and adopting the Credit Documents, the transactions
contemplated therein and authorizing execution and delivery thereof,
certified by an officer of such Credit Party as of the Closing Date to
be true and correct and in force and effect as of such date.
(iii) Operating Agreements/Bylaws. A copy of the operating
---------------------------
agreement or bylaws, as applicable, of each Credit Party certified by
an officer of such Credit Party as of the Closing Date to be true and
correct and in force and effect as of such date.
(iv) Good Standing. Copies of (i) certificates of good standing,
-------------
existence or its equivalent with respect to the each Credit Party
certified as of a recent date by the appropriate governmental
authorities of the state of incorporation and each other state in
which the failure to so qualify and be in good standing could
reasonably be expected to have a Material Adverse Effect on the
business or operations of the Borrower and its Subsidiaries in such
state and (ii) a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the appropriate
governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each Credit Party
----------
certified by a secretary or assistant secretary to be true and correct
as of the Closing Date.
(c) Legal Opinions of Counsel.
-------------------------
(i) The Agent shall have received an opinion of Alston & Bird,
LLP, counsel for the Credit Parties, dated the Closing Date and
addressed to the Agent and the Lenders, in form and substance
acceptable to the Agent.
(ii) The Agent shall have received each opinion, report and other
document required to be delivered pursuant to the Acquisition
Documents in connection with the Acquisition, with a letter from each
person delivering such opinion, report and other document authorizing
reliance thereon by the Agent and the Lenders, all in form and
substance acceptable to the Agent.
(d) Personal Property Collateral. The Agent shall have received, in
----------------------------
form and substance satisfactory to the Agent:
(i) searches of Uniform Commercial Code filings in the
jurisdiction of the chief executive office of each Credit Party and
each jurisdiction where any Collateral is located or where a filing
would need to be made in order to perfect the Agent's security
interest in the Collateral, copies of the financing statements on file
in such jurisdictions and evidence that no Liens exist other than
Permitted Liens;
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(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Agent's sole
discretion, to perfect the Agent's security interest in the
Collateral;
(iii) searches of ownership of Intellectual Property in the
appropriate governmental offices and such patent/trademark/copyright
filings as requested by the Agent in order to perfect the Agent's
security interest in the Collateral;
(iv) all stock certificates evidencing the Capital Stock
pledged to the Agent pursuant to the Pledge Agreement and the Member
Pledge Agreement, together with duly executed in blank undated stock
powers attached thereto (unless, with respect to the pledged Capital
Stock of any Foreign Subsidiary, such stock powers are deemed
unnecessary by the Agent in its reasonable discretion under the law of
the jurisdiction of incorporation of such Person);
(v) such patent/trademark/copyright filings as requested by
the Agent in order to perfect the Agent's security interest in the
Intellectual Property;
(vi) all instruments and chattel paper in the possession of any
of the Credit Parties, together with allonges or assignments as may be
necessary or appropriate to perfect the Agent's security interest in
the Collateral;
(vii) duly executed consents as are necessary, in the Agent's
sole discretion, to perfect the Lenders' security interest in the
Collateral; and
(viii) in the case of any personal property Collateral
located at premises leased by a Credit Party, such estoppel letters,
consents and waivers from the landlords on such real property as may
be required by the Agent.
(e) Real Property Collateral. The Agent shall have received, in form
------------------------
and substance satisfactory to the Agent:
(i) fully executed and notarized mortgages, deeds of trust or
deeds to secure debt (each, as the same may be amended, modified,
restated or supplemented from time to time, a "Mortgage Instrument"
-------------------
and collectively the "Mortgage Instruments") encumbering the fee
--------
interest and/or leasehold interest of any Credit Party in each real
property asset designated in Schedule 3.19(a) (each a "Mortgaged
---------------- ---------
Property" and collectively the "Mortgaged Properties");
--------
(ii) a title report obtained by the Credit Parties in respect of
each of the Mortgaged Properties;
(iii) in the case of each real property leasehold interest of any
Credit Party constituting Mortgaged Property, (a) such estoppel
letters, consents and waivers from the landlords on such real property
as may be required by the Agent,
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which estoppel letters shall be in the form and substance reasonably
satisfactory to the Agent and (b) evidence that the applicable lease,
a memorandum of lease with respect thereto, or other evidence of such
lease in form and substance reasonably satisfactory to the Agent, has
been or will be recorded in all places to the extent necessary or
desirable, in the reasonable judgment of the Agent, so as to enable
the Mortgage Instrument encumbering such leasehold interest to
effectively create a valid and enforceable first priority lien
(subject to Permitted Liens) on such leasehold interest in favor of
the Agent (or such other Person as may be required or desired under
local law) for the benefit of Lenders;
(iv) ALTA mortgagee title insurance policies issued by Chicago
Title Insurance Company (the "Mortgage Policies"), in amounts not less
-----------------
than the respective amounts designated in Schedule 3.19(a) with
---------------
respect to any particular Mortgaged Property, assuring the Agent that
each of the Mortgage Instruments creates a valid and enforceable first
priority mortgage lien on the applicable Mortgaged Property, free and
clear of all defects and encumbrances except Permitted Liens, which
Mortgage Policies shall be in form and substance reasonably
satisfactory to the Agent and shall provide for affirmative insurance
and such reinsurance as the Agent may reasonably request, all of the
foregoing in form and substance reasonably satisfactory to the Agent;
(v) evidence as to (A) whether any Mortgaged Property is in an
area designated by the Federal Emergency Management Agency as having
special flood or mud slide hazards (a "Flood Hazard Property") and (B)
---------------------
if any Mortgaged Property is a Flood Hazard Property, (1) whether the
community in which such Mortgaged Property is located is participating
in the National Flood Insurance Program, (2) the applicable Credit
Party's written acknowledgment of receipt of written notification from
the Agent (a) as to the fact that such Mortgaged Property is a Flood
Hazard Property and (b) as to whether the community in which each such
Flood Hazard Property is located is participating in the National
Flood Insurance Program and (3) copies of insurance policies or
certificates of insurance of the Borrower and its Subsidiaries
evidencing flood insurance satisfactory to the Agent and naming the
Agent as sole loss payee on behalf of the Lenders;
(vi) maps or plats of an as-built survey of the sites of the
Mortgaged Properties certified to the Agent and the Title Insurance
Company in a manner reasonably satisfactory to them, dated a date
satisfactory to each of the Agent and the Title Insurance Company by
an independent professional licensed land surveyor reasonably
satisfactory to each of the Agent and the Title Insurance Company,
which maps or plats and the surveys on which they are based shall be
sufficient to delete any standard printed survey exception contained
in the applicable title policy and be made in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and, without
limiting the generality of the foregoing, there shall be surveyed and
shown on such maps, plats or surveys the following: (A) the
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locations on such sites of all the buildings, structures and other
improvements and the established building setback lines; (B) the lines
of streets abutting the sites and width thereof; (C) all access and
other easements appurtenant to the sites necessary to use the sites;
(D) all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the site,
whether recorded, apparent from a physical inspection of the sites or
otherwise known to the surveyor; (E) any encroachments on any
adjoining property by the building structures and improvements on the
sites; and (F) if the site is described as being on a filed map, a
legend relating the survey to said map; and
(vii) evidence satisfactory to the Agent that each of the
Mortgaged Properties, and the uses of the Mortgaged Properties, are in
compliance in all material respects with all applicable laws,
regulations and ordinances including without limitation health and
environmental protection laws, erosion control ordinances, storm
drainage control laws, doing business and/or licensing laws, zoning
laws (the evidence submitted as to zoning should include the zoning
designation made for each of the Mortgaged Properties, the permitted
uses of each such Mortgaged Properties under such zoning designation
and zoning requirements as to parking, lot size, ingress, egress and
building setbacks) and laws regarding access and facilities for
disabled persons including, but not limited to, the federal
Architectural Barriers Act, the Fair Housing Amendments Act of 1988,
the Rehabilitation Act of 1973 and the Americans with Disabilities Act
of 1990.
(f) Liability and Casualty Insurance. The Agent shall have received
--------------------------------
copies of insurance policies or certificates of insurance evidencing
liability and casualty insurance meeting the requirements set forth herein
or in the Security Documents. The Agent shall be named as loss payee and
additional insured on all such insurance policies for the benefit of the
Lenders.
(g) Fees. The Agent shall have received all fees, if any, owing
----
pursuant to the Fee Letter and Section 2.5.
(h) Litigation. There shall not exist any pending litigation or
----------
investigation affecting or relating to this Agreement and the other Credit
Documents or the Acquisition that in the reasonable judgment of the Agent
could materially adversely affect this Agreement and the other Credit
Documents or the Acquisition, that has not been settled, dismissed,
vacated, discharged or terminated prior to the Closing Date.
(i) Solvency Evidence. The Agent shall have received an officer's
-----------------
certificate for each Credit Party prepared by the chief financial officer
of each such Credit Party as to the financial condition, solvency and
related matters of each such Credit Party, in each case after giving effect
to the Acquisition and the initial borrowings under the Credit Documents,
in substantially the form of Schedule 4.1(i-A) hereto.
-----------------
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(j) Account Designation Letter. The Agent shall have received the
---------------
executed Account Designation Letter in the form of Schedule 1.1(a) hereto.
(k) Acquisition Documents. The Acquisition Documents shall have been
---------------------
completed to the satisfaction of the Agent, the Acquisition shall have been
consummated substantially in accordance with the terms of the Acquisition
Documents. The Borrower shall distribute up to (but not more than)
$250,000,000 from the proceeds of the Loans to the LLC Members in
connection with the consummation of the Acquisition. The Agent shall have
received a copy, certified by an officer of the Borrower as true and
complete, of each Acquisition Agreement as originally executed and
delivered, together with all exhibits and schedules thereto.
(l) Corporate Structure. The corporate capital and ownership
-------------------
structure of the Borrower and its Subsidiaries shall be as described in
Schedule 3.12.
(m) Subordinated Debt. The Borrower shall have received gross
-----------------
proceeds from the issuance of the Subordinated Debt in an aggregate
principal amount of not less than $150,000,000. The terms and conditions
governing the Subordinated Debt shall be acceptable to the Agent and the
Agent shall have received a copy, certified by an officer of the Borrower
as true and complete, of the Subordinated Debt Documentation as originally
executed and delivered, together with all exhibits and schedules thereto.
(n) Government Consent. The Agent shall have received evidence that
------------------
all governmental, shareholder and material third party consents and
approvals necessary in connection with the Acquisition and the related
financings and other transactions contemplated hereby have been obtained
and all applicable waiting periods have expired without any action being
taken by any authority that could restrain, prevent or impose any material
adverse conditions on the Acquisition or such other transactions or that
could seek or threaten any of the foregoing.
(o) Compliance with Laws. The Acquisition and the related financings
--------------------
and other transactions contemplated hereby shall be in compliance with all
applicable laws and regulations (including all applicable securities and
banking laws, rules and regulations).
(p) Bankruptcy. There shall be no bankruptcy or insolvency
----------
proceedings with respect to Borrower or any of its Subsidiaries or the
Acquired Business or any pending injunction with respect to the
Acquisition.
(q) Financial Statements. The Administrative Agent shall have
--------------------
received copies of the financial statements referred to in Section 3.1
hereof, each in form and substance satisfactory to it.
(r) Governance of the Borrower and Related Matters. All matters
----------------------------------------------
relating to the relationship between Owens Corning and GHC and between the
LLC Members, including, without limitation, matters of ownership, capital
structure and voting control, shall be satisfactory to the Administrative
Agent. The Agent shall have received a copy,
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certified by an officer of the Borrower as true and complete, of each of
the Joint Venture Contracts as originally executed and delivered, together
with all exhibits and schedules thereto, and each third-party consent
required or necessary in connection with the assignment of any of the Joint
Venture Contracts to the Borrower.
(s) Transition Services Agreement. The Borrower and Owens Corning
-----------------------------
shall have entered into a transition services agreement dated as of the
date hereof providing for the orderly transition of the Acquired Business
in connection with the transfer thereof from Owens Corning to the Borrower,
which shall be in form and substance satisfactory to the Agent.
(t) Waiver Letter. Owens Corning shall have agreed in writing to
-------------
waive any right it may have to preclude a merger or sale of the Acquired
Business upon the occurrence of an Event of Default and the acceleration of
the Loans and termination of the Commitments pursuant to Section 7. Such
waiver letter shall be satisfactory to the Agent.
(u) Environmental Reports. The Agent shall have received satisfactory
---------------------
environmental reports, including Phase I and Phase II reports, as
applicable, of a recent date relating to the Mortgaged Properties addressed
to the Agent and the Lenders or accompanied by a satisfactory reliance
letter from the environmental consultant that prepared such reports.
(v) Projections. The Agent shall have received the seven year
-----------
financial and operational projections for the Borrower and its Subsidiaries
for the fiscal years 1998 through 2005, together with a detailed
explanation of all management assumptions contained therein, which
projections shall be in form and substance satisfactory to the Agent.
(w) Year 2000 Plan. The Agent shall have received the Borrower's plan
--------------
for becoming Year 2000 Compliant, which plan shall be in form and substance
satisfactory to the Agent.
(x) Additional Matters. All other documents and legal matters in
------------------
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Agent and its counsel.
SECTION 4.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
--------------------------------------
The obligation of each Lender to make any Extension of Credit hereunder is
subject to the satisfaction of the following conditions precedent on the date of
making such Extension of Credit:
(a) Representations and Warranties. The representations and
------------------------------
warranties made by the Credit Parties herein, in the Security Documents or
which are contained in any certificate furnished at any time under or in
connection herewith shall be true and correct in all material respects on
and as of the date of such Extension of Credit as if made on and as of such
date (except for those which expressly relate to an earlier date).
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(b) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing on such date or after giving effect
to the Extension of Credit to be made on such date unless such Default or
Event of Default shall have been waived in accordance with this Agreement.
(c) Compliance with Commitments. Immediately after giving effect to
---------------------------
the making of any such Extension of Credit (and the application of the
proceeds thereof), (i) the sum of the aggregate principal amount of
outstanding Revolving Loans plus Swingline Loans plus LOC Obligations shall
---- ----
not exceed the aggregate Revolving Committed Amount then in effect, (ii)
the LOC Obligations shall not exceed the LOC Committed Amount and (iii) the
Swingline Loans shall not exceed the Swingline Commitment.
(d) Additional Conditions to Revolving Loans. If such Loan is made
----------------------------------------
pursuant to Section 2.1, all conditions set forth in such Section shall
have been satisfied.
(e) Additional Conditions to Term Loans. If such Loan is made
-----------------------------------
pursuant to Section 2.2A or 2.2B, all conditions set forth in such Section
shall have been satisfied.
(f) Additional Conditions to Swingline Loan. If such Loan is made
---------------------------------------
pursuant to Section 2.3, all conditions set forth in such Section shall
have been satisfied.
(g) Additional Conditions to Letters of Credit. If such Extension of
------------------------------------------
Credit is made pursuant to Section 2.4, all conditions set fort in such
Section shall have been satisfied.
Each request for an Extension of Credit and each acceptance by the Borrower
of any such Extension of Credit shall be deemed to constitute a representation
and warranty by the Borrower as of the date of such Extension of Credit that the
applicable conditions in paragraphs (a) through (g) of this Section have been
satisfied.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower hereby covenants and agrees that on the Closing Date, and
thereafter for so long as this Agreement is in effect and until the Commitments
have terminated, no Note remains outstanding and unpaid and the Credit Party
Obligations, together with interest, Commitment Fees and all other amounts owing
to the Agent or any Lender hereunder, are paid in full, the Borrower shall, and
shall cause each of its Subsidiaries (other than in the case of Sections 5.1,
5.2 or 5.7 hereof), to:
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SECTION 5.1 FINANCIAL STATEMENTS.
--------------------
Furnish to the Agent and each of the Lenders:
(a) Annual Financial Statements. As soon as available, but in any
---------------------------
event within ninety (90) days after the end of each fiscal year of the
Borrower a copy of the consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and of cash flows
of the Borrower and its consolidated Subsidiaries for such year, audited by
a firm of independent certified public accountants of nationally recognized
standing reasonably acceptable to the Required Lenders, setting forth in
each case in comparative form the figures for the previous year, reported
on without a "going concern" or like qualification or exception, or
qualification indicating that the scope of the audit was inadequate to
permit such independent certified public accountants to certify such
financial statements without such qualification (with respect to financial
statements for fiscal year 1998, it is understood and acknowledged that
fiscal year 1998 consists of the three months ended December 31, 1998);
(b) Quarterly Financial Statements. As soon as available and in any
------------------------------
event within forty-five (45) days after the end of each of the first three
fiscal quarters of the Borrower, a company-prepared consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end of
such period and related company-prepared statements of income and retained
earnings and of cash flows for the Borrower and its consolidated
Subsidiaries for such quarterly period and for the portion of the fiscal
year ending with such period, in each case setting forth in comparative
form consolidated figures for the corresponding period or periods of the
preceding fiscal year (subject to normal recurring year-end audit
adjustments); and
(c) Annual Budget Plan. As soon as available, but in any event no
------------------
later than December 15th of each fiscal year, a copy of the detailed annual
budget or plan of the Borrower for the next fiscal year, in form and detail
reasonably acceptable to the Agent and the Required Lenders, together with
a summary of the material assumptions made in the preparation of such
annual budget or plan;
all such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring year-
end audit adjustments) and to be prepared in reasonable detail and, in the case
of the annual and quarterly financial statements provided in accordance with
subsections (a) and (b) above, in accordance with GAAP applied consistently
throughout the periods reflected therein and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change, if any, in the application of accounting principles as
provided in Section 1.3.
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SECTION 5.2 CERTIFICATES; OTHER INFORMATION.
-------------------------------
Furnish to the Agent and each of the Lenders:
(a) concurrently with the delivery of the financial statements
referred to in Section 5.1(a) above, a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a) and 5.1(b) above, a certificate of a
Responsible Officer stating that, to the best of such Responsible Officer's
knowledge, each of the Credit Parties during such period observed or
performed in all material respects all of its covenants and other
agreements, and satisfied in all material respects every condition,
contained in this Agreement to be observed, performed or satisfied by it,
and that such Responsible Officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate and such
certificate shall include the calculations in reasonable detail required to
indicate compliance with Section 5.9;
(c) within thirty (30) days after the same are sent, copies of all
reports (other than those otherwise provided pursuant to Section 5.1 and
those which are of a promotional nature) and other financial information
which the Borrower sends to its members, and within thirty days after the
same are filed, copies of all financial statements and non-confidential
reports which the Borrower may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental Authority;
(d) within ninety (90) days after the end of each fiscal year of the
Borrower, a certificate containing information regarding (i) the
calculation of Excess Cash Flow and (ii) the amount of all Asset
Dispositions, Debt Issuances, and Equity Issuances that were made during
the prior fiscal year and amounts received in connection with any Recovery
Event during the prior fiscal year;
(e) promptly upon receipt thereof, a copy of any other report or
"management letter" submitted by independent accountants to the Borrower or
any of its Subsidiaries in connection with any annual, interim or special
audit of the books of such Person; and
(f) promptly, such additional financial and other information as the
Agent, on behalf of any Lender, may from time to time reasonably request.
SECTION 5.3 PAYMENT OF OBLIGATIONS.
----------------------
Pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, in accordance with industry practice
(subject, where applicable, to specified grace periods) all its obligations of
whatever nature and any additional costs that are imposed as a result of any
failure to so pay, discharge or otherwise satisfy such obligations, except
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(i) when the amount or validity of such obligations and costs is currently being
contested in good faith by appropriate proceedings and reserves, if applicable,
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or its Subsidiaries, as the case may be or (ii) where the failure
to pay, discharge or satisfy could not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
------------------------------------------------
Continue to engage in business of the same general type historically
conducted by Owens Corning with respect to the Acquired Business and as now
conducted by it on the Closing Date and preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business; comply with all Contractual Obligations and
Requirements of Law applicable to it except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 5.5 MAINTENANCE OF PROPERTY; INSURANCE.
----------------------------------
(a) Keep all material property useful and necessary in its business
in good working order and condition (ordinary wear and tear and
obsolescence excepted);
(b) Maintain with financially sound and reputable insurance companies
insurance on all its material property (including without limitation its
material tangible Collateral) in at least such amounts and against at least
such risks as are usually insured against in the same general area by
companies engaged in the same or a similar business; and furnish to the
Agent, upon written request, full information as to the insurance carried;
provided, however, that the Borrower and its Subsidiaries may maintain self
-------- -------
insurance plans to the extent companies of similar size and in similar
businesses do so. The Agent shall be named as loss payee or mortgagee, as
its interest may appear, and/or additional insured with respect to any such
insurance providing coverage in respect of any Collateral, and each
provider of any such insurance shall agree, by endorsement upon the policy
or policies issued by it or by independent instruments furnished to the
Agent, that it will give the Agent thirty (30) days prior written notice
before any such policy or policies shall be altered or canceled, and that
no act or default of the Borrower or any of its Subsidiaries or any other
Person shall affect the rights of the Agent or the Lenders under such
policy or policies. The present insurance coverage of the Borrower and its
Subsidiaries is outlined as to carrier, policy number, expiration date,
type and amount on Schedule 5.5(b); and
---------------
(c) In case of any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to the Agent generally describing the
nature and extent of such damage or destruction. In case of any loss,
damage to or destruction of the Collateral of any Credit Party or any part
thereof, after the occurrence and during the continuation of an Event of
Default, such Credit Party, whether or not the insurance proceeds, if any,
received on account of such damage or destruction shall be sufficient for
that purpose, at such Credit Party's cost and expense, will at the option
of the Required Lenders, (i) promptly repair or replace the Collateral of
such Credit
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Party so lost, damaged or destroyed or (ii) immediately prepay the Loans
with the insurance proceeds received on account thereof in accordance with
Section 2.7(b)(vi).
SECTION 5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
------------------------------------------------------
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its businesses and activities; and
permit, during regular business hours and upon reasonable notice by the Agent or
any Lender, the Agent or any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records (other than
materials protected by the attorney-client privilege and materials which the
Borrower may not disclose without violation of a confidentiality obligation
binding upon it) at any reasonable time and as often as may reasonably be
desired, subject to the rights of tenants in possession of all or a portion of
the Mortgaged Properties pursuant to leases or other occupancy agreements
permitted hereunder and to discuss the business, operations, properties and
financial and other condition of the Borrower and its Subsidiaries with officers
and employees of the Borrower and its Subsidiaries and with its independent
certified public accountants.
SECTION 5.7 NOTICES.
-------
Give notice in writing to the Agent (which shall promptly transmit such
notice to each Lender) of:
(a) within five Business Days after the Borrower knows or has reason
to know thereof, the occurrence of any Default or Event of Default;
(b) promptly, any default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries which could
reasonably be expected to have a Material Adverse Effect;
(c) promptly, any litigation, or any investigation or proceeding
known to the Borrower, affecting the Borrower or any of its Subsidiaries
which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect;
(d) as soon as possible and in any event within thirty (30) days
after the Borrower knows or has reason to know thereof: (i) the occurrence
or expected occurrence of any Reportable Event with respect to any Plan, a
failure to make any required contribution to a Plan, the creation of any
Lien in favor of the PBGC (other than a Permitted Lien) or a Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking of
any other action by the PBGC or the Borrower or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or
the terminating, Reorganization or Insolvency of, any Plan; and
(e) promptly, any other development or event which could reasonably
be expected to have a Material Adverse Effect.
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Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto. In
the case of any notice of a Default or Event of Default, the Borrower shall
specify that such notice is a Default or Event of Default notice on the face
thereof.
SECTION 5.8 ENVIRONMENTAL LAWS.
------------------
(a) Comply in all material respects with, and ensure compliance in
all material respects by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply in all material
respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all
lawful orders and directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being contested
in good faith by appropriate proceedings and the pendency of such
proceedings could not reasonably be expected to have a Material Adverse
Effect; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders,
and their respective employees, agents, officers and directors, from and
against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known
or unknown, contingent or otherwise, arising out of, or in any way relating
to the material violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Borrower any of its
Subsidiaries or the Properties, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable attorney's and consultant's fees, investigation and laboratory
fees, response costs, court costs and litigation expenses, provided,
--------
however, that the Borrower shall be given notice and the opportunity as
-------
deemed reasonable under the circumstances to address, correct and, as
appropriate, remediate any violations of, noncompliance with or liability
under such Environmental Laws before the Agent or any Lender (i) undertakes
any action to address such violations, noncompliance or liability or (ii)
seeks indemnification for claims, demands, penalties, fines, liabilities,
settlements, damages, costs or other expenses arising therefrom or relating
thereto; provided, further, that the Borrower shall not be obligated to
-------- -------
defend, indemnify, or hold harmless the Agent or any Lender in the event
the Agent or any Lender fails to give the Borrower such opportunity as is
reasonably necessary under the circumstances to correct or, as appropriate,
remediate any of the foregoing or for claims, demands, penalties, fines,
liabilities, settlements, damages, costs or other expenses arising out of
the voluntary and unnecessary intervention, gross negligence or willful
misconduct of the Agent or any
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Lender. The agreements in this paragraph shall survive repayment of the
Notes and all other amounts payable hereunder.
SECTION 5.9 FINANCIAL COVENANTS.
-------------------
Commencing on the day immediately following the Closing Date, the Borrower
shall, and shall cause each of its Subsidiaries to, comply with the following
financial covenants:
(a) Leverage Ratio. The Leverage Ratio as of the last day of
--------------
each fiscal quarter of the Credit Parties shall be less than or equal to:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Fiscal Year March 31 June 30 September 30 December 31
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------
1998 5.50 to 1.0
----------------------------------------------------------------------------------
1999 5.25 to 1.0 5.25 to 1.0 5.25 to 1.0 5.25 to 1.0
----------------------------------------------------------------------------------
2000 5.00 to 1.0 5.00 to 1.0 5.00 to 1.0 5.00 to 1.0
----------------------------------------------------------------------------------
2001 4.75 to 1.0 4.75 to 1.0 4.75 to 1.0 4.75 to 1.0
----------------------------------------------------------------------------------
2002 4.50 to 1.0 4.50 to 1.0 4.50 to 1.0 4.50 to 1.0
----------------------------------------------------------------------------------
2003 4.00 to 1.0 4.00 to 1.0 4.00 to 1.0 4.00 to 1.0
----------------------------------------------------------------------------------
2004 3.75 to 1.0 3.75 to 1.0 3.75 to 1.0 3.75 to 1.0
----------------------------------------------------------------------------------
thereafter 3.50 to 1.0
----------------------------------------------------------------------------------
</TABLE>
provided, that for purposes of calculating the Leverage Ratio for the first
--------
three (3) fiscal quarters following the Closing Date, Consolidated EBITDA
shall be determined as follows: (i) for the fiscal quarter ending December
31, 1998, Consolidated EBITDA shall be calculated from the FQ1 Financials,
the FQ2 Financials, the FQ3 Financials and the annual audited financial
statements of the Borrower delivered pursuant to Section 5.1(a)(i), (ii)
for the fiscal quarter ending March 31, 1999, Consolidated EBITDA shall
equal Consolidated EBITDA of the Borrower and its Subsidiaries for the two
(2) fiscal quarters then ending plus Consolidated EBITDA of the Acquired
----
Business as reported in the FQ2 Financials and the FQ3 Financials, and
(iii) for the fiscal quarter ending June 30, 1999, Consolidated EBITDA
shall equal Consolidated EBITDA of the Borrower and its Subsidiaries for
the three (3) fiscal quarters then ending plus Consolidated EBITDA of the
----
Acquired Business as reported in the FQ3 Financials.
(b) Consolidated Net Worth. As of the end of any fiscal
----------------------
quarter, commencing with the fiscal quarter ending December 31, 1998,
Consolidated Net Worth of the Borrower and its Subsidiaries shall be
greater than or equal to (i) Consolidated Net Worth as of September 30,
1998 less $10,000,000 plus (ii) 50% of cumulative quarterly Consolidated
Net Income (less cumulative quarterly Consolidated Cash Tax Payments)
commencing on October 1, 1998 (without deduction for any quarterly losses)
plus (iii) 75% of the Net Cash Proceeds received by the Borrower or any of
its Subsidiaries of any Equity Issuance by the Borrower or any of its
Subsidiaries subsequent to the Closing Date.
(c) Interest Coverage Ratio. The Interest Coverage Ratio as of
-----------------------
the last day of each fiscal quarter of the Credit Parties shall be greater
than or equal to:
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<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Fiscal Year March 31 June 30 September 30 December 31
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------
1998 1.75 to 1.0
--------------------------------------------------------------------------------------------------
1999 2.00 to 1.0 2.00 to 1.0 2.00 to 1.0 2.00 to 1.0
--------------------------------------------------------------------------------------------------
2000 2.15 to 1.0 2.15 to 1.0 2.15 to 1.0 2.15 to 1.0
--------------------------------------------------------------------------------------------------
2001 2.25 to 1.0 2.25 to 1.0 2.25 to 1.0 2.25 to 1.0
--------------------------------------------------------------------------------------------------
thereafter 2.50 to 1.0
--------------------------------------------------------------------------------------------------
</TABLE>
provided, that for purposes of calculating the Interest Coverage Ratio for
--------
the first three (3) fiscal quarters following the Closing Date,
Consolidated EBITDA and Consolidated Interest Expense shall be calculated
as follows: for the fiscal quarter ending December 31, 1998, Consolidated
EBITDA and Consolidated Interest Expense shall equal Consolidated EBITDA
and Consolidated Interest Expense, respectively, for such fiscal quarter,
for the fiscal quarter ending March 31, 1999, Consolidated EBITDA and
Consolidated Interest Expense shall equal Consolidated EBITDA and
Consolidated Interest Expense, respectively, for the two (2) fiscal
quarters then ending, and for the fiscal quarter ending June 30, 1999,
Consolidated EBITDA and Consolidated Interest Expense shall equal
Consolidated EBITDA and Consolidated Interest Expense, respectively, for
the three (3) fiscal quarters then ending.
(e) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio
---------------------------
as of the last day of each fiscal quarter of the Credit Parties shall be
greater than or equal to 1.05 to 1.0; provided, that for purposes of
--------
calculating the Fixed Charge Coverage Ratio for the first three (3) fiscal
quarters following the Closing Date, Consolidated EBITDA and Consolidated
Fixed Charges shall be calculated as follows: for the fiscal quarter ending
December 31, 1998, Consolidated EBITDA and Consolidated Fixed Charges shall
equal Consolidated EBITDA and Consolidated Fixed Charges, respectively, for
such fiscal quarter, for the fiscal quarter ending March 31, 1999,
Consolidated EBITDA and Consolidated Fixed Charges shall equal Consolidated
EBITDA and Consolidated Fixed Charges, respectively, for the two (2) fiscal
quarters then ending, and for the fiscal quarter ending June 30, 1999,
Consolidated EBITDA and Consolidated Fixed Charges shall equal Consolidated
EBITDA and Consolidated Fixed Charges, respectively, for the three (3)
fiscal quarters then ending; and provided, further, that for such first
-------- -------
three fiscal quarters, (i) Consolidated Scheduled Funded Debt Payments as a
component of Consolidated Fixed Charges shall be calculated as follows:
for the fiscal quarter ending December 31, 1998, Consolidated Scheduled
Funded Debt Payments shall be calculated for the next succeeding fiscal
quarter, for the fiscal quarter ending March 31, 1999, Consolidated
Scheduled Funded Debt Payments shall be calculated for the next succeeding
two fiscal quarters and for the fiscal quarter ending June 30, 1999,
Consolidated Scheduled Funded Debt Payments shall be calculated for the
next succeeding three fiscal quarters and (ii) Capital Expenditures as a
component of Consolidated Fixed Charges shall be calculated as follows:
for the fiscal quarter ending December 31, 1998, Capital Expenditures shall
be calculated based on actual Capital Expenditures made (to the extent
exceeding $5,000,000) during such fiscal quarter, for the fiscal quarter
ending March 31, 1999, Capital Expenditures shall be calculated based on
actual Capital Expenditures made (to the extent exceeding $5,000,000)
during the two fiscal quarters then ending and for the fiscal
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quarter ending June 30, 1999, Capital Expenditures shall be calculated
based on actual Capital Expenditures made (to the extent exceeding
$7,500,000) during the three fiscal quarters then ending.
SECTION 5.10 ADDITIONAL GUARANTORS.
---------------------
The Credit Parties will cause each of their Domestic Subsidiaries, whether
newly formed, after acquired or otherwise existing, to promptly become a
Guarantor hereunder by way of execution of a Joinder Agreement. The guaranty
obligations of any such Additional Credit Party shall be secured by, among other
things, the Collateral of the Additional Credit Party and a pledge of 100% of
the Capital Stock or other equity interest of its Domestic Subsidiaries and 65%
of the Capital Stock or other equity interest of its Foreign Subsidiaries to the
extent that such pledge is permissible under applicable law, and a pledge by the
Borrower or other Credit Party which is the owner of the Capital Stock or other
equity interest in such Subsidiary of 100% of the Capital Stock if it is a
Domestic Subsidiary and 65% of its Capital Stock or other equity interest if it
is a Foreign Subsidiary.
SECTION 5.11 COMPLIANCE WITH LAW.
-------------------
Each Credit Party will, and will cause each of its Subsidiaries to, comply
with all laws, rules, regulations and orders, and all applicable restrictions
imposed by all Governmental Authorities, applicable to it and its Property if
noncompliance with any such law, rule, regulation, order or restriction could
reasonably be expected to have a Material Adverse Effect.
SECTION 5.12 PLEDGED ASSETS.
--------------
(a) Each Credit Party will, and will cause each of its
Subsidiaries to, cause 51% of the Capital Stock in the Borrower, 100% of
the Capital Stock in each other direct or indirect Domestic Subsidiaries of
the Borrower and 65% of the Capital Stock in each of the first-tier Foreign
Subsidiaries of the Borrower and its Domestic Subsidiaries to be subject at
all times to a first priority, perfected Lien in favor of the Agent
pursuant to the terms and conditions of the Security Documents or such
other security documents as the Agent shall reasonably request.
(b) If, subsequent to the Closing Date, a Credit Party shall (a)
acquire any Intellectual Property, securities, instruments, chattel paper
or other personal property required to be delivered to the Agent as
Collateral hereunder or under any of the Security Documents or (b) acquire
or lease any real property, the Borrower shall promptly (and in any event
within twenty (20) Business Days) after any Responsible Officer of a Credit
Party acquires knowledge of same notify the Agent of same. Each Credit
Party shall, and shall cause each of its Subsidiaries to, take such action
at its own expense as requested by the Agent (including, without
limitation, any of the actions described in Section 4.1(d) or (e) hereof)
to ensure that the Agent has a first priority perfected Lien to secure the
Credit Party Obligations in (i) all personal property of the Credit Parties
located in the United States, (ii) all real property of the Credit Parties
located in the United States and (iii) to the extent deemed to be material
by the Agent or the Required Lenders in its or their sole
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reasonable discretion, all other personal and real property of the Credit
Parties, subject in each case only to Permitted Liens. Each Credit Party
shall, and shall cause each of its Subsidiaries to, adhere to the covenants
regarding the location of personal property as set forth in the Security
Documents.
SECTION 5.13 INTEREST RATE PROTECTION AGREEMENTS.
-----------------------------------
Until such time as the Subordinated Debt referred to in clause (a) of the
definition thereof is refinanced with the Subordinated Debt referred to in
clause (b) of the definition thereof, the Borrower shall cause at least 50% of
all Indebtedness arising under this Agreement outstanding on the Closing Date to
be hedged at fixed rates pursuant to Hedging Agreements with a counterparty
reasonably acceptable to the Agent within 90 days following the Closing Date.
Thereafter, the Borrower shall cause at least 50% of all Consolidated Funded
Indebtedness to be hedged at fixed rates pursuant to Hedging Agreements with a
counterparty reasonably acceptable to the Agent; for purposes of this sentence,
the Subordinated Debt shall be deemed to be hedged to the extent it bears a
fixed rate of interest.
SECTION 5.14 YEAR 2000 COMPLIANCE.
--------------------
The Credit Parties will promptly notify the Agent in the event any Credit
Party discovers or determines that any computer application (including those of
its suppliers, vendors and customers) that is material to its or any of its
Subsidiaries' business and operations will not be Year 2000 Compliant, except to
the extent that such failure could not reasonably be expected to have a Material
Adverse Effect.
ARTICLE VI
NEGATIVE COVENANTS
On the Closing Date, and thereafter for so long as this Agreement is in
effect and until the Commitments have terminated, no Note remains outstanding
and unpaid and the Credit Party Obligations, together with interest, Commitment
Fees and all other amounts owing to the Agent or any Lender hereunder, are paid
in full:
SECTION 6.1 INDEBTEDNESS.
------------
The Borrower will not, nor will it permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising or existing under this Agreement and
the other Credit Documents, the Subordinated Debt and the Keep-Well
Agreement;
(b) Indebtedness existing as of the Closing Date as referenced
in the financial statements referenced in Section 3.1 (and set out more
specifically in Schedule 6.1(b)) hereto and renewals, refinancings or
---------------
extensions thereof in a
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principal amount not in excess of that outstanding as of the date of such
renewal, refinancing or extension (plus any interest and fees that have
accrued on such principal amount being refinanced);
(c) Indebtedness incurred after the Closing Date consisting of
Capital Leases or Indebtedness incurred to provide all or a portion of the
purchase price or cost of construction of an asset provided that (i) such
Indebtedness when incurred shall not exceed the purchase price or cost of
construction of such asset; (ii) no such Indebtedness shall be refinanced
for a principal amount in excess of the principal balance outstanding
thereon at the time of such refinancing; and (iii) the total amount of all
such Indebtedness shall not exceed $10,000,000 at any time outstanding;
(d) Unsecured intercompany Indebtedness among the Borrower and
its Subsidiaries, provided that any such Indebtedness shall be fully
--------
subordinated to the Credit Party Obligations hereunder on terms reasonably
satisfactory to the Agent;
(e) Indebtedness and obligations owing under Hedging Agreements
relating to the Loans hereunder and other Hedging Agreements entered into
in order to manage existing or anticipated interest rate, exchange rate or
commodity price risks and not for speculative purposes;
(f) Indebtedness and obligations of Credit Parties owing under
documentary letters of credit for the purchase of goods or other
merchandise (but not under standby, direct pay or other letters of credit
except for the Letters of Credit hereunder) generally;
(g) Indebtedness of a Subsidiary of the Borrower, which
Subsidiary was acquired after the Closing Date and which Indebtedness was
in existence at the time of acquisition by the Borrower of such Subsidiary,
and not incurred in contemplation of such acquisition, so long as such
Indebtedness is non-recourse debt (except with respect to such Subsidiary
and its Subsidiaries);
(h) Indebtedness of the Borrower in the form of holdback notes
or deferred purchase price in connection with an acquisition;
(i) obligations in respect of performance bonds and completion
guarantees provided by the Borrower or any Subsidiary of the Borrower in
the ordinary course of business not to exceed $500,000 in the aggregate at
any time;
(j) local lines of credit in favor of Foreign Subsidiaries
secured by Letters of Credit in an aggregate principal amount not to exceed
$25,000,000 at any time, and when aggregated with investments described in
clause (vii) of the definition of "Permitted Investments" and Indebtedness
of the type described in clause (k) below, not exceed $30,000,000 in the
aggregate at any time;
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<PAGE>
(k) local lines of credit in favor of Foreign Subsidiaries in an
aggregate principal amount not to exceed $5,000,000 at any time, and when
aggregated with investments described in clause (vii) of the definition of
"Permitted Investments" and Indebtedness of the type described in clause
(j) above, not exceed $30,000,000 in the aggregate at any time;
(l) Guaranty Obligations permitted by Section 6.3; and
(m) other unsecured Indebtedness of Credit Parties which
(together with Indebtedness permitted pursuant to clauses (g) and (h)
above) does not exceed $10,000,000 in the aggregate at any time
outstanding.
SECTION 6.2 LIENS.
-----
The Borrower will not, nor will it permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Lien with respect to any of its
property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or hereafter acquired, except for Permitted
Liens.
SECTION 6.3 GUARANTY OBLIGATIONS.
--------------------
The Borrower will not, nor will it permit any Subsidiary to, enter into or
otherwise become or be liable in respect of any Guaranty Obligations (excluding
specifically therefrom endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) other than (i) those in favor
of the Lenders in connection herewith, (ii) Guaranty Obligations by the Borrower
or its Subsidiaries of Indebtedness and other obligations referred to in and
permitted under Section 6.1 and (iii) Guaranty Obligations of other obligations
not constituting Indebtedness including real property leases and other contracts
entered into in the ordinary course of business.
SECTION 6.4 NATURE OF BUSINESS.
------------------
The Borrower will not, nor will it permit any Subsidiary to engage in any
business other than a Permitted Business.
SECTION 6.5 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.
------------------------------------------------------
The Borrower will not, nor will it permit any Subsidiary to,
(a) dissolve, liquidate or wind up its affairs, sell, transfer,
lease or otherwise dispose of its property or assets or agree to do so at a
future time except the following, without duplication, shall be expressly
permitted:
(i) Specified Sales;
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(ii) the sale, transfer, lease or other disposition of
property or assets (a) to an unrelated party not in the ordinary
course of business (other than Specified Sales), where and to the
extent that they are the result of a Recovery Event or (b) the sale,
lease, transfer or other disposition of machinery, parts and
equipment, no longer used or useful in the conduct of the business of
the Borrower or any of its Subsidiaries, as appropriate, in its
reasonable discretion;
(iii) the sale, lease or transfer of property or assets
(at fair value) between and among Credit Parties; and
(iv) transfers of Property to Foreign Subsidiaries so long
as (A) such transfers, together with investments in such Foreign
Subsidiaries permitted hereunder do not exceed $30,000,000 in the
aggregate (such transferred Property to be valued at the greater of
book value of fair market value) and (B) the Borrower shall have
provided the Agent with a list of the Property then being transferred
and the related values of such Property; and
(v) the sale, lease or transfer of property or assets
(including sale leaseback transactions not prohibited by Section 6.13)
not to exceed $10,000,000 in the aggregate in any fiscal year;
provided, that in each case (except for clause (iii) above) at least 75%
--------
of the consideration received therefor by the Borrower or any such
Subsidiary is in the form of cash or Cash Equivalents; or
(b) purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) the property or assets of
any Person (other than purchases or other acquisitions of inventory,
leases, materials, property and equipment in the ordinary course of
business and other Capital Expenditures permitted hereunder, except as
otherwise limited or prohibited herein and other than as permitted pursuant
to Section 2.7(b)(vi) and Section 6.7), or enter into any transaction of
merger or consolidation, except for (i) investments or acquisitions
permitted pursuant to Section 6.6 and 6.7, (ii) the Acquisition, and (iii)
the merger or consolidation of a Credit Party with and into another Credit
Party, provided that if the Borrower is a party thereto, the Borrower will
--------
be the surviving corporation.
SECTION 6.6 ADVANCES, INVESTMENTS AND LOANS.
-------------------------------
The Borrower will not, nor will it permit any Subsidiary to, lend money or
extend credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any Person except for Permitted Investments.
Except (a) as permitted in subsection (iv) of the definition of Permitted
Investments, (b) for the Joint Venture Contracts and (c) as permitted otherwise
to an extent not judged material by the Required Lenders in their discretion,
the Borrower will not, nor will it permit any Subsidiary
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to, enter into any transaction or series of transactions, whether or not in the
ordinary course of business, with any officer, director, shareholder or
Affiliate other than on terms and conditions substantially as favorable to the
Borrower and its Subsidiaries as would be obtainable in a comparable arm's-
length transaction with a Person other than an officer, director, shareholder or
Affiliate.
SECTION 6.7 OWNERSHIP OF SUBSIDIARIES; RESTRICTIONS.
---------------------------------------
The Borrower will not, nor will it permit any Subsidiary to, create, form
or acquire any Subsidiaries, except for Domestic Subsidiaries which are joined
as Additional Credit Parties in accordance with the terms hereof and except for
Foreign Subsidiaries, the total aggregate investments in which shall not exceed
$30,000,000 at any time so long as at least 65% of the Capital Stock of such
Foreign Subsidiaries is pledged under the Credit Documents. The Borrower will
not sell, transfer, pledge or otherwise dispose of any Capital Stock or other
equity interests in any of its Subsidiaries, nor will it permit any of its
Subsidiaries to issue, sell, transfer, pledge or otherwise dispose of any of
their Capital Stock or other equity interests, except in a transaction permitted
by Sections 6.5 or 6.6.
SECTION 6.8 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS; MATERIAL CONTRACTS.
---------------------------------------------------------
The Borrower will not, nor will it permit any of its Subsidiaries to,
change its fiscal year. The Borrower will not, nor will it permit any
Subsidiary to, amend, modify or change its articles of incorporation (or
corporate charter or other similar organizational document) or bylaws (or other
similar document) in any way which could reasonably be expected to have a
Material Adverse Effect without the prior written consent of the Required
Lenders. The Borrower will not, nor will it permit any of its Subsidiaries to,
without the prior written consent of the Agent, amend, modify, waive any default
of or breach under, cancel or terminate or fail to renew or extend or permit the
amendment, modification, waiver of any default of or breach under, cancellation
or termination of any of the Material Contracts, except in the event that such
amendments, modifications, waivers, cancellations or terminations could not
reasonably be expected to have a Material Adverse Effect. The Borrower further
agrees that it will not amend, modify, waive any default of or breach under, or
prior to December 31, 2001, cancel or terminate the Keep-Well Agreement without
the prior written consent of the Agent.
SECTION 6.9 LIMITATION ON RESTRICTED ACTIONS.
--------------------------------
The Borrower will not permit any Subsidiary to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any such Subsidiary to (a) pay dividends or
make any other distributions to any Credit Party on its Capital Stock or with
respect to any other interest or participation in, or measured by, its profits,
(b) pay any Indebtedness or other obligation owed to any Credit Party, (c) make
loans or advances to any Credit Party, (d) sell, lease or transfer any of its
properties or assets to any Credit Party, or (e) act as a Guarantor and pledge
its assets pursuant to the Credit Documents or any renewals, refinancings,
exchanges, refundings or extension thereof, except (in respect of any of the
matters referred to in clauses (a)-(d) above) for such encumbrances or
restrictions existing under or by reason of (i) this Agreement and the other
Credit Documents, (ii) the Subordinated
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Debt, (iii) applicable law, (iv) any document or instrument governing
Indebtedness incurred pursuant to Sections 6.1(c), (g) and (h), provided that in
--------
the case of Section 6.1(c), any such restriction contained therein relates only
to the asset or assets constructed or acquired in connection therewith or (v)
any Permitted Lien or any document or instrument governing any Permitted Lien,
provided that any such restriction contained therein relates only to the asset
- --------
or assets subject to such Permitted Lien.
SECTION 6.10 RESTRICTED PAYMENTS.
-------------------
The Borrower will not, nor will it permit any Subsidiary to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment, except (a) to make dividends payable solely in the same class of
Capital Stock of such Person, (b) to make dividends or other distributions
payable to any Credit Party (directly or indirectly through Subsidiaries), (c)
as permitted by Section 6.12, (d) to make distributions in cash to each LLC
Member within 75 days after the end of each taxable year of the Borrower in an
amount equal to the greater of (i) the product of (A) the sum of (x) the maximum
federal corporate income tax rate in effect during such taxable year and (y) six
percent and (B) the sum of the items of ordinary income and expense and net
capital gain allocated to such LLC Member for such taxable year (taking into
account any items specially allocated to such LLC Member resulting from
adjustments under Section 743 of the Code) and (ii) actual income taxes then
being assessed against such LLC Member on items of ordinary income and expense
and net capital gain allocated to such LLC Member so long as, in each case,
immediately both before and after giving effect to such payments no Event of
Default shall then exist and (e) to make distributions to Jefferson with respect
to the purchase price under the LLC Purchase Agreement for net asset value not
to exceed $2.5 million.
SECTION 6.11 PREPAYMENTS OF INDEBTEDNESS, ETC.
---------------------------------
The Borrower will not, nor will it permit any Subsidiary to, (a) after the
issuance thereof, amend or modify (or permit the amendment or modification of)
any of the terms of any Indebtedness (which by its terms is expressly
subordinated to the Indebtedness hereunder) if such amendment or modification
would add or change any terms in a manner adverse to the issuer of such
Indebtedness, or shorten the final maturity or average life to maturity or
require any payment to be made sooner than originally scheduled or increase the
interest rate applicable thereto or change any subordination provision thereof
or (b) make (or give any notice with respect thereto) any voluntary or optional
payment or prepayment, redemption, acquisition for value or defeasance of
(including without limitation, by way of depositing money or securities with the
trustee with respect thereto before due for the purpose of paying when due),
refund, refinance or exchange of any Subordinated Debt; provided, however, that
-------- -------
(i) the Borrower may prepay the Subordinated Debt with up to 50% of the proceeds
of any public offering of the Borrower's Capital Stock if after giving effect
thereto on a Pro Forma Basis the Leverage Ratio for the four fiscal quarters
ending on the last day of the most recent fiscal quarter end shall be less than
3.5 to 1.0 and (ii) the Borrower may refinance the Subordinated Debt (including
any interest and fees accrued thereon) on terms and conditions at least as
favorable to the Lenders as then existing so long as the refinancing
Indebtedness is subordinated to the same or greater extent as the Subordinated
Debt with an applicable interest rate not to exceed 13%, has a weighted average
life to maturity equal to or greater than the Subordinated Debt and requires no
amortization of principal prior to the
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tenth anniversary of the Closing Date; provided, however, the Borrower may
-------- -------
refinance the Bridge Notes by issuing Exchange Notes (as defined in the Senior
Subordinated Credit Agreement) in accordance with the Senior Subordinated Credit
Agreement.
SECTION 6.12 SALE LEASEBACKS.
---------------
The Borrower will not, nor will it permit any Subsidiary to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real, personal or mixed), whether now owned or hereafter
acquired, (a) which the Borrower or any Subsidiary has sold or transferred or is
to sell or transfer to a Person which is not the Borrower or any Subsidiary or
(b) which the Borrower or any Subsidiary intends to use for substantially the
same purpose as any other property which has been sold or is to be sold or
transferred by the Borrower or any Subsidiary to another Person which is not the
Borrower or any Subsidiary in connection with such lease unless the Net Cash
Proceeds of such transactions are applied in accordance with the provisions of
Section 2.7(b)(iii).
SECTION 6.13 NO FURTHER NEGATIVE PLEDGES.
---------------------------
The Borrower will not, nor will it permit any Subsidiary to, enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation, unless such agreement
permits that the obligations of the Credit Parties hereunder may be secured to
the extent contemplated by this Agreement and the other Credit Documents.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
-----------------
An Event of Default shall exist upon the occurrence of any of the following
specified events (each an "Event of Default"):
----------------
(a) The Borrower shall fail to pay any principal on any Note
when due in accordance with the terms thereof or hereof; or the Borrower
shall fail to reimburse the Issuing Lender for any LOC Obligations when due
in accordance with the terms hereof; or the Borrower shall fail to pay any
interest on any Note or any fee or other amount payable hereunder when due
in accordance with the terms thereof or hereof and such failure shall
continue unremedied for five (5) calendar days (or any Guarantor shall fail
to pay on the Guaranty in respect of any of the foregoing or in respect of
any other Guaranty Obligations thereunder); or
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(b) Any representation or warranty made or deemed made herein, in the
Security Documents or in any of the other Credit Documents or which is
contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement shall
prove to have been incorrect, false or misleading in any material respect
on or as of the date made or deemed made; or
(c) (i) Any Credit Party shall fail to perform, comply with or observe
any term, covenant or agreement applicable to it contained in Section
5.7(a), Section 5.9 or Article VI hereof ; or (ii) any Credit Party shall
fail to comply with any other covenant, contained in this Credit Agreement
or the other Credit Documents or any other agreement, document or
instrument among any Credit Party, the Agent and the Lenders or executed by
any Credit Party in favor of the Agent or the Lenders (other than as
described in Sections 7.1(a) or 7.1(c)(i) above), and in the event such
breach or failure to comply is capable of cure, is not cured within thirty
(30) days of its occurrence; or
(d) The Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on (A) the Subordinated Debt or (B) any
Indebtedness (other than the Notes or the Subordinated Debt) in a principal
amount outstanding of at least $5,000,000 in the aggregate for the Borrower
and any of its Subsidiaries beyond the period of grace (not to exceed 30
days), if any, provided in the instrument or agreement under which such
Indebtedness was created; or (ii) default in the observance or performance
of any other agreement or condition relating to (A) the Subordinated Debt
or (B) any Indebtedness (other than the Notes or the Subordinated Debt) in
a principal amount outstanding of at least $5,000,000 in the aggregate for
the Borrower and its Subsidiaries or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other 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, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity; or
(e) (i) The Borrower, any of its Subsidiaries or GHC Sub shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking (x) to
have an order for relief entered with respect to it or (y) to adjudicate it
a bankrupt or insolvent or (z) reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all
or any substantial part of its assets, or the Borrower or any Subsidiary
shall make a general assignment for the benefit of its creditors; or (ii)
there shall be commenced against the Borrower or any Subsidiary any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Borrower or any Subsidiary any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its
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assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (iv) the Borrower or any
Subsidiary shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) the Borrower or any Subsidiary
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(f) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability
(to the extent not paid when due or covered by insurance) of $7,500,000 or
more and all such judgments or decrees shall not have been paid and
satisfied, vacated, discharged, stayed or bonded pending appeal within 30
days from the entry thereof; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan (other than a Permitted Lien) shall
arise on the assets of the Borrower or any Commonly Controlled Entity,
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a Trustee is, in the
reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower, any of its Subsidiaries or any Commonly Controlled Entity shall,
or in the reasonable opinion of the Required Lenders is likely to, incur
any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, any Multiemployer Plan or (vi) any other similar event
or condition shall occur or exist with respect to a Plan; and in each case
in clauses (i) through (vi) above, such event or condition, together with
all other such events or conditions, if any, would reasonably foreseeably
have a Material Adverse Effect; or
(h) Either (A) (i) for the five year period commencing on the Closing
Date, either (x) Glass Holdings, GHC Sub or another Subsidiary of Glass
Holdings shall fail to own 51% of the Capital Stock of the Borrower or fail
to control a majority of the Board of Directors of the Borrower or (y)
Owens Corning, Jefferson or a Subsidiary of Owens Corning shall fail to own
49% of the Capital Stock of the Borrower (without giving effect to the
issuance, if any, of the 5% Warrants under the Senior Subordinated Credit
Agreement for the Bridge Notes), and (ii) after the fifth anniversary of
the Closing Date either (x) Owens Corning and Glass Holdings shall fail to
own (directly or indirectly), individually or jointly, at least 51% of the
Capital Stock of the Borrower or (y) the Non-Compete Agreement shall fail
to be in full force and effect or the Non-Compete Term (as defined in the
Non-Compete Agreement) shall have ended, (B) a majority of the Board of
Directors of the Borrower shall consist of individuals who are not
Continuing Directors ("Continuing Director" means, as of any date of
-------------------
determination, (i) an individual who on the date two years prior to such
determination date was a member of the Borrower's Board of Directors and
(ii) any new Director whose nomination for election by the
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Borrower's members was approved by a vote of at least 75% of the Directors
then still in office who either were Directors on the date two years prior
to such determination date or whose nomination for election was previously
so approved); or (C) a "Change of Control" within the meaning of the
Subordinated Debt Documentation shall have occurred; or
(i) The Guaranty or any provision thereof shall cease to be in full
force and effect or any Guarantor or any Person acting by or on behalf of
any Guarantor shall deny or disaffirm any Guarantor's obligations under the
Guaranty; or
(j) Any other Credit Document shall fail to be in full force and
effect or to give the Agent and/or the Lenders the security interests,
liens, rights, powers and privileges purported to be created thereby
(except as such documents may be terminated or no longer in force and
effect in accordance with the terms thereof, other than those indemnities
and provisions which by their terms shall survive); or
(k) There shall occur and be continuing any Event of Default under and
as defined in the Subordinated Debt Documentation or any of the Credit
Party Obligations for any reason shall cease to be designated as senior
indebtedness thereunder.
SECTION 7.2 ACCELERATION; REMEDIES.
----------------------
Upon the occurrence of an Event of Default, then, and in any such event,
(a) if such event is an Event of Default specified in Section 7.1(e) above,
automatically the Commitments shall immediately terminate and the Loans (with
accrued interest thereon), and all other amounts under the Credit Documents
(including without limitation the maximum amount of all contingent liabilities
under Letters of Credit) shall immediately become due and payable, and (b) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) with the written consent of the Required Lenders, the
Agent may, or upon the written request of the Required Lenders, the Agent shall,
by notice to the Borrower declare the Commitments to be terminated forthwith,
whereupon the Commitments shall immediately terminate; and (ii) with the written
consent of the Required Lenders, the Agent may, or upon the written request of
the Required Lenders, the Agent shall, by notice of default to the Borrower,
declare the Loans (with accrued interest thereon) and all other amounts owing
under this Agreement and the Notes to be due and payable forthwith and direct
the Borrower to pay to the Agent cash collateral as security for the LOC
Obligations for subsequent drawings under then outstanding Letters of Credit an
amount equal to the maximum amount of which may be drawn under Letters of Credit
then outstanding, whereupon the same shall immediately become due and payable.
Except as expressly provided above in this Section 7.2, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
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ARTICLE VIII
THE AGENT
SECTION 8.1 APPOINTMENT.
-----------
Each Lender hereby irrevocably designates and appoints First Union National
Bank as the Agent of such Lender under this Agreement, and each such Lender
irrevocably authorizes First Union National Bank, as the Agent for such Lender,
to take such action on its behalf under the provisions of this Agreement and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent.
SECTION 8.2 DELEGATION OF DUTIES.
--------------------
The Agent may execute any of its duties under this Agreement by or through
agents 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 agents or attorneys-in-fact
selected by it with reasonable care. Without limiting the foregoing, the Agent
may appoint one of its affiliates as its agent to perform the functions of the
Agent hereunder relating to the advancing of funds to the Borrower and
distribution of funds to the Lenders and to perform such other related functions
of the Agent hereunder as are reasonably incidental to such functions.
SECTION 8.3 EXCULPATORY PROVISIONS.
----------------------
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained in this Agreement 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 for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any of the Credit
Documents or for any failure of the Borrower to perform its obligations
hereunder or thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance by the
Borrower of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Borrower.
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SECTION 8.4 RELIANCE BY AGENT.
-----------------
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it in good faith
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,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless (a) a written notice of
assignment, negotiation or transfer thereof shall have been filed with the Agent
and (b) the Agent shall have received the written agreement of such assignee to
be bound hereby as fully and to the same extent as if such assignee were an
original Lender party hereto, in each case in form satisfactory to the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or 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 any of the Credit Documents in accordance with a request of the
Required Lenders or all of the Lenders, as may be required under this Agreement,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders and all future holders of the Notes.
SECTION 8.5 NOTICE OF DEFAULT.
-----------------
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
notice from a Lender or the Borrower referring to this Agreement, describing
such Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Agent receives such a notice, the Agent shall
give prompt notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided, however, that unless and until the Agent
-------- -------
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Lenders except to the extent that this Credit Agreement expressly requires
that such action be taken, or not taken, only with the consent or upon the
authorization of the Required Lenders, or all of the Lenders, as the case may
be.
SECTION 8.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.
---------------------------------------
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates 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 Borrower, shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property,
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financial and other condition and creditworthiness of the Borrower and made its
own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrower which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
SECTION 8.7 INDEMNIFICATION.
---------------
The Lenders agree to indemnify the Agent in its capacity hereunder (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their respective Commitment Percentages
in effect on the date on which indemnification is sought under this Section,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Notes) be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of any Credit Document
or any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing; provided, however,
-------- -------
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent resulting from the Agent's gross
negligence or willful misconduct, as determined by a court of competent
jurisdiction. The agreements in this Section 8.7 shall survive the termination
of this Agreement and payment of the Notes and all other amounts payable
hereunder.
SECTION 8.8 AGENT IN ITS INDIVIDUAL CAPACITY.
--------------------------------
The Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower as though the Agent
were not the Agent hereunder. With respect to its Loans made or renewed by it
and any Note issued to it, the Agent shall have the same rights and powers under
this Agreement as any Lender and may exercise the same as though it were not the
Agent, and the terms "Lender" and "Lenders" shall include the Agent in its
individual capacity.
SECTION 8.9 SUCCESSOR AGENT.
---------------
The Agent may resign as Agent upon 30 days' prior notice to the Borrower
and the Lenders. If the Agent shall resign as Agent under this Agreement and
the Notes, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall be approved by the
Borrower, whereupon such successor agent shall
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succeed to the rights, powers and duties of the Agent, and the term "Agent"
shall mean such successor agent effective upon such appointment and approval,
and the former Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such former Agent or any
of the parties to this Agreement or any holders of the Notes. After any retiring
Agent's resignation as Agent, the provisions of this Section 8.9 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 AMENDMENTS, WAIVERS AND RELEASE OF COLLATERAL.
---------------------------------------------
Neither this Agreement, nor any of the Notes, nor any of the other Credit
Documents, nor any terms hereof or thereof may be amended, supplemented, waived
or modified except in accordance with the provisions of this Section nor may be
released except as specifically provided herein or in the Security Documents or
in accordance with the provisions of this Section 9.1. The Required Lenders
may, or, with the written consent of the Required Lenders, the Agent may, from
time to time, (a) enter into with the Borrower written amendments, supplements
or modifications hereto and to the other Credit Documents for the purpose of
adding any provisions to this Agreement or the other Credit Documents or
changing in any manner the rights of the Lenders or of the Borrower hereunder or
thereunder or (b) waive, on such terms and conditions as the Required Lenders
may specify in such instrument, any of the requirements of this Agreement or the
other Credit Documents or any Default or Event of Default and its consequences
or (c) release collateral in accordance with the terms hereof or of any Security
Document or on such other terms and conditions as the Required Lenders may
agree; provided, however, that no such waiver and no such amendment, waiver,
-------- -------
supplement, modification or release shall:
(i) reduce the amount or extend the scheduled date of maturity
of any Loan or Note or any installment thereon, or reduce the stated
rate of any interest or fee payable hereunder (other than interest at
the Default Rate) or extend the scheduled date of any payment thereof
or increase the amount or extend the expiration date of any Lender's
Commitment, in each case without the written consent of each Lender
directly affected thereby, or
(ii) amend, modify or waive any provision of this Section 9.1 or
reduce the percentage specified in the definition of Required Lenders,
without the written consent of all the Lenders, or
(iii) amend, modify or waive any provision of Article VIII
without the written consent of the then Agent, or
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(iv) release any of the Guarantors from their obligations under
the Guaranty, without the written consent of all of the Lenders, or
(v) release all or substantially all of the collateral, without
the written consent of all of the Lenders, or
(vi) without the consent of Lenders holding in the aggregate
more than 50% of the outstanding Tranche A Term Loans and more than
50% of the outstanding Tranche B Term Loans, extend the time for or
the amount or the manner of application of proceeds of any mandatory
prepayment required by Section 2.7(b)(ii), (iii), (iv), (v) or (vi)
hereof, or
(vii) amend, modify or waive the Lender approval requirements of
any provision of the Credit Documents which at such time requires the
consent, approval or request of the Required Lenders or all Lenders,
as the case may be, without the written consent of all of the Lenders
and, provided, further, that no amendment, waiver or consent affecting
-------- -------
the rights or duties of the Agent or the Issuing Lender under any
Credit Document shall in any event be effective, unless in writing and
signed by the Agent and/or the Issuing Lender, as applicable, in
addition to the Lenders required hereinabove to take such action.
Any such waiver, any such amendment, supplement or modification and any
such release shall apply equally to each of the Lenders and shall be binding
upon the Borrower, the other Credit Parties, the Lenders, the Agent and all
future holders of the Notes. In the case of any waiver, the Borrower, the other
Credit Parties, the Lenders and the Agent shall be restored to their former
position and rights hereunder and under the outstanding Loans and Notes and
other Credit Documents, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
Notwithstanding any of the foregoing to the contrary, the consent of the
Borrower shall not be required for any amendment, modification or waiver of the
provisions of Article VIII (other than the provisions of Section 8.9); provided,
--------
however, that the Agent will provide written notice to the Borrower of any such
- -------
amendment, modification or waiver. In addition, the Borrower and the Lenders
hereby authorize the Agent to modify this Credit Agreement by unilaterally
amending or supplementing Schedule 2.1(a) from time to time in the manner
---------------
requested by the Borrower, the Agent or any Lender in order to reflect any
assignments or transfers of the Loans as provided for hereunder; provided,
--------
however, that the Agent shall promptly deliver a copy of any such modification
- -------
to the Borrower and each Lender.
Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans, and each Lender acknowledges that the provisions of Section 1126(c) of
the Bankruptcy Code supersedes the unanimous consent provisions set forth herein
and (y) the Required Lenders may consent to allow a Credit Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.
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SECTION 9.2 NOTICES.
-------
Except as otherwise provided in Article II, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made (a) when delivered by
hand, (b) when transmitted via telecopy (or other facsimile device) to the
number set out herein, (c) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (d)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case, addressed as follows in the
case of the Borrower, the other Credit Parties and the Agent, and as set forth
on Schedule 9.2 in the case of the Lenders, or to such other address as may be
------------
hereafter notified by the respective parties hereto and any future holders of
the Notes:
The Borrower Advanced Glassfiber Yarns LLC
and the other 2556 Wagener Road
Credit Parties: Aiken, South Carolina 29801
Attention: Robert B. Fisher, President
Telecopier: (803) 643-1190
Telephone: (803) 648-8351
with a copy to:
Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Telecopier: (419) 248-1723
Telephone: (419) 248-8000
BGF Industries, Inc.
3802 Robert Porcher Way
Greensboro, North Carolina 27410
Telecopier: (336) 545-7715
Telephone: (336) 545-0011
The Agent: First Union National Bank
One First Union Center, TW10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telecopier: (704) 383-0288
Telephone: (704) 374-2698
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with a copy to:
First Union National Bank
One First Union Center, DC-5
Charlotte, North Carolina 28288-0737
Attention: Roger Pelz
Senior Vice President
Telecopier: (704) 374-4793
Telephone: (704) 374-6060
SECTION 9.3 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. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
SECTION 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
All representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the Notes and the
making of the Loans, provided that all such representations and warranties shall
--------
terminate on the date upon which the Commitments have been terminated and all
amounts owing hereunder and under any Notes have been paid in full.
SECTION 9.5 PAYMENT OF EXPENSES AND TAXES.
-----------------------------
The Borrower agrees (a) to pay or reimburse the Agent for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation, negotiation, printing and execution of, and any
amendment, supplement or modification to, this Agreement and the other Credit
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, together with the reasonable fees and disbursements of counsel to
the Agent, (b) to pay or reimburse each Lender and the Agent for all its
reasonable costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes and any such other
documents, including, without limitation, the reasonable fees and disbursements
of counsel to the Agent and to the Lenders (including reasonable allocated costs
of in-house legal counsel), and (c) on demand, to pay, indemnify, and hold each
Lender and the Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other similar taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, the Credit Documents and any such other documents, and (d) to
pay, indemnify, and hold each Lender and
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the Agent and their Affiliates harmless from and against, any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of the
Credit Documents and any such other documents and the use, or proposed use, of
proceeds of the Loans (all of the foregoing, collectively, the "indemnified
-----------
liabilities"); provided, however, that the Borrower shall not have any
- ----------- -------- -------
obligation hereunder to the Agent or any Lender with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of the Agent
or any such Lender, as determined by a court of competent jurisdiction. The
agreements in this Section 9.5 shall survive repayment of the Loans, Notes and
all other amounts payable hereunder.
SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING
--------------------------------------------------
LENDERS.
- -------
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Agent, all future holders of the Notes and
their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement or
the other Credit Documents without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its lending business and
in accordance with applicable law, at any time sell to one or more banks or
other entities ("Participants") participating interests in any Loan owing
------------
to such Lender, any Note held by such Lender, any Commitment of such
Lender, or any other interest of such Lender hereunder. In the event of
any such sale by a Lender of participating interests to a Participant, such
Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the
holder of any such Note for all purposes under this Agreement, and the
Borrower and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. No Lender shall transfer or grant any participation under which
the Participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend the scheduled maturity of any Loan or
Note or any installment thereon in which such Participant is participating,
or reduce the stated rate or extend the time of payment of interest or fees
thereon (except in connection with a waiver of interest at the Default
Rate) or reduce the principal amount thereof, or increase the amount of the
Participant's participation over the amount thereof then in effect (it
being understood that a waiver of any Default or Event of Default shall not
constitute a change in the terms of such participation, and that an
increase in any Commitment or Loan shall be permitted without consent of
any participant if the Participant's participation is not increased as a
result thereof), (ii) release any of the Guarantors from their obligations
under the Guaranty, (iii) release all or substantially all of the
collateral, or (iv) consent to the assignment or transfer by the Borrower
of any of its rights and obligations under this Agreement. In the case of
any such participation, the Participant shall not have any rights under
this Agreement or any of the other Credit Documents (the Participant's
rights against such Lender in respect of such participation to be those set
forth in the agreement
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executed by such Lender in favor of the Participant relating thereto) and
all amounts payable by the Borrower hereunder shall be determined as if
such Lender had not sold such participation, provided that each Participant
--------
shall be entitled to the benefits of Sections 2.16, 2.17, 2.18 and 9.5 with
respect to its participation in the Commitments and the Loans outstanding
from time to time; provided, that no Participant shall be entitled to
--------
receive any greater amount pursuant to such Sections than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had
no such transfer occurred.
(c) Any Lender may, in the ordinary course of its lending business and
in accordance with applicable law, at any time, sell or assign to any
Lender or any affiliate thereof or any fund that invests in bank loans and
is advised or managed by an investment advisor to an existing Lender and
with the consent of the Agent and, so long as no Event of Default has
occurred and is co ntinuing, the Borrower (in each case, which consent
shall not be unreasonably withheld), to one or more additional Eligible
Assignees ("Purchasing Lenders"), all or any part of its rights and
------------------
obligations under this Agreement and the Notes in minimum amounts of
$5,000,000 with respect to its Revolving Commitment, its Revolving Loans
and its Tranche A Term Loans and $2,500,000 with respect to its Tranche B
Term Loans (or, if less, the entire amount of such Lender's obligations),
pursuant to a Commitment Transfer Supplement, executed by such Purchasing
Lender and such transferor Lender (and, in the case of a Purchasing Lender
that is not then a Lender or an affiliate thereof, the Agent and, so long
as no Event of Default has occurred and is continuing, the Borrower), and
delivered to the Agent for its acceptance and recording in the Register;
provided, however, that any sale or assignment to an existing Lender or any
-------- -------
affiliate thereof shall not require the consent of the Agent or the
Borrower nor shall any such sale or assignment be subject to the minimum
assignment amounts specified herein. Upon such execution, delivery,
acceptance and recording, from and after the Transfer Effective Date
specified in such Commitment Transfer Supplement, (x) the Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein, and (y) the transferor
Lender thereunder shall, to the extent provided in such Commitment Transfer
Supplement, be released from its obligations under this Agreement (and, in
the case of a Commitment Transfer Supplement covering all or the remaining
portion of a transferor Lender's rights and obligations under this
Agreement, such transferor Lender shall cease to be a party hereto). Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to
the extent, and only to the extent, necessary to reflect the addition of
such Purchasing Lender and the resulting adjustment of Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Notes. On or prior to the Transfer Effective Date
specified in such Commitment Transfer Supplement, the Borrower, at its own
expense, shall execute and deliver to the Agent in exchange for the Notes
delivered to the Agent pursuant to such Commitment Transfer Supplement new
Notes to the order of such Purchasing Lender in an amount equal to the
Commitment assumed by it pursuant to such Commitment Transfer Supplement
and, unless the transferor Lender has not retained a Commitment hereunder,
new Notes to the order of the transferor Lender in an amount
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equal to the Commitment retained by it hereunder. Such new Notes shall be
dated the Closing Date and shall otherwise be in the form of the Notes
replaced thereby. The Notes surrendered by the transferor Lender shall be
returned by the Agent to the Borrower marked "canceled".
(d) The Agent shall maintain at its address referred to in Section 9.2
a copy of each Commitment Transfer Supplement delivered to it and a
register (the "Register") for the recordation of the names and addresses of
--------
the Lenders and the Commitment of, and principal amount of the Loans owing
to, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the
Register as the owner of the Loan recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of a duly executed Commitment Transfer
Supplement, together with payment to the Agent by the transferor Lender or
the Purchasing Lender, as agreed between them, of a registration and
processing fee of $3,000 for each Purchasing Lender listed in such
Commitment Transfer Supplement and the Notes subject to such Commitment
Transfer Supplement, the Agent shall (i) accept such Commitment Transfer
Supplement, (ii) record the information contained therein in the Register
and (iii) give prompt notice of such acceptance and recordation to the
Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any Participant
or Purchasing Lender (each, a "Transferee") and any prospective Transferee
----------
any and all financial information in such Lender's possession concerning
the Borrower and its Affiliates which has been delivered to such Lender by
or on behalf of the Borrower pursuant to this Agreement or which has been
delivered to such Lender by or on behalf of the Borrower in connection with
such Lender's credit evaluation of the Borrower and its Affiliates prior to
becoming a party to this Agreement, in each case subject to Section 9.16.
(g) At the time of each assignment pursuant to this Section 9.6 to a
Person which is not already a Lender hereunder and which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code)
for Federal income tax purposes, the respective assignee Lender shall
provide to the Borrower and the Agent the appropriate Internal Revenue
Service Forms (and, if applicable, a 2.18 Certificate) described in Section
2.18.
(h) Nothing herein shall prohibit any Lender, without the consent of
the Agent or the Borrower, from pledging or assigning any of its rights
under this Agreement as collateral security for its obligations, including
without limitation, any right to payment of principal and interest under
any Note, to (i) any Federal Reserve Bank in accordance with applicable
laws or (ii) in the case of any Lender which has made Term Loans hereunder
and is an investment fund, to the trustee under the indenture to which such
fund is a party in support of its obligations to such trustee for the
benefit of the applicable trust
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beneficiaries; provided, however, that in either case, (A) such Lender
-------- -------
shall remain a "Lender" under this Agreement and shall continue to be bound
by all the terms and conditions set forth in this Agreement and the other
Credit Documents and (B) any assignment to such trustee shall be subject to
the provisions of Section 9.6(c).
SECTION 9.7 ADJUSTMENTS; SET-OFF.
--------------------
(a) Each Lender agrees that if any Lender (a "benefited Lender") shall
----------------
at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily
or involuntarily, by set-off, pursuant to events or proceedings of the
nature referred to in Section 7.1(e), or otherwise) in a greater proportion
than any such payment to or collateral received by any other Lender, if
any, in respect of such other Lender's Loans, or interest thereon, such
benefited Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan,
or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such collateral
or proceeds ratably with each of the Lenders; provided, however, that if
-------- -------
all or any portion of such excess payment or benefits is thereafter
recovered from such benefited Lender, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of such recovery,
but without interest. The Borrower agrees that each Lender so purchasing a
portion of another Lender's Loans may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law (including, without limitation, other rights of set-off), each Lender
shall have the right, without prior notice to the Borrower, any such notice
being expressly waived by the Borrower to the extent permitted by
applicable law, upon the occurrence and continuance of any Event of
Default, to setoff and appropriate and apply any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case
whether direct or indirect, absolute or contingent, matured or unmatured,
at any time held or owing by such Lender or any branch or agency thereof to
or for the credit or the account of the Borrower, or any part thereof in
such amounts as such Lender may elect, against and on account of the
obligations and liabilities of the Borrower to such Lender hereunder and
claims of every nature and description of such Lender against the Borrower,
in any currency, whether arising hereunder, under the Notes or under any
documents contemplated by or referred to herein or therein, as such Lender
may elect, whether or not such Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The aforesaid right of set-off may be exercised by such Lender
against the Borrower or against any trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver or execution,
judgment or attachment creditor of the Borrower, or against anyone else
claiming through or against the Borrower or any such trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor, notwithstanding the fact that
such right of
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set-off shall not have been exercised by such Lender prior to the
occurrence of any Event of Default. Each Lender agrees promptly to notify
the Borrower and the Agent after any such set-off and application made by
such Lender; provided, however, that the failure to give such notice shall
-------- -------
not affect the validity of such set-off and application.
SECTION 9.8 TABLE OF CONTENTS AND SECTION HEADINGS.
--------------------------------------
The table of contents and the Section and subsection headings herein are
intended for convenience only and shall be ignored in construing this Agreement.
SECTION 9.9 COUNTERPARTS.
------------
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
the Borrower and the Agent.
SECTION 9.10 EFFECTIVENESS.
-------------
This Credit Agreement shall become effective on the date on which all of
the parties have signed a copy hereof (whether the same or different copies) and
shall have delivered the same to the Agent pursuant to Section 9.2 or, in the
-----------
case of the Lenders, shall have given to the Agent written, telecopied or telex
notice (actually received) at such office that the same has been signed and
mailed to it.
SECTION 9.11 SEVERABILITY.
------------
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 9.12 INTEGRATION.
-----------
This Agreement and the Notes represent the agreement of the Borrower, the
Agent and the Lenders with respect to the subject matter hereof, and there are
no promises, undertakings, representations or warranties by the Agent, the
Borrower or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the Notes.
SECTION 9.13 GOVERNING LAW.
-------------
This Agreement and the Notes and the rights and obligations of the parties
under this Agreement and the Notes shall be governed by, and construed and
interpreted in accordance with, the law of the State of North Carolina.
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SECTION 9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
----------------------------------------------
All judicial proceedings brought against the Borrower and/or any other
Credit Party with respect to this Agreement, any Note or any of the other Credit
Documents may be brought in any state or federal court of competent jurisdiction
in the State of North Carolina, and, by execution and delivery of this
Agreement, each of the Borrower and the other Credit Parties accepts, for itself
and in connection with its properties, generally and unconditionally, the non-
exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any final judgment rendered thereby in connection with this Agreement
from which no appeal has been taken or is available. Each of the Borrower and
the other Credit Parties irrevocably agrees that all service of process in any
such proceedings in any such court may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to it at its address set forth in Section 9.2 or at such other
address of which the Agent shall have been notified pursuant thereto, such
service being hereby acknowledged by the each of the Borrower and the other
Credit Parties to be effective and binding service in every respect. Each of
the Borrower, the other Credit Parties, the Agent and the Lenders irrevocably
waives any objection, including, without limitation, 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 such action or proceeding in any such
jurisdiction. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any Lender to bring
proceedings against the Borrower or the other Credit Parties in the court of any
other jurisdiction.
SECTION 9.15 ARBITRATION.
-----------
(a) Notwithstanding the provisions of Section 9.14 to the contrary,
upon demand of any party hereto, whether made before or within three (3)
months after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement
and other Credit Documents ("Disputes") between or among parties to this
Agreement shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of
that party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, disputes as to whether a matter is
subject to arbitration, claims brought as class actions, claims arising
from Credit Documents executed in the future, or claims arising out of or
connected with the transaction reflected by this Agreement.
Arbitration shall be conducted under and governed by the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration
hearings shall be conducted in Charlotte, North Carolina. A hearing shall
begin within 90 days of demand for arbitration and all hearings shall be
concluded within 120 days of demand for arbitration. These time
limitations may not be extended unless a party shows cause for extension
and then no more than a total extension of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
-- ---
applicable to claims of less than $1,000,000. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be
entered in any court having jurisdiction. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel
of the AAA. The parties hereto
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do not waive applicable Federal or state substantive law except as provided
herein. Notwithstanding the foregoing, this arbitration provision does not
apply to disputes under or related to Hedging Agreements.
(b) Notwithstanding the preceding binding arbitration provisions, the
Agent, the Lenders, the Borrower and the other Credit Parties agree to
preserve, without diminution, certain remedies that the Agent on behalf of
the Lenders may employ or exercise freely, independently or in connection
with an arbitration proceeding or after an arbitration action is brought.
The Agent on behalf of the Lenders shall have the right to proceed in any
court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable (i) all rights to foreclose against any
real or personal property or other security by exercising a power of sale
granted under Credit Documents or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
(c) The parties hereto agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby
waive any right or claim to punitive or exemplary damages they have now or
which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.
(d) By execution and delivery of this Agreement, each of the parties
hereto accepts, for itself and in connection with its properties, generally
and unconditionally, the non-exclusive jurisdiction relating to any
arbitration proceedings conducted under the Arbitration Rules in Charlotte,
North Carolina and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with this Agreement from which no appeal has
been taken or is available.
SECTION 9.16 CONFIDENTIALITY.
---------------
The Agent and each of the Lenders agrees that it will use its best efforts
not to disclose without the prior consent of the Borrower (other than to its
employees, affiliates, auditors or counsel or to another Lender) any information
with respect to the Borrower and its Subsidiaries which is furnished pursuant to
this Agreement, any other Credit Document or any documents contemplated by or
referred to herein or therein and which is designated by the Borrower to the
Lenders in writing as confidential or as to which it is otherwise reasonably
clear such information is not public, except that any Lender may disclose any
such information (a) as has become generally available to the public other than
by a breach of this Section 9.16, (b) as may be required or appropriate in any
report, statement or testimony submitted to any municipal, state or federal
regulatory body having or claiming to have jurisdiction over such Lender or to
the National Association of Insurance Commissioners or the Federal Reserve Board
or the Federal Deposit
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<PAGE>
Insurance Corporation or the OCC or similar organizations (whether in the United
States or elsewhere) or their successors, (c) as may be required or appropriate
in response to any summons or subpoena or any law, order, regulation or ruling
applicable to such Lender, (d) to any prospective Participant or assignee in
connection with any contemplated transfer pursuant to Section 9.6, provided that
--------
such prospective transferee shall have been made aware of this Section 9.16 and
shall have agreed to be bound by its provisions as if it were a party to this
Agreement, (e) to Gold Sheets and other similar bank trade publications; such
-----------
information to consist of deal terms and other information regarding the credit
facilities evidenced by this Credit Agreement customarily found in such
publications or (f) to any Person listed on Schedule 9.2 hereof (so long as such
Person agrees to be bound by the provisions of this Section 9.16).
SECTION 9.17 ACKNOWLEDGMENTS.
---------------
The Borrower and the other Credit Parties each hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of each Credit Document;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to the Borrower or any other Credit Party arising out of or in
connection with this Agreement and the relationship between Agent and
Lenders, on one hand, and the Borrower and the other Credit Parties, on the
other hand, in connection herewith is solely that of debtor and creditor;
and
(c) no joint venture exists among the Lenders or among the Borrower or
the other Credit Parties and the Lenders.
SECTION 9.18 WAIVERS OF JURY TRIAL.
---------------------
THE BORROWER, THE OTHER CREDIT PARTIES, THE AGENT AND THE LENDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
ARTICLE X
GUARANTY
SECTION 10.1 THE GUARANTY.
------------
In order to induce the Lenders to enter into this Agreement and to extend
credit hereunder and in recognition of the direct benefits to be received by the
Guarantors from the Extensions of Credit hereunder, each of the Guarantors
hereby agrees with the Agent and the Lenders as follows: the Guarantor hereby
unconditionally and irrevocably jointly and severally guarantees as primary
obligor and not merely as surety the full and prompt payment when due, whether
upon
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<PAGE>
maturity, by acceleration or otherwise, of any and all indebtedness of the
Borrower to the Agent and the Lenders, including, without limitation, all
obligations of the Borrower under Hedging Agreements. If any or all of the
indebtedness of the Borrower to the Agent and the Lenders becomes due and
payable hereunder, each Guarantor unconditionally promises to pay such
indebtedness to the Agent and the Lenders, or order, on demand, together with
any and all reasonable expenses which may be incurred by the Agent or the
Lenders in collecting any of the indebtedness. The word "indebtedness" is used
in this Article X in its most comprehensive sense and includes any and all
advances, debts, obligations and liabilities of the Borrower arising in
connection with this Agreement, in each case, heretofore, now, or hereafter
made, incurred or created, whether voluntarily or involuntarily, absolute or
contingent, liquidated or unliquidated, determined or undetermined, whether or
not such indebtedness is from time to time reduced, or extinguished and
thereafter increased or incurred, whether the Borrower may be liable
individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents, to the extent the obligations of a Guarantor
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each such Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code).
SECTION 10.2 BANKRUPTCY.
----------
Additionally, each of the Guarantors unconditionally and irrevocably
guarantees jointly and severally the payment of any and all indebtedness of the
Borrower to the Lenders whether or not due or payable by the Borrower upon the
occurrence of any of the events specified in Section 7.1(e), and unconditionally
promises to pay such indebtedness to the Agent for the account of the Lenders,
or order, on demand, in lawful money of the United States. Each of the
Guarantors further agrees that to the extent that the Borrower or a Guarantor
shall make a payment or a transfer of an interest in any property to the Agent
or any Lender, which payment or transfer or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, or otherwise is avoided,
and/or required to be repaid to the Borrower or a Guarantor, the estate of the
Borrower or a Guarantor, a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such avoidance or repayment, the obligation or part thereof intended
to be satisfied shall be revived and continued in full force and effect as if
said payment had not been made.
SECTION 10.3 NATURE OF LIABILITY.
-------------------
The liability of each Guarantor hereunder is exclusive and independent of
any security for or other guaranty of the indebtedness of the Borrower whether
executed by any such Guarantor, any other guarantor or by any other party, and
no Guarantor's liability hereunder shall be affected or impaired by (a) any
direction as to application of payment by the Borrower or by any other party, or
(b) any other continuing or other guaranty, undertaking or maximum liability of
a
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guarantor or of any other party as to the indebtedness of the Borrower, or (c)
any payment on or in reduction of any such other guaranty or undertaking, or (d)
any dissolution, termination or increase, decrease or change in personnel by the
Borrower, or (e) any payment made to the Agent or the Lenders on the
indebtedness which the Agent or such Lenders repay the Borrower pursuant to
court order in any bankruptcy, reorganization, arrangement, moratorium or other
debtor relief proceeding, and each of the Guarantors waives any right to the
deferral or modification of its obligations hereunder by reason of any such
proceeding.
SECTION 10.4 INDEPENDENT OBLIGATION.
----------------------
The obligations of each Guarantor hereunder are independent of the
obligations of any other guarantor or the Borrower, and a separate action or
actions may be brought and prosecuted against each Guarantor whether or not
action is brought against any other guarantor or the Borrower and whether or not
any other Guarantor or the Borrower is joined in any such action or actions.
SECTION 10.5 AUTHORIZATION.
-------------
Each of the Guarantors authorizes the Agent and each Lender without notice
or demand (except as shall be required by applicable statute and cannot be
waived), and without affecting or impairing its liability hereunder, from time
to time to (a) renew, compromise, extend, increase, accelerate or otherwise
change the time for payment of, or otherwise change the terms of the
indebtedness or any part thereof in accordance with this Agreement, including
any increase or decrease of the rate of interest thereon, (b) take and hold
security from any guarantor or any other party for the payment of this Guaranty
or the indebtedness and exchange, enforce waive and release any such security,
(c) apply such security and direct the order or manner of sale thereof as the
Agent and the Lenders in their discretion may determine and (d) release or
substitute any one or more endorsers, guarantors, the Borrower or other
obligors.
SECTION 10.6 RELIANCE.
--------
It is not necessary for the Agent or the Lenders to inquire into the
capacity or powers of the Borrower or the officers, directors, partners or
agents acting or purporting to act on its behalf, and any indebtedness made or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
SECTION 10.7 WAIVER.
------
(a) Each of the Guarantors waives any right (except as shall be
required by applicable statute and cannot be waived) to require the Agent
or any Lender to (i) proceed against the Borrower, any other guarantor or
any other party, (ii) proceed against or exhaust any security held from the
Borrower, any other guarantor or any other party, or (iii) pursue any other
remedy in the Agent's or any Lender's power whatsoever. Each of the
Guarantors waives any defense based on or arising out of any defense of the
Borrower, any other guarantor or any other party other than payment in full
of the indebtedness, including without limitation any defense based on or
arising out of the
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<PAGE>
disability of the Borrower, any other guarantor or any other party, or the
unenforceability of the indebtedness or any part thereof from any cause, or
the cessation from any cause of the liability of the Borrower other than
payment in full of the indebtedness. Without limiting the generality of the
provisions of this Article X, each of the Guarantors hereby specifically
waives the benefits of N.C. Gen. Stat. (S) 26-7 through 26-9, inclusive.
The Agent or any of the Lenders may, at their election, foreclose on any
security held by the Agent or a Lender by one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Agent and any Lender may
have against the Borrower or any other party, or any security, without
affecting or impairing in any way the liability of any Guarantor hereunder
except to the extent the indebtedness has been paid. Each of the Guarantors
waives any defense arising out of any such election by the Agent and each
of the Lenders, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of the
Guarantors against the Borrower or any other party or any security.
(b) Each of the Guarantors waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notice of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. Each Guarantor assumes all
responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing upon
the risk of nonpayment of the indebtedness and the nature, scope and extent
of the risks which such Guarantor assumes and incurs hereunder, and agrees
that neither the Agent nor any Lender shall have any duty to advise such
Guarantor of information known to it regarding such circumstances or risks.
(c) Each of the Guarantors hereby agrees it will not exercise any
rights of subrogation which it may at any time otherwise have as a result
of this Guaranty (whether contractual, under Section 509 of the U.S.
Bankruptcy Code, or otherwise) to the claims of the Lenders against the
Borrower or any other guarantor of the indebtedness of the Borrower owing
to the Lenders (collectively, the "Other Parties") and all contractual,
-------------
statutory or common law rights of reimbursement, contribution or indemnity
from any Other Party which it may at any time otherwise have as a result of
this Guaranty until such time as the Loans hereunder shall have been paid
and the Commitments have been terminated. Each of the Guarantors hereby
further agrees not to exercise any right to enforce any other remedy which
the Agent and the Lenders now have or may hereafter have against any Other
Party, any endorser or any other guarantor of all or any part of the
indebtedness of the Borrower and any benefit of, and any right to
participate in, any security or collateral given to or for the benefit of
the Lenders to secure payment of the indebtedness of the Borrower until
such time as the Loans hereunder shall have been paid and the Commitments
have been terminated.
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<PAGE>
SECTION 10.8 LIMITATION ON ENFORCEMENT.
-------------------------
The Lenders agree that this Guaranty may be enforced only by the action of
the Agent acting upon the instructions of the Required Lenders and that no
Lender shall have any right individually to seek to enforce or to enforce this
Guaranty, it being understood and agreed that such rights and remedies may be
exercised by the Agent for the benefit of the Lenders upon the terms of this
Agreement. The Lenders further agree that this Guaranty may not be enforced
against any director, officer, employee, stockholder or other equity holder of
the Guarantors.
SECTION 10.9 CONFIRMATION OF PAYMENT.
-----------------------
The Agent and the Lenders will, upon request after payment of the
indebtedness and obligations which are the subject of this Guaranty and
termination of the commitments relating thereto, confirm to the Borrower, the
Guarantors or any other Person that the such indebtedness and obligations have
been paid and the commitments relating thereto terminated, subject to the
provisions of Section 10.2.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Charlotte, North Carolina by its proper and duly
authorized officers as of the day and year first above written.
BORROWER: ADVANCED GLASSFIBER YARNS LLC
- --------
By: /s/ Robert B. Fisher
-----------------------
Name: Robert B. Fisher
Title: President
GUARANTORS: AGY CAPITAL CORP.
- ----------
By: /s/ Robert B. Fisher
-----------------------
Name: Robert B. Fisher
Title: President
AGENT AND LENDERS: FIRST UNION NATIONAL BANK,
- ------------------
as Administrative Agent and as a Lender
By: /s/ Glenn F. Edwards
----------------------------
Name: Glenn F. Edwards
----------------------------
Title: Senior Vice President
----------------------------
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<PAGE>
EXHIBIT 10.14
$150,000,000
SENIOR SUBORDINATED CREDIT AGREEMENT
dated as of
September 30, 1998
among
ADVANCED GLASSFIBER YARNS LLC
AGY CAPITAL CORP.
as Borrowers,
CERTAIN SUBSIDIARIES
FROM TIME TO TIME PARTY HERETO,
as Guarantors,
THE LENDERS PARTIES HERETO
AND
FIRST UNION INVESTORS, INC.
WARBURG DILLON READ LLC,
as Co-Agents
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SECTION 1 DEFINITIONS.......................................................................................... 1
1.1 Certain Defined Terms............................................................................. 1
1.2 Accounting Terms.................................................................................. 28
1.3 Other Definitional Provisions..................................................................... 28
SECTION 2 AMOUNT AND TERMS OF BRIDGE LOAN COMMITMENT AND LOANS; BRIDGE NOTES................................... 28
2.1 Bridge Loan and Bridge Note....................................................................... 28
2.2 Interest on the Bridge Loan....................................................................... 30
2.3 Fees.............................................................................................. 31
2.4 Prepayments and Payments.......................................................................... 31
2.5 Use of Proceeds................................................................................... 35
SECTION 3 CONDITIONS........................................................................................... 35
3.1 Conditions to Bridge Loan......................................................................... 35
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE BORROWERS...................................................... 41
4.1 Organization and Good Standing; Capitalization.................................................... 41
4.2 Authorization and Power........................................................................... 41
4.3 No Conflicts or Consents.......................................................................... 41
4.4 Enforceable Obligations........................................................................... 42
4.5 Properties; Liens................................................................................. 42
4.6 Financial Condition............................................................................... 43
4.7 Full Disclosure................................................................................... 44
4.8 No Default........................................................................................ 44
4.9 Compliance with Contracts, Etc.................................................................... 44
4.10 No Litigation.................................................................................... 45
4.11 Use of Proceeds; Margin Stock, Etc............................................................... 45
4.12 Taxes............................................................................................ 45
4.13 ERISA............................................................................................ 45
4.14 Compliance with Law.............................................................................. 46
4.15 Government Regulation............................................................................ 46
4.16 Intellectual Property............................................................................ 46
4.17 Environmental Matters............................................................................ 46
4.18 Survival of Representations and Warranties....................................................... 48
4.19 Permits.......................................................................................... 48
4.20 Insurance........................................................................................ 48
4.21 Labor Matters.................................................................................... 49
</TABLE>
i
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<TABLE>
<S> <C>
4.22 Guarantees....................................................................................... 49
4.23 Senior Subordinated Indenture; Etc............................................................... 49
4.24 Broker's or Finder's Fees........................................................................ 50
4.25 JV Supply and Service Agreements................................................................. 50
4.26 Year 2000 Compliance............................................................................. 50
4.27 Entire Business.................................................................................. 51
4.28 Representations and Warranties in Other Agreements............................................... 51
SECTION 5 AFFIRMATIVE COVENANTS................................................................................ 51
5.1 Financial Statements and Other Reports............................................................ 51
5.2 Corporate Existence, Etc.......................................................................... 56
5.3 Payment of Taxes and Claims; Tax Consolidation.................................................... 56
5.4 Maintenance of Properties; Insurance.............................................................. 56
5.5 Inspection........................................................................................ 57
5.6 Equal Security for Bridge Loan.................................................................... 57
5.7 Compliance with Laws, Etc......................................................................... 57
5.8 Maintenance of Accurate Records, Etc.............................................................. 57
5.9 Take-Out Financing................................................................................ 57
5.10 Exchange of Bridge Notes......................................................................... 58
5.11 ERISA Compliance................................................................................. 59
5.12 Payments in U.S. Dollars......................................................................... 60
5.13 Register......................................................................................... 60
5.14 Lenders Meeting.................................................................................. 60
5.15 Additional Guarantors............................................................................ 60
5.16 Marketing Take-Out Securities.................................................................... 61
5.17 Environmental Matters............................................................................ 61
SECTION 6 NEGATIVE COVENANTS................................................................................... 61
6.1 Indebtedness...................................................................................... 61
6.2 Liens............................................................................................. 63
6.3 Restricted Payments............................................................................... 65
6.4 Contingent Obligations............................................................................ 66
6.5 Layering of Indebtedness.......................................................................... 67
6.6 Restriction on Fundamental Changes................................................................ 67
6.7 Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries...................... 68
6.8 Transactions with Shareholders and Affiliates..................................................... 68
6.9 Subsidiary Stock; Borrower Restrictions........................................................... 69
6.10 Business Activities.............................................................................. 70
6.11 Amendment or Waivers of Certain Documents........................................................ 70
6.12 Amendment to Charter Documents................................................................... 70
6.13 Asset Sales...................................................................................... 70
6.14 Transfer of Assets to Subsidiaries............................................................... 71
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.15 Sale and Leaseback Transactions.................................................................. 71
6.16 Refinancing of the Bridge Loan in Part........................................................... 71
SECTION 7 EVENTS OF DEFAULT.................................................................................... 71
7.1 Failure to Make Payments When Due................................................................. 71
7.2 Default in Other Agreements....................................................................... 71
7.3 Breach of Certain Covenants....................................................................... 72
7.4 Breach of Warranty................................................................................ 72
7.5 Other Defaults Under Agreement or Loan Documents.................................................. 72
7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc............................................. 72
7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc............................................... 73
7.8 Judgments and Attachments......................................................................... 73
7.9 Dissolution....................................................................................... 73
7.10 Guarantee........................................................................................ 73
7.11 ERISA............................................................................................ 74
7.12 Foreclosure...................................................................................... 74
7.13 Termination of Certain Agreements................................................................ 74
7.14 Amendment of Keep Well Agreement................................................................. 74
SECTION 8 SUBORDINATION........................................................................................ 75
8.1 Obligations Subordinated to Senior Indebtedness of the Borrowers.................................. 75
8.2 Priority and Payment Over of Proceeds in Certain Events........................................... 75
8.3 Payments May Be Paid Prior to Dissolution......................................................... 77
8.4 Rights of Holders of Senior Indebtedness of the Borrowers Not To Be Impaired...................... 78
8.5 Subrogation....................................................................................... 78
8.6 Obligations of the Borrowers Unconditional........................................................ 79
8.7 Lenders Authorize Agent to Effectuate Subordination............................................... 79
SECTION 9 THE AGENT............................................................................................ 80
9.1 Appointment....................................................................................... 80
9.2 Delegation of Duties.............................................................................. 80
9.3 Exculpatory Provisions............................................................................ 80
9.4 Reliance by Agent................................................................................. 81
9.5 Notice of Default................................................................................. 81
9.6 Non-Reliance on Agent and Other Lenders........................................................... 82
9.7 Indemnification................................................................................... 82
9.8 Agents in Their Individual Capacity............................................................... 83
9.9 Resignation of the Agents; Successor Agents....................................................... 83
SECTION 10 GUARANTEE........................................................................................... 83
10.1 Unconditional Guarantee.......................................................................... 83
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
10.2 Subordination of Guarantee....................................................................... 84
10.3 Severability..................................................................................... 84
10.4 Limitation of Guarantor's Liability.............................................................. 84
10.5 Guarantors May Consolidate, etc., on Certain Terms............................................... 85
10.6 Contribution..................................................................................... 85
10.7 Waiver of Subrogation............................................................................ 86
10.8 Evidence Guarantee............................................................................... 86
10.9 Waiver of Stay, Extension or Usury Laws.......................................................... 87
SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS.............................................................. 87
11.1 Guarantee Obligations Subordinated to Guarantor Senior Indebtedness.............................. 87
11.2 Priority and Payment Over of Proceeds in Certain Events.......................................... 87
11.3 Payments May Be Paid Prior to Dissolution........................................................ 89
11.4 Rights of Holders of Guarantor Senior Indebtedness Not To Be Impaired............................ 90
11.5 Subrogation...................................................................................... 90
11.6 Obligations of the Guarantors Unconditional...................................................... 91
11.7 Lenders Authorize Agent to Effectuate Subordination.............................................. 91
SECTION 12 MISCELLANEOUS........................................................................................ 92
12.1 Representation of the Lenders.................................................................... 92
12.2 Participations in and Assignments of Bridge Loan................................................. 92
12.3 Expenses......................................................................................... 94
12.4 Indemnitee....................................................................................... 94
12.5 Setoff........................................................................................... 95
12.6 Amendments and Waivers........................................................................... 95
12.7 Independence of Covenants........................................................................ 96
12.8 Entirety......................................................................................... 97
12.9 Notices.......................................................................................... 97
12.10 Survival of Warranties and Certain Agreements................................................... 97
12.11 Failure or Indulgence Not Waiver; Remedies Cumulative........................................... 97
12.12 Severability.................................................................................... 98
12.13 Headings........................................................................................ 98
12.14 Applicable Law.................................................................................. 98
12.15 Successors and Assigns; Subsequent Holders of Bridge Notes...................................... 98
12.16 Counterparts; Effectiveness..................................................................... 98
12.17 Consent to Jurisdiction; Venue; Waiver of Jury Trial............................................ 99
12.18 Payments Pro Rata............................................................................... 99
12.19 Taxes........................................................................................... 100
12.20 Waiver of Stay, Extension or Usury Laws......................................................... 101
12.21 Requirements of Law............................................................................. 101
12.22 Confidentiality................................................................................. 102
12.23 Compensation.................................................................................... 102
</TABLE>
iv
<PAGE>
SCHEDULES
A EXISTING LIENS
B ENVIRONMENTAL MATTERS
C EXISTING INDEBTEDNESS
D JV SUPPLY AND SERVICE AGREEMENTS
E AFFILIATE TRANSACTIONS
F FORM OF KEEP WELL AGREEMENT
G LITIGATION
EXHIBITS
I FORM OF BRIDGE NOTE
II FORM OF COMPLIANCE CERTIFICATE
III FORM OF NOTICE OF BORROWING
IV FORM OF REGISTRATION RIGHTS AGREEMENT
V FORM OF OPINION OF ALSTON & BIRD- COUNSEL
FOR THE COMPANY AND THE GUARANTORS
VI FORM OF OPINION OF CLEARY, GOTTLIEB, STEEN & HAMILTON -
COUNSEL FOR THE LENDERS
VII FORM OF NOTATION OF GUARANTEE
VIII FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
IX FORM OF SECTION 12.2E(ii) CERTIFICATE
v
<PAGE>
This Senior Subordinated Credit Agreement is dated as of September 30,
1998, and entered into by and among Advanced Glassfiber Yarns LLC, a limited
liability company formed under the Delaware Limited Liability Company Act (the
"Company") and AGY Capital Corp., a Delaware corporation ("Capital") and
together with the Company, the "Borrowers"), as joint and several obligors, such
Subsidiaries of the Company as may from time to time become a party hereto (the
"Guarantors"), the banks and other financial institutions from time to time
parties hereto (the "Lenders" and individually a "Lender") and First Union
Investors, Inc. ("First Union") and Warburg Dillon Read LLC ("Warburg"), as co-
agents for the Lenders (in such capacity, the "Agents").
RECITALS
WHEREAS, the Borrowers desire that the Lenders extend a senior subordinated
credit facility to the Borrowers in connection with the JV Transactions (as
defined herein);
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereby agree as follows:
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms
---------------------
The following terms used in this Agreement shall have the following
meanings:
"Acquired Assets" means all or substantially all of the assets constituting
the Business.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or any of its
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Subsidiary of the
Company or such acquisition, merger or consolidation. Such Indebtedness shall be
deemed to have been Incurred at the time such Person becomes a Subsidiary of the
Company or at the time it merges or consolidates with the Company or a
Subsidiary of the Company or at the time such Indebtedness is assumed in
connection with the acquisition of assets from such Person.
"Acquisition" means, collectively, (i) the acquisition by the Company of
the Acquired Assets pursuant to the Asset Contribution and Sale Agreements and
(ii) the AGY Holdings Acquisition.
"Adjusted Net Assets" shall have the meaning provided in Section 10.6.
"Affiliate," means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a
<PAGE>
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling", "controlled by" and "under common
control with" have meanings correlative of the foregoing; provided, however,
-------- -------
that beneficial ownership of 10% or more of the Voting Stock of a Person shall
be deemed to be control; provided that none of First Union or any of its
--------
Affiliates shall be treated as an Affiliate of the Company or of any Subsidiary
of the Company.
"Affiliate Transaction" has the meaning ascribed to it in Section 6.8.
"Agents" has the meaning ascribed to it in the introduction to this
Agreement.
"Agreement" means this Senior Subordinated Credit Agreement dated as of
September 30, 1998, as it may be amended, supplemented or otherwise modified
from time to time in accordance with the terms hereof.
"AG Yarns" means AG Yarns Canada Inc., a Canadian corporation and Wholly-
Owned Subsidiary of the Company.
"AGY Holdings" means AGY Holdings, Inc., a Delaware corporation and Wholly-
Owned Subsidiary of Glass Holdings.
"AGY Holdings Acquisition" means the acquisition by AGY Holdings of a 51%
interest in the Company pursuant to the LLC Sale and Purchase Agreement at a
purchase price of approximately $332.0 million.
"AGY Holdings Distribution" means the cash payment of approximately $199.0
million made by the Company to AGY Holdings concurrently with the consummation
of the other JV Transactions.
"Alloy Services Agreement" means the Alloy Services Agreement dated as of
the Closing Date, by and between Owens Corning and the Company.
"Amended and Restated Commitment Letter" means the (i) letter agreement
dated September 30, 1998, between BGF, Owens Corning, FUCM, First Union and
Warburg pursuant to which First Union and Warburg committed to provide the
Bridge Loan to the Borrowers, subject to the terms and conditions thereof and
(ii) the letter agreement dated September 30, 1998 between BGF, Owens Corning,
FUCM, First Union and Warburg pursuant to which the Borrowers are committed to
pay First Union, Warburg and their respective Affiliates certain fees and to
satisfy certain other obligations to First Union, Warburg and their Affiliates
in respect of the commitment set forth in (i) above.
"Amount of Unfunded Benefit Liability" means, with respect to any Pension
Plan, (i) if set forth on the most recent actuarial valuation report with
respect to such Pension Plan, the amount of unfunded benefit liabilities (as
defined in Section 4001(a) (18) of ERISA) and (ii) otherwise, the excess of (a)
the greater of the current liability (as defined in Section 412(1) (7) of the
Internal Revenue Code) or the actuarial present value of the accrued
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benefits with respect to such Pension Plan over (b) the market value of the
assets of such Pension Plan.
"Applicable Interest Rate" means for each Interest Period, (i) the greater
of the Applicable LIBOR Based Rate and the Applicable Treasury Based Rate plus
(ii) the Applicable Spread; provided, however, that in no event shall the
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Applicable Interest Rate exceed 18% per annum.
"Applicable LIBOR Based Rate" means for any Interest Period, (i) an
interest rate per annum equal to the rate of interest appearing on Telerate Page
3750 (or any successor page) or if no such rate is available, the rate of
interest determined by First Union to be the rate or the arithmetic mean of
rates (rounded upward, if necessary, to the nearest 1/16 of one percentage
point) at which Dollar deposits in immediately available funds are offered by
First Union to first-tier banks in the London interbank Euro-dollar market, at
approximately 11:00 a.m., London time, on the Interest Rate Determination Date
for such Interest Period in the amount of the Bridge Loan outstanding plus (ii)
the Pricing Spread as of the Interest Payment Date that is the last day of such
Interest Period.
"Applicable Redemption Premium" means, (i) with respect to any redemption
of Exchange Notes occurring in the first year following the fifth anniversary of
the Closing Date, a redemption premium equal to 50.0% of the interest rate borne
by the Exchange Notes, (ii) with respect to any redemption of Exchange Notes
occurring in the second year following the fifth anniversary of the Closing
Date, a redemption premium equal to 33.3% of the interest rate borne by the
Exchange Notes, (iii) with respect to any redemption of Exchange Notes occurring
in the third year following the fifth anniversary of the Closing Date, a
redemption premium equal to 16.6% of the interest rate borne by the Exchange
Notes and (iv) with respect to any redemption of Exchange Notes occurring in or
after the fourth year following the fifth anniversary of the Closing Date, a
redemption premium equal to 0.0% of the interest rate borne by the Exchange
Notes.
"Applicable Spread" means (i) 0.0% per annum for the Interest Period
commencing on the Closing Date, (ii) 0.25% per annum for the Interest Period
commencing on the last day of the Interest Period referred to in clause (i), and
(iii) for each subsequent Interest Period, the Applicable Spread in effect for
the immediately preceding Interest Period plus 0.25% per annum.
"Applicable Treasury Based Rate" means for any Interest Period, (i) a rate
per annum determined by First Union on the Interest Rate Determination Date for
such Interest Period (such determination to be based upon quotes obtained by
First Union from established dealers in such market) to be the yield expressed
as a rate in the secondary market on United States Treasury securities of
substantially the same principal amount as the Bridge Notes and having a
maturity of one, three, five or ten years, whichever maturity produces the
highest yield for such Interest Period plus (ii) the Pricing Spread as of the
Interest Payment Date that is the last day of such Interest Period.
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other person pursuant to which such Person
shall be merged with or into the
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Company or any Subsidiary of the Company, or (b) the acquisition by the Company
or any Subsidiary of the Company of the assets of any person (other than a
Subsidiary of the Company) which constitute all or substantially all of the
assets of such Person or comprises any division or line of business of such
Person or any other properties or assets of such Person other than in the
ordinary course of business.
"Asset Contribution Agreement" means the Amended and Restated Asset
Purchase Agreement, dated as of July 31, 1998, between Owens Corning and the
Company.
"Asset Contribution and Sale Agreements" means, collectively, (i) the Asset
Contribution Agreement, (ii) the NVOC Asset Purchase Agreement, (iii) the OCC
Asset Purchase Agreement and (iv) the OC Japan Asset Purchase Agreement.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
lease, assignment, transfer or other disposition for value (including, without
limitation, pursuant to any amalgamation, merger or consolidation or pursuant to
any Sale and Leaseback Transaction) by the Borrowers or by any of its
Subsidiaries to any Person other than the Company or any of its Wholly-Owned
Subsidiaries (any such transaction, a "disposition") of (i) any of the stock of
any of the Company's Subsidiaries, (ii) substantially all of the assets of any
division or line of business of the Company or of any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of the Company or of any
of its Subsidiaries; excluding (a) any disposition of Cash Equivalents or
---------
inventory in the ordinary course of business or obsolete equipment in the
ordinary course of business consistent with past practices of the Company or any
of its Subsidiaries or the lease or sublease of any real or personal property in
the ordinary course of business, (b) any disposition of stock or assets in any
single transaction or related series of transactions the aggregate value of
which does not exceed $2.0 million.
"Asset Sale Transaction" means Asset Sales and, whether or not constituting
an Asset Sale, (i) any sale or other disposition of Capital Stock and (ii) any
sale or other disposition excluded from the definition set forth herein of
"Asset Sale" by clause (iii)(b) of such definition.
"Assignment and Assumption Agreement" means the Assignment and Assumption
Agreement, dated the Closing Date, between AGY and AGY Holdings.
"Bankruptcy Law" means Title 11 of the United States Code entitled
"bankruptcy", as now and hereafter in effect, or any successor statute or any
other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
"Bankruptcy Order" means any court order made in a proceeding pursuant to
or within the meaning of any Bankruptcy Law, containing an adjudication of
bankruptcy or insolvency, or providing for liquidation, winding up, dissolution
or reorganization, or appointing a custodian of- a debtor or of all or any
substantial part of a debtor's property, or providing for the staying,
arrangement, adjustment or composition of indebtedness or other relief of a
debtor.
"Belmont" shall mean Belmont of America, Inc., a Delaware corporation.
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"BGF" means BGF Industries, Inc., a Delaware corporation.
"BGF Bridge Loan Facility" means that certain credit agreement to be
entered into on or before the Closing Date between BGF, the guarantors from time
to time a party thereto, the lenders from time to time a party thereto and First
Union, as agent, pursuant to which BGF may borrow up to $65,000,000 in the
aggregate at any one time outstanding together with the documents related
thereto (including, without limitation, any guarantee agreements), as such
agreements may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including adding Subsidiaries of BGF as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any other agent,
lender or group of lenders.
"BGF Loan" means the secured loan of approximately $135.0 million from BGF
to Glass Holdings pursuant to the BGF Loan Agreement to fund a portion of the
Purchase Price Loan and to pay certain fees payable by Glass Holdings in
connection with the Acquisition.
"BGF Loan Agreement" means the definitive documentation as executed on the
Closing Date evidencing the BGF Loan, including, without limitation, all related
instruments and documents (including security documents).
"BGF Senior Credit Facility" means that certain credit agreement to be
entered into on or before the Closing Date between BGF, the guarantors from time
to time a party thereto, the lenders from time to time a party thereto and First
Union National Bank, as agent, pursuant to which BGF may borrow up to
$125,000,000 in the aggregate at any one time outstanding together with the
documents related thereto (including, without limitation, any guarantee
agreements and security documents), as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including adding Subsidiaries of BGF as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Board of Directors" means, (i) in the case of a Person that is a
corporation, the board of directors of such person or any committee authorized
to act therefor and (ii) in the case of any other person, the board of
directors, management committee, or similar governing body or any authorized
committee thereof responsible for the management and affairs of such Person.
"Borates Supply Agreement" means the Borates Supply Agreement dated as of
the Closing Date, by and between Owens Corning and the Company.
"Borrower Transactions" means, collectively, (i) the incurrence by the
Borrowers of the Bridge Loan hereunder on the Closing Date, (ii) the incurrence
by the Company of the Senior Credit Facility on or prior to the Closing Date,
(iii) the entering into by the Company of (A) the LLC Sale and Purchase
Agreement, (B) the LLC Operating Agreement, (C) the Asset
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Contribution and Sale Agreements and (D) the JV Supply and Service Agreements,
(iv) the AGY Holdings Distribution, (v) the Jefferson Distribution, (vi) any
other transactions on or prior to the Closing Date contemplated in relation to
any of the foregoing and (vii) the payment of fees and expenses in connection
with any of the foregoing.
"Borrowers" has the meaning ascribed to it in the introduction to this
Agreement.
"Bridge Loan" has the meaning ascribed to it in Section 2.1A
"Bridge Loan Commitment" means the commitment of the Lenders to make the
Bridge Loan as set forth in Section 2.1A.
"Bridge Notes" has the meaning ascribed to it in Section 2.1D.
"Business" means the glass yarns and specialty materials business of Owens
Corning.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of Charlotte, North Carolina or New York, New
York or is a day on which banking institutions therein located are authorized or
required by law or other governmental action to close; provided, however, that
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when used in connection with a rate determination, borrowing or payment with
respect to the Bridge Notes, the term "Business Day" shall also exclude any day
on which banks in London, England are not open for dealings in Dollar deposits
in the London interbank market.
"Capital Lease," as applied to any person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is required to be accounted for as a capital lease on the balance
sheet of that Person.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including, without
limitation, each class of Common Stock and Preferred Stock of such Person and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"Capitalized Lease Obligation" means obligations under a Capital Lease, and
the amount of Indebtedness represented by such obligations shall be the
capitalized amount of such obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no
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<PAGE>
more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $500 million; (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; and (vi) investments
in money market funds which invest substantially all their assets in securities
of the types described in clauses (i) through (v) above.
"Cash Proceeds" means, with respect to any Asset Sale, cash payments
(including any cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise but only as and when so
received) received from such Asset Sale.
"Change of Control" means, at any time that any Bridge Notes or Exchange
Notes are outstanding, the occurrence of any of the following: (A) Robert
Porcher and members of his immediate family, or trusts solely for their benefit,
shall fail to own and control, directly or indirectly, at least 69.6% of the
issued and outstanding Capital Stock and of the voting power of the issued and
outstanding Voting Stock of Societe Saumuroise de Participations S.A. ("SSP");
(B) SSP shall fail to own and control, directly or indirectly, at least 63.3% of
the Capital Stock and of the voting power of the issued and outstanding Voting
Stock of Porcher Industries S.A. ("Porcher"); (C) Porcher shall fail to own and
control, directly or indirectly, at least 100% of the Capital Stock and of the
voting power of the issued and outstanding Voting Stock of Glass Holdings; (D)
Glass Holdings shall fail to own and control, directly or indirectly, at least
51.0% of the Capital Stock and of the voting power of the issued and outstanding
Voting Stock of the of the Company or (E) the failure by Owens Corning to own
and control, directly or indirectly, 49.0% of the Capital Stock and of the
voting power of the Voting Stock of the Company; provided, however, that the
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failure by Glass Holdings or Owens Corning to own and control the percentages of
the Capital Stock and of the voting power of the Voting Stock of the Company
specified in clauses (D) and (E), respectively, shall not be deemed to
constitute a Change of Control if such failure, in either case, results solely
from the issuance to First Union, Warburg or any of their assignees of warrants
to purchase Capital Stock of the Company issued pursuant to the Amended and
Restated Commitment Letter. Each percentage in the preceding sentence shall be
calculated on a fully diluted basis after giving effect to the conversion,
exchange or exercise of all outstanding warrants, options and other similar
agreements or obligations of the relevant Person that are or could become
convertible, exchangeable or exercisable for Capital Stock or Voting Stock of
the relevant Person.
"Change of Control Date" has the meaning ascribed to it in Section
2.4A(iv).
"Change of Control Offer" has the meaning ascribed to it in Section
2.4A(iv).
"Change of Control Payment Date" has the meaning ascribed to it in Section
2.4A(iv).
"Change of Control Purchase Price" has the meaning ascribed to it in
Section 2.4A(iv).
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"Closing Date" has the meaning ascribed to it in Section 2.1B.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of, such Person's common stock, whether outstanding on the
Closing Date or issued after the Closing Date, and includes, without limitation,
all series and classes of such common stock
"Compliance Certificate" means a certificate substantially in the form of
Exhibit II delivered to the Agents by the Borrowers pursuant to Section 5.1.
- ----------
"Consolidated EBITDA" means, for any period, Consolidated Net Income for
such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;
(ii) Consolidated Interest Expense for such period; and (iii) Consolidated Non-
cash Charges for such period; less (A) all non-cash items increasing
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of the aggregate amount of Consolidated EBITDA for the
four most recent full fiscal quarters for which financial statements are
available ending prior to the date of such determination (the "Four Quarter
Period") to Consolidated Fixed Charges for such Four Quarter Period. In addition
to and without limitation of the foregoing, for purposes of this definition,
"Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma basis for the period of such calculation to (i) the
Incurrence or repayment of any Indebtedness of the Company or any of its
Subsidiaries (and the application of the proceeds thereof), including the
Incurrence of any Indebtedness (and the application of the proceeds thereof)
giving rise to the need to make such determination, occurring during such Four
Quarter Period or at any time subsequent to the last day of such Four Quarter
Period and on or prior to such date of determination, as if such Incurrence or
repayment, as the case may be (and the application of the proceeds thereof),
occurred on the first day of such Four Quarter Period and (ii) any Asset Sale
Transactions or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such determination as a result of
the Company or one of its Subsidiaries (including any Person who becomes a
Subsidiary as a result of the Asset Acquisition) Incurring Acquired Indebtedness
and including, without limitation, by giving pro forma effect to any
Consolidated EBITDA (provided that such pro forma Consolidated EBITDA shall be
calculated in a manner consistent with the exclusions in the definition of
"Consolidated Net Income" but without giving effect to clause (c) of the
definition of Consolidated Net Income) attributable to the assets which are the
subject of the Asset Sale Transaction or Asset Acquisition during the Four
Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to such
date of determination, as if such Asset Sale Transaction or Asset Acquisition
(including the Incurrence of any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If the
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Company or any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the preceding sentence shall give effect to the
Incurrence of such guaranteed Indebtedness as if the Company or any of its
Subsidiaries had directly Incurred such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Fixed Charges" for purposes of determining the
denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage
Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the date of determination and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on such date of
determination; (2) if interest on any Indebtedness actually Incurred on such
date of determination may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency interbank offered rate,
or other rates, then the interest rate in effect on such date of determination
will be deemed to have been in effect during the Four Quarter Period; and (3)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by Hedging
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of (i) Consolidated Interest Expense, plus (ii) the product of (x)
the amount of all dividend payments on any series of Preferred Stock of the
Company (other than dividends paid in Qualified Capital Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the sum of
(A) the maximum federal corporate income tax rate in effect during such taxable
year and (B) six percent.
"Consolidated Income Tax Expense" means, with respect to the Company for
any period, the product of (i) the net income of the Company and its
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP and (ii) the sum of (x) the maximum federal corporate income tax rate
in effect during such period and (y) six percent.
"Consolidated Interest Expense" means, for any period, the sum of, without
duplication: (i) the aggregate of cash and non-cash interest expense of the
Company and its Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, including, without limitation (whether or not interest
expense in accordance with GAAP), (a) any amortization of debt discount and any
amortization or write off of deferred financing costs, (b) the net costs under
Hedging Obligations related to Indebtedness (including amortization of fees),
(c) all capitalized interest, (d) the interest portion of any deferred payment
obligation, (e) commissions, discounts and other fees and charges Incurred in
respect of letters of credit or bankers' acceptances and (f) any interest
expense on Indebtedness of another Person that is guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on the assets of such Person or one
of its Subsidiaries (whether or not such guarantee or Lien is called upon); and
(ii) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by the Company and its Subsidiaries
during such period as determined on a consolidated basis in accordance with
GAAP.
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"Consolidated Net Income" means, for any period, the aggregate net income
(or loss) of the Company and its Subsidiaries for such period on a consolidated
basis (after giving effect to any decrease (but not increase) attributable to
minority interests in Subsidiaries), determined in accordance with GAAP;
provided, however, that there shall be excluded therefrom (a) net after-tax
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gains and losses (assuming for tax purposes that no special allocations are made
to any member of the Company under Section 743 of the Code) from Asset Sale
Transactions or abandonments or reserves relating thereto, (b) net after-tax
items (assuming for tax purposes that no special allocations are made to any
member of the Company under Section 743 of the Code) classified as extraordinary
gains or losses, (c) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Subsidiary or is
merged or consolidated with the Company or any Subsidiary, (d) the net income
(but not loss) of any Subsidiary to the extent that the declaration of
dividends or similar distributions by that Subsidiary of that income is
restricted by contract, operation of law or otherwise, (e) the net income of any
Person, other than a Subsidiary, except to the extent of cash dividends or
distributions paid to the Company or to a Subsidiary by such Person and (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Exchange Date.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses of the Company and its
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charge which requires an accrual of or a reserve
for cash charges for any future period).
"Contested Claim" means any Tax, Indebtedness or other claim or liability
(i) the validity or amount of which is being diligently contested in good faith,
(ii) for which adequate reserve, or other appropriate provision, if any, as
required in conformity with GAAP shall have been made, and (iii) with respect to
which any right to execute upon or sell any assets of the Company or of any of
its Subsidiaries has not matured or has been and continues to be effectively
enjoined, superseded or stayed.
"Contingent Obligation," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of such
other Person that such obligation of such other Person will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected (in whole or in part)
against loss in respect thereof, (ii) with respect to any letter of credit
issued for the account of that Person or as to which that Person is otherwise
liable for reimbursement of drawings, or (iii) under Hedging Obligations.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or
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sale with recourse by the referent Person of the obligation of another, (b) the
obligation to make take-or-pay or similar payments if required regardless of
non-performance by any other party or parties to an agreement, and (c) any
liability of the referent Person for the obligation of another through any
agreement (contingent or otherwise) (X) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise) or (Y) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another if, in the case of any agreement described under subclauses (X) or (Y)
of this sentence, the primary purpose or intent thereof is as described in the
preceding sentence. The amount of any Contingent Obligation shall be equal to
the amount of the obligation so guaranteed or otherwise supported or, if less,
the amount to which such Contingent Obligation is specifically limited.
"Contractual Obligation", as applied to any Person, means any provision of
any Security issued by that Person or of any indenture, mortgage, deed of trust,
contract, undertaking, agreement or other instrument to which that Person is a
party or by which it or any of its properties is bound or to which it or any of
its properties is subject.
"CSG" means Compagnie Saint-Gobain, a corporation organized under the laws
of France.
"Currency Agreement" means, in respect of any Person, any foreign exchange
contract, currency swap agreement other similar agreement or arrangement as to
which such Person is a party.
"Custodian" means any receiver, interim receiver, receiver and manager,
trustee, assignee, liquidator, sequestrator or similar official charged with
maintaining possession or control over property for one or more creditors,
whether under any Bankruptcy Law or otherwise.
"Daylight Loan" means the loan of approximately $199.0 million from First
Union National Bank to the AGY Holdings pursuant to the Daylight Loan Agreement.
"Daylight Loan Agreement" means the definitive documentation executed on
the Closing Date evidencing the Daylight Loan including, without limitation, all
related instruments and documents (including security documents).
"Demand Take-Out Notes" means senior subordinated notes of the Borrowers
issued under an indenture to be negotiated by the Company and the Take-Out Bank
the proceeds of which shall be used to repay the Bridge Notes in whole or in
part, which Demand Take-Out Notes shall be guaranteed by each entity that
guarantees the Bridge Notes.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily
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redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof, in any case, on or prior to the 91st
day after the Maturity Date.
"Dollars" or the sign "$" means the lawful money of the United States of
America.
"Eligible Assignee" means (A) (i) a commercial bank organized under the
laws of the United States of America or any state thereof; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that (x) such bank is
--------
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; provided, however, that, at the time of determination, the Lender
--------- -------
making the assignment or transfer to such bank, believes that such bank will be
entitled to an exemption from U.S. withholding tax (assuming compliance with the
first sentence of Section 12.2E); and (iv) any other entity which is an
"accredited investor" (as defined in Regulation D under the Securities Act of
1933) which extends credit or buys loans as one of its businesses including, but
not limited to, insurance companies, mutual funds and lease financing companies,
in each case (under clauses (i) through (iv) above) that is reasonably
acceptable to the Agents; and (B) any Lender and any Affiliate of any Lender;
provided, however, that the term "Eligible Assignee" shall not include CSG.
- -------- -------
"Employee Pension Benefit Plan" means any "employee pension benefit plan"
as defined in Section 3(2) of ERISA (i) which is, or, at any time within the
five calendar years immediately preceding the date hereof, was at any time,
sponsored, maintained or contributed to by the Borrowers or their Subsidiaries
or any of their respective ERISA Affiliates or (ii) with respect to which the
Borrowers or their Subsidiaries retains any liability, including any potential
joint and several liability as a result of an affiliation with an ERISA
Affiliate or a party that would be an ERISA Affiliate except for the fact the
affiliation ceased more than five calendar years prior to the date hereof.
"Environmental Claim" means any allegation, notice of violation, claim,
demand, abatement order or other order or direction (conditional or otherwise)
by any governmental authority or any person for any response or corrective
action, any damage, including, without limitation, personal injury (including
sickness, disease or death), property damage, contribution, indemnity, indirect
or consequential damages, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions, in each case arising under any Environmental Law,
including without limitation, relating to, resulting from or in connection with
Hazardous Materials and relating to the Borrowers, any of their Subsidiaries or
any of their respective Facilities or predecessors in interest.
"Environmental Laws" means the common law and all statutes, ordinances,
orders, rules, regulations, requirements, judgments, plans, policies or decrees
and the like relating to (i) environmental matters, including, without
limitation, those relating to fines, injunctions, penalties, damages,
contribution, cost recovery compensation, losses or injuries resulting from the
Release or threatened Release of Hazardous Materials, (ii) the generation, use,
storage,
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<PAGE>
transportation or disposal of Hazardous Materials including, without limitation,
investigation, study, assessment, testing, monitoring, containment, removal,
remediation, or clean-up of any such Release, or (iii) occupational safety and
health, industrial hygiene or the protection of the environment, natural
resources, human, plant or animal health or welfare, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. (S) 9601 et. seq.), the Hazardous Materials
-- ---
Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource Conservation and
-- ---
Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution Control
-- ---
Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et
-- --- --
seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the
- --- -- ---
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 136 et seq.),
-- ---
the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.) and the
-- ---
Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et
--
seq.), each as amended or supplemented, and any analogous future or present
- ---
statutes, orders, rules, regulations, requirements, judgments or decrees
promulgated pursuant thereto, each as in effect as of the date of determination.
"Environmental Liabilities and Costs" means any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the actual and reasonable fees and disbursements of counsel
in connection with any investigative, administrative or judicial proceeding
commenced or threatened), suffered by, imposed on, incurred by or asserted
against the Lenders, the Agents, and any holders of the Bridge Notes and their
respective officers, directors, employees, agents, representatives and
affiliates arising from or relating to any: (1) Environmental Claim; (2) failure
of the Borrowers and their Subsidiaries (including, without limitation, all
operations and conditions at or in the Facilities) to comply with applicable
Environmental Laws, including without limitation fines, penalties, and costs or
expenses incurred to achieve compliance with applicable Environmental Laws; (3)
presence of Hazardous Materials on or related to or generated by the operations
at or in the Facilities; or (4) assertion or attachment of any lien under
Environmental Laws on any of the Facilities.
"Environmental Lien" means a Lien in favor of a Tribunal or other Person
(i) for any liability under an Environmental Law or (ii) for damages arising
from or costs incurred by such Tribunal or other Person in response to a release
or threatened release of Hazardous Materials into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder and any successor statute, regulations and rulings.
"ERISA Affiliate," as applied to any Person, means (i) any corporation
which is, or was at any time within the five calendar years immediately
preceding the date hereof, a member of a controlled group of corporations within
the meaning of Section 414(b) of the Internal Revenue Code of which that Person
is, or was at any time within the five calendar years immediately preceding the
date hereof, a member; (ii) any trade or business (whether or not incorporated)
which is, or was at any time within the five calendar years immediately
preceding the date hereof, a member of a group of trades or businesses under
common control within the meaning
13
<PAGE>
of Section 414(c) of the Internal Revenue Code of which that Person is, or was
at any time within the five calendar years immediately preceding the date
hereof, a member; and (iii) any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
Person, any corporation described in clause (i) above or any trade or business
described in clause (ii) above is, or was at any time within the five calendar
years immediately preceding the date hereof, a member.
"ERISA Event" means (i) a "reportable event" within the meaning of Section
4043 of ERISA and the regulations issued thereunder with respect to any Pension
Plan (excluding those for which the provision for 30-day notice to the PBGC has
been waived by regulation); (ii) the failure to meet the minimum funding
standard of Section 412 of the Internal Revenue Code with respect to any Pension
Plan (whether or not waived) or the failure to make any required contribution
within 30 days of its due date with respect to any Multiemployer Plan; (iii) the
provision by the administrator of any Pension Plan pursuant to Section 4041 (a)
(2) of ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the withdrawal by the
Company or any of its Subsidiaries or any of their respective ERISA Affiliates
from any Multiple Employer Plan or the termination of any such Multiple Employer
Plan resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which might reasonably be expected to
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; (vi) the imposition of liability on the
Company or any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal by the Company or any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by the Company or any of its Subsidiaries or any of their respective
ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(viii) the occurrence of an act or omission which could reasonably be expected
to give rise to the imposition on the Borrowers or any of their Subsidiaries or
any of their respective ERISA Affiliates of fines, penalties, taxes or related
charges under Chapter 43 of the Internal Revenue Code or under Section 406, 409
or 502(i) or (1) of ERISA in respect of any Employee Benefit Pension Plan; (ix)
receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Pension Benefit Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code) to qualify under
Section 401(a) of the Internal Revenue Code, or the failure of any trust forming
part of any Pension Plan or Employee Pension Benefit Plan to qualify for
exemption from taxation under Section 501(a) of the Internal Revenue Code; or
(x) the imposition of a Lien pursuant to Section 401(a) (29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.
"Event of Default" means each of the events set forth in Section 7.
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<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time and any successor statute.
"Exchange Date" means the eighteen month anniversary of the Closing Date.
"Exchange Notes" has the meaning ascribed to it in Section 5.10(b)(i).
"Exchange Request" has the meaning ascribed to it in Section 5.10.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by the Company, its
Subsidiaries or any of their respective predecessors in interest.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
equal for each day during such period to the weighted average of the rates on
overnight Federal Funds transactions with members of the Federal Reserve System
arranged by Federal Funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by First Union from three Federal Funds brokers of recognized standing
selected by First Union.
"First Union" has the meaning assigned to it in the first paragraph hereto.
"Foreign Plan" means any employee benefit plan maintained outside the U.S.
by the Company, any of its Subsidiaries or any of their respective Affiliates
for employees substantially all of whom are non-resident aliens of the U.S. and
for which the Company or any of its Subsidiaries may be directly or indirectly
liable.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"FUCM" means First Union Capital Markets.
"Funding Guarantor" has the meaning ascribed to it in Section 10.6.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Closing Date.
"Glass Holdings" means Glass Holdings Corp., a Delaware corporation.
"Glass Holdings Pledge" shall mean the pledge by Glass Holdings to BGF of
all of the Capital Stock of AGY Holdings and Belmont as security for the BGF
Loan.
15
<PAGE>
"Glass Marbles Supply Agreement" means the Glass Marbles Supply Agreement,
dated as of the Closing Date, by and between Owens Corning and the Company.
"Guarantee Obligations" has the meaning ascribed to it in Section 11.1.
"Guarantees" means, collectively, the guarantees delivered to the Lenders
by the Guarantors pursuant to Section 11 which guarantees shall be evidenced by
notations of guarantee substantially in the form of Exhibit VII.
-----------
"Guarantor Payment Blockage Period" has the meaning ascribed to it in
Section 11.2(b).
"Guarantor Senior Indebtedness" means, with respect to any Guarantor, the
principal of, premium, if any, and interest on, and all amounts payable in
respect of, all obligations of every nature of such Guarantor from time to time
owed to the lenders under the Senior Credit Facility, including, without
limitation, all obligations with respect to letters of credit and principal of
and interest on, and all fees, indemnities and expenses payable under, the
Senior Credit Facility and all obligations under Interest Rate Agreements
entered into with lenders under the Senior Credit Facility and their respective
Affiliates and any guarantees thereof including any agreement refinancing all or
any portion of the Indebtedness under such Senior Credit Facility but only to
the extent such Indebtedness is fully and adequately secured. Without limiting
the generality of the foregoing, "Guarantor Senior Indebtedness" shall include
interest accruing thereon subsequent to the occurrence of any Event of Default
specified in Sections 7.6 and 7.7 relating to the Guarantors, whether or not the
claim for such interest is allowed under any applicable Bankruptcy Law.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include
that portion of any Indebtedness which is incurred by such Guarantor in
violation of this Agreement.
"Guarantors" means each future Wholly-Owned Subsidiary of the Company
(other than Capital) that is organized under the laws of the United States or
any state or commonwealth thereof or under the laws of the District of Columbia.
"Hazardous Materials" means (i) any chemical, material or substance at any
time defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "infectious waste," "toxic substances" or any
other formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in any
form; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million; (ix) pesticides; and (x) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any
16
<PAGE>
governmental authority or which may or could pose a hazard to human health or
safety or the environment.
"Hedging Obligations" means the obligations of any Person pursuant to any
Interest Rate Agreement or Currency Agreement.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become directly or indirectly liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall
have meanings correlative to the foregoing); provided that any amendment,
--------
modification or waiver of any document pursuant to which Indebtedness was
previously Incurred shall only be deemed to be an Incurrence of Indebtedness if
and to the extent such amendment, modification or waiver (i) increases the
principal thereof or interest rate or premium payable thereon or (ii) changes to
an earlier date the stated maturity thereof or the date of any scheduled or
required principal payment thereon or the time or circumstances under which such
Indebtedness shall be redeemed; provided, further, that any Indebtedness of a
-------- -------
Person existing at the time such Person becomes a Subsidiary of the Company
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Subsidiary at the time it becomes a Subsidiary of the
Company.
"Indebtedness" means, with respect to any Person, (i) all indebtedness,
obligations and liabilities of such Person for borrowed money, (ii) that portion
of obligations with respect to Capital Leases that is properly classified as a
liability on a balance sheet of such person in conformity with GAAP, (iii) notes
payable and drafts accepted representing extensions of credit, whether or not
representing obligations for borrowed money, of such Person, (iv) any
indebtedness, obligation or liability of such Person owed for all or any part of
the deferred purchase price of property or services (excluding any such
obligations incurred under ERISA), which purchase price is (a) due more than six
months (or a longer period of up to one year, if such terms are available from
suppliers in the ordinary course of business) from the date of incurrence of the
obligation in respect thereof or (b) evidenced by a note or similar written
instrument, (v) all indebtedness, obligations and liabilities secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person except that "Indebtedness" shall not
include trade payables and accrued liabilities Incurred in the ordinary course
of business for the purchase of goods or services which are not secured by a
Lien other than a Lien permitted pursuant to Section 6.2(ii) and Hedging
Obligations (which constitute Contingent Obligations, not Indebtedness), (vi)
guarantees of such Person in respect of Indebtedness of other Persons and (vii)
all Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such
17
<PAGE>
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Agreement, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value to be determined reasonably and in good
faith by the board of directors of the issuer of such Disqualified Capital
Stock.
"Indemnified Liabilities" has the meaning ascribed to it in Section 12.4.
"Indemnitees" has the meaning ascribed to it in Section 12.4.
"Independent Financial Advisor" means an accounting firm, appraisal firm or
investment banking firm (i) which does not, and whose directors, officers and
employees or Affiliates do not, have a direct or indirect financial interest in
the Company or any of its Subsidiaries and (ii) which, in the judgment of the
Board of Directors of the Company or any of its Subsidiaries is otherwise
independent and qualified to perform the task for which it is to be engaged.
"Initial Exchange Request" has the meaning ascribed to it in Section 5.10.
"Initial Request Date" has the meaning ascribed to it in Section 5.9.
"Intellectual Property" means all patents, trademarks, tradenames,
copyrights, technology, know-how and processes used in or necessary for the
conduct of the business of the Company or any of its Subsidiaries as currently
conducted that are material to the condition (financial or otherwise), business,
operations or prospects of the Company and its Subsidiaries, taken as a whole.
"Interest Payment Date" means the last day of each Interest Period.
"Interest Period" shall mean, in respect of the Bridge Loan and subject to
Section 2.2E, (a) the period commencing on the Closing Date and ending three
months thereafter on the same numerical day of the month as the Closing Date and
(b) each subsequent period beginning on the last day of the preceding Interest
Period and ending three months thereafter on the same numerical day of the month
as that last day.
"Interest Rate Agreement" of any Person means any interest rate protection
agreement (including, without limitation, interest rate swaps, caps, floors,
collars, derivative instruments and similar agreements) and/or other types of
interest hedging agreements.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day on which banks in New York and London are open
prior to the first Business Day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor code or statute.
"Investment" means (i) any direct or indirect purchase or other acquisition
of, or of a beneficial interest in, any Securities of any other Person or (ii)
any direct or indirect loan,
18
<PAGE>
advance (other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business), extension of credit or capital contribution to any other Person,
including all indebtedness and accounts receivable from that other Person that
are not current assets or did not arise from sales to that other Person in the
ordinary course of business. The amount of any Investment shall be the original
cost of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment. "Investment" shall not include bank
demand deposit accounts.
"Jefferson" means Jefferson Holdings, Inc., a Delaware corporation.
"Jefferson Distribution" means the cash payment of approximately $191.0
million made by the Company to Jefferson concurrently with the consummation of
other JV Transactions.
"JV Supply and Service Agreements" has the meaning ascribed to it in
Section 4.25.
"JV Transaction Documents" means, collectively, (i) the LLC Sale and
Purchase Agreement, (ii) the LLC Operating Agreement, (iii) the Asset
Contribution and Sale Agreements, (iv) the JV Supply and Service Agreements, (v)
the Purchase Price Loan Agreement, (vi) the Daylight Loan Agreement, (vii) the
BGF Loan Agreement, (viii) the Senior Credit Facility, (ix) the BGF Loan, (x)
the BGF Bridge Loan Facility, (xi) the BGF Senior Credit Facility and (xii) the
Assignment and Assumption Agreement.
"JV Transactions" means, collectively, (i) the Borrower Transactions, (ii)
the Acquisition, (iii) the Purchase Price Loan, (iv) the BGF Bridge Loan
Facility, (v) the BGF Senior Credit Facility, (vi) each of the transactions
contemplated to occur on or prior to the Closing Date by the JV Supply and
Service Agreements, (vii) the incurrence by AGY Holdings of the Daylight Loan on
or prior to the Closing Date, (viii) the Assignment and Assumption Agreement and
(ix) any other transactions on or prior to the Closing Date contemplated in
relation to any of the foregoing.
"Keep Well Agreement" means an agreement between Owens Corning and the
Company substantially in the form of Exhibit F hereto.
"Laws" means all applicable statutes, laws, ordinances, regulations, rules,
orders, judgments, writs, injunctions or decrees of any state, commonwealth,
nation, territory, possession, province, county, parish, township, village,
municipality or Tribunal, and "Law" means each of the foregoing.
"Lenders" has the meaning ascribed to that term in the introduction to this
Agreement and shall include any assignee of any Bridge Loan, Bridge Note or
Bridge Loan Commitment to the extent of such assignment.
"Lien" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any
19
<PAGE>
lease in the nature thereof, and any agreement to give any security interest)
and any option, trust or other preferential arrangement having the practical
effect of any of the foregoing.
"Litigation" means any action, suit, proceeding, claim, lawsuit and/or
investigation conducted or threatened by or before any Tribunal.
"LLC Operating Agreement" means the Amended and Restated Limited Liability
Operating Agreement for the Company, dated as of the Closing Date, by and
between AGY Holdings and Jefferson, as amended by Amendment No. 1 to the LLC
Interest Sale and Purchase Agreement, dated as of the Closing Date.
"LLC Sale and Purchase Agreement" means the LLC Interest Sale and Purchase
Agreement dated as of July 31, 1998 among Owens Corning, the Company and Glass
Holdings and all instruments and documents related thereto.
"Loan Documents" means this Agreement, the Bridge Notes, the Guarantees,
the Senior Subordinated Indenture, the Exchange Notes and the Registration
Rights Agreement.
"Margin Stock" has the meaning assigned to that term in Regulation U and
Regulation G of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"Material Adverse Change" means a material adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of the Company and its Subsidiaries, taken as a whole.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, whether before
or after giving effect to the Borrower Transactions or (ii) a material
impairment of the ability of the Company and its Subsidiaries, taken as a whole,
to perform or consummate, or the material impairment of the ability of the
Agents or Lenders to enforce, the Obligations or the Borrower Transactions.
"Maturity Date" means the tenth anniversary of the Closing Date.
"Maximum Cash Interest Rate" means an interest rate of 14% per annum;
provided that in computing such interest rate, fees paid to the Lenders shall
- --------
not be deemed an interest payment.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Company, its Subsidiaries or any of its ERISA
Affiliates is making or accruing an obligation to make contributions, or has
within any of the preceding five years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Company, its Subsidiaries or any of their ERISA Affiliates and at least one
Person other than the Company, its Subsidiaries and their ERISA Affiliates or
(ii) was so maintained and in respect of which such
20
<PAGE>
Company, Subsidiaries or ERISA Affiliates could have liability under Section
4064 or Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash Proceeds of
such Asset Sale net of bona fide direct costs of sale including, but not limited
to, (i) the amount of tax distributions reasonably estimated to be required to
be made to Jefferson and AGY Holdings as a result of such Asset Sale within two
years of the date of such Asset Sale, (ii) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on, any Indebtedness that is
secured by a Lien on the stock or assets in question and that is required to be
repaid under the terms thereof as a result of such Asset Sale, (iii) out-of-
pocket expenses and fees relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees and sales commissions)
and (iv) any portion of Cash Proceeds which the Company determines in good faith
should be reserved for post-closing adjustments or liabilities relating to the
Asset Sale retained by the Company or any of its Subsidiaries, it being
understood and agreed that on the day that all such post-closing adjustments
have been determined, the amount (if any) by which the reserved amount in
respect of such Asset Sale exceeds the actual post-closing adjustments, payable
by the Company or any of its Subsidiaries, shall constitute Net Cash Proceeds on
such date.
"Non-Payment Default" means any event (other than a Payment Default) the
occurrence of which entitles one or more Persons to act to accelerate the
maturity of any Senior Indebtedness.
"Notice of Borrowing" means a notice substantially in the form of Exhibit
-------
III hereto with respect to a proposed borrowing.
- ---
"NVOC Asset Purchase Agreement" means the NVOC Asset Purchase Agreement,
dated as of September 29, 1998, between N.V. Owens Corning S.A. and the Company
and all instruments and documents related thereto.
"Obligations" means all obligations of every nature of the Borrowers from
time to time owed to the Lenders and the Agents under the Loan Documents,
whether for principal, reimbursements, interest, fees, expenses, indemnities or
otherwise, and whether primary, secondary, direct, indirect, contingent, fixed
or otherwise (including obligations of performance).
"OC Japan Asset Purchase Agreement" means the Asset Purchase Agreement
dated as of the Closing Date, by and between Owens-Corning (Japan) Ltd. and the
Company.
"OCC Asset Purchase Agreement" means the OCC Asset Purchase Agreement,
dated as of September 29, 1998, between Owens-Corning Canada Inc. and AG Yarns.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
Chief Operating Officer, the General Manager, the Chief Financial Officer, the
Treasurer or the Secretary of each of the Borrowers and their Subsidiaries.
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<PAGE>
"Officers' Certificate" means, as applied to any corporation, a certificate
executed on behalf of such corporation by two Officers; provided that every
Officers' Certificate with respect to the compliance with a condition precedent
to the making of the Bridge Loans hereunder shall include (i) a statement that
the officer or officers making or giving such Officers' Certificate have read
such condition and any definitions or other provisions contained in this
Agreement relating thereto, (ii) a statement that, in the opinion of the
signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such condition has been complied with, and (iii) a statement
as to whether, in the opinion of the signers, such condition has been complied
with.
"Original Bridge Notes" has the meaning assigned to it in Section 2.1D.
"Owens Corning" means Owens Corning, a Delaware corporation.
"Payment Blockage Period" has the meaning ascribed to it in Section 8.2(b).
"Payment Default" means any default in the payment of principal, premium,
if any, or interest on any Senior Indebtedness beyond any applicable grace
period with respect thereto.
"Payment Office" shall mean the office of First Union located at 301 South
College Street DC-4, Charlotte, NC 28288-0680 or such other office as First
Union may designate to the Borrowers and the Lenders from time to time.
"Payment Restriction" has the meaning ascribed to it in Section 6.7.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor to
all or any of the Pension Benefit Guaranty Corporation's functions under ERISA.
"Pension Plan" means a Single Employer Plan or Multiple Employer Plan.
"Permits" has the meaning ascribed to it in Section 4.19.
"Permitted Business" means the business conducted by the Company on the
Closing Date and any business reasonably related thereto.
"Permitted Indebtedness" has the meaning ascribed to it in Section 6.1.
"Permitted Investments" means:
(i) Investments by the Company or any Subsidiary of the Company
(other than Capital) in any Person that is or will become immediately after
such Investment a Wholly-Owned Subsidiary of the Company or that will merge
or consolidate into the Company or a Wholly-Owned Subsidiary of the Company
(other than Capital);
(ii) Investments in the Company by any Subsidiary of the Company
(other than Capital); provided that any Indebtedness evidencing such
--------
Investment is unsecured
22
<PAGE>
and subordinated, pursuant to a written agreement, to the Company's
obligations under the Bridge Notes and the Exchange Notes;
(iii) Investments in cash and Cash Equivalents;
(iv) loans and advances to employees and officers of the Company and
its Subsidiaries in the ordinary course of business for bona fide business
purposes not in excess of $1,500,000 at any one time outstanding;
(v) Hedging Obligations entered into in the ordinary course of the
Company's or its Subsidiaries' (other than Capital) businesses and not for
speculative purposes and otherwise in compliance with this Agreement; and
(vi) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers;
(vii) Investments made by the Company or its Subsidiaries (other than
Capital) as a result of consideration received in connection with an Asset
Sale made in compliance with Section 6.13; and
(viii) Investments permitted pursuant to Section 6.8(c)(5).
"Permitted Liens" has the meaning ascribed to it in Section 6.2.
"Permitted Refinancing Indebtedness" means (A) any Refinancing by the
Company of Indebtedness of the Company or of its Subsidiaries (other than
Indebtedness Incurred or outstanding pursuant to clause (ii), (iv), (v), (vi),
(vii), (viii), (ix) or (xi) of Section 6.1) and (B) any Indebtedness incurred
pursuant to a Refinancing by any Subsidiary of the Company of Indebtedness
Incurred by such Subsidiary (other than Indebtedness Incurred or outstanding
pursuant to clause (ii), (iv), (v), (vi), (vii), (viii), (ix) or (xi) of Section
6.1), in the case of each of (A) and (B), that does not (1) result in an
increase in the total of the aggregate principal amount of the Indebtedness of
such Person being Refinanced as of the date of such proposed Refinancing (if
such Indebtedness that is Refinancing the existing Indebtedness is issued at a
price less than 100% of the principal amount thereof, an increase shall not be
deemed to have occurred unless the gross proceeds of such Indebtedness that is
Refinancing the existing Indebtedness is in excess of the total of the aggregate
principal amount of the Indebtedness being Refinanced as of the date of such
proposed Refinancing) or (2) create Indebtedness with a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced; provided that (x) if such Indebtedness being
--------
Refinanced is Indebtedness of the Borrowers, then such Refinancing Indebtedness
shall be Indebtedness solely of the Borrowers, (y) if such Indebtedness being
Refinanced is subordinate or junior in right of payment to the Bridge Loan or
the Guarantees, as the case may be, or if recourse in respect of the
Indebtedness being Refinanced is limited in any respect, then such Indebtedness
proposed to be Incurred to Refinance the existing Indebtedness shall be
subordinate in right of payment to the Bridge Loan or the Guarantees, as the
case may be, and recourse with respect thereto, as the case may be, shall
23
<PAGE>
be limited at least to the same extent and in the same manner as the
Indebtedness being Refinanced and (z) if such Indebtedness being Refinanced is
Senior Subordinated Indebtedness, then such Indebtedness proposed to be incurred
to Refinance the existing Indebtedness shall be Senior Subordinated
Indebtedness; provided, further, that Permitted Refinancing Indebtedness shall
-------- -------
include any Indebtedness Incurred concurrently with an irrevocable offer to
purchase, on a date not more than 60 days from the date of the Incurrence of
such Indebtedness, an amount of Bridge Notes equal to such Indebtedness.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities and governments and agencies and political subdivisions thereof.
"PIK Interest Amount" has the meaning ascribed to it in Section 2.2B.
"Potential Event of Default" means a condition or event which, after notice
or lapse of time or both, would constitute an Event of Default if that condition
or event were not cured or removed within any applicable grace or cure period.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights over any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Pricing Spread" means, as of an Interest Payment Date, (a) in the event
that the Keep Well Agreement becomes a binding agreement of Owens Corning and
the Company on or prior to the thirtieth day following the Closing Date, 4.25%
per annum or (b) in all other cases, 4.75% per annum.
- --- ----- --- -----
"Pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Agreement, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act as interpreted by the
Company's chief financial officer or Board of Directors in consultation with its
independent certified public accountants.
"Purchase Price Loan" means the loan of approximately $133.0 million from
Glass Holdings to AGY Holdings to fund the AGY Holdings Acquisition.
"Purchase Price Loan Agreement" means the definitive documentation as
executed on the Closing Date evidencing the Purchase Price loan including,
without limitation, all related instruments and documents (including all
security documents).
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Recovery Event" means the receipt by the Borrowers or any of their
Subsidiaries of any cash insurance proceeds or condemnation award payable by
reason of theft, loss, physical destruction or damage, taking or similar event
with respect to any of their respective properties or assets.
24
<PAGE>
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund or defease, or to issue a security or
Indebtedness in exchange or replacement for, such security or Indebtedness in
whole or in part. "Refinanced" and "Refinancing" shall have correlative
meanings.
"Register" has the meaning ascribed to it in Section 5.12.
"Registration Rights Agreement" means a registration rights agreement
substantially in the form contemplated by Exhibit V (with such changes therein
---------
as the Agents and the Borrowers shall approve).
"Release" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of any barrels,
containers or other closed receptacles containing any Hazardous Materials), or
onto or out of any Facility, including the movement of any Hazardous Material
through the air, soil, surface water, groundwater or property.
"Required Lenders" means the Lender or Lenders holding at least 51% of the
aggregate outstanding principal amount of Bridge Notes.
"Restricted Payment" has the meaning ascribed to it in Section 6.3.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the leasing
to the Company or a Subsidiary of the Company of any property, whether owned by
the Company or any Subsidiary of the Company at the Closing Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Subsidiary to such Person or to any other Person by whom funds have been or are
to be advanced on the security of such Property.
"Securities" means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit sharing
agreement or arrangement, bonds, debentures, options, warrants, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, shares or participations in temporary or interim
certificates for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Senior Credit Facility" means that certain credit agreement to be entered
into on or before the Closing Date between the Company, the guarantors from time
to time a party thereto, the lenders from time to time a party thereto and First
Union National Bank, as agent, pursuant to which the Company may, as of the
Closing Date, borrow up to $315,000,000 in the aggregate at any one time
outstanding together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing,
25
<PAGE>
replacing or otherwise restructuring (including adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder or increasing the
principal amount available thereunder) all or any portion of the Indebtedness
under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender or group of lenders.
"Senior Indebtedness" means for any Person the principal of, premium, if
any, and interest on, and all amounts payable in respect of, all obligations of
every nature of the Company from time to time owed to the lenders under the
Senior Credit Facility; including, without limitation, all obligations in
respect of letters of credit and principal of and interest on and all fees,
indemnities, and expenses payable under the Senior Credit Facility and all
obligations under Interest Rate Agreements entered into with lenders under the
Senior Credit Facility and their respective Affiliates and any guarantees
thereof including any agreement refinancing all or any portion of the
Indebtedness under such Senior Credit Facility. Without limiting the generality
of the foregoing "Senior Indebtedness" shall include interest accruing thereon
subsequent to the occurrence of any Event of Default specified in Sections 7.6
and 7.7 relating to the Borrowers, whether or not the claim for such interest is
allowed under any applicable Bankruptcy Law. Notwithstanding the foregoing,
"Senior Indebtedness" of any Person shall not include that portion of any
Indebtedness which is incurred by such Person in violation of this Agreement.
"Senior Subordinated Indebtedness" means, with respect to the Borrowers or
any Guarantor, Indebtedness of such Person that specifically provides that such
Indebtedness is to rank pari passu in right of payment with the terms set forth
in this Agreement and the Bridge Loan or the Guarantee of such Guarantor, as the
case may be, and is not subordinated by its terms in right of payment to any
Indebtedness or other obligation of the Borrowers or such Guarantor which is not
Senior Indebtedness in the case of the Borrowers or Guarantor Senior
Indebtedness in the case of such Guarantor.
"Senior Subordinated Indenture" means an indenture among the Borrowers, the
Guarantors and a trustee having terms substantially similar to the terms set
forth in this Agreement and the Bridge Notes except where the context of this
Agreement provides otherwise (with such changes therein as the Agents and the
Borrowers shall approve, and at such time as notes issued thereunder are sold in
a public offering, with other appropriate changes to reflect such public
offering), as the same may at any time be amended, modified and supplemented and
in effect.
"Single Employer Plan" means a "single-employer plan," as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the
Company, any of its Subsidiaries or any of their ERISA Affiliates and no Person
other than the Company, any of its Subsidiaries or any of their ERISA Affiliates
or (ii) was so maintained and in respect of which the Company, its Subsidiaries
or their ERISA Affiliates could have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.
"Subordinated Indebtedness" means Indebtedness of the Borrowers or any
Guarantor which is expressly subordinated in right of payment to the Bridge
Notes or the Guarantee of such Guarantor, as the case may be.
26
<PAGE>
"Subsequent Bridge Note" has the meaning ascribed to it in Section 2.1D.
"Subsequent Exchange Request" has the meaning ascribed to it in Section
5.10.
"Subsidiary" with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person; or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Take-Out Bank" means FUCM.
"Take-Out Request" has the meaning ascribed to it in Section 5.9.
"Take-Out Securities" means (i) any debt securities of the Borrowers and/or
the Guarantors the proceeds of which are used to repay the Bridge Loan in full
and (ii) any debt securities of the Borrowers issued in accordance with Section
5.9, the proceeds of which are used to Refinance the Bridge Notes in part,
including, without limitation, the Demand Take-Out Notes.
"Tax Return" means a report, return or other information (including any
amendments) required to be supplied to a Tribunal with respect to Taxes
including, where permitted or required, combined or consolidated returns for any
group of entities that includes the Borrowers or any Subsidiary.
"Taxes" means any present or future taxes, assessments, fees, levies,
imposts, duties, deductions, liabilities, withholdings or other charges of any
nature whatsoever, including interest, penalties and additions thereto from time
to time or at any time imposed by any Law or any Tribunal.
"Transaction Date" means the date on which any transaction that would give
rise to the need to calculate the Consolidated Fixed Change Coverage Ratio
occurs.
"Tribunal" means any government, any arbitration panel, any court or any
governmental department, commission, board, bureau, agency, authority or
instrumentality of any state, province, commonwealth, nation, territory,
possession, county, parish, town, township, village or municipality, whether now
or hereafter constituted and/or existing.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
board of directors or the governing body of such Person.
27
<PAGE>
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
"Wholly-Owned Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which 100% of the total
voting power of shares of stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled
directly or indirectly, by that Person or one or more of the other Wholly-Owned
Subsidiaries of that Person or a combination thereof.
"Year 2000 Compliant" has the meaning ascribed to it in Section 4.26.
1.2 Accounting Terms
----------------
For the purposes of this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to them in conformity with GAAP.
1.3 Other Definitional Provisions
-----------------------------
Any of the terms defined in Section 1.1 may, unless the context otherwise
requires, be used in the singular or the plural depending on the reference.
SECTION 2 AMOUNT AND TERMS OF BRIDGE LOAN COMMITMENT AND LOANS; BRIDGE NOTES
2.1 Bridge Loan and Bridge Note
---------------------------
A. Bridge Loan Commitment. Subject to the terms and conditions of this
----------------------
Agreement and in reliance upon the representations and warranties of the
Borrowers herein set forth, the Lenders hereby agree to lend to the Borrowers on
the Closing Date $150,000,000 in the aggregate (the "Bridge Loan"), each such
Lender committing to lend the aggregate amount set forth next to such Lender's
name on the signature pages hereto. The Lenders' commitments to make the Bridge
Loan to the Borrowers pursuant to this Section 2.1 A are herein called
individually, the "Bridge Loan Commitment" and collectively, the "Bridge Loan
Commitments."
B. Notice of Borrowing. When the Borrowers desire to borrow under this
-------------------
Section 2.1, they shall deliver to First Union a Notice of Borrowing no later
than 11:00 A.M. (New York time), at least two Business Days in advance of the
date of funding of the Bridge Loan (the "Closing Date") or such later date as
shall be agreed to by First Union. Upon receipt of such Notice of Borrowing,
First Union shall promptly notify each Lender of its share of the Bridge Loan
and the matters covered by the Notice of Borrowing.
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<PAGE>
C. Disbursement of Funds. (a) No later than 5:00 p.m. (New York time) on
---------------------
the Closing Date, each Lender will make available its pro rata share of the
Bridge Loan requested to be made on such date in the manner provided below. All
amounts shall be made available to First Union in U.S. Legal Tender and
immediately available funds at the Payment Office and First Union promptly will
make available to the Borrowers by depositing to their account at the Payment
Office the aggregate of the amounts so made available in the type of funds
received. Unless First Union shall have been notified by any Lender prior to the
Closing Date that such Lender does not intend to make available to First Union
its pro rata share of the Bridge Loan to be made on such date, First Union may
assume that such Lender has made such amount available to First Union on such
date, and First Union, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrowers
a corresponding amount. If such corresponding amount is not in fact made
available to First Union by such Lender and First Union has made available same
to the Borrowers, First Union shall be entitled to recover such corresponding
amount from such Lender. If such Lender does not pay such corresponding amount
forthwith upon First Union's demand therefor, First Union shall promptly notify
the Borrowers, and the Borrowers shall immediately pay such corresponding amount
to First Union. First Union shall also be entitled to recover from such Lender
or the Borrowers, as the case may be, interest on such corresponding amount in
respect of each day from the date such corresponding amount was made available
by First Union to the Borrowers to the date such corresponding amount is
recovered by First Union, at a rate per annum equal to (x) if paid by such
Lender, the overnight Federal Funds Rate or (y) if paid by the Borrowers, the
then applicable rate of interest on the Bridge Loan.
(b) Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its Bridge Loan Commitment hereunder or to prejudice any
rights which the Borrowers may have against any Lender as a result of any
default by such Lender hereunder.
D. Bridge Notes. The Borrowers shall execute and deliver to each Lender
on the Closing Date, a note dated the Closing Date, substantially in the form of
Exhibit I to evidence such Lender's portion of its Bridge Loan Commitment and
- ---------
with appropriate insertions (the "Original Bridge Notes"). On each interest
payment date on which the Borrowers elect to pay a PIK Interest Amount pursuant
to Section 2.2B, the Borrowers shall execute and deliver to each Lender on such
interest payment date a note dated such interest payment date substantially in
the form of Exhibit I in a principal amount equal to such Lender's pro rata
---------
portion of such PIK Interest Amount and with other appropriate insertions (each
a "Subsequent Bridge Note" and, together with the Original Bridge Notes, the
"Bridge Notes"). A Subsequent Bridge Note shall bear interest from the date of
its issuance at the same rate borne by all Bridge Notes.
E. Maturity of Bridge Loan. The Bridge Loan shall mature and the
-----------------------
Borrowers shall pay in full the outstanding principal amount thereof and accrued
interest thereon on the Maturity Date.
F. Termination of Bridge Loan Commitment. The Bridge Loan Commitment
-------------------------------------
hereunder shall terminate on the earlier of (i) consummation of the Acquisition
or another transaction or series of transactions in which the Borrowers or any
of their Affiliates acquires the
29
<PAGE>
Acquired Assets, (ii) the termination of the LLC Sale and Purchase Agreement
(iii) the occurrence of any event that First Union reasonably believes in good
faith has, or could reasonably be expected to have, a Material Adverse Effect
and (iv) 5:00 p.m. (Charlotte time) on October 15, 1998, if the closing of the
Acquisition shall not have occurred by such time.
G. Pro Rata Borrowings. The Bridge Loan made under this Agreement shall
-------------------
be made by the Lenders pro rata on the basis of their respective Bridge Loan
Commitments. It is understood that no Lender shall be responsible for any
default by any other Lender of its obligation to make its portion of the Bridge
Loan hereunder and that each Lender shall be obligated to make its portion of
the Bridge Loan hereunder, regardless of the failure of any other Lender to
fulfill its commitments hereunder.
2.2 Interest on the Bridge Loan
---------------------------
A. Rate of Interest. The Bridge Loan shall bear interest on the unpaid
----------------
principal amount thereof from the date made through maturity (whether by
prepayment, acceleration or otherwise) at a rate per annum equal to the
Applicable Interest Rate for each Interest Period.
Notwithstanding this Section 2.2A or any other provision herein, in no
event will the combined sum of interest (cash or otherwise) on the Bridge Loan
exceed 18.00% per annum.
B. Interest Payments. Interest shall be payable with respect to the
-----------------
Bridge Loan, in arrears, on each Interest Payment Date, commencing on the first
Interest Payment Date following the Closing Date and upon any prepayment of the
Bridge Loan (to the extent accrued on the amount being prepaid) and at maturity
(whether by prepayment, acceleration or otherwise); provided, however, that if,
-------- -------
on any Interest Payment Date on which interest is required to be paid (other
than at maturity), the interest rate borne by the Bridge Loan exceeds the
Maximum Cash Interest Rate, the Borrowers may pay all or a portion of the
interest payable in excess of the amount of interest that would be payable on
such date at the Maximum Cash Interest Rate by issuance of Subsequent Bridge
Notes, in an aggregate principal amount equal to the amount of such interest
being so paid (the "PIK Interest Amount").
C. Post-Maturity Interest. Any principal payments on the Bridge Loan not
----------------------
paid when due and, to the extent permitted by applicable law, any interest
payment on the Bridge Loan not paid when due, in each case whether at maturity,
by notice of prepayment, by acceleration or otherwise, shall thereafter bear
interest payable upon demand at a rate which is 2.00% per annum in excess of the
rate of interest otherwise payable under this Agreement for the Bridge Loan.
D. Computation of Interest. Interest on the Bridge Loan shall be computed
-----------------------
on the basis of a 360-day year and the actual number of days elapsed in the
period during which it accrues. In computing interest on the Bridge Loan, the
date of the making of the Bridge Loan shall be included and the date of payment
shall be excluded; provided that if the Bridge Loan is repaid on the same day on
--------
which it is made, one day's interest shall be paid on the Bridge Loan.
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<PAGE>
E. Making of Payments. Any payment stated to be due in respect of any
------------------
Bridge Loan, and any Interest Period stated to end, on a given day in a
specified month shall instead be made or end (as the case may be) (i) if there
is no such day in that month, on the last Business Day of that month or (ii) if
that day is not a Business Day, on the following Business Day, unless that
following Business Day falls in a different calendar month, in which case that
payment shall be made or that Interest Period shall end (as the case may be) on
the preceding Business Day.
2.3 Fees
----
The Borrowers agree to pay to First Union and its Affiliates all fees and
other obligations in accordance with, and at the times specified by, the Amended
and Restated Commitment Letter.
2.4 Prepayments and Payments
------------------------
A. Prepayments
-----------
(i) Voluntary Prepayments. The Borrowers may prepay the Bridge Loan
---------------------
at any time or from time to time in whole or in part upon not less than
three Business Days' prior written notice to First Union which notice shall
specify the effective date thereof and the amount of any such prepayment,
which shall be in a minimum amount of $5,000,000 and integral multiples of
$1,000,000 in excess of that amount, or shall be in the amount of the
balance outstanding, at a prepayment price equal to the principal amount to
be prepaid plus accrued and unpaid interest thereon to the date of
prepayment.
Notice of prepayment having been given as aforesaid, the principal
amount of the Bridge Loan to be prepaid shall become due and payable on the
prepayment date. Amounts of the Bridge Loan so prepaid may not be
reborrowed.
(ii) Mandatory Prepayments.
---------------------
(a) Prepayments from Asset Sales. Upon receipt by the Company or any
----------------------------
Subsidiary of the Company of Cash Proceeds of any Asset Sale occurring
after the Closing Date, the Borrowers shall, or shall cause the Company's
Subsidiaries to, apply an amount equal to the Net Cash Proceeds of such
Asset Sale to prepay loans outstanding under the Senior Credit Facility;
provided that the commitment thereunder is permanently reduced to the
--------
extent of the prepayment. Concurrently with the consummation of any such
Asset Sale, the Borrowers shall deliver to First Union an Officer's
Certificate demonstrating the derivation of Net Cash Proceeds from the
gross sales price of such Asset Sale.
The Borrowers shall, or shall cause the Company's Subsidiaries to,
prepay the Bridge Loan in an amount equal to the Net Cash Proceeds not used
as provided in the preceding paragraph on a date not later than the
Business Day next succeeding the 30th day after the consummation of such
Asset Sale.
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<PAGE>
(b) Prepayments from Capital Contributions and Sales or Issuances of
----------------------------------------------------------------
Capital Stock. Concurrently with the receipt by the Company or any
-------------
Subsidiary of the Company of cash proceeds from any capital contribution or
any sale or issuance of its Capital Stock, other than any cash proceeds
from any capital contribution by, or any sale of Capital Stock to
Jefferson, AGY Holdings or any of their Subsidiaries or any of the
Company's Subsidiaries, the Borrowers shall, or shall cause the Company's
Subsidiaries to, to the extent that such proceeds are not required by the
Senior Credit Facility to prepay any amounts outstanding thereunder, prepay
the Bridge Loan in a principal amount equal to the lesser of the cash
proceeds thereof (net of underwriting or placement discounts or commissions
and other reasonable costs associated therewith) or the aggregate principal
amount of the Bridge Loan then outstanding.
(c) Prepayments from Issuances of Certain Indebtedness. Concurrently
--------------------------------------------------
with the receipt by the Borrowers of proceeds from the issuance or
incurrence of Indebtedness for borrowed money (other than the Senior Credit
Facility and other than Indebtedness represented by Take-Out Securities),
the Borrowers shall, to the extent that such proceeds are not required by
the Senior Credit Facility to prepay any amounts outstanding thereunder,
prepay the Bridge Loan in an amount equal to the lesser of the cash
proceeds thereof (net of underwriting or placement discounts or commissions
and other reasonable costs associated therewith) or the aggregate principal
amount of the Bridge Loan then outstanding.
(d) Prepayments from Issuances of Take-Out Securities. Concurrently
-------------------------------------------------
with the receipt by the Borrowers of proceeds from the issuance or
incurrence of Take-Out Securities, the Borrowers shall, or shall cause the
Company's Subsidiaries to prepay the Bridge Loan in an amount equal to the
lesser of the cash proceeds thereof (net of underwriting or placement
discounts or commissions and other reasonable costs associated therewith)
or the aggregate principal amount of the Bridge Loan then outstanding.
(e) Prepayments from Recovery Events. Concurrently with the
--------------------------------
occurrence of a Recovery Event, the Borrowers shall, or shall cause the
Company's Subsidiaries to, to the extent that such proceeds are not (A)
required by the Senior Credit Facility to prepay any amounts outstanding
thereunder or (B) used to repair such damaged assets or to purchase or
otherwise acquire replacement assets or property, provided that such
repair, purchase or acquisition is committed within 30 days after receipt
of such cash proceeds and consummated within 180 days thereof, prepay the
Bridge Loan in an aggregate amount equal to the lesser of the cash proceeds
thereof or the aggregate amount of the Bridge Loan then outstanding.
Notwithstanding anything to the contrary contained herein, after the
occurrence and during the continuation of an Event of Default, First Union
shall have the option to require such cash proceeds, to the extent not
required by the Senior Credit Facility to prepay amounts outstanding
thereunder, to be applied immediately to prepay the Bridge Loan in an
aggregate amount equal to the lesser of the cash proceeds thereof or the
aggregate amount of the Bridge Loan then outstanding.
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<PAGE>
(f) Any prepayment of the Bridge Loan pursuant to clause (a), (b),
(c), (d) or (e) of this Section 2.4A(ii) shall be made at a prepayment
price equal to the principal amount of the Bridge Loan so prepaid plus
accrued and unpaid interest thereon to the date of prepayment.
(g) Notice. The Borrowers shall notify First Union in writing of any
------
prepayment to be made pursuant to this Section 2.4A(ii) at least three
Business Days prior to such prepayment date (unless shorter notice is
satisfactory to First Union).
(iii) Application of Prepayments. All prepayments shall include
--------------------------
payment of accrued interest on the principal amount so prepaid and shall be
applied to payment of interest before application to principal.
(iv) Mandatory Offer to Purchase Notes.
---------------------------------
(a) Upon the occurrence of a Change of Control (the date of such
occurrence, the "Change of Control Date"), the Lenders shall have the right
to require the Borrowers to purchase (the "Change of Control Offer") all of
the Bridge Notes at a purchase price equal to 103% of the aggregate
principal amount thereof plus accrued and unpaid interest thereon to the
date of purchase (the "Change of Control Purchase Price"). Prior to the
mailing of the notice to First Union provided for in paragraph (b) below
but in any event within 30 days following any Change of Control, the
Borrowers hereby covenant to (i) repay in full all Indebtedness under the
Senior Credit Facility or to offer to repay in full all such Indebtedness
and to repay the Indebtedness of each lender under the Senior Credit
Facility who has accepted such offer or (ii) obtain the requisite consents
under the Senior Credit Facility to permit the payment of the Bridge Notes
as provided for in paragraph (d) below. The Borrowers shall first comply
with the covenant in the preceding sentence before it shall be required to
purchase the Bridge Notes pursuant to this Section 2.4A(iv).
(b) Within 30 days following any Change of Control the Borrowers
shall mail a notice to First Union that shall contain all instructions and
materials necessary to enable the Lenders to tender Bridge Notes and
stating:
(1) that the Change of Control Offer is being made pursuant to
this Section 2.4(A) (iv) and that all Bridge Notes validly tendered
will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date,
which shall be no earlier than 30 days nor later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date");
(3) that any Bridge Note not tendered will continue to accrue
interest;
(4) that any Bridge Note accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the
Change of Control
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Payment Date unless the Borrowers shall default in the payment of the
Change of Control Purchase Price with respect to Bridge Notes tendered
for purchase;
(5) that if a Lender elects to have a Bridge Note purchased
pursuant to the Change of Control Offer it will be required to
surrender the Bridge Note, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Bridge Note completed, to the
Borrowers prior to 5:00 p.m. New York time on the third Business Day
prior to the Change of Control Payment Date;
(6) that a Lender will be entitled to withdraw its election if
the Company receives, not later than 5:00 p.m. New York time on the
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the principal
amount of Bridge Notes such Lender surrendered for purchase, and a
statement that such Lender is withdrawing its election to have such
Bridge Notes (or portions thereof) purchased; and
(7) that if Bridge Notes surrendered for purchase are purchased
only in part a new Bridge Note of the same type will be issued in
principal amount equal to the unpurchased portion of the Bridge Notes
surrendered.
(c) On or before the Change of Control Payment Date, the Borrowers
shall (i) accept for payment Bridge Notes or portions thereof which are to
be purchased in accordance with the above, and (ii) deposit at the Payment
Office U.S. Legal Tender sufficient to pay the Change of Control Purchase
Price of all Bridge Notes surrendered for purchase and not withdrawn
pursuant to clause (b)(6) of this Section 2.4(A)(iv). First Union shall
promptly mail to the Lenders whose Bridge Notes are so accepted payment in
an amount equal to the Change of Control Purchase Price for such Bridge
Notes unless such payment is prohibited pursuant to Section 8 or otherwise.
(d) The Borrowers shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the purchase of Bridge Notes pursuant to a Change of
Control Offer. To the extent the provisions of any securities laws or
regulations conflict with the provisions under this Section, the Borrowers
shall comply with the applicable securities laws and regulations and shall
not be deemed to have breached its obligations under this Section by virtue
thereof.
B. Manner and Time of Payment. All payments of principal and interest
--------------------------
hereunder and under the Bridge Notes by the Borrowers shall be made without
defense, set-off or counterclaim and in same-day funds and delivered to First
Union, unless otherwise specified, not later than 12:00 Noon (New York time) on
the date due at the Payment Office for the account of the Lenders; funds
received by First Union after that time shall be deemed to have been paid by the
Borrowers on the next succeeding Business Day. The Borrowers hereby authorize
First Union to charge its account with First Union in order to cause timely
payment to be made of all principal, interest and fees due hereunder (subject to
sufficient funds being available in its account for that purpose).
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C. Notation of Payment. Each Lender agrees that before disposing of any
-------------------
Bridge Note held by it, or any part thereof (other than by granting
participations therein), such Lender will make a notation thereon of all
principal payments previously made thereon and of the date to which interest
thereon has been paid and will notify the Borrowers and First Union (such notice
to First Union to be made to it at the Payment Office) of the name and address
of the transferee of that Bridge Note; provided that the failure to make (or any
--------
error in the making of) such a notation or to notify the Borrowers of the name
and address of such transferee shall not limit or otherwise affect the
obligation of the Borrowers hereunder or under such Bridge Notes with respect to
the Bridge Loan and payments of principal or interest on any such Bridge Note.
2.5 Use of Proceeds
---------------
The proceeds of the Bridge Loan shall be used by the Borrowers to fund the
Jefferson Distribution and the AGY Holdings Distribution.
SECTION 3 CONDITIONS
3.1 Conditions to Bridge Loan
-------------------------
The obligations of the Lenders to make the Bridge Loan hereunder are
subject to the satisfaction of, or waiver of, immediately prior to or concurrent
with the making of such Bridge Loan on the Closing Date, the following
conditions precedent:
(a) On or prior to the Closing Date, all corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto, not previously found acceptable to the Agents,
shall be acceptable to the Agents, and the Agents shall have received on behalf
of the Lenders the following items, each of which shall be in form and substance
satisfactory to the Agents and, unless otherwise noted, dated the Closing Date:
(1) a certified copy of each of the Company's and Capital's
certificate of formation or charter together with a certificate of
status, compliance, good standing or like certificate or its
equivalent dated within a reasonable time prior to the Closing Date
issued by the appropriate government officials of the respective
jurisdiction of incorporation of each of the foregoing and of each
jurisdiction in which each of the foregoing owns any material assets
or carries on any material business; and
(2) a copy of each of the Company's and Capital's operating
agreement or bylaws, certified by one of its Officers; and
(3) resolutions of each of the Company's and Capital's Board of
Directors approving and authorizing the execution, delivery and
performance of this Agreement, each of the other Loan Documents and
any other documents, instruments and certificates required to be
executed by the Company or Capital in connection herewith and
therewith and approving and authorizing the execution,
35
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delivery and payment of the Bridge Notes and the consummation of the
Borrower Transactions, each certified by one of its Officers as being
in full force and effect without modification or amendment; and
(4) signature and incumbency certificates of the Borrower's
Officers executing this Agreement and the Bridge Notes; and
(5) executed copies of this Agreement and the Original Bridge
Notes substantially in the form of Exhibit I executed in accordance
---------
with Section 2.1D drawn to the order of the Lenders and with
appropriate insertions; and
(6) an originally executed Notice of Borrowing substantially in
the form of Exhibit III, signed by the President or a Vice President
-----------
of the Borrowers on behalf of the Borrowers delivered to the Agents;
and
(7) originally executed copies of one or more favorable written
opinions of (I) Alston & Bird, counsel for the Borrowers,
substantially in the form of Exhibit V and addressed to the Lenders
---------
and (II) Cleary, Gottlieb, Steen & Hamilton, special counsel for the
Lenders, substantially in the form of Exhibit VI and addressed to the
----------
Lenders; and (III) such other opinions of counsel and such
certificates or opinions of accountants, appraisers or other
professionals as the Agents shall have reasonably requested,
including, without limitation, receipt of an environmental report and
technical reports from independent consultants in respect of the
Company and its Subsidiaries and their respective properties,
reasonably satisfactory to the Agents; and
(8) a certificate, delivered by the Company and signed by the
President or a Vice President and the Chief Financial or Accounting
Officer of the Company and addressed to the Lenders in form and
substance reasonably satisfactory to the Agents, with appropriate
attachments, stating that, after giving effect to the consummation of
the Borrower Transactions, the fair saleable value of the assets of
the Company and Capital will not be less than the probable liability
on their debts, that each of the Company and Capital will be able to
pay its debts as they mature and that each will not have unreasonably
small capital to conduct its business, and the Agents shall have
received such opinions of value, other appropriate factual information
and expert advice supporting the conclusions reached in such letter as
the Agents may reasonably request, all in form and substance
reasonably satisfactory to the Agents; and
(9) an Officers' Certificate from each of the Company and
Capital in form and substance satisfactory to the Agents to the effect
that (i) the representations and warranties in Section 4 hereof are
true, correct and complete on and as of the Closing Date to the same
extent as though made on and as of the Closing Date, (ii) the
Borrowers have performed and complied with all covenants and
agreements to be performed and observed by the Borrowers on or prior
to the Closing Date and (iii) all conditions to the consummation of
the Borrower
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<PAGE>
Transactions have been satisfied on the terms set forth therein and
have not been waived or amended without the Agents' prior written
consent; and
(10) executed or conformed copies of each of the JV Transaction
Documents and, with respect to each of the foregoing, a copy of each
legal opinion delivered in connection therewith, and all documents and
instruments relating thereto; and
(11) such further information, certificates and documents as the
Agents may reasonably request.
(b) The Borrowers shall have performed or complied with all covenants and
agreements which this Agreement provides shall be performed or complied with
prior to the Closing Date, except as otherwise disclosed to and agreed to in
writing by the Agents.
(c) The form, terms and substance of each of the JV Transaction Documents
shall be reasonably satisfactory to the Agents; all of the covenants and
agreements to be performed or observed in connection with each of the JV
Transaction Documents and any agreements or documents related thereto prior to
the Closing Date shall have been performed or complied with and all conditions
contained in each of the JV Transaction Documents shall have been satisfied and
not waived without the prior written consent of the Agents; and all of the
transactions contemplated by the JV Transaction Documents and any agreements or
documents related thereto to occur on or prior to the Closing Date shall have
been consummated in accordance with the terms thereof concurrently with the
transactions contemplated by this Agreement.
(d) All authorizations, consents and approvals necessary in connection
with the JV Transactions shall have been obtained and remain in full force and
effect and evidence of the receipt of such authorizations, consents and
approvals satisfactory to the Agents shall have been delivered to the Agents.
(e) There shall not be pending or, to the knowledge of the Borrowers,
threatened any action, suit, proceeding, governmental investigation or
arbitration which has not been settled, dismissed, vacated, discharged or
terminated, against or affecting the Company, any of its Subsidiaries or any of
their respective Affiliates or any property or asset of the Company, any of its
Subsidiaries or any of their respective Affiliates which has not been disclosed
by the Borrowers in writing to the Agents (and the Agents shall have received an
Officer's Certificate dated the Closing Date attesting to the same) and there
shall have occurred no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so disclosed, which, in
each case, singly or in the aggregate, in the opinion of the Agents, could
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the JV Transactions. No injunction or other restraining order shall
have been issued and no hearing to cause an injunction or other restraining
order to be issued shall be pending or noticed with respect to any action, suit
or proceeding seeking to restrain, enjoin, delay, prohibit or otherwise prevent
the consummation of, or to recover any damages or obtain relief as a result of,
the JV Transactions. There shall not be threatened, instituted or pending any
action, suit, proceeding or application before or by any Tribunal, or any other
Person, domestic or foreign (i) challenging
37
<PAGE>
the JV Transactions or seeking to restrain, delay or prohibit the consummation
thereof; (ii) seeking to prohibit or impose material limitations on the
Company's ownership or operation of all or any portion of the Company's business
or assets (including the business and assets of Capital) or to compel the
Company to dispose of or hold separate all or any portion of the Company's
business or assets (including the business and assets of Capital) as a result of
the JV Transactions; (iii) which, in any event, might materially adversely
affect the JV Transactions; or (iv) seeking to impose any materially adverse
conditions upon the JV Transactions.
(f) The Agents and their counsel shall be reasonably satisfied that the
consummation of the JV Transactions shall be in compliance with all Laws
(including, without limitation, all applicable U.S. securities and banking laws,
rules and regulations).
(g) All of the covenants and agreements to be performed or observed in
connection with the JV Transactions prior to the Closing Date shall have been
performed or complied with; all of the conditions to the consummation of the JV
Transactions shall have been satisfied and not waived without the prior written
consent of the Agents and the JV Transactions, and all other transactions
contemplated thereby, shall have been consummated on terms acceptable to the
Agents.
(h) No event shall have occurred and be continuing or would result from
the consummation of the borrowing contemplated by the Notice of Borrowing which
would constitute an Event of Default or Potential Event of Default.
(i) There shall be no bankruptcy, insolvency, liquidation or other similar
proceeding affecting, in any manner, all or a portion of the Acquired Assets.
(j) The making of the Bridge Loan in the manner contemplated in this
Agreement shall not violate the applicable provisions of Regulation T, U or X of
the Board of Governors of the Federal Reserve Board or any other regulation of
the Federal Reserve Board.
(k) The Borrowers shall have complied with all agreements and obligations
under the Amended and Restated Commitment Letter including the payment to First
Union and its Affiliates of all fees payable pursuant to Section 2.3 hereof.
(l) Neither of the Borrowers shall have sustained any loss or interference
with respect to its businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute or any legal or governmental proceeding, which loss or
interference, in the sole judgment of First Union, has had or could reasonably
be expected to have a Material Adverse Effect or a material adverse effect on
the ability of either of the Borrowers to consummate the Borrower Transactions
and to execute, deliver and perform its obligations under the Loan Documents,
the Senior Credit Facility and each other document or instrument to be delivered
in connection with the Borrower Transactions executed or to be executed by it;
there shall not have been, in the reasonable judgment of First Union, any
Material Adverse Change, or any development involving a prospective Material
Adverse Change.
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<PAGE>
(m) There shall not have occurred (i) any general suspension of, or
limitation on times or prices for, trading in securities on the New York Stock
Exchange or American Stock Exchange or in the over-the-counter market in the
United States or minimum or maximum prices established on any such exchanges;
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of the banks in the United States or New York; or (iii) either (A) an
outbreak or escalation of hostilities between the United States and any foreign
power, or (B) an outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial markets of
the United States, which, in the case of clause (A), (B) or (C) of this
sentence, in the sole judgment of First Union, (x) makes it impractical or
inadvisable to proceed with the consummation of the Borrower Transactions or the
Bridge Loan or any of the other transactions contemplated hereby including,
without limitation, the issuance and sale of the Demand Take-Out Securities or
(y) would materially affect the ability to sell or syndicate the Bridge Loan.
(n) There shall not have been any disclosure of information relating to
conditions or events not previously disclosed to the Lenders, or new information
regarding previously disclosed matters, in the course of the Lenders' continuing
legal, financial, tax, environmental, business and accounting due diligence
review which the Lenders shall reasonably determine is material and adverse to
the Borrowers or any of their Subsidiaries.
(o) The Acquired Assets shall have generated a minimum EBITDA (as defined
in the Prior Commitment Letter (as defined in the Amended and Restated
Commitment Letter)) of at least $90.0 million for the 12 month period ending
August 31, 1998.
(p) The labor agreement for the Aiken, South Carolina facility shall have
been extended through at least April 30, 1999, and the labor agreement for the
Huntingdon, Pennsylvania facility shall have been extended through at least
October 31, 1999, each extension on terms and conditions satisfactory to the
Agents.
(q) The Agents shall be satisfied with management structure, legal
structure, voting control, liquidity, total leverage and total capitalization of
the Borrowers as of the Closing Date.
(r) The Agents shall be satisfied with all matters relating to the
Company's relationship with Owens Corning and Jefferson, including, without
limitation, raw material supply agreements, the transfer and use of Intellectual
Property, the sharing of facilities, non-compete agreements, the sharing of
employees and real property associated with the Acquired Assets and all other
corporate services arrangements necessary for the Company to operate the
Acquired Assets in a manner consistent with the historical practices of Owens
Corning. The Agents shall have received a copy, certified by an Officer of the
Company as true and complete, of each of the JV Supply and Service Agreements as
originally executed and delivered, together with all exhibits and schedules
thereto, and each third-party consent required or necessary in connection with
the assignment of any of the JV Supply and Service Agreements to the Company.
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<PAGE>
(s) All matters relating to the relationship between Owens Corning and
Glass Holdings and between Owens Corning and AGY Holdings, including, without
limitation, matters of ownership, capital structure and voting control, shall be
satisfactory to the Agents.
(t) The Borrowers and Owens Corning shall have entered into a transition
services agreement dated as of the date hereof providing for the orderly
transition of the Acquired Assets in connection with the transfer thereof from
Owens Corning to the Company, which plan shall be in form and substance
satisfactory to the Agents.
(u) Owens Corning shall have agreed in writing to waive (in favor of the
lenders under the Senior Credit Facility) any right it may have to preclude a
merger or sale of the Acquired Assets upon the occurrence of an Event of Default
and the acceleration of the Bridge Loans and termination of the Bridge Loan
Commitments pursuant to Section 7. Such waiver letter shall be satisfactory to
the Agents.
(v) The management team and board of directors as described in the LLC
Operating Agreement shall have been appointed.
(w) The Agents shall have received the five-year strategic business plan
of the Borrowers covering the five-year period following the Closing Date,
approved by the Owens Corning and AGY Holdings, which plan shall be in form and
substance satisfactory to the Agents.
(x) The Agents shall have received the seven year financial and
operational projections for the Company and its Subsidiaries for the fiscal
years 1998 through 2005, together with a detailed explanation of all management
assumptions contained therein, which projections shall be in form and substance
satisfactory to the Agents.
(y) The Agents shall have received the Borrowers' plan for becoming Year
2000 Compliant, which plan shall be in form and substance satisfactory to the
Agents.
(z) The Agents shall have received copies of all appraisals conducted on
the personal property of the Borrowers and their Subsidiaries.
(aa) Each of the Glass Marbles Supply Agreement, the Alloy Services
Agreement and the Borates Supply Agreement shall have been amended so that the
Company shall have the option to extend the duration of such agreements for a
period of at least seven years from the Closing Date.
(bb) The Company shall have had discussions with the Agents regarding the
Company's financial condition and results of operations for the month of
September 1998 based on the most current information reasonably available to the
management of the Company and which discussions shall not have disclosed any
information which the Agents shall reasonably determine is material and adverse
to the Company.
40
<PAGE>
SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
In order to induce the Lenders to enter into this Agreement and to make the
Bridge Loan, the Borrowers jointly and severally represent and warrant to the
Lenders that, at the time of execution hereof the following statements are, and
on the Closing Date will be, true, correct and complete.
4.1 Organization and Good Standing; Capitalization
----------------------------------------------
(a) The Company and Capital are duly organized, validly existing and in
good standing under the laws of their respective jurisdiction of incorporation.
The Company and Capital have the full power and authority to own and operate
their respective properties and to carry on their respective businesses as now
conducted and as proposed to be conducted and are duly qualified as a foreign
corporation and in good standing in all jurisdictions in which they are doing
business, except where failure to be so qualified or in good standing, singly or
in the aggregate, has not had and could not reasonably be expected to have a
Material Adverse Effect.
(b) Capital and AG Yarns are the only Subsidiaries of the Company in
existence on the date of this Agreement. The Capital Stock of each of Capital
and AG Yarns is duly authorized, validly issued, fully paid and nonassessable
and none of such Capital Stock constitutes Margin Stock. All of the outstanding
shares of Capital Stock of each of Capital and AG Yarns are beneficially owned
directly by the Company, free and clear of any perfected security interest or
any other security interests, claims, Liens or encumbrances other than Liens
granted to secure the Senior Credit Facility.
4.2 Authorization and Power
-----------------------
The Borrowers have the full power and requisite authority, and, to the
extent a party thereto, have taken all corporate action necessary, to consummate
the Borrower Transactions and to execute, deliver and perform their respective
obligations under the Loan Documents, the Senior Credit Facility and each other
document and instrument to be executed, delivered or performed by them in
connection with the Borrower Transactions.
4.3 No Conflicts or Consents
------------------------
(a) The execution, delivery and performance of the Loan Documents, the
Senior Credit Facility and each other document and instrument to be executed,
delivered or performed by the Borrowers in connection with the Borrower
Transactions, the consummation of each of the transactions herein or therein
contemplated and, the compliance with each of the terms and provisions hereof or
thereof, and the issuance, delivery and performance of the Bridge Notes and the
Senior Credit Facility do not and on the Closing Date will not (i) violate any
Law applicable to the Company or Capital or any judgment, order, writ,
injunction or decree of any Tribunal binding on the Company or Capital (ii)
conflict with, result in a breach or violation of or constitute a default under
the certificate of formation or incorporation or bylaws or operating agreement
of the Company or Capital or any Contractual Obligation of the Company or
Capital (iii) result in or require the creation or imposition of any Lien upon
any of the properties or assets
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of the Company or Capital (other than any Liens created under the Senior Credit
Facility) or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of the Company or Capital
except for such approvals or consents which have been obtained and disclosed in
writing to First Union or which have been waived in writing by First Union on
behalf of the Lenders.
(b) No consent, approval, authorization or order of any Tribunal or other
Person is required in connection with the execution and delivery by the
Borrowers of the Loan Documents, the Senior Credit Facility or any other
document or instrument to be delivered, executed or performed by the Borrowers
in connection with the Borrower Transactions or the consummation of the
transactions contemplated hereby or thereby, other than any such consent,
approval, authorization or order that has been obtained and remains in full
force and effect or which has been waived in writing by First Union on behalf of
the Lenders.
4.4 Enforceable Obligations
-----------------------
Each of the Loan Documents the Senior Credit Facility and each other
document or instrument to be delivered in connection therewith has been duly
authorized by all necessary action of the Borrowers; each of the Loan Documents,
the Senior Credit Facility and each other document or instrument to be delivered
in connection therewith to be executed and delivered on or prior to the date
hereof has been duly executed and delivered by the Borrowers; and each of the
Loan Documents, the Senior Credit Facility and each other document or instrument
to be delivered in connection therewith to be executed and delivered on or prior
to the date hereof is, and each of the Loan Documents, the Senior Credit
Facility and each other document or instrument to be delivered in connection
therewith to be executed and delivered after the Closing Date, will be, upon
such execution and delivery, the legal, valid and binding obligations of the
Borrowers, enforceable against the Borrowers in accordance with their respective
terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally or by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.5 Properties; Liens
-----------------
The Borrowers own, lease or have sufficient rights to use such properties
and assets as are necessary to the conduct of their operations as presently
conducted and as contemplated to be conducted following consummation of the
Borrower Transactions, and the Borrowers are not, nor to the knowledge of the
Company, is any other party thereto, in default under any lease, except in each
case for such defects or defaults that, singly or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. None of the material
assets of the Borrowers is subject to any restriction which would prevent
continuation of the use currently made, or contemplated to be made, thereof or
which would materially adversely affect the value thereof.
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4.6 Financial Condition
-------------------
(a) The Company has delivered copies of the following financial
statements to the Agents: (i) the audited statement of net assets as of December
31, 1996 and December 31, 1997 of the Company and the related statements of
operations, changes in net assets and cash flows of the Company for the three-
year period ended December 31, 1997, certified by Arthur Andersen LLP and (ii)
the unaudited statement of net assets of the Company at June 30, 1998 and the
related statements of operations, changes in net assets and cash flows for the
Company for the six-month period ended June 30, 1998. The foregoing financial
statements referred to in clauses (i) and (ii) were prepared in accordance with
GAAP, have been prepared from, and are consistent with, the books and records of
the Company, and fairly present in all material respects the consolidated
financial position of the Company, respectively, as at the respective dates
thereof and the consolidated results of operations and cash flows of the Company
for the periods then ended. The Company did not have at December 31, 1997 any
material contingent liabilities, liabilities for Taxes or long-term leases,
unusual forward or long-term commitments or unrealized or unanticipated losses
from any unfavorable commitments which are of a type required by GAAP to be
reflected in financial statements or the notes thereto which are not so
reflected. No events which have had or could reasonably be expected to have a
Material Adverse Effect have occurred since December 31, 1997 except as
reflected therein.
(b) Upon giving effect to the Borrower Transactions:
(i) The fair saleable value of the assets of the Company, Capital
and AG Yarns, on a stand-alone basis, exceeds the amount that will be
required to be paid on or in respect of the existing debts and other
liabilities (including contingent liabilities) of such Person as they
mature.
(ii) The assets of the Company, Capital and AG Yarns, on a stand-
alone basis, do not constitute unreasonably small capital for any such
Person to carry out its business as now conducted and as proposed to be
conducted including the capital needs of any such Person, taking into
account the particular capital requirements of the business conducted by
such Person, and projected capital requirements and capital availability
thereof.
(iii) The Borrowers do not intend to, and will not permit any of
their Subsidiaries to, Incur debts beyond such Person's ability to pay such
debts as they mature (taking into account the timing and amounts of cash to
be payable on or in respect of debt of each of such Person). The cash flow
of the Company and each of its Subsidiaries, after taking into account all
anticipated uses of the cash of each such Person, will at all times be
sufficient to pay all amounts on or in respect of debt of each such Person
when such amounts are required to be paid.
(iv) The Borrowers do not intend, and do not believe, that final
judgments against the Borrowers or any of their Subsidiaries in actions for
money damages will be rendered at a time when, or in an amount such that,
any such Person will be unable to satisfy any such judgments promptly in
accordance with their terms (taking into account
43
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the maximum reasonable amount of such judgments in any such actions and the
earliest reasonable time at which such judgments might be rendered). The
cash flow of the Company, Capital and AG Yarns, on a stand-alone basis,
after taking into account all other anticipated uses of the cash of each
such Person (including the payments on or in respect of debt referred to in
paragraph (iii) of this Section 4.6(b)), will at all times be sufficient to
pay all such judgments promptly in accordance with their terms.
4.7 Full Disclosure
---------------
The financial projections (including, without limitation, the pro forma
financial statements included therewith) heretofore furnished to the Agents by
the Borrowers are complete, were prepared by or under the direction of an
officer of the Borrowers and were prepared in good faith on the basis of
information and assumptions that the Borrowers believed to be fair, complete and
reasonable as of the date of such information, and which assumptions are
believed to be fair, complete and reasonable as of the date hereof. All other
factual information heretofore or contemporaneously furnished in writing by or
on behalf of the Borrowers to the Agents or Lenders for purposes of or in
connection with the Loan Documents, the Senior Credit Facility and all exhibits
and appendices thereto does not contain any untrue statement by such party or,
to its knowledge, any other party of a material fact or omit to state any
material fact necessary to keep the statements made by such party or, to its
knowledge, any other party contained herein or therein from being misleading in
a material respect. No fact is known, no condition exists nor has any event
occurred which has not been disclosed herein or in any other document or
certificate furnished to the Agents or the Lenders for use in the transactions
contemplated hereby which, singly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
4.8 No Default
----------
No event has occurred and is continuing which constitutes a Potential Event
of Default or an Event of Default.
4.9 Compliance with Contracts, Etc.
-------------------------------
Neither the Company nor Capital is in violation of its charter or
certificate of formation, by-laws or operating agreement or other organizational
documents, and no Event of Default or event that but for the giving of notice or
the lapse of time, or both, would constitute an Event of Default on the part of
the Borrowers exists under any Contractual Obligation of the Borrowers which
could reasonably be expected to have a Material Adverse Effect.
4.10 No Litigation
-------------
Except as disclosed on Schedule G, there is no Litigation pending or, to
the best knowledge of the Borrowers after due investigation, threatened, by,
against, or which may relate to or affect (a) any benefit plan or any fiduciary
or administrator thereof, (b) the JV Transactions, or (c) the Borrowers which
singly or in the aggregate, could reasonably be expected to have a Material
Adverse Effect or that could reasonably be expected to materially and adversely
affect
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the ability of the Borrowers to consummate the Borrower Transactions in a timely
manner. There are no outstanding injunctions or restraining orders prohibiting
consummation of any of the JV Transactions or any other transactions
contemplated by the Loan Documents or the Senior Credit Facility. Neither of the
Borrowers is in default with respect to any judgment, order, writ, injunction or
decree of any Tribunal, and there are no unsatisfied judgments against the
Borrowers or their respective businesses or properties. Neither of the Borrowers
has been advised that there is a reasonable likelihood of an adverse
determination of any Litigation which adverse determination, should it occur,
could reasonably be expected to have a Material Adverse Effect.
4.11 Use of Proceeds; Margin Stock, Etc.
-----------------------------------
The proceeds of the Bridge Loan will be used solely to fund the Jefferson
Distribution and AGY Holdings Distribution. None of such proceeds will be used
in violation of Regulation T, U or X. Neither of the Borrowers has taken or will
take any action which might cause any of the Loan Documents to violate the
applicable provisions of Regulation T, U or X, or any other regulation of the
Board of Governors of the Federal Reserve System.
4.12 Taxes
-----
All material Tax Returns, foreign and domestic, required to be filed by or
on behalf of either of the Borrowers in any jurisdiction have been filed, and
all material Taxes for which they are directly or indirectly liable or to which
any of their respective properties or assets are subject have been paid prior to
the time that such Taxes could give rise to a Lien thereon other than Contested
Claims. There is no material proposed tax assessment with respect to Taxes due
by or on behalf of either of the Borrowers, and, to the best knowledge of the
Borrowers, there is no basis for such assessment, except for Contested Claims.
4.13 ERISA
-----
A. No ERISA Events have occurred or are reasonably expected to occur
which individually or in the aggregate resulted in or might reasonably be
expected to result in a liability of either of the Borrowers or any of their
respective ERISA Affiliates which could reasonably be expected to have a
Material Adverse Effect.
B. In accordance with the most recent actuarial valuations, the Amount
of Unfunded Benefit Liabilities individually or in the aggregate for all Pension
Plans (excluding for purposes of such computation any Pension Plans which have a
negative Amount of Unfunded Benefit Liabilities), is not an amount which would
reasonably be expected to have a Material Adverse Effect.
C. Neither of the Borrowers has incurred or is reasonably expected to
incur any liability with respect to any Foreign Plan or Foreign Plans which
individually or in the aggregate has or could reasonably be expected to have a
Material Adverse Effect.
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4.14 Compliance with Law
-------------------
The Borrowers are in compliance with all Laws, except where the failure to
comply, singly or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
4.15 Government Regulation
---------------------
Neither of the Borrowers is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940 (as any of the preceding acts have been amended) or other Law which
regulates the Incurrence by either of the Borrowers of Indebtedness, including,
but not limited to, Laws relating to common contract carriers or the sale of
electricity, gas, steam, water or other public utility services.
4.16 Intellectual Property
---------------------
A. Each of the Borrowers owns or is licensed to use all Intellectual
Property necessary to permit the operation of its businesses as currently
conducted except where the failure to own or license the use of such
Intellectual Property could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
B. To the Borrowers' knowledge, no material claim has been asserted by
any Person with respect to the use of any such Intellectual Property, or
challenging or questioning the validity or effectiveness of any such
Intellectual Property. To the Borrowers' knowledge, the use of such Intellectual
Property by the Borrowers does not infringe on the rights of any Person, subject
to such claims and infringements as could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The consummation of
the Borrower Transactions will not impair the ownership of (or the license to
use, as the case may be) of such Intellectual Property by the Borrowers.
4.17 Environmental Matters
---------------------
(i) The operations of each of the Borrowers (including, without
limitation, as the term is used throughout this Section 4.17, all
operations and conditions at or in the Facilities) comply in all material
respects with all Environmental Laws except for any such noncompliance
which could not reasonably be expected to have a Material Adverse Effect;
(ii) Each of the Borrowers has obtained all Permits under
Environmental Laws necessary to their respective operations under currently
applicable law, and all such Permits are being maintained in good standing,
and each of the Borrowers is in compliance with all material terms and
conditions of such Permits except for any such failure to obtain, maintain
or comply which could not reasonably be expected to have a Material Adverse
Effect;
(iii) Neither of the Borrowers has received (a) any notice or claim
to the effect that it is or may be liable to any Person under any Environmental
Law, including without
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limitation, any relating to any Hazardous Materials except as could not
reasonably be expected to have a Material Adverse Effect or (b) any letter
or request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. (S)
9604) or comparable foreign or state laws regarding any matter which could
reasonably be expected to result in a Material Adverse Effect, and, to the
best of the Borrowers' knowledge, neither of the Borrowers is involved in
any investigation, response or corrective action relating to or in
connection with any Hazardous Materials at any Facility or at any other
location except for such of the foregoing which could not reasonably be
expected to have a Material Adverse Effect;
(iv) Neither of the Borrowers is subject to any judicial or
administrative proceeding alleging the violation of or liability under any
Environmental Laws which if adversely determined could reasonably be
expected to have a Material Adverse Effect;
(v) Neither of the Borrowers or any of their respective Facilities
or operations are subject to any outstanding written order or agreement
with any governmental authority or private party relating to (a) any actual
or potential violation of or liability under Environmental Laws or (b) any
Environmental Claims except for such of the foregoing which would
reasonably be expected to have a Material Adverse Effect;
(vi) Neither of the Borrowers has any contingent liability in
connection with any Release or threatened Release of any Hazardous
Materials by any of the Company or its Subsidiaries except for such of the
foregoing which would not reasonably be expected to have a Material Adverse
Effect;
(vii) Except as disclosed on Schedule B, neither of the Borrowers or
any predecessor of any of the Company or its Subsidiaries has filed any
notice under any Environmental Law indicating past or present treatment,
storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts
260-270 or any state equivalent;
(viii) No Hazardous Materials exist on, under or about any Facility
in a manner that would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect, and neither of the
Borrowers has filed any notice or report of a Release of any Hazardous
Materials that would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect;
(ix) Neither of the Borrowers or, to the best of the Borrowers'
knowledge, any of their respective predecessors has disposed of any
Hazardous Materials in a manner that would reasonably be expected to give
rise to an Environmental Claim having a Material Adverse Effect;
(x) No unregistered or noncompliant underground storage tanks and
no unmonitored or otherwise noncompliant surface impoundments are on or at
any Facility; and
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(xi) No Lien in favor of any Person relating to or in connection
with any Environmental Claim has been filed or has been attached to any
Facility or other assets of either of the Borrowers except for any such
Lien which would not reasonably be expected to have a Material Adverse
Effect.
Notwithstanding anything in this Section 4.17 to the contrary, no event or
condition has occurred which may interfere with present compliance by either of
the Borrowers with any Environmental Law, or which may give rise to any
liability under any Environmental Law, including, without limitation, any matter
disclosed on Schedule B which, individually or in the aggregate, has had a
----------
Material Adverse Effect.
4.18 Survival of Representations and Warranties
------------------------------------------
Subject to Section 12.10(B), all representations and warranties in the Loan
Documents shall survive delivery of the Bridge Notes and the making of the
Bridge Loan and shall continue until one year after repayment of the Bridge
Notes and the Obligations, and any investigation at any time made by or on
behalf of the Lenders shall not diminish the Lenders' right to rely thereon.
4.19 Permits
-------
Each of the Borrowers has, such certificates, permits, licenses,
franchises, consents, approvals, authorizations and clearances ("Permits"), and
is in compliance in all material respects with all Laws as are necessary to own,
lease or operate its properties and to conduct its businesses in the manner as
presently conducted and to be conducted immediately after the consummation of
the JV Transactions except where the failure to have such Permits or to comply
with such Laws could not, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect, and all such Permits are valid and in full force
and effect. Each of the Borrowers is in compliance in all material respects
with its obligations under such Permits and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or termination of such
Permits, except for any such revocation or termination as could not, singly or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
4.20 Insurance
---------
Each of the Borrowers carry or are entitled to the benefits of insurance in
such amounts and covering such risks as is generally maintained by companies of
established repute engaged in the same or similar businesses, and all such
insurance is in full force and effect.
4.21 Labor Matters
-------------
No labor disturbance by the employees of either of the Borrowers exists or,
to the best knowledge of the Borrowers, is threatened and the Borrowers are not
aware of any existing or imminent labor disturbance by the employees of the
principal suppliers, manufacturers or customers of either of the Borrowers.
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4.22 Guarantees
----------
Each Guarantor shall, on the date it executes and delivers a Guarantee
hereunder, have the full corporate power, authority and capacity to execute and
deliver such Guarantee and to perform all of its obligations to be performed
thereunder; all corporate and other acts, conditions and things required to be
done and performed or to have occurred prior to such execution and delivery to
constitute such Guarantee as a valid and legally binding obligation of such
Guarantor enforceable in accordance with its terms shall have been done and
performed and shall have occurred in due compliance with all Laws; on the date
of such execution and delivery, the execution, delivery and performance of such
Guarantee by such Guarantor will not (i) violate any Law or the charter or
bylaws of such Guarantor, or (ii) result in a breach of, a default under
(including, without limitation, any event which with notice or lapse of time, or
both, would constitute a breach of or a default under), or the creation of any
Lien on the properties or assets of such Guarantor, the Company or any other
Subsidiary of the Company under any Contractual Obligation of such Guarantor or
the Company or any other Subsidiary of the Company; on the date of such
execution and delivery, each Guarantee executed and delivered by a Guarantor
shall constitute legal, valid, binding and unconditional obligations of such
Guarantor, enforceable in accordance with its terms, except to the extent that
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the enforcement
of creditors' rights generally or by general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law); and
the foregoing representations and warranties of the Borrowers shall be deemed
for all purposes to have been made on each date when a Guarantee is delivered
hereunder with respect solely to that Guarantee and the Guarantor so issuing
such Guarantee.
4.23 Senior Subordinated Indenture; Etc.
-----------------------------------
The Borrowers and each Guarantor shall (to the extent such documents are
executed), on the date they execute and deliver the Senior Subordinated
Indenture and the Exchange Notes (or the guarantees related thereto, as the case
may be) and the Demand Take-Out Notes and the indenture governing the Demand
Take-Out Notes (or the guarantees related thereto, as the case may be), have the
full corporate power, authority and capacity to do so and to perform all of
their respective obligations to be performed thereunder; all corporate and other
acts, conditions and things required to be done and performed or to have
occurred prior to such execution and delivery to constitute them as valid and
legally binding obligations of the Borrowers and the Guarantors enforceable
against the Borrowers and the Guarantors in accordance with their respective
terms except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law), shall have been done and
performed and shall have occurred in due compliance with all applicable Laws; on
the date, if any, of such execution and delivery by the Borrowers and the
Guarantors, the Senior Subordinated Indenture and the Exchange Notes (and the
guarantees thereof) and the Demand Take-Out Notes and the indenture governing
the Demand Take-Out Notes (and the guarantees thereof) shall constitute legal,
valid, binding and unconditional obligations of the Borrowers and
49
<PAGE>
the Guarantors, as the case may be, enforceable against the Borrowers and the
Guarantors, as the case may be, in accordance with their respective terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
4.24 Broker's or Finder's Fees
-------------------------
Other than as contemplated in the Amended and Restated Commitment Letter
and other than fees payable to First Union and its Affiliates in connection with
the Acquisition, no broker's or finder's fees or commissions will be payable by
the Borrowers or any of their Subsidiaries with respect to any transaction
contemplated by any of the Loan Documents or the Senior Credit Facility and no
similar fees or commissions will be payable by the Borrowers or any of their
Subsidiaries for any other services rendered to the Borrowers or any of their
Subsidiaries in connection with the transactions contemplated hereby and
thereby. The Borrowers represent, warrant, covenant and agree that the
Borrowers will indemnify the Lenders and the Agents against, and hold each of
them completely harmless from and against, any and all claims, demands or
liabilities for broker's or finder's fees or similar fees or commissions
asserted to have been incurred in connection with any of the Loan Documents or
the Senior Credit Facility or any of the transactions contemplated thereunder.
4.25 JV Supply and Service Agreements
--------------------------------
The agreements and contracts set forth on Schedule D (the "JV Supply and
Service Agreements") represent all of the agreements and contracts (i) entered
into between the Company and Owens Corning (and such other Persons as may be
parties thereto) and (ii) that Owens Corning is transferring or assigning to, or
otherwise conferring rights thereunder upon, the Company in connection with the
Acquisition.
4.26 Year 2000 Compliance
--------------------
Any reprogramming and related testing required to permit the proper
functioning of each of the Borrowers' computer systems in and following the year
2000 will be completed in all material respects prior to September 1, 1999 (that
is, each of the Borrowers will be "Year 2000 Compliant"), and the cost to each
of the Borrowers of such reprogramming and testing will not result in a Default
or Potential Event of Default or a Material Adverse Effect. Except for such
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of each of the Borrowers is and,
with ordinary course upgrading and maintenance, will continue for the term of
this Agreement to be, adequate for the conduct of its business.
4.27 Entire Business
---------------
The assets transferred and the rights and services made available to the
Company pursuant to the LLC Sale and Purchase Agreement, the Asset Contribution
and Sale Agreements
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and the JV Supply and Service Agreements constitute all assets, properties and
rights necessary to conduct the Business following the Acquisition in all
material respects as currently conducted and as historically conducted by Owens
Corning.
4.28 Representations and Warranties in Other Agreements
--------------------------------------------------
As of the Closing Date, each representation and warranty made by the
Borrowers in any JV Transaction Document is true, correct and complete in all
material respects.
SECTION 5 AFFIRMATIVE COVENANTS
The Borrowers jointly and severally covenant and agree that, until the
satisfaction in full of the Bridge Loan and the Bridge Notes and all other
amounts due under this Agreement have been paid in full, they shall, and shall
cause each of their Subsidiaries to, fully and timely perform all covenants in
this Section 5.
5.1 Financial Statements and Other Reports
--------------------------------------
The Borrowers will maintain, and cause each of their Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of consolidated financial
statements in conformity with GAAP. The Company will deliver (or, in the case
of clause (i) below, make certain Officers available) to each Lender and the
Agents as follows:
(i) within 30 days after the end of each month ending after the
Closing Date, the Company will make available to the Lenders, Officers of
the Company who have responsibility for, or are knowledgeable with respect
to, financial and accounting matters of the Company and its Subsidiaries,
to discuss with the Lenders the Company's results of operations and
financial condition for each such month based on the most recent financial
information reasonably available to such Officers; provided, that the
--------
Company will not be required to comply with this clause (i) more than once
during each such 30 day period;
(ii) as soon as available and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year, (1) the
consolidated balance sheets of the Company and its Subsidiaries as at the
end of such fiscal quarter, (2) the related consolidated statements of
income, stockholders' equity and cash flows for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of
such fiscal quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous fiscal
year and the corresponding figures from the consolidated plan and financial
forecast for the current fiscal year delivered pursuant to Section 5.1(x),
all in reasonable detail and certified by the chief financial officer or
the controller of the Company that they fairly present in all material
respects the financial condition of the Company and its Subsidiaries at the
dates indicated and the results of their operations and their cash flows
for the periods indicated, subject to changes resulting from audit and
normal year-end adjustments, (3) the Company's
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quarterly report on Form 10-Q for such quarterly period, and (4) only if
the Company does not file quarterly reports on Form 10-Q with the
Commission, a narrative report describing the operations of the Company and
its Subsidiaries (in the form of management's discussion and analysis of
such operations which would comply with the disclosure requirements of the
Exchange Act and rules and regulations promulgated thereunder with respect
to management's discussion and analysis set forth in quarterly reports on
Form 10-Q) prepared for such fiscal quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal
quarter;
(iii) as soon as available, but in any event within ninety 90 days
after the end of (i) the fiscal year of the Company ending on December 31,
1998, a copy of the joint balance sheet of the Business and the Company and
its consolidated Subsidiaries as at the end of such fiscal year and the
related joint statements of income and retained earnings and of cash flows
of the Business and the Company and its consolidated Subsidiaries for such
year, audited by a firm of independent certified public accountants of
nationally recognized standing reasonably acceptable to the Agent, (x)
setting forth in comparative form the figures for the Business for the
previous year, reported on without a "going concern" or like qualification
or exception, or qualification indicating that the scope of the audit was
inadequate to permit such independent certified public accountants to
certify such financial statements without such qualification and (y)
prepared in a manner consistent with the annual audited financial
statements of the Business for the fiscal year ended on December 31, 1997
previously delivered to the Agents and the Lenders (giving effect to the
Acquisition as if it had occurred on January 1, 1998 and taking into
account expense adjustments, as applicable, for selling, general and
administrative expenses and for expenses incurred pursuant to the JV Supply
and Service Contracts); and (ii) each fiscal year of the Company
thereafter, (1) the consolidated balance sheets of the Company and its
Subsidiaries as at the end of such fiscal year, (2) the related
consolidated statements of income, stockholders' equity and cash flows for
such fiscal year, setting forth in each case in comparative form the
corresponding figures for the previous fiscal year and the corresponding
figures from the consolidated plan and financial forecast for the current
fiscal year delivered pursuant to section 5.l(x) for the fiscal year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer or the controller of the Company
that they fairly present in all material respects the financial condition
of the Company and its Subsidiaries, at the dates indicated and the results
of their operations and their cash flows for the periods indicated, (3) the
Company's annual report on Form 10-K for such year, (4) only if the Company
does not file annual reports on Form 10-K with the Commission, a narrative
report describing the operations of the Company and its Subsidiaries (in
the form of management's discussion and analysis of such operations which
would comply with the disclosure requirements of the Exchange Act and rules
and regulations promulgated thereunder with respect to management's
discussion and analysis set forth in annual reports on Form 10-K) prepared
for such fiscal year, and (5) in the case of such consolidated financial
statements, a report thereon of independent certified public accountants of
recognized national standing, which report shall be unqualified as to scope
of audit, shall express no doubts about the ability of the Company and its
Subsidiaries to continue as a going concern, and shall state
52
<PAGE>
that such consolidated financial statements fairly present in all material
respects the consolidated financial position of the Company and its
Subsidiaries as at the dates indicated and the results of their operations
and their cash flows for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination by such
accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards;
(iv) together with each delivery of financial statements pursuant to
Sections 5.1(ii) and (iii) above, (a) an Officers' Certificate of the
Company stating that the signers have reviewed the terms of this Agreement
and the Bridge Notes and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of the Company and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not disclosed
the existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as of the date of the
Officers' Certificate, of any condition or event which constitutes an Event
of Default or Potential Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof and what action the Company has taken, is taking and proposes to
take with respect thereto and (b) a Compliance Certificate demonstrating in
reasonable detail compliance (as determined in accordance with GAAP) during
and at the end of such accounting periods with the restrictions contained
in Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.7, 6.8, 6.9 and 6.13;
(v) together with each delivery of consolidated financial statements
pursuant to Section 5.1(iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating whether,
in connection with their audit examination, any condition or event that
constitutes an Event of Default or Potential Event of Default that relates
to accounting matters has come to their attention and, if any such
condition or event has come to their attention, specifying the nature and
period of existence thereof; provided that such accountants shall not be
--------
liable by reason of any failure to obtain knowledge of any such Event of
Default or Potential Event of Default that would not be disclosed in the
course of their audit examination, and (b) stating that based on their
audit examination nothing has come to their attention that causes them to
believe that the information contained in the Compliance Certificates
delivered therewith is not correct;
(vi) promptly upon receipt thereof, copies of all reports in final
form (other than reports of a routine or ministerial nature which are not
material) submitted to the Company by independent certified public
accountants in connection with each annual, interim or special audit of the
financial statements of the Company and its Subsidiaries made by such
accountants, including, without limitation, any comment letter submitted by
such accountants to management in connection with their annual audit;
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(vii) promptly upon the sending or filing thereof, copies of (a) all
financial statements, reports, notices and proxy statements sent or made
available generally by the Company to its public security holders or by any
Subsidiary of the Company to its public security holders other than the
Company or another Subsidiary of the Company, (b) all regular and periodic
reports and all registration statements (other than on Form S-8 or a
similar form) and prospectuses, if any, filed by the Company or any of its
Subsidiaries with any securities exchange or with the Commission or any
governmental authority (other than reports of a routine or ministerial
nature which are not material), and (c) all press releases and other
statements made available generally by the Company or any of its
Subsidiaries to the public concerning material developments in the business
of the Company or any of its Subsidiaries;
(viii) promptly upon any executive officer of either of the Borrowers
obtaining knowledge (a) of any condition or event which constitutes an
Event of Default or Potential Event of Default, or becoming aware that any
Lender or Agent has given any notice or taken any other action with respect
to a claimed Event of Default or Potential Event of Default under this
Agreement, (b) that any Person has given any notice to either of the
Borrowers or any Subsidiary of either of the Borrowers or taken any other
action with respect to a claimed default or event or condition which might
result in an Event of Default referred to in Section 7.2, (c) of any
condition or event which would be required to be disclosed in a current
report filed with the Commission on Form 8-K whether or not the Company is
required to file such reports under the Exchange Act, or (d) of the
occurrence of any event or change that has caused or evidences, either in
any case or in the aggregate, a Material Adverse Effect, an Officers'
Certificate specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
Person and the nature of such claimed default, Event of Default, Potential
Event of Default, event or condition, and what action the Borrowers have
taken, are taking and propose to take with respect thereto;
(ix) promptly upon any executive officer of either of the Borrowers
obtaining knowledge of (X) the institution of, or non-frivolous threat of,
any action, suit, proceeding (whether administrative, judicial or
otherwise), Environmental Claim, governmental investigation or arbitration
against or affecting either of the Borrowers or any of their Subsidiaries
or any property of either of the Borrowers or any of their Subsidiaries not
previously disclosed in writing by either of the Borrowers to the Lenders
or (Y) any material development in any proceeding that, in any case:
(1) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the JV
Transactions;
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written notice thereof together with such other information as may be
reasonably available to either of the Borrowers or any of their
Subsidiaries to enable the Lenders and their counsel to evaluate such
matters;
(x) as soon as practicable but in any event no later than 45 days
following the first day of each fiscal year a forecast for each of the next
succeeding twelve months of the consolidated balance sheet and the
consolidated statements of income, cash flow and cash position of the
Company and its Subsidiaries, together with an outline of the major
assumptions upon which the forecast is based. Together with each delivery
of financial statements pursuant to Sections 5.1(ii) and (iii) above, the
Company shall deliver a comparison of the current year to date financial
results against the budget required to be submitted pursuant to this
Section 5.1(x);
(xi) in writing, promptly upon any Officer of either of the
Borrowers obtaining knowledge that the Company or any of its Subsidiaries
has received notice or otherwise learned of any Environmental Claim or
other claim, demand, action, event, condition, report or investigation
indicating any potential or actual liability arising in connection with (x)
the non-compliance with or violation of the requirements of any
Environmental Law which could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, (y) the release, threatened
release or presence of any Hazardous Material in the environment which
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect or which either of the Borrowers or any of their
Subsidiaries would have a duty to report to a Tribunal under an
Environmental Law, or (z) the existence of any Environmental Lien on any
properties or assets of either of the Borrowers or any of their
Subsidiaries;
(xii) promptly after the availability thereof, copies of all
material amendments to the certificate of incorporation or by-laws of the
Company or any of its Subsidiaries;
(xiii) promptly upon any Person becoming a Subsidiary of the
Company, a written notice setting forth with respect to such Person (a) the
date on which such Person became a Subsidiary of the Company and (b) the
ownership structure and jurisdiction of incorporation of such Person; and
(xiv) with reasonable promptness such other information and data
with respect to the Company or any of its Subsidiaries or any of their
respective properties, businesses or assets as from time to time may be
reasonably requested by any Lender; provided that no information or data
--------
shall be required to be delivered hereunder or under any other provision of
this Agreement if it would violate any applicable attorney-client or
accountant-client privilege.
5.2 Corporate Existence, Etc.
-------------------------
The Company will at all times preserve and keep in full force and effect
its (a) rights and franchises to its business and those of each of its
Subsidiaries, except as permitted by Section 6.6
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or where the failure to so preserve or keep could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The Company will at all times preserve and keep in full force and
effect the corporate existence of Capital.
5.3 Payment of Taxes and Claims; Tax Consolidation
----------------------------------------------
A. Each of the Borrowers will, and will cause each of its Subsidiaries
to, pay all material Taxes, assessments and other governmental charges imposed
upon it or any of its Subsidiaries or any of its or their material properties or
assets or in respect of any of its or their franchises, business, income or
property before any material penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
which have become due and payable and which by law have or may become a Lien
upon any of its or their properties or assets prior to the time when any
material penalty or fine shall be incurred with respect thereto; provided that
--------
no such charge or claim need be paid if the validity or amount of such charge or
claim is being diligently contested in good faith and if such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor.
B. Neither of the Borrowers will, nor permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income Tax Return with any
Person (other than the Borrowers or any of their Subsidiaries so long as the
filing of such consolidated income Tax Return is permitted by applicable law).
5.4 Maintenance of Properties; Insurance
------------------------------------
Each of the Borrowers will maintain or cause to be maintained in good
repair, working order and condition, ordinary wear and tear excepted, all
material properties used or useful in its business and the business of its
Subsidiaries and from time to time promptly will make or cause to be made all
necessary repairs, renewals and replacements thereof; provided that nothing in
--------
this Section 5.4 shall prevent either of the Borrowers or any of its
Subsidiaries from discontinuing the use, operation or maintenance of any such
properties, or disposing of any of them, if such action is in the ordinary
course of business or, in the reasonable good faith judgment of its Board of
Directors, necessary or desirable in the conduct of its business or otherwise
permitted by this Agreement. Each of the Borrowers will maintain or cause to be
maintained, with financially sound and reputable insurers to the extent
consistent with prudent business practices and customary in its industry,
insurance with respect to its properties and business and the properties and
businesses of its Subsidiaries against loss or damage of the kinds (including,
in any event, business interruption insurance) and in the amounts customarily
carried or maintained under similar circumstances by corporations of established
reputation engaged in similar businesses and owning similar properties in the
same general respective areas in which either of the Borrowers and its
Subsidiaries operate.
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5.5 Inspection
----------
Each of the Borrowers shall permit any authorized representatives
designated by the Agents to visit and inspect any of the properties of it or its
Subsidiaries, including, without limitation, its and their financial and
accounting records, and to receive copies and extracts therefrom, and to discuss
its and their affairs, finances and accounts with its and their officers and
independent public accountants (provided that representatives of each of the
Borrowers or any of its Subsidiaries may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be reasonably
requested.
5.6 Equal Security for Bridge Loan
------------------------------
If either of the Borrowers or any of their Subsidiaries shall create,
assume or suffer to exist any Lien upon any of their respective properties or
assets, whether now owned or hereafter acquired, other than Liens permitted by
the provisions of Section 6.2, the Borrowers shall make or cause to be made
effective provision whereby (i) the Obligations under this Agreement, in the
case of the Borrowers and (ii) the Guarantee Obligations of the Guarantors if
any, will be secured by such Lien equally and ratably with any and all other
Indebtedness thereby secured as long as any such Indebtedness shall be secured;
provided that this covenant shall not be construed as or deemed to be a consent
- --------
by the Agents to any violation of the provisions of Section 6.2; and provided,
--------
further, that the Borrowers shall under no circumstances be required to make or
- -------
cause to be made effective provision whereby the Obligations under this
Agreement will be secured, directly or indirectly, by Margin Stock.
5.7 Compliance with Laws, Etc.
--------------------------
The Borrowers shall and shall cause each of their Subsidiaries to comply
with the requirements of all Laws, to the extent noncompliance, singly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.8 Maintenance of Accurate Records, Etc.
-------------------------------------
Each of the Borrowers shall, and shall cause each of its Subsidiaries to,
keep true books and records and accounts in which full and correct entries will
be made of all of its and their respective business transactions, and will
reflect, and cause each of its Subsidiaries to reflect, in its or their
respective financial statements adequate accruals and appropriations to reserves
all in accordance with GAAP and consistent with prior business practices.
5.9 Take-Out Financing
------------------
The Borrowers agree that upon request (a "Take-Out Request") from the Take-
Out Bank, the Borrowers will take all actions necessary or desirable, to the
extent within their power, so that the Take-Out Bank can, as soon as practicable
after such Take-Out Request, publicly sell or privately place the Demand Take-
Out Notes (the "Initial Request Date"). The Borrowers further agree that upon
notice by the Take-Out Bank, at any time and from time to time following the
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Initial Request Date, the Borrowers will issue and sell Demand Take-Out Notes
upon such terms and conditions as specified in such notice; provided that (i)
--------
the interest rate thereon (whether fixed or floating) shall be determined by the
Take-Out Bank in light of the then prevailing market conditions but in no event
shall the Borrowers be required to accept either (a) a stated interest rate on
the Demand Take-Out Notes in excess of 13.0% per annum or (b) an issue price
--- -----
(after deducting the Take-Out Bank's selling or placement discount but before
deducting expenses) of less than 97.25% of par value; (ii) the Borrowers, in its
reasonable discretion after consultation with the Take-Out Bank, shall determine
whether the Demand Take-Out Notes shall be issued through a public offering or a
private placement and, if issued in a private placement, the Demand Take-Out
Notes will be accompanied by customary registration rights; (iii) the maturity
of any Demand Take-Out Notes shall not be earlier than the tenth anniversary of
the Closing Date; and (iv) all other arrangements with respect to the Demand
Take-Out Notes shall be reasonably satisfactory in all respects to the Take-Out
Bank and the Borrowers in light of the then prevailing market conditions. The
foregoing shall not limit the Borrowers' right to refinance the Bridge Loan by
any other means.
5.10 Exchange of Bridge Notes
------------------------
(a) The Borrowers will, at any time after the Exchange Date, on or prior
to the tenth Business Day following the written request of First Union or
Warburg (the "Initial Exchange Request"):
(i) Execute and deliver, cause each Guarantor, if any, to execute and
deliver, and cause a bank or trust company acting as trustee thereunder to
execute and deliver, the Senior Subordinated Indenture;
(ii) Notify each Lender that the Bridge Notes may be exchanged for
Exchange Notes (as defined below) and provide each Lender with a copy of
the Senior Subordinated Indenture.
(b) At any time after the receipt of the Initial Exchange Request, upon
receipt of a written request from any Lender to exchange an amount of Bridge
Notes permitted by clause (c) below, (a "Subsequent Exchange Request"), the
Borrowers shall, within 10 Business Days following any such receipt:
(i) Execute and deliver in accordance with the Senior Subordinated
Indenture to each Lender that delivered the Initial Exchange Request or a
Subsequent Exchange Request a note in the form attached to the Senior
Subordinated Indenture (the "Exchange Notes") in exchange for such Bridge
Notes dated the date of the issuance of such Exchange Note, payable to such
Lender in the same principal amount as such Bridge Notes (or portions
thereof) being exchanged, and cause each Guarantor to endorse its guarantee
thereon; and
(ii) Execute and deliver, and cause each Guarantor, if any, to
execute and deliver, to each holder or beneficial owner of Exchange Notes,
a Registration Rights Agreement containing terms as are generally set forth
in Exhibit IV hereto, if such
----------
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Registration Rights Agreement has not previously been executed and
delivered or, if such Registration Rights Agreement has previously been
executed and delivered and such holder or owner is not already a party
thereto, permit such holder or owner to become a party thereto.
(c) A Subsequent Exchange Request shall specify the principal amount of
the Bridge Notes to be exchanged pursuant to this Section 5.10 which shall be at
least $5,000,000 and integral multiples of $10,000 in excess thereof. Bridge
Notes delivered to the Borrowers under this Section 6.10 in exchange for
Exchange Notes shall be canceled by the Borrowers and the corresponding amount
of the Bridge Loan deemed repaid and the Exchange Notes shall be governed by and
construed in accordance with the terms of the Senior Subordinated Indenture.
(d) The Exchange Notes shall (unless First Union otherwise elects by
providing the Borrowers with notice prior to the Exchange Date) bear interest at
a fixed rate per annum equal to the rate of interest borne by the Bridge Notes
on the Exchange Date and shall be subject to the PIK Interest Amount if
otherwise available to the Borrowers. The Exchange Notes will not be redeemable
by the Borrowers for a period of 5 years from the Closing Date and, subject to
Section 6.16, will be redeemable thereafter, in whole or in part, at a
redemption price equal to the principal amount thereof plus accrued and unpaid
interest thereon to the date of such redemption plus the Applicable Redemption
Premium; provided, however, that if First Union provides the notice described in
------- -------
the first sentence of this paragraph, but subject to Section 6.16, the Exchange
Notes will be redeemable at any time, in whole or in part, by the Borrowers upon
not less than 10 days written notice to the holders of such Exchange Notes at a
redemption price equal to the principal amount thereof plus accrued and unpaid
interest thereon to the date of such redemption.
(e) The bank or trust company acting as trustee under the Senior
Subordinated Indenture shall at all times be a corporation organized and doing
business under the laws of the United States of America or the State of New
York, in good standing and having its principal offices in the Borough of
Manhattan, in The City of New York, which is authorized under such laws to
exercise corporate trust powers and is subject to supervision or examination by
Federal or State authority and which has a combined capital and surplus of not
less than $50,000,000.
5.11 ERISA Compliance
----------------
The Borrowers and each of their Subsidiaries will notify the Lenders
promptly upon becoming aware of any fact arising in connection with any of the
Pension Plans or any Multiemployer Plans which have resulted in or could be
reasonably expected to constitute or result in an ERISA Event, together with a
statement as to the action, if any, proposed to be taken with respect thereto.
5.12 Payments in U.S. Dollars
------------------------
All payments of any Obligations to be made hereunder or under the Bridge
Notes by the Borrowers or any other obligor with respect thereto shall be made
solely in U.S. Dollars or such other currency as is then legal tender for public
and private debts in the United States of America.
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<PAGE>
5.13 Register
--------
The Borrowers hereby designate First Union to serve as the Borrower's
agent, solely for purposes of this Section 5.12, to maintain a register (the
"Register") on which it will record the Bridge Loan made by each of the Lenders
and each repayment in respect of the principal amount of the Bridge Loan of each
Lender. Failure to make any such recordation, or any error in such recordation
shall not affect the Borrowers' obligations in respect of such Bridge Loan. With
respect to any Lender, the transfer of the Bridge Loan Commitment of such Lender
and the rights to the principal of, and interest on, any Bridge Loan made
pursuant to such Bridge Loan Commitment shall not be effective until such
transfer is recorded on the Register maintained by First Union with respect to
ownership of such Bridge Loan Commitment and Bridge Loan and prior to such
recordation all amounts owing to the transferor with respect to such Bridge Loan
Commitment and Bridge Loan shall remain owing to the transferor. The
registration of assignment or transfer of all or part of any Bridge Loan
Commitment and Bridge Loan shall be recorded by First Union on the Register only
upon the receipt by First Union of a properly executed and delivered assignment
and assumption agreement pursuant to Section 12.2A. Coincident with the delivery
of such an assignment and assumption agreement to First Union for acceptance and
registration of assignment or transfer of all or part of a Bridge Loan, or as
soon thereafter as practicable, the assigning or transferor Lender shall
surrender the Bridge Note evidencing such Bridge Loan, and thereupon one or more
new Bridge Notes of the same type and in the same aggregate principal amount
shall be issued to the assigning or transferor Lender and/or the new Lender
5.14 Lenders Meeting
---------------
The Borrowers will participate in a meeting with the Lenders once during
each fiscal year during which any Obligations are outstanding hereunder to be
held at a location and a time selected by the Borrowers and reasonably
satisfactory to the Lenders.
5.15 Additional Guarantors
---------------------
The Borrowers will cause any Person that becomes a Wholly-Owned Subsidiary
of either Borrower that is organized under the laws of the United States or any
state or commonwealth thereof or under the laws of the District of Columbia
(whether by creation, acquisition or otherwise) to execute and deliver a
notation of guarantee substantially in the form of Exhibit VII, (and with such
-----------
documentation relating thereto as First Union shall require, including, without
limitation, a supplement or amendment to this Agreement and opinions of counsel
as to the enforceability of such guarantee) pursuant to which such Wholly-Owned
Subsidiary shall become a Guarantor under the Bridge Notes and this Agreement in
accordance with Section 10 with the same effect and to the same extent as if
such Person had been named herein as a Guarantor.
5.16 Marketing Take-Out Securities
-----------------------------
(a) If requested from time to time by First Union, the Borrowers will make
appropriate officers of the Borrowers and their Subsidiaries available to First
Union for meetings
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<PAGE>
with prospective purchasers of the Bridge Notes and preparing and presenting to
such prospective purchasers material in connection with such meetings.
(b) If requested by FUCM, the Borrowers will make appropriate officers
of the Borrowers and their Subsidiaries available to FUCM for road show meetings
with prospective purchasers of the Take-Out Securities and preparing and
presenting to potential investors road show material in a manner consistent with
other new issuances of high yield debt securities.
5.17 Environmental Matters
---------------------
(i) The Borrowers shall and shall cause each of their
Subsidiaries (including, without limitation, all operations and conditions
at or in the Facilities) to comply materially with all applicable
Environmental Laws and to maintain and comply materially with the terms of
all Permits under applicable Environmental Laws necessary to their
respective operations.
(ii) The Borrowers shall and shall cause each of their
Subsidiaries (including, without limitation, all operations and conditions
at or in the Facilities) promptly to conduct and complete all
notifications, investigations, studies, sampling and testing, and all
remedial, cleanup, removal and other actions, required under applicable
Environmental Laws.
(iii) The Borrowers shall and shall cause each of their
Subsidiaries (including, without limitation, all operations and conditions
at or in the Facilities) to limit the presence of Hazardous Materials to
those Hazardous Materials that are necessary to the normal operation of
their respective businesses.
SECTION 6 NEGATIVE COVENANTS
The Borrowers jointly and severally covenant and agree that until the
satisfaction in full of the Bridge Loan and the Bridge Notes and all other
amounts due under this Agreement have been paid in full, they shall, and shall
cause each of their Subsidiaries to, fully and timely perform all covenants in
this Section 6.
6.1 Indebtedness
------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries, directly or indirectly, to Incur any Indebtedness, except for the
following ("Permitted Indebtedness"):
(i) Indebtedness under the Bridge Notes, the Exchange Notes, the
Guarantees and the Keep Well Agreement;
(ii) Indebtedness of up to $315,000,000 in the aggregate at any
one time outstanding under the Senior Credit Facility, reduced by any
required permanent repayments (which are accompanied by a corresponding
permanent commitment reduction) thereunder (it being understood that the
Senior Subordinated Indenture shall
61
<PAGE>
provide that any borrowings under the Senior Credit Facility in excess of
$315,000,000, or such lesser amount resulting from any permanent commitment
reductions, must be made in accordance with the last paragraph of this
Section 6.1);
(iii) other Indebtedness of the Company and its Subsidiaries
existing on the Closing Date (as set forth in Schedule C) reduced by the
----------
amount of any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions thereon;
(iv) Hedging Obligations of the Company and its Subsidiaries
entered into in the ordinary course of business and not for speculative
purposes;
(v) Contingent Obligations permitted by Section 6.5 and, upon any
matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(vi) Indebtedness of a Subsidiary of the Company to the Company or
to a Subsidiary of the Company for so long as such Indebtedness is held by
the Company or a Subsidiary of the Company, in each case subject to no Lien
held by a Person other than the Company or a Subsidiary of the Company;
provided that if as of any date any Person other than the Company or a
--------
Subsidiary of the Company owns or holds any such Indebtedness or holds a
Lien (other than Permitted Liens) in respect of such Indebtedness, such
date shall be deemed the Incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly-Owned Subsidiary of
the Company for so long as such Indebtedness is held by a Wholly-Owned
Subsidiary of the Company and subject to no Lien; provided that (a) any
--------
Indebtedness of the Company to any Wholly-Owned Subsidiary of the Company
is unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under any Senior Indebtedness and under this
Agreement and the Bridge Notes and (b) if as of any date any Person other
than a Wholly-Owned Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien (other than Permitted Liens) in
respect of such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
-------- -------
Indebtedness is extinguished within two Business Days of Incurrence;
(ix) Indebtedness of the Company or any of its Subsidiaries (other
than Capital) represented by letters of credit for the account of the
Company or such Subsidiary, as the case may be, in order to provide
security for workers' compensation
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<PAGE>
claims, payment obligations in connection with self-insurance or similar
requirements in the ordinary course of business;
(x) Permitted Refinancing Indebtedness; and
(xi) Additional Indebtedness of the Company and its Subsidiaries
(other than Capital) in an aggregate principal amount not to exceed
$2,000,000 at any one time outstanding for Capital Lease Obligations or for
purposes of financing the purchase price or construction cost of equipment,
fixtures or similar property.
In addition to the foregoing, the Senior Subordinated Indenture shall
provide that the Company and any Guarantors may Incur additional Indebtedness;
provided, that (a) no Potential Event of Default with respect to payment of
- --------
principal of, or interest on, the Exchange Notes or Event of Default shall have
occurred and be continuing at the time of or as a consequence of the Incurrence
of any such Indebtedness and (b) immediately before and immediately after giving
effect to the Incurrence of such Indebtedness, the Consolidated Fixed Charge
Coverage Ratio of the Company would be greater than 3.0 to 1.0.
6.2 Liens
-----
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument in respect of goods or accounts receivable) of the
Company or of any of its Subsidiaries, whether now owned or hereafter acquired,
or assign or otherwise convey any right to receive any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
State or under any similar recording or notice statute, other than the following
(collectively, the "Permitted Liens"):
(i) Liens for Taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any of its Subsidiaries shall
have set aside on its or their books such reserves as may be required
pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business in connection therewith,
or to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government performance and return-of-
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money bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default and
Liens securing appeal or similar surety bonds therefor; provided, that (a)
no Event of Default exists with respect thereto and (b) the aggregate
amount secured by such Lien does not exceed $10,000,000 (exclusive of Liens
securing judgments covered by insurance in respect of which the carrier has
not contested coverage);
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not interfering
in any material respect with the ordinary conduct of the business of the
Company or any of its Subsidiaries;
(vi) any interest or title of a lessor under any Capital Lease;
provided that such Liens do not extend to any property or assets which is
--------
not leased property subject to such Capital Lease;
(vii) purchase money Liens to finance property or assets of the
Company or a Subsidiary of the Company acquired in the ordinary course of
business; provided, however, that (A) the related purchase money
-------- -------
Indebtedness (x) is Incurred in accordance with Section 6.1, (y) shall not
exceed the cost of such property or assets and (z) shall not be secured by
any property or assets of the Company or any Subsidiary of the Company
other than the property and assets so acquired and (B) the Lien securing
such Indebtedness shall be created within 30 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of the Company or any of its Subsidiaries securing such
obligations of the Company or any of its Subsidiaries in respect of
bankers' acceptances issued or created for the account of the Company or
any of its Subsidiaries to facilitate the purchase, shipment or storage of
such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Subsidiaries, including rights of offset and set-off;
(xi) Liens securing Hedging Obligations which Hedging Obligations
relate to Indebtedness that is Incurred under this Agreement or the Senior
Credit Facility;
(xii) Liens upon all or substantially all of the assets of the
Company and its Subsidiaries, whether now owned or hereafter acquired,
granted to secure the Senior Credit Facility; and
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<PAGE>
(xiii) Liens existing on the Closing Date as set forth on Schedule A
----------
to the extent and in the manner such Liens are in effect on the Closing
Date and Liens to secure any Permitted Refinancing Indebtedness which is
Incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under this Section 6.2 and which Indebtedness has been Incurred
in accordance with Section 6.1; provided that such new Lien shall not
--------
extend to any property or assets other than the property or assets securing
the Indebtedness being Refinanced by such Permitted Refinancing
Indebtedness.
6.3 Restricted Payments
-------------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly (i) declare or pay any dividend or make
any distribution, on any Capital Stock of the Company or its Subsidiaries (other
than dividends or distributions payable solely in Qualified Capital Stock of the
Company or dividends or distributions payable to the Company or any Wholly-Owned
Subsidiary of the Company), (ii) purchase, redeem or otherwise acquire or retire
for value any of the Capital Stock of the Company or any of its Subsidiaries, or
any warrants, rights or options to acquire shares of any class of such Capital
Stock, (iii) make any principal payment on, purchase, defease, redeem, prepay,
or otherwise acquire or retire for value, other than any scheduled final
maturity payment, scheduled repayment or scheduled sinking fund payment, any
Subordinated Indebtedness or Senior Subordinated Indebtedness of the Company or
any of its Subsidiaries or (iv) make any Investment other than Permitted
Investments (any such dividend, distribution, purchase, redemption, acquisition,
retirement, defeasance, prepayment or Investment set forth in clauses (i), (ii),
(iii) and (iv) above a "Restricted Payment").
The preceding paragraph will not prohibit (a) the making of distributions
in cash to Jefferson and AGY Holdings within 75 days after the end of each
taxable year of the Company in an amount equal to the greater of (i) the product
of (A) the sum of (x) the maximum federal corporate income tax rate in effect
during such taxable year and (y) six percent and (B) the sum of the items of
ordinary income and expense and net capital gain allocated to Jefferson or AGY
Holdings, as the case may be, for such taxable year (taking into account any
special allocations resulting from adjustments under section 743 of the Code,
referred to herein as "Special Allocations") and (ii) actual income taxes then
being assessed against Jefferson or AGY Holdings on items of ordinary income and
expense and net capital gain allocated to Jefferson or AGY Holdings so long as,
in each case, immediately both before and after giving effect to such payments
no Event of Default shall then exist; (b) the making of distributions to
Jefferson with respect to the purchase price under the LLC Sale and Purchase
Agreement for net asset value not to exceed $2.5 million and (c) the making by
the Company and its Subsidiaries of Restricted Payments not to exceed $4,000,000
in the aggregate; provided, that the Senior Subordinated Indenture shall omit
--------
this clause (c).
Notwithstanding the first paragraph of this Section 6.3, the Senior
Subordinated Indenture shall provide that the Company and its Subsidiaries may
make Restricted Payments if, at the time of making any such Restricted Payment
or immediately after giving effect thereto, (i) no Potential Event of Default or
Event of Default shall have occurred and be continuing, (ii) the
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Company is able to incur at least $1.00 of additional Indebtedness pursuant to
the last paragraph of Section 6.1 and (iii) the aggregate amount of Restricted
Payments (including such proposed Restricted Payment) made subsequent to the
Closing Date (the amount expended for such purposes, if other than cash, being
the fair market value of such property) does not exceed: (A) 50% of cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) accrued during the period (treated as one
accounting period) beginning on the first full fiscal quarter after the Closing
Date to the end of the most recent fiscal quarter for which consolidated
financial information of the Company is available; less (B) the amount of
----
Restricted Payments made pursuant to clause (c) of the preceding paragraph (it
being understood that clause (c) of the preceding paragraph will be omitted from
the Senior Subordinated Indenture); plus (C) without duplication of any amounts
----
included in clause (A) above, in the case of the disposition or repayment of, or
the receipt by the Company or any Subsidiary of the Company of any dividends or
distributions from, any Restricted Payment made pursuant to clause (c) of the
preceding paragraph that constituted an Investment, an amount equal to the
lesser of the amount of such Investment and the amount received by the Company
or any Subsidiary of the Company upon such disposition, repayment, dividend or
distribution. In determining the aggregate amount of Restricted Payments made
subsequent to the Closing Date in accordance with clause (iii) of this
paragraph, amounts expended pursuant to clauses (a) and (b) of the preceding
paragraph shall not be included in such calculation.
6.4 Contingent Obligations
----------------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) the Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations outstanding on the Closing Date
described in Schedule C.
----------
(ii) any Guarantors may become and remain liable with respect to
Contingent Obligations under the Guarantees;
(iii) the Company and its Subsidiaries (other than Capital) may
become and remain liable with respect to Contingent Obligations in respect
of customary indemnification and purchase price adjustment obligations
incurred in connection with additional acquisitions of assets or stock,
Asset Sales or other sales of assets; provided that the maximum assumable
--------
liability in respect of all such obligations shall at no time exceed the
gross proceeds actually received by the Company and its Subsidiaries in
connection with such Asset Sales and other sales;
(iv) the Company and its Subsidiaries (other than Capital) may
become and remain liable with respect to Contingent Obligations under
guarantees made under the Senior Credit Facility; and
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(v) Hedging Obligations of the Company and its Subsidiaries entered
into in the ordinary course of business and not for speculative purposes.
6.5 Layering of Indebtedness
------------------------
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, Incur any Indebtedness that is by its terms (or by the terms of any
agreement governing such Indebtedness) subordinated in right of payment to any
other Indebtedness of the Company or of such Subsidiary unless such Indebtedness
is also by its terms (or by the terms of any agreement governing such
Indebtedness) made expressly subordinate to the Bridge Notes and the Guarantees
to the same extent and in the same manner as the Bridge Notes and the Guarantees
are subordinated to the Senior Credit Facility, except for Senior Subordinated
Indebtedness that is subordinate to the Senior Credit Facility to the same
extent and in the same manner as the Bridge Loan and the Guarantees.
6.6 Restriction on Fundamental Changes
----------------------------------
Subject to Section 5.2 and other than the sale of 100% of a Subsidiary of
the Company in accordance with Section 6.13 and Section 6.14, the Company shall
not, and shall not cause or permit any of its Subsidiaries to, directly or
indirectly, enter into any transaction, or series of related transactions, of
merger, amalgamation, consolidation or combination, or consolidate, or
liquidate, windup or dissolve itself (or suffer any liquidation or dissolution),
or convey, sell, lease, sublease, transfer or otherwise dispose of, in one
transaction or in a series of transactions, all or substantially all of its
business, property or assets, whether now owned or hereafter acquired, except
that any Subsidiary of the Company (other than Capital) may be merged,
amalgamated, consolidated or combined with or into the Company or any Guarantor
or be liquidated, wound up or dissolved, or all or substantially all of its
business, property or assets may be conveyed, sold, leased, transferred or
otherwise disposed of, in one transaction or in a series of related
transactions, to the Company, any Guarantor or any Person which, as a result
thereof, shall (i) become a Wholly-Owned Subsidiary of the Company and (ii)
become a Guarantor in accordance with Section 10; provided that (A) no Potential
--------
Event of Default or Event of Default shall have occurred and be continuing or
would result therefrom, (B) in the case of such a merger, amalgamation,
consolidation or combination of the Company and a Subsidiary of the Company, the
Company shall be the continuing or surviving entity, (C) the surviving entity
(I) continues to be bound as such under this Agreement or the Guarantee of such
Guarantor, as the case may be, and (II) executes and delivers to First Union
immediately upon consummation of such transaction a written confirmation or
acknowledgment to such effect, in form and substance satisfactory to First
Union, together with evidence of appropriate corporate power, authority and
action and a written legal opinion in form and substance satisfactory to First
Union to the effect that this Agreement and such Guarantee continue to be a
legal, valid and binding obligation of such entity, enforceable against such
entity in accordance with its terms (subject to customary exceptions in respect
of bankruptcy, insolvency and other equitable remedies) and with respect to such
other matters as First Union may reasonably request and (D) immediately after
giving effect to any transaction contemplated by this Section 6.6, the Company
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<PAGE>
shall have a Consolidated Net Worth in an amount that is not less than the
Consolidated Net Worth of the Company prior to such transaction.
6.7 Limitation on Dividend and Other Payment Restrictions Affecting
---------------------------------------------------------------
Subsidiaries
------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary of the Company to (a) pay dividends or make any other
distributions on its Capital Stock or any other interest or participation in, or
measured by, such Subsidiary's profits; (b) make loans or advances or pay any
Indebtedness or other obligation owed to the Company or to any Subsidiary of the
Company; or (c) transfer any of its property or assets to the Company or to any
Subsidiary of the Company (any such restriction or encumbrance a "Payment
Restriction"), except for such encumbrances or restrictions existing under or by
reason of: (1) any restrictions contained in (i) the Loan Documents and any
instrument governing Take-Out Securities or Exchange Notes to the extent
Incurred in accordance with this Agreement; (ii) the Senior Credit Facility as
in effect on the Closing Date and any amendment or restatement thereof;
provided, however, that any such amendment or restatement is not materially more
- -------- -------
restrictive with respect to such encumbrance or restriction than those in
existence on the Closing Date; (iii) any instrument governing Acquired
Indebtedness which encumbrances or restrictions do not apply to any Person, or
the properties of assets of any Person, other than the Subsidiary acquired and
such Acquired Indebtedness is otherwise permitted to be incurred pursuant to
Section 6.1; or (iv) secured Indebtedness otherwise permitted to be incurred
pursuant to Sections 6.1 and 6.2 that limits the right of the debtor to dispose
of the assets securing such Indebtedness; (2) customary non-assignment
provisions of any contract and customary provisions restricting assignment or
subletting in any lease governing a leasehold interest of any Subsidiary of the
Company, or any customary restriction on the ability of a Subsidiary of the
Company to dividend, distribute or otherwise transfer any asset which secures
Indebtedness Incurred by such Subsidiary pursuant to Section 6.1(xi); (3)
restrictions with respect to a Subsidiary of the Company imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of
Capital Stock or assets of such Subsidiary; provided, however, that such
-------- -------
restrictions apply solely to the Capital Stock or assets of such Subsidiary
which are being sold; (4) customary restrictions imposed on the transfer of
copyrighted or patented materials; (5) applicable law; and (6) any instrument
that Refinances any Indebtedness effecting any such encumbrance or restriction
pursuant to clause (1) above; provided that the provisions relating to any such
--------
encumbrance or restriction in any such instrument are not more restrictive than
those contained in the agreements referred to in clause (1).
6.8 Transactions with Shareholders and Affiliates
---------------------------------------------
(a) The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, enter into any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), unless:
(i) the terms of such Affiliate Transaction are no less favorable than those
that could reasonably be
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<PAGE>
expected to be obtained in a comparable transaction at such time on an arm's-
length basis from a Person that is not an Affiliate of the Company; (ii) in the
event that such Affiliate Transaction involves aggregate payments, or transfers
of property or services with a fair market value in excess of $1.0 million, the
terms of such Affiliate Transaction shall be approved by a majority of the
disinterested members of the Board of Directors of the Company, such approval to
be evidenced by a resolution of the Board of Directors of the Company stating
that such members of the Board of Directors have determined that such
transaction complies with the foregoing provisions and (iii) in the event that
such Affiliate Transaction involves aggregate payments or transfers or services
with a fair market value in excess of $5.0 million, the Company shall, prior to
the consummation thereof, obtain the written approval of First Union with
respect to the terms thereof.
(b) The Senior Subordinated Indenture shall provide that in the event
that such Affiliate Transaction involves aggregate payments, or transfer of
property or services with a fair market value, in excess of $10.0 million, the
Company shall, prior to the consummation thereof, obtain a favorable opinion as
to the fairness of such transaction or series of related transactions to the
Company and the relevant Subsidiary (if any) from a financial point of view from
an Independent Financial Advisor and file the same with the trustee under the
Senior Subordinated Indenture.
(c) Notwithstanding the foregoing, the restrictions set forth in
paragraph (a) or (b) shall not apply to (i) transactions with or among the
Company and any Wholly-Owned Subsidiary of the Company or between or among
Wholly-Owned Subsidiaries; (ii) reasonable fees and compensation paid to, and
any indemnity provided on behalf of, officers, directors, employees, consultants
or agents of the Company or any Subsidiary of the Company as determined in good
faith by the Company's Board of Directors; (iii) any transactions undertaken
pursuant to any Contractual Obligations or rights set forth in Schedule E (as in
effect on the Closing Date) and any renewals thereof or amendments thereto;
provided, that such renewals or amendments do not materially change the rights
- --------
and obligations of the Company or any of its Subsidiaries; (iv) any Investments
made in compliance with clause (iv) of the definition of Permitted Investments;
(v) loans and advances to officers, directors and employees of the Company or
any Subsidiary of the Company for travel, entertainment, moving and other
relocation expenses, in each case made in the ordinary course of business, (vi)
the entering into by the Company and any of its consolidated Subsidiaries of a
tax sharing or similar arrangement and (vii) any Restricted Payment permitted to
be made pursuant to Section 6.3.
6.9 Subsidiary Stock; Borrower Restrictions
---------------------------------------
(a) Except for any sale of 100% of the Capital Stock or other equity
securities of any of the Company's Subsidiaries in compliance with the
provisions of Section 6.6, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of Capital Stock or other equity securities of
any of the Company's Subsidiaries, except (i) to qualify directors if required
by applicable law, (ii) to the Company's or to a Wholly-Owned Subsidiary of the
Company, and (iii) Liens in favor of the lenders under the Senior Credit
Facility; provided, that, notwithstanding the foregoing, Capital
--------
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<PAGE>
shall, at all times prior to the reorganization of the Company as a corporation,
remain a Wholly-Owned Subsidiary of the Company.
(b) The Company will not permit Capital to acquire or hold any
significant assets or other properties or engage in any business activities.
6.10 Business Activities
-------------------
The Company will not, nor will it permit any Subsidiary to engage in any
business other than a Permitted Business.
6.11 Amendment or Waivers of Certain Documents
-----------------------------------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, enter into any amendment, modification
supplement or waiver with respect to any JV Transaction Document to which it or
any of its Subsidiaries is a party as in effect on the date hereof or that would
modify any of the provisions thereof or any of the definitions relating thereof
in a manner adverse to the Lenders.
6.12 Amendment to Charter Documents
------------------------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, amend their respective certificates of incorporation or
formation or bylaws or operating agreements in any respect which could be
materially adverse to the interests of the Lenders.
6.13 Asset Sales
-----------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, consummate any Asset Sale unless (1)
the Company or such Subsidiary, as the case may be, receives consideration
therefor at the time thereof at least equal to the fair market value (determined
at the time of such Asset Sale) of the property, assets or stock that is the
subject of such Asset Sale, (2) at least 85% of the consideration received
therefor by the Company or such Subsidiary is in the form of cash or Cash
Equivalents and (3) all of the Net Cash Proceeds in respect thereof are applied
by the Company or a Subsidiary of the Company in accordance with Section
2.4A(ii)(a); provided, that Capital shall not be permitted to consummate,
--------
directly or indirectly, any Asset Sales at any time; provided, further, that the
-------- -------
Company shall not, and shall not cause or permit any of its Subsidiaries to,
directly or indirectly, consummate any Asset Sale or series of related Asset
Sales involving, in each case, assets, stock or property with an aggregate fair
market value in excess of $10.0 million without the prior approval of First
Union.
Nothing in this covenant shall be deemed to prevent the exercise of
remedies by secured creditors of the Company or any Subsidiary of the Company.
6.14 Transfer of Assets to Subsidiaries
----------------------------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, transfer (other than in the ordinary
course of business and other than pursuant to a
70
<PAGE>
Permitted Investment) any assets or property to any Subsidiary of the Company
that is not a Guarantor.
6.15 Sale and Leaseback Transactions
-------------------------------
The Company will not, nor will it permit any Subsidiary to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any Sale and Leaseback Transaction.
6.16 Refinancing of the Bridge Loan in Part
--------------------------------------
The Borrowers shall not, and shall not cause or permit any of their
Subsidiaries to, Incur any Indebtedness to Refinance the Bridge Loan in part
other than the Demand Take-Out Notes or the Exchange Notes, unless the terms,
conditions, covenants, events of default and other provisions in respect of the
instruments evidencing the Indebtedness Incurred to Refinance the Loans in part
shall have been approved in writing by First Union prior to the Incurrence of
any such Indebtedness; provided that no Refinancing in part shall result in the
--------
amount of the Bridge Loans outstanding being less than $75,000,000 and no
Refinancing in part shall occur at a time when the amount of the Bridge Loans
outstanding is less than $75,000,000.
SECTION 7 EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur and be continuing:
7.1 Failure to Make Payments When Due
---------------------------------
Failure to pay any installment of principal of the Bridge Loan when due,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise (whether or not such payment is prohibited by Section 8); or failure
to pay any interest on the Bridge Loan or any other amount due under this
Agreement within five days or more after the date due (whether or not such
payment is prohibited by Section 8); or
7.2 Default in Other Agreements
---------------------------
Failure of either of the Borrowers any of their Subsidiaries to pay at
final maturity principal on one or more issues of Indebtedness or Contingent
Obligations of either of the Borrowers or of any of their Subsidiaries (other
than Indebtedness referred to in Section 7.1) or (B) breach or default by either
of the Borrowers or any of their Subsidiaries with respect to any other term of
any one or more issues of Indebtedness or Contingent Obligations of either of
the Borrowers or of any of their Subsidiaries or any agreement or instrument
evidencing or securing such Indebtedness or Contingent Obligations and such
breach or default results in the acceleration of that Indebtedness or Contingent
Obligation prior to its stated maturity and, in any case of (A) or (B), the
principal amount of such Indebtedness or Contingent Obligation and all other
such Indebtedness or Contingent Obligations of either of the Borrowers and its
Subsidiaries
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<PAGE>
in respect of which there is such a failure to pay principal or which has been
so accelerated equals $5,000,000 or more; or
7.3 Breach of Certain Covenants
---------------------------
Failure of the Borrowers or any of their Subsidiaries to perform or comply
with any covenant, term or condition contained in (x) Section 2.4A(ii),
2.4A(iv), 5.2 or Section 6 or (y) in the Amended and Restated Commitment Letter;
or
7.4 Breach of Warranty
------------------
Any representation, warranty or certification made by either of the
Borrowers or any of their Subsidiaries in any Loan Document or in any statement
or certificate at any time given by either of the Borrowers or any of their
Subsidiaries in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false or incorrect in any material respect on the date as of
which made or deemed made; or
7.5 Other Defaults Under Agreement or Loan Documents
------------------------------------------------
The Borrowers or any of their Subsidiaries shall default in the performance
of or compliance with any covenant, term or condition contained in this
Agreement or the other Loan Documents (other than those covered by Section 7.1,
7.3, 7.4, 7.10, or 7.13) and such default shall not have been remedied or waived
in accordance with this Agreement within 30 days after the date of written
notice from the holder or holders of not less than 25% in aggregate principal
amount of the Bridge Loan then outstanding of such default; or
7.6 Involuntary Bankruptcy; Appointment of Custodian, Etc.
------------------------------------------------------
A court of competent jurisdiction enters a Bankruptcy Order under any
Bankruptcy Law that:
(A) is for relief against either of the Borrowers or any of their
Subsidiaries in an involuntary case or proceeding, or
(B) appoints a Custodian of either of the Borrowers or any of their
Subsidiaries for all or substantially all of its properties, or
(C) orders the liquidation of either of the Borrowers or any of their
Subsidiaries,
and in each case the order or decree remains unstayed and in effect
for 60 days.
7.7 Voluntary Bankruptcy; Appointment of Custodian, Etc.
----------------------------------------------------
Either of the Borrowers or any of their Subsidiaries pursuant to or within
the meaning of any Bankruptcy Law:
72
<PAGE>
(A) commences a voluntary case or proceeding, or
(B) consents to the entry of a Bankruptcy Order for relief against it
in an involuntary case or proceeding, or
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors or
files a proposal or scheme of arrangement involving the rescheduling or
composition of its indebtedness, or
(E) consents to the filing of a petition in bankruptcy against it, or
(F) shall generally not pay its debts when such debts become due or
shall admit in writing its inability to pay its debts generally.
7.8 Judgments and Attachments
-------------------------
Any money judgment, writ or warrant of attachment, or similar process
involving in any individual case or in the aggregate at any time an amount in
excess of $5,000,000 (to the extent not covered by third-party insurance as to
which the insurance company has acknowledged coverage) shall be entered or filed
against either of the Borrowers or any of their Subsidiaries or any of their
respective properties or assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of 60 days or in any event later than five
days prior to the date of any proposed sale thereunder; or
7.9 Dissolution
-----------
Any order, judgment or decree shall be entered against either of the
Borrowers or any of their Subsidiaries decreeing the dissolution or split-up of
either of the Borrowers or that Subsidiary and such order shall remain
undischarged or unstayed for a period in excess of 30 days; or
7.10 Guarantee
---------
(i) Any Guarantee or any provision thereof shall cease to be in full
force and effect (other than in accordance with its express terms and the terms
of this Agreement), or (ii) any Guarantor or any Person acting by or on behalf
of such Guarantor shall deny or disaffirm such Guarantor's obligations under its
Guarantee, or (iii) any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed, after giving effect to any applicable grace periods, pursuant to its
Guarantee; or
7.11 ERISA
-----
Any ERISA Event shall have occurred with respect to any Pension Plan or
Multiemployer Plan of either of the Borrowers, any of their Subsidiaries or
their respective
73
<PAGE>
ERISA Affiliates; the Amount of Unfunded Benefit Liabilities, which, when added
to the aggregate Amount of Unfunded Benefit Liabilities with respect to all
other Pension Plans, exceeds the aggregate Amount of Unfunded Benefit
Liabilities that existed on the Closing Date; or any event shall have occurred
with respect to any Foreign Plan which results in a liability to either of the
Borrowers or any of their Subsidiaries; and there shall result from any such
event, events or underfunding described above the imposition of a Lien or a
liability or a material risk of incurring a liability which Lien or liability in
the opinion of First Union has had or could reasonably be expected to have a
Material Adverse Effect; or
7.12 Foreclosure
-----------
The agent under the Senior Credit Facility or any other party entitled to
act thereunder commences judicial proceedings to foreclose on the collateral
securing the Senior Credit Facility or exercises any right under applicable law
or any instrument evidencing a security interest or other encumbrance in respect
of such collateral to take ownership or effect the transfer of such collateral
in lieu of foreclosure; or
7.13 Termination of Certain Agreements
---------------------------------
Either (i) CSG becomes an Affiliate of the Company or (ii) the Company
transfers any Intellectual Property or tangible property incorporating any
Intellectual Property, and, as a result of either (i) or (ii), the various
Intellectual Property agreements between Owens Corning and the Company are
terminated; or
7.14 Amendment of Keep Well Agreement
--------------------------------
The Keep Well Agreement is amended or modified without the prior consent of
the Agents or, with respect to the Exchange Notes, the Required Lenders.
THEN (i) upon the occurrence of any Event of Default described in the
foregoing Sections 7.6 or 7.7, all of the unpaid principal amount of and accrued
interest on the Bridge Loan and all other outstanding Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Borrowers, and the commitments of the Lenders hereunder shall,
thereupon terminate, and (ii) upon the occurrence of any other Event of Default,
any of First Union, Warburg or a representative of the Required Lenders shall
upon written notice of the holder or holders of a majority in aggregate
principal amount of the Bridge Loan then outstanding, by written notice to the
Borrowers and the agent under the Senior Credit Facility, declare all of the
unpaid principal amount of and accrued interest on the Bridge Loan and all other
outstanding Obligations to be, and the same shall forthwith become, due and
payable, and the obligations of the Lenders hereunder shall thereupon terminate;
provided that if any declaration of acceleration under this Agreement occurs
- --------
solely because an Event of Default set forth in Section 7.2 has occurred and is
continuing, such declaration of acceleration shall be automatically annulled if
the holders of the Indebtedness which is the subject of such Event of Default
have rescinded their declaration of acceleration in respect of such Indebtedness
within thirty days of such acceleration of such Indebtedness and First Union and
Warburg have received
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<PAGE>
written notice thereof within such time and if no other Event of Default has
occurred during such thirty-day period which has not been cured or waived in
accordance with this Agreement. Nevertheless, if at any time after acceleration
of the maturity of the Bridge Loan, the Borrowers shall pay all arrears of
interest and all payments on account of the principal thereof which shall have
become due otherwise than by acceleration (with interest on principal and, to
the extent permitted by law, on overdue interest, at the rates specified in this
Agreement or the Bridge Notes) and all Events of Default and Potential Events of
Default (other than non-payment of principal of and accrued interest on the
Bridge Notes due and payable solely by virtue of such acceleration) shall be
remedied or waived pursuant to Section 12.6, then First Union shall, upon
written notice of the holders of a majority in aggregate principal amount of the
Bridge Loan then outstanding, by written notice to the Borrowers rescind and
annul the acceleration and its consequences; but such action shall not affect
any subsequent Event of Default or Potential Event of Default or impair any
right consequent thereon.
SECTION 8 SUBORDINATION
8.1 Obligations Subordinated to Senior Indebtedness of the Borrowers
----------------------------------------------------------------
The Lenders covenant and agree that payments in respect of the Obligations
by the Borrowers shall be subordinated in accordance with the provisions of this
Section 8 to the prior payment in full, in cash or Cash Equivalents, of all
amounts payable in respect of Senior Indebtedness of the Borrowers, whether now
outstanding or hereafter created (including any interest accruing subsequent to
an event specified in Section 7.6 or 7.7 whether or not such interest is an
allowed claim enforceable against the Borrowers), that the subordination is for
the benefit of the holders of Senior Indebtedness of the Borrowers, and that
each holder of Senior Indebtedness of the Borrowers whether now outstanding or
hereafter Incurred, shall be deemed to have acquired Senior Indebtedness of the
Borrowers in reliance upon the covenants and provisions contained in this
Agreement. Notwithstanding anything to the contrary contained herein, any
payment made by Owens Corning pursuant to the Keep Well Agreement (whether paid
to the Company and applied to interest payments due under the Bridge Loan or the
Exchange Notes or paid to an assignee of the Company for such application) shall
not be subject to this paragraph.
8.2 Priority and Payment Over of Proceeds in Certain Events
-------------------------------------------------------
(a) Subordination on Dissolution, Liquidation or Reorganization of the
------------------------------------------------------------------
Borrowers. Upon any payment or distribution of assets or securities of either
- ---------
of the Borrowers of any kind or character, whether in cash, property or
securities, upon any dissolution or winding up or total or partial liquidation
or reorganization of either of the Borrowers, whether voluntary or involuntary
or in bankruptcy, insolvency, receivership or other proceedings, all Senior
Indebtedness of the Borrowers (including any interest accruing subsequent to an
event specified in Section 7.6 or 7.7 whether or not such interest is an allowed
claim enforceable against the Borrowers) shall first be paid in full in cash or
Cash Equivalents, before the Lenders shall be entitled to receive any payment by
the Borrowers in respect of any Obligations and upon any such dissolution or
winding up or liquidation or reorganization, any payment or distribution of
assets or securities of
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<PAGE>
either of the Borrowers of any kind or character, whether in cash, property or
securities, to which the Lenders would be entitled except for the provisions of
this Section 8 shall be made by the Borrowers or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, directly to the holders of the Senior Indebtedness of the
Borrowers or their representatives to the extent necessary to pay all of the
Senior Indebtedness of the Borrowers to the holders of such Senior Indebtedness
of the Borrowers.
(b) Subordination on Default on Senior Indebtedness. Upon the maturity
-----------------------------------------------
of any Senior Indebtedness of either of the Borrowers by lapse of time,
acceleration or otherwise, all Senior Indebtedness of the Borrowers then due and
payable shall first be paid in full in cash or Cash Equivalents, before any
payment is made by the Borrowers or any Person acting on behalf of the Borrowers
with respect to the Obligations. No direct or indirect payment by the Borrowers
or any Person acting on behalf of the Borrowers of any Obligations whether
pursuant to the terms of the Bridge Loan or upon acceleration or otherwise shall
be made, if at the time of such payment, there exists a default (as defined in
the document governing any Senior Indebtedness of the Borrowers) in the payment
of all or any portion of any principal, interest, fees, letter of credit
reimbursement obligations or other amounts payable in respect of any Senior
Indebtedness of the Borrowers and such default shall not have been cured or
waived or the benefits of this sentence waived by or on behalf of the holders of
such Senior Indebtedness. In addition, during the continuation of any other
Non-Payment Default with respect to the Senior Indebtedness of the Borrowers,
upon the (i) receipt by First Union of written notice from the agent or
representative of the holders of such Senior Indebtedness of such default or
(ii) if such Non-Payment Default results from the acceleration of the Bridge
Loan, the date of the acceleration of the Bridge Loan, no such payment may be
made by the Borrowers upon or in respect of the Obligations, for a period
("Payment Blockage Period") commencing on the date of receipt of such notice or
the date of such acceleration and ending 179 days after receipt of such notice
(unless such Payment Blockage Period shall be terminated by written notice to
First Union from such agent or representative) or 179 days after the date of
such acceleration, whichever is the earlier to occur (provided such Senior
Indebtedness shall theretofore not have been accelerated). Notwithstanding
anything herein to the contrary, (x) in no event will a Payment Blockage Period
or successive Payment Blockage Periods with respect to the same payment on the
Obligations extend beyond 179 days from the date the payment on the Obligations
was due and (y) there must be 180 consecutive days in any 365-day period during
which no Payment Blockage Period is in effect. For all purposes of this Section
8.2(b), no event of default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Senior
Indebtedness of the Borrowers initiating such Payment Blockage Period shall be,
or be made, the basis for the commencement of a second Payment Blockage Period
by the holders or by the agent or other representative of such Senior
Indebtedness whether or not within a period of 365 consecutive days, unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days.
(c) Rights and Obligations of the Lenders. In the event that,
-------------------------------------
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Agents or any Lender shall have received any payment in
respect of any Obligation (other than as permitted by Sections (a) and (b) of
this Section 8.2) at a time when such payment is prohibited by this Section 8.2,
then
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and in such event such payment or distribution shall be received and held in
trust for the holders of the Senior Indebtedness of the Borrowers and shall be
paid over or delivered to the holders of the Senior Indebtedness of the
Borrowers remaining unpaid to the extent necessary to pay in full in cash or
Cash Equivalents all Senior Indebtedness of the Borrowers in accordance with the
terms thereof after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness of the Borrowers.
If payment in respect of the Obligations is accelerated because of an
Event of Default, the Borrowers shall promptly notify the agent or other
representatives for Senior Indebtedness of the Borrowers of such acceleration.
Upon any payment or distribution of assets or securities referred to
in this Section 8, the Lenders (notwithstanding any other provision of this
Agreement) shall be entitled to rely upon any order or decree of a court of
competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making any
such payment or distribution, delivered to the Lenders for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of Senior Indebtedness of the Borrowers, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 8.
The Borrowers shall promptly give written notice to each of the
Lenders of any default or event of default under any Senior Indebtedness of the
Borrowers or under any agreement pursuant to which Senior Indebtedness of the
Borrowers may have been issued, and, in the event of any such event of default,
shall provide to First Union the names and addresses of the trustees or other
representatives of holders of such Senior Indebtedness of the Borrowers.
With respect to the holders and owners of Senior Indebtedness of the
Borrowers, each Lender undertakes to perform only such obligations on the part
of such Lender as are specifically set forth in this Section 8, and no implied
covenants or obligations with respect to the holders or owners of Senior
Indebtedness of the Borrowers shall be read into this Agreement against the
Lenders. The Lenders shall not be deemed to owe any fiduciary duty to the
holders or owners of Senior Indebtedness of the Borrowers or to any agent under
the Senior Credit Facility or any other representative of the holders of the
Senior Indebtedness of the Borrowers.
8.3 Payments May Be Paid Prior to Dissolution
-----------------------------------------
Nothing contained in this Section 8 or elsewhere in this Agreement
shall prevent or delay (i) the Borrowers, except under the conditions described
in Section 8.2, from making payments at any time for the purpose of making
payments in respect of its Obligations, or from depositing with the Agents any
moneys for such payments, or (ii) subject to Section 8.2, the application by the
Agents of any moneys deposited with it for the purpose of making payments in
respect of Obligations.
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8.4 Rights of Holders of Senior Indebtedness of the Borrowers Not To Be
-------------------------------------------------------------------
Impaired
- --------
No right of any present or future holder of any Senior Indebtedness of the
Borrowers to enforce subordination as provided in this Section 8 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 the Borrowers with the terms and
provisions and covenants herein, regardless of any knowledge thereof any such
holder may have or otherwise be charged with. Without in any way limiting the
generality of the foregoing Section, such holders of Senior Indebtedness of the
Borrowers may, at any time and from time to time without impairing or releasing
the subordination provided in this Section 8 or the obligations of the Lenders
hereunder to the holders of Senior Indebtedness of the Borrowers, do any one or
more of the following: (i) change the manner, place, terms or time of payment
of, or renew or alter, Senior Indebtedness of the Borrowers or otherwise amend
or supplement in any manner Senior Indebtedness of the Borrowers or any
instrument evidencing the same or any agreement under which any Senior
Indebtedness of the Borrowers is outstanding; (ii) sell, exchange, release, or
otherwise deal with any property pledged, mortgaged, or otherwise securing
Senior Indebtedness of the Borrowers or fail to perfect or delay in the
perfection of the security interest in such property; (iii) release any Person
liable in any manner for the collection of Senior Indebtedness of the Borrowers;
and (iv) exercise or refrain from exercising any rights against the Borrowers
and any other Person. Each Lender by purchasing or accepting a Bridge Note
waives any and all notice of the creation, modification, renewal, extension or
accrual of any Senior Indebtedness of the Borrowers and notice of or proof of
reliance by any holder or owner of Senior Indebtedness of the Borrowers upon
this Section 8 and the Senior Indebtedness of the Borrowers shall conclusively
be deemed to have been Incurred in reliance upon this Section 8, and all
dealings between the Borrowers and the holders and owners of the Senior
Indebtedness of the Borrowers shall be deemed to have been consummated in
reliance upon this Section 8.
The provisions of this Section 8 are intended to be for the benefit of, and
shall be enforceable directly by, the holders of the Senior Indebtedness of the
Borrowers.
8.5 Subrogation
-----------
Upon the payment in full in accordance with the terms of Section 8.2 of all
amounts payable under or in respect of the Senior Indebtedness of the Borrowers,
the Lenders shall be subrogated to the rights of the holders of such Senior
Indebtedness of the Borrowers to receive payments or distributions of assets of
the Borrowers made on such Senior Indebtedness of the Borrowers until the
Obligations shall be paid in full in cash or Cash Equivalents; and for purposes
of such subrogation no payments or distributions to holders of such Senior
Indebtedness of the Borrowers of any cash, property or securities to which the
Lenders would be entitled except for the provisions of this Section 8, and no
payment over pursuant to the provisions of this Section 8 to holders of such
Senior Indebtedness of the Borrowers by the Lenders, shall, as between the
Borrowers, its creditors other than holders of such Senior Indebtedness of the
Borrowers and the Lenders, be deemed to be a payment by the Borrowers to or on
account of such Senior Indebtedness of the Borrowers, it being understood that
the provisions of this Section 8 are solely for the purpose of defining the
relative rights of the holders
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of such Senior Indebtedness of the Borrowers, on the one hand, and the Lenders,
on the other hand. A release of any claim by any holder of Senior Indebtedness
of the Borrowers shall not limit the Lenders' rights of subrogation under this
Section 8.5.
If any payment or distribution to which the Lenders would otherwise have
been entitled but for the provisions of this Section 8 shall have been applied,
pursuant to the provisions of this Section 8, to the payment of all amounts
payable under the Senior Indebtedness of the Borrowers, then and in such case,
the Lenders shall be entitled to receive from the holders of such Senior
Indebtedness of the Borrowers at the time outstanding the full amount of any
such payments or distributions received by such holders of Senior Indebtedness
of the Borrowers in excess of the amount sufficient to pay all Senior
Indebtedness of the Borrowers payable under or in respect of the Senior
Indebtedness of the Borrowers in full in cash or Cash Equivalents in accordance
with the terms of Section 8.2.
8.6 Obligations of the Borrowers Unconditional
------------------------------------------
Nothing contained in this Section 8 or elsewhere in this Agreement is
intended to or shall impair as between the Borrowers and the Lenders the
obligations of the Borrowers, which are absolute and unconditional, to pay to
the Lenders the Obligations as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Lenders and creditors of the Borrowers other than the holders of
the Senior Indebtedness of the Borrowers, nor shall anything herein or therein
prevent the Lenders from exercising all remedies otherwise permitted by
applicable law upon default under this Agreement, subject to the rights, if any,
under this Section 8 of the holders of such Senior Indebtedness of the Borrowers
in respect of cash, property or securities of the Borrowers received upon the
exercise of any such remedy.
The failure to make a payment in respect of Obligations by reason of any
provision of this Section 8 shall not prevent the occurrence of an Event of
Default under Section 8.
8.7 Lenders Authorize Agent to Effectuate Subordination
---------------------------------------------------
Each Lender hereby authorizes and expressly directs the Agents on its
behalf to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Section 8 and appoints the Agents its attorney in
fact for such purpose, including, without limitation, in the event of any
dissolution, winding up, liquidation or reorganization of the Borrowers (whether
in bankruptcy, insolvency, receivership, reorganization or similar proceedings
or upon an assignment for the benefit of creditors or any other similar remedy
or otherwise) tending towards liquidation of the business and assets of the
Borrowers, the immediate filing of a claim for the unpaid balance of the
Obligations in the form required in said proceedings and causing said claim to
be approved. If the Agents do not file proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Senior Indebtedness of the
Borrowers are hereby authorized to have the right to file and are hereby
authorized to file an appropriate claim for and on behalf of the Lenders. In the
event of any such proceeding, until the Senior Indebtedness of the Borrowers is
paid in full in cash or Cash Equivalents, without the consent of
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the holders of a majority in principal amount outstanding of Senior Indebtedness
of the Borrowers, no Lender shall waive, settle or compromise any such claim or
claims relating to the Obligations that such Lender now or hereafter may have
against the Borrowers.
SECTION 9 THE AGENT
9.1 Appointment
-----------
Each Lender hereby irrevocably designates and appoints First Union as Agent
of such Lender to act as specified herein and in the other Loan Documents, and
each Lender hereby irrevocably authorizes First Union and Warburg as the Agents
to take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Agents by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. The Agents agree to act as such upon the express conditions contained
in this Section 9. Notwithstanding any provision to the contrary elsewhere in
this Agreement or in any other Loan Document, the Agents shall not have any
duties or responsibilities, except those expressly set forth herein or in the
other Loan Documents, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against the
Agents. The provisions of this Section 9 are solely for the benefit of the
Agents and the Lenders, and neither of the Borrowers nor any of their
Subsidiaries shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
the Agents shall act solely as agent of the Lenders and the Agents do not assume
and shall not be deemed to have assumed any obligation or relationship of agent
or trust with or for the Borrowers or any of their Subsidiaries.
9.2 Delegation of Duties
--------------------
The Agents may execute any of their duties under this Agreement or any
other Loan Document by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agents shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care except to the
extent otherwise required by Section 9.3.
9.3 Exculpatory Provisions
----------------------
Neither of the Agents nor any of their officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or the other Loan Documents (except for its or
such Person's own gross negligence or willful misconduct) or (ii) responsible in
any manner to any of the Lenders for any recitals, statements, representations
or warranties made by the Borrowers, any of their Subsidiaries or any of their
respective officers contained in this Agreement, any other Loan Documents, or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Agents under or in connection with, this Agreement or any
other Loan Document or for any failure of the Borrowers, any of their
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Subsidiaries or any of their respective officers to perform its or their
obligations hereunder or thereunder. The Agents shall not 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 the other Loan Documents, or to inspect the properties, books or
records of the Borrowers or any of their Subsidiaries. The Agents shall not be
responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the Agents to
the Lenders or by or on behalf of the Borrowers or any of their Subsidiaries to
the Agents or any Lender or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained herein or therein or as to the use of the proceeds of
the Bridge Loan or of the existence or possible existence of any Potential Event
of Default or Event of Default.
9.4 Reliance by Agent
-----------------
The Agents shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, facsimile, telex or teletype message,
statement, order or other document or conversation believed by them 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, without
limitation, counsel to the Borrowers or any of their Subsidiaries), independent
accountants and other experts selected by the Agents. The Agents shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless they shall first receive such advice as they deem
appropriate or they shall first be indemnified to their 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. As between the Agents
and the Lenders, the Agents shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement and the other Loan Documents in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders.
9.5 Notice of Default
-----------------
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Potential Event of Default or Event of Default hereunder unless the Agent
has actually received notice from a Lender or the Borrowers referring to this
Agreement, describing such Potential Event of Default or Event of Default and
stating that such notice is a "notice of default." In the event that the Agent
receives such a notice, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall take such action with respect to such Potential Event
of Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided that, as between the Agent and the Lenders unless and until
--------
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Potential Event of Default or Event of Default as it shall deem
advisable in the best interests of the Lenders.
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9.6 Non-Reliance on Agent and Other Lenders
---------------------------------------
Each Lender expressly acknowledges that neither of the Agents nor any of
their respective officers, directors, employees, agents, attorneys-in-fact or
affiliates have made any representations or warranties to it and that no act by
the Agents hereinafter taken, including any review of the affairs of the
Borrowers or any of their Subsidiaries, shall be deemed to constitute any
representation or warranty by the Agents to any Lender. Each Lender represents
to the Agents that it has, independently and without reliance upon the Agents or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
assets, operations, property, financial and other condition, prospects and
creditworthiness of the Borrowers and their Subsidiaries and made its own
decision to make its Bridge Loan hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Agents or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other condition, prospects
and creditworthiness of the Borrowers and its Subsidiaries. The Agents shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, assets, property,
financial and other condition, prospects or creditworthiness of the Borrowers or
any of their Subsidiaries which may come into the possession of the Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification
---------------
The Lenders agree to indemnify the Agents in their capacity as such ratably
according to their respective "percentages" as used in determining the Required
Lenders at such time, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, reasonable
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment in full of the
Obligations) be imposed on, incurred by or asserted against the Agents in their
capacity as such in any way relating to or arising out of this Agreement or any
other Loan Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be taken
by the Agents under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by the Borrowers or any of their
Subsidiaries; provided that no Lender shall be liable to the Agents for the
--------
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the gross negligence or willful misconduct of the Agents. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agents be insufficient or become impaired, the Agents may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in this Section 9.7
shall survive the payment in full of all Obligations.
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9.8 Agents in Their Individual Capacity
-----------------------------------
The Agents and their affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrowers and their
Subsidiaries as though the Agents were not the Agents hereunder. With respect
to the Bridge Loan made by it and all Obligations owing to it, the Agents shall
have the same rights and powers under this Agreement as any Lender and may
exercise the same as though they were not the Agents and the terms "Lender" and
"Lenders" shall include the Agents in their individual capacity.
9.9 Resignation of the Agents; Successor Agents
-------------------------------------------
The Agents may resign as the Agents upon 20 days' notice to the Lenders and
the Borrowers. Upon the resignation of either of the Agents, the Required
Lenders shall appoint from among the Lenders a successor Agent which is a bank
or a trust company for the Lenders subject to prior approval by the Borrowers
(such approval not to be unreasonably withheld or delayed), whereupon such
successor agent shall succeed to the rights, powers and duties of such Agent,
and the term "Agents" shall include such successor agent effective upon its
appointment, and the resigning Agent's rights, powers and duties as an Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent or any of the parties to this Agreement. After the
resignation of an Agent hereunder, the provisions of this Section 9 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
SECTION 10 GUARANTEE
10.1 Unconditional Guarantee
-----------------------
Each Guarantor hereby unconditionally, jointly and severally, guarantees
(such guarantee to be referred to herein as the "Guarantee"), subject to Section
11, to each of the Lenders and to the Agents and their respective successors and
assigns that (i) the principal of and interest on the Bridge Loan will be
promptly paid in full when due, subject to any applicable grace period, whether
at the Maturity Date, by acceleration or otherwise and interest on the overdue
principal, if any, and interest on any interest, to the extent lawful, of the
Bridge Loan and all other obligations of the Borrowers to the Lenders or the
Agents hereunder or thereunder will be promptly paid in full or performed, all
in accordance with the terms hereof and thereof; and (ii) in case of any
extension of time of payment or renewal of any of the Bridge Loan or of any such
other obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, subject to any
applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in Section 11.5. Each Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Bridge Loan or this Agreement, the absence
of any action to enforce the same, any waiver or consent by any of the Lenders
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Borrowers, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
Guarantor. Each Guarantor hereby waives diligence, presentment, demand of
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payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Borrowers, any right to require a proceeding first against the Borrowers,
protest, notice and all demands whatsoever and covenants that this Guarantee
will not be discharged except by complete performance of the obligations
contained in the Bridge Loan, this Agreement and in this Guarantee. If any
Lender or the Agents are required by any court or otherwise to return to the
Borrowers, any Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to the Borrowers or any Guarantor, any amount paid
by the Borrowers or any Guarantor to the Agents or such Lender, this Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect. Each Guarantor further agrees that, as between each Guarantor, on the
one hand, and the Lenders and the Agents, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Section 7
for the purposes of this Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Section 7, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of this
Guarantee. In the event of a disposition of all of the assets or all of the
Capital Stock of any Guarantor, by way of sale, merger, consolidation or
otherwise, such Guarantor in the event of a disposition of all of the Capital
Stock or all of the assets of such Guarantor or the surviving entity (whether or
not such Guarantor) in the event of a merger or consolidation will be deemed
released and relieved of its obligations under its Guarantee and this Agreement
and the Person acquiring or owning the assets or Capital Stock of such Guarantor
(if not otherwise required to be a Guarantor pursuant to the provisions of this
Section 10.1) will not be required to enter into a Guarantee; provided, in each
--------
case, that such transaction is carried out pursuant to and in accordance with
Section 6.6, 6.9, 6.13 and 6.14.
10.2 Subordination of Guarantee
--------------------------
The obligations of each Guarantor to the Lenders and to the Agents pursuant
to the Guarantee of such Guarantor and this Agreement are expressly subordinate
and subject in right of payment to the prior payment in full of all Guarantor
Senior Indebtedness of such Guarantor, to the extent and in the manner provided
in Section 11.
10.3 Severability
------------
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
10.4 Limitation of Guarantor's Liability
-----------------------------------
Each Guarantor and by its acceptance hereof each of the Lenders hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law.
To effectuate the foregoing intention, the Lenders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under its Guarantee
shall be
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limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor (including, but not limited
to, the Guarantor Senior Indebtedness of such Guarantor) and after giving effect
to any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 10.6, result in the obligations of such Guarantor under its
Guarantee not constituting such fraudulent transfer or conveyance.
10.5 Guarantors May Consolidate, etc., on Certain Terms
--------------------------------------------------
(a) Nothing contained in this Agreement or in the Bridge Loan shall
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety, to the Borrowers or
another Guarantor. Upon any such consolidation, merger, sale or conveyance, the
Guarantee given by such Guarantor shall no longer have any force or effect.
(b) Except as set forth in Section 6.6, nothing contained in this
Agreement or in the Bridge Loan shall prevent any consolidation or merger of a
Guarantor with or into a corporation or corporations other than the Borrowers or
another Guarantor (whether or not affiliated with the Guarantor); provided that,
--------
subject to Section 10.5(a), (i) immediately after such transaction, and giving
effect thereto, no Potential Event of Default or Event of Default shall have
occurred as a result of such transaction and be continuing, and (ii) upon any
such consolidation, merger, sale or conveyance, the Guarantee of such Guarantor
set forth in this Section 10, and the due and punctual performance and
observance of all of the covenants and conditions of this Agreement to be
performed by such Guarantor, shall be expressly assumed (in the event that the
Guarantor is not the surviving corporation in the merger), by supplemental
indenture satisfactory in form and substance to the Agents, executed and
delivered to the Agents, by the corporation formed by such consolidation, or
into which the Guarantor shall have merged, or by the corporation that shall
have acquired such property. In the case of any such consolidation, merger, sale
or conveyance and upon the assumption by the successor corporation, of the due
and punctual performance of all of the covenants and conditions of this
Agreement to be performed by the Guarantor, such successor corporation shall
succeed to and be substituted for the Guarantor with the same effect as if it
had been named herein as a Guarantor.
10.6 Contribution
------------
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
----- --
distribution is made by any Guarantor (a "Funding Guarantor") under its
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets (as
defined below) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in discharging
the Borrowers' obligations with respect to the Obligations. "Adjusted Net
Assets" of such Guarantor at any date shall mean the lesser of (x) the amount by
which the fair value of the property of such Guarantor exceeds the total amount
of liabilities, including, without limitation, contingent liabilities (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date (other
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than liabilities of such Guarantor under Subordinated Indebtedness)), but
excluding liabilities under the Guarantee, of such Guarantor at such date and
(y) the amount by which the present fair salable value of the assets of such
Guarantor at such date exceeds the amount that will be required to pay the
probable liabilities of such Guarantor on its debts including, without
limitation, Guarantor Senior Indebtedness (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date and after
giving effect to any collection from any Subsidiary of such Guarantor in respect
of the obligations of such Subsidiary under the Guarantee), excluding debt in
respect of the Guarantee of such Guarantor, as they become absolute and matured.
10.7 Waiver of Subrogation
---------------------
Each Guarantor hereby irrevocably waives any claim or other rights which it
may now or hereafter acquire against the Borrowers that arise from the
existence, payment, performance or enforcement of such Guarantor's obligations
under its Guarantee and this Agreement, including, without limitation, any right
of subrogation, reimbursement, exoneration, indemnification, and any right to
participate in any claim or remedy of any Lender against the Borrowers, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including, without limitation, the right to take or receive from
the Borrowers, directly or indirectly, in cash or other property or by set-off
or in any other manner, payment or security on account of such claim or other
rights. If any amount shall be paid to any Guarantor in violation of the
preceding sentence and the Bridge Loan shall not have been paid in full, such
amount shall be deemed to have been paid to such Guarantor for the benefit of,
and held in trust for the benefit of, the Lenders, and shall, subject to the
provisions of Section 8, Section 10.2 and Section 11, forthwith be paid to the
Agents for the benefit of such Lenders to be credited and applied upon the
Bridge Loan, whether matured or unmatured, in accordance with the terms of this
Agreement. Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Agreement and that
the waiver set forth in this Section 10.7 is knowingly made in contemplation of
such benefits.
10.8 Evidence Guarantee
------------------
To evidence their guarantees to the Lenders set forth in this Section 10,
each of the Guarantors hereby agrees to execute the notation of Guarantee in
substantially the form included in Exhibit VII. Each such notation of Guarantee
-----------
shall be signed on behalf of each Guarantor by two Officers, or an Officer and
an assistant Secretary or one Officer shall sign and one Officer or an assistant
Secretary (each of who shall, in each case, have been duly authorized by all
requisite corporate actions) shall attest to such notation of Guarantee.
10.9 Waiver of Stay, Extension or Usury Laws
---------------------------------------
Each Guarantor covenants that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury law or other law that would prohibit or forgive
such Guarantor from performing its Guarantee as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Agreement; and each Guarantor hereby
expressly
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waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the Agents,
but will suffer and permit the execution of every such power as though no such
law had been enacted.
SECTION 11 SUBORDINATION OF GUARANTEE OBLIGATIONS
11.1 Guarantee Obligations Subordinated to Guarantor Senior Indebtedness
-------------------------------------------------------------------
The Lenders covenant and agree that payments in respect of the obligations
by a Guarantor in respect of its Guarantee (collectively, as to any Guarantor,
its "Guarantee Obligations") shall be subordinated in accordance with the
provisions of this Section 11 to the prior payment in full, in cash or Cash
Equivalents, of all amounts payable in respect of Guarantor Senior Indebtedness
of such Guarantor whether now outstanding or hereafter created (including any
interest accruing subsequent to an event specified in Section 7.6 or 7.7 whether
or not such interest is an allowed claim enforceable against such Guarantor),
that the subordination is for the benefit of the holders of Guarantor Senior
Indebtedness, and that each holder of Guarantor Senior Indebtedness whether now
outstanding or hereafter Incurred, shall be deemed to have acquired Guarantor
Senior Indebtedness in reliance upon the covenants and provisions contained in
this Agreement.
11.2 Priority and Payment Over of Proceeds in Certain Events
-------------------------------------------------------
(a) Subordination of Guarantee Obligations on Dissolution, Liquidation or
---------------------------------------------------------------------
Reorganization of Such Guarantor. Upon any payment or distribution of assets or
- --------------------------------
securities of any Guarantor of any kind or character, whether in cash, property
or securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of such Guarantor, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings
(other than a liquidation or dissolution of such Guarantor into the Company or
another Guarantor), all Guarantor Senior Indebtedness of such Guarantor
(including. any interest accruing subsequent to an event specified in Section
7.6 or 7.7 whether or not such interest is an allowed claim enforceable against
such Guarantor) shall first be paid in full in cash or Cash Equivalents, before
the Lenders shall be entitled to receive any payment with respect to any
Guarantee Obligations of such Guarantor and upon any such dissolution or winding
up or liquidation or reorganization, any payment or distribution of assets or
securities of such Guarantor of any kind or character, whether in cash, property
or securities, to which the Lenders would be entitled except for the provisions
of this Section 11 shall be made by such Guarantor or by any receiver, trustee
in bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, directly to the holders of the Guarantor Senior Indebtedness of
such Guarantor or their representatives to the extent necessary to pay all of
the Guarantor Senior Indebtedness of such Guarantor to the holders of such
Guarantor Senior Indebtedness.
(b) Subordination of Guarantee Obligations on Default on Senior
-----------------------------------------------------------
Indebtedness. Upon the maturity of any Guarantor Senior Indebtedness by lapse of
- ------------
time, acceleration or otherwise, all such Guarantor Senior Indebtedness then due
and payable shall first be paid in full in cash or Cash Equivalents, before any
payment is made by such Guarantor or any Person acting on behalf of such
Guarantor with respect to the Guarantee Obligations of such Guarantor. No
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direct or indirect payment by any Guarantor or any Person acting on behalf of
such Guarantor of any Guarantee obligations of such Guarantor whether pursuant
to the terms of the Bridge Loan or upon acceleration or otherwise shall be made,
if at the time of such payment, there exists a default (as defined in the
document governing any such Guarantor Senior Indebtedness) in the payment of all
or any portion of any principal, interest, fees, letter of credit reimbursement
obligations or other amounts payable in respect of any such Guarantor Senior
Indebtedness and such default shall not have been cured or waived or the
benefits of this sentence waived by or on behalf of the holders of such
Guarantor Senior Indebtedness. In addition, during the continuation of any other
Non-Payment Default with respect to any such Guarantor Senior Indebtedness of
such Guarantor, upon the earlier of (i) receipt by the Agents of written notice
from the agent or representative of the holders of such Senior Indebtedness or
(ii) if such non-payment default results from the acceleration of the Bridge
Loan, the date of acceleration of the Bridge Loan, no such payment may be made
by such Guarantor under its Guarantee for a period ("Guarantor Payment Blockage
Period") commencing on the date of receipt of such notice or the date of the
acceleration referred to in clause (ii) above, as the case may be, and ending on
the earlier to occur of 179 days after receipt of such written notice by the
Agents (unless such Guarantor Payment Blockage Period shall be terminated by
written notice to the Agents from such agent) or 179 days after the date of such
acceleration, whichever is the earlier to occur (provided such Guarantor Senior
Indebtedness shall theretofore not have been accelerated). Notwithstanding
anything herein to the contrary, (x) in no event will a Guarantor Payment
Blockage Period or successive Guarantor Payment Blockage Periods with respect to
the same payment on such Guarantee extend beyond 179 days from the date the
payment on such Guarantee was due and (y) there must be 180 consecutive days in
any 365-day period during which no Guarantor Payment Blockage Period is in
effect. For all purposes of this Section 11.2(b), no event of default which
existed or was continuing on the date of the commencement of any Guarantor
Payment Blockage Period with respect to the Senior Indebtedness initiating such
Guarantor Payment Blockage Period shall be, or be made, the basis for the
commencement of a second Guarantor Payment Blockage Period by the holders or by
the agent or other representative of such Guarantor Senior Indebtedness whether
or not within a period of 365 consecutive days, unless such event of default
shall have been cured or waived for a period of not less than 90 consecutive
days.
(c) Rights and Obligations of the Lenders. In the event that,
-------------------------------------
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Agents or any Lender shall have received any payment in
respect of any Guarantee Obligation with respect to the Bridge Loan (other than
permitted by Sections (a) and (b) of this Section 11.2) at a time when such
payment is prohibited by this Section 11.2, then and in such event such payment
or distribution shall be received and held in trust for the holders of the
Guarantor Senior Indebtedness and shall be paid over or delivered to the holders
of the Guarantor Senior Indebtedness remaining unpaid to the extent necessary to
pay in full in cash or Cash Equivalents all Guarantor Senior Indebtedness in
accordance with the terms thereof after giving effect to any concurrent payment
or distribution to the holders of such Guarantor Senior Indebtedness.
Nothing contained in this Section 11 will limit the right of the Lenders to
take any action to accelerate the maturity of the Bridge Loan pursuant to
Section 7 or to pursue any rights or remedies hereunder or otherwise.
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Upon any payment or distribution of assets or securities referred to in
this Section 11, the Lenders (notwithstanding any other provision of this
Agreement) shall be entitled to rely upon any order or decree of a court of
competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making any
such payment or distribution, delivered to the Lender for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of Guarantor Senior Indebtedness, the amount thereof or payable thereon,
the amount or amounts paid or distributed hereon and all other facts pertinent
thereto or to this Section 11.
The Guarantors shall promptly give written notice to each of the Lenders of
any default or event of default under any Guarantor Senior Indebtedness or under
any agreement pursuant to which Guarantor Senior Indebtedness may have been
issued, and, in the event of any such event of default, shall provide to the
Agents the names and addresses of the trustees or other representatives of
holders of such Guarantor Senior Indebtedness.
With respect to the holders and owners of Guarantor Senior Indebtedness,
each Lender undertakes to perform only such obligations on the part of such
Lender as are specifically set forth in this Section 11, and no implied
covenants or obligations with respect to the holders or owners of Guarantor
Senior Indebtedness shall be read into this Agreement against the Lenders. The
Lenders shall not be deemed to owe any fiduciary duty to the holders or owners
of Guarantor Senior Indebtedness or to the agent under the Senior Credit
Facility or any other representative of the holders of the Guarantor Senior
Indebtedness.
11.3 Payments May Be Paid Prior to Dissolution
-----------------------------------------
Nothing contained in this Section 11 or elsewhere in this Agreement shall
prevent or delay (i) Guarantors, except under the conditions described in
Section 11.2, from making payments at any time for the purpose of making
payments in respect of their respective Guarantee Obligations, or from
depositing with the Agents any moneys for such payments, or (ii) subject to
Section 11.2, the application by the Agents of any moneys deposited with it for
the purpose of making payments in respect of Guarantee Obligations.
11.4 Rights of Holders of Guarantor Senior Indebtedness Not To Be Impaired
----------------------------------------------------------------------
No right of any present or future holder of any Guarantor Senior
Indebtedness to enforce subordination as provided in this Section 11 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 the Guarantors with the terms and
provisions and covenants herein, regardless of any knowledge thereof any such
holder may have or otherwise be charged with. Without in any way limiting the
generality of the foregoing Section, such holders of Guarantor Senior
Indebtedness may, at any time and from time to time without impairing or
releasing the subordination provided in this Section 11 or the obligations of
the Lenders hereunder to the holders of Guarantor Senior Indebtedness, do any
one or more of the following: (i) change the manner, place, terms or time of
payment of, or renew or alter, Guarantor Senior Indebtedness or otherwise amend
or
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supplement in any manner Guarantor Senior Indebtedness or any instrument
evidencing the same or any agreement under which any Guarantor Senior
Indebtedness is outstanding; (ii) sell, exchange, release, or otherwise deal
with any property pledged, mortgaged, or otherwise securing Guarantor Senior
Indebtedness or fail to perfect or delay in the perfection of the security
interest in such property; (iii) release any Person liable in any manner for the
collection of Guarantor Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Guarantors and any other Person. Each Lender
by purchasing or accepting a Bridge Note waives any and all notice of the
creation, modification, renewal, extension or accrual of any Guarantor Senior
Indebtedness and notice of or proof of reliance by any holder or owner of
Guarantor Senior Indebtedness upon this Section 11 and the Guarantor Senior
Indebtedness shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Section 11, and all dealings between the
Guarantors and the holders and owners of the Guarantor Senior Indebtedness shall
be deemed to have been consummated in reliance upon this Section 11.
The provisions of this Section 11 are intended to be for the benefit of,
and shall be enforceable directly by, the holders of the Guarantor Senior
Indebtedness.
11.5 Subrogation
-----------
Upon the payment in full in accordance with the terms of Section 11.2 of
all amounts payable under or in respect of Guarantor Senior Indebtedness, the
Lenders shall be subrogated to the rights of the holders of such Guarantor
Senior Indebtedness to receive payments or distributions of assets of the
Guarantors made on such Guarantor Senior Indebtedness until the Guarantee
Obligations shall be paid in full in cash or Cash Equivalents and for purposes
of such subrogation no payments or distributions to holders of such Guarantor
Senior Indebtedness of any cash, property or securities to which the Lenders
would be entitled except for the provisions of this Section 11, and no payment
over pursuant to the provisions of this Section 11 to holders of such Guarantor
Senior Indebtedness by the Lenders, shall, as between such Guarantor, its
creditors other than holders of such Guarantor Senior Indebtedness and the
Lenders, be deemed to be a payment by such Guarantor to or on account of such
Guarantor Senior Indebtedness, it being understood that the provisions of this
Section 11 are solely for the purpose of defining the relative rights of the
holders of such Guarantor Senior Indebtedness, on the one hand, and the Lenders,
on the other hand. A release of any claim by any holder of Guarantor Senior
Indebtedness shall not limit the Lenders' rights of subrogation under this
Section 11.5.
If any payment or distribution to which the Lenders would otherwise have
been entitled but for the provisions of this Section 11 shall have been applied,
pursuant to the provisions of this Section 11, to the payment of all amounts
payable under the Guarantor Senior Indebtedness, then and in such case, the
Lenders shall be entitled to receive from the holders of such Guarantor Senior
Indebtedness at the time outstanding the full amount of any payments or
distributions received by such holders of Guarantor Senior Indebtedness in
excess of the amount sufficient to pay all Guarantor Senior Indebtedness payable
under or in respect of the Guarantor Senior Indebtedness in full in cash or Cash
Equivalents in accordance with the terms of Section 11.2.
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11.6 Obligations of the Guarantors Unconditional
-------------------------------------------
Nothing contained in this Section 11 or elsewhere in this Agreement or in
the Guarantees is intended to or shall impair as between the Guarantors and the
Lenders the obligations of the Guarantors, which are absolute and unconditional,
to pay to the Lenders the Guarantee Obligations as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Lenders and creditors of the Guarantors
other than the holders of the Guarantor Senior Indebtedness, nor shall anything
herein or therein prevent the Lenders from exercising all remedies otherwise
permitted by applicable law upon default under this Agreement, subject to the
rights, if any, under this Section 11 of the holders of such Guarantor Senior
Indebtedness in respect of cash, property or securities of the Guarantors
received upon the exercise of any such remedy.
The failure to make a payment in respect of Guarantee Obligations by reason
of any provision of this Section 11 shall not prevent the occurrence of an Event
of Default under Section 7.
11.7 Lenders Authorize Agent to Effectuate Subordination
---------------------------------------------------
Each Lender hereby authorizes and expressly directs the Agents on its
behalf to take such action as may be necessary or appropriate to effectuate the
subordination provided in this Section 11 and appoints the Agents its attorney
in fact for such purpose including, without limitation, in the event of any
dissolution, winding up, liquidation or reorganization of any Guarantor (whether
in bankruptcy, insolvency, receivership, reorganization or similar proceedings
or upon an assignment for the benefit of creditors or any other similar remedy
or otherwise) tending towards liquidation of the business and assets of any
Guarantor, the immediate filing of a claim for the unpaid balance of the
Guarantee Obligations in the form required in said proceedings and causing said
claim to be approved. If the Agents do not file a proper claim or proof of debt
in the form required in such proceeding prior to 30 days before the expiration
of the time to file such claim or claims, then the holders of the Guarantor
Senior Indebtedness are hereby authorized to have the right to file and are
hereby authorized to file an appropriate claim for and on behalf of the Lenders
In the event of any such proceeding, until the Guarantor Senior Indebtedness is
paid in full in cash or Cash Equivalents, without the consent of the holders of
a majority in principal amount outstanding of Guarantor Senior Indebtedness, no
Lender shall waive, settle or compromise any such claim or claims relating to
the Guarantee Obligations that such Lender now or hereafter may have against the
Guarantors.
SECTION 12 MISCELLANEOUS
12.1 Representation of the Lenders
-----------------------------
Each Lender hereby represents that it is a commercial lender which makes
loans in the ordinary course of its business and that it will make the Bridge
Loan hereunder for its own account or the account of its affiliates in the
ordinary course of such business.
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12.2 Participations in and Assignments of Bridge Loan
------------------------------------------------
A. Each Lender shall have the right at any time to sell, assign, transfer
or negotiate all or any portion of its Bridge Notes or its Bridge Loan
Commitment in an aggregate amount of not less than $1,000,000 to any Eligible
Assignee. In the case of any sale, transfer or negotiation of all or part of the
Bridge Loan or any Bridge Loan Commitment authorized under this Section 12.2A,
the assignee, transferee or recipient shall become a party to this Agreement as
a Lender by execution of an assignment and assumption agreement substantially in
the form of Exhibit VIII hereto; provided that (i) at such time Section 2.1A
------------ --------
shall be deemed modified to reflect the Bridge Loan Commitment of such new
Lender and of the existing Lenders, (ii) upon surrender of the Bridge Notes, new
Bridge Notes will be issued, at the Borrowers' expense to such new Lender and to
the assigning Lender, such new Bridge Notes to be in conformity with the
requirements of Section 2.1D (with appropriate modifications) to the extent
needed to reflect the revised Bridge Loan Commitment, and (iii) First Union
shall receive at the time of each such assignment, from the assigning or
assignee Lender, the payment of a non-refundable assignment fee of $3,500; and
provided, further, that such transfer or assignment will not be effective until
- -------- -------
recorded by First Union on the Register pursuant to Section 5.12. To the extent
of any assignment pursuant to this Section 12.2A, the assigning Lender shall be
relieved of its obligations hereunder with respect to its assigned Bridge Loan
Commitment, and the assignee, transferee or recipient shall have, to the extent
of such sale, assignment, transfer or negotiation, the same rights, benefits and
obligations as it would if it were a Lender with respect to such Bridge Notes or
Bridge Loan Commitment, including, without limitation, the right to approve or
disapprove actions which, in accordance with the terms hereof, require the
approval of a Lender. At the time of each assignment pursuant to this Section
12.2A to an Eligible Assignee which is not already a Lender hereunder and which
is not a United States Person (as such term is defined in Section 7701 (a) (30)
of the Internal Revenue Code) for Federal income tax purposes, the respective
Eligible Assignee shall provide to the Borrowers and the Agents the appropriate
Internal Revenue Service Forms (and, if applicable a Section 12.2E(ii)
Certificate) described in Section 12.2E.
B. Each Lender may grant participations in all or any part of its Bridge
Notes or its Bridge Loan Commitment in an aggregate amount of not less than
$1,000,000 to any Eligible Assignee.
C. The Borrowers shall, at their own cost and expense, provide such
certificates, acknowledgments and further assurances in respect of this
Agreement and the Bridge Loan as any Lender may reasonably require in connection
with any participation, transfer or assignment pursuant to this Section 12.2.
D. Nothing in this Agreement shall prevent or prohibit any Lender from
pledging its Bridge Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank.
E. Each Lender that is an assignee or transferee of an interest under
this Agreement pursuant to Section 12.2A (unless the respective Lender was
already a Lender hereunder
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immediately prior to such assignment or transfer) and that is not a United
States Person (as such term is defined in Section 7701 (a) (30) of the Internal
Revenue Code) agrees to deliver to the Borrowers and the Agents, on the date of
such assignment or transfer to such Lender, (i) two accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001 (or
successor forms) certifying to such Lender's entitlement to a complete exemption
from United States withholding tax with respect to payments to be made under
this Agreement and under any Bridge Note, or (ii) if the Lender is not a "bank"
within the meaning of Section 881(c) (3) (A) of the Internal Revenue Code and
cannot deliver either Internal Revenue Service Form 1001 or 4224 (or successor
forms) pursuant to clause (i) above, (X) a certificate substantially in the form
of Exhibit IX hereto (a "Section 12.2E(ii) Certificate") and (Y) two accurate
and complete original signed copies of Internal Revenue Service Form W-8 (or
successor form) certifying to such Lender's entitlement to a complete exemption
from United States withholding tax with respect to payments of interest to be
made under this Agreement and under any Bridge Note. In addition, each Lender
agrees that, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, it will
deliver to the Borrowers and the Agents two new accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor
forms), or a Section 12.2E(ii) Certificate and Form W-8 (or successor form), as
the case may be, and such other forms as may be required in order to confirm or
establish the entitlement of such Lender to a continued exemption from or
reduction in United States withholding tax with respect to payments under this
Agreement and any Bridge Note, or it shall immediately notify the Borrowers and
the Agents of its inability to deliver any such form or certificate; provided,
--------
however, that the Lender shall not be obligated to complete and deliver any form
- -------
requiring disclosure of information or statements that it considers to be
confidential or otherwise disadvantageous to disclose. Subject to the
immediately succeeding sentence, and notwithstanding Section 12.19, the
Borrowers shall be entitled, to the extent they are required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
fees or other amounts payable hereunder or made on any other Loan Document for
the account of any Lender which is not a United States Person (as such term is
defined in Section 7701 (a) (30) of the Internal Revenue Code) for U.S. Federal
income tax purposes to the extent that such Lender has not provided to the
Borrowers U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this Section 12.2E,
the Borrowers agree to pay additional amounts and to indemnify and hold harmless
each Lender (without regard to the identity of the jurisdiction requiring the
deduction or withholding), and reimburse such Lender upon its written request,
in respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the date of any
assignment or transfer in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of income or similar Taxes.
12.3 Expenses
--------
Whether or not the transactions contemplated hereby shall be consummated,
the Borrowers agree to pay promptly (i) all the actual and reasonable costs and
expenses of
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preparation of the Loan Documents and all the costs of furnishing all opinions
by counsel for the Borrowers (including without limitation any opinions
requested by the Lenders as to any legal matters arising hereunder), and of the
Borrowers' performance of and compliance with all agreements and conditions
contained herein on its part to be performed or complied with; (ii) the actual
and reasonable fees, expenses and disbursements of Cleary, Gottlieb, Steen &
Hamilton in connection with the negotiation, preparation, execution and
administration of the Loan Documents and the Bridge Loan hereunder, and any
amendments, modifications and waivers hereto or thereto and consents to
departures from the terms hereof and thereof; and (iii) after the occurrence of
an Event of Default, all actual and reasonable costs and expenses (including
actual and reasonable attorneys fees, including allocated costs of internal
counsel, and costs of settlement) incurred by the Lenders or the Agents in
enforcing any Obligations of or in collecting any payments due from the
Borrowers, Owens Corning, any Guarantors hereunder or under the Bridge Notes by
reason of such Event of Default or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or of any insolvency or bankruptcy proceedings.
12.4 Indemnitee
----------
In addition to the payment of expenses pursuant to Section 12.3, whether or
not the transactions contemplated hereby shall be consummated, the Borrowers
agree to indemnify, pay and hold each of the Lenders and the Agents, and each of
their respective officers, directors, employees, agents, representatives and
affiliates (collectively called the "Indemnitees"), harmless from and against
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, the actual and reasonable fees
and disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated as a party thereto), which
may be suffered by, imposed on, incurred by, or asserted against that
Indemnitee, in any manner resulting from, connected with, in respect of,
relating to or arising out of this Agreement, the other Loan Documents, the
Amended and Restated Commitment Letter, the Lenders' agreements to make the
Bridge Loan or the use or intended use of any of the proceeds of the Bridge Loan
hereunder or the issuance of the Exchange Notes or the Take-Out Securities
including, without limitation, any Environmental Liabilities and Costs or the
breach of any representation, warranty or covenant in this Agreement (the
"Indemnified Liabilities"); provided, that the Borrowers shall have no
--------
obligation to an Indemnitee hereunder with respect to Indemnified Liabilities
(i) to the extent such liabilities are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted primarily from
(A) the gross negligence or willful misconduct of that Indemnitee or (B) the
failure of such Indemnitee to perform its obligations under any Loan Document or
(C) such Indemnitee's violation of law or (ii) in connection with the
obligations of any Indemnitee under any Loan Document or for any transfer fees.
To the extent that the undertaking to indemnify, pay and hold harmless set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, the Borrowers shall contribute the maximum portion which
they are permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
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12.5 Setoff
------
Subject to Section 8, in addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default, each Lender, the
Agents and each subsequent holder of any Bridge Note is hereby authorized by the
Borrowers at any time or from time to time, without notice to the Borrowers, or
to any other Person, any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all deposits (general or special,
including, but not limited to, Indebtedness evidenced by certificates of
deposit, whether matured or unmatured but not including trust accounts or any
other accounts held for the benefit of another Person) and any other
Indebtedness at any time held or owing by such Person or any such subsequent
holder to or for the credit or the account of the Borrowers or the Borrowers
against and on account of the obligations and liabilities of the Borrowers to
such Person or such subsequent holder under this Agreement and the Bridge Notes,
including, but not limited to, all claims of any nature or description arising
out of or connected with this Agreement or the Bridge Notes, irrespective of
whether or not (a) such Person or such subsequent holder shall have made any
demand hereunder or (b) such Person or such subsequent holder shall have
declared the principal of or the interest on its portion of the Bridge Loan and
its Bridge Notes and other amounts due hereunder to be due and payable as
permitted by Section 8 and although said obligations and liabilities, or any of
them, may be contingent or unmatured.
12.6 Amendments and Waivers
----------------------
No amendment, modification, termination or waiver of any term or provision
of this Agreement, of the Bridge Notes, any Guarantee or, prior to the execution
and delivery thereof, of the form of Registration Rights Agreement, or the form
of the Senior Subordinated Indenture or consent to any departure by the
Borrowers or any Guarantor therefrom, shall in any event be effective without
the prior written concurrence of the Borrowers or such Guarantor, as the case
may be, and the Agents and the Required Lenders, and, upon the request of any
Lender, the receipt of a written opinion of counsel of the Borrowers addressed
to the Lenders to the effect that such amendment, modification, termination,
waiver or consent does not violate or conflict with any of the terms and
provisions of the Senior Credit Facility or any other Contractual Obligation of
the Borrowers in respect of Indebtedness for money borrowed or other material
agreement of the Borrowers otherwise known to such counsel after reasonable
inquiry; provided that, notwithstanding the third sentence of Section 12.15,
--------
without the prior written consent of each Lender affected, an amendment,
modification, termination or waiver of this Agreement, any Bridge Notes any
Guarantee or, prior to the execution and delivery thereof, of the form of
Registration Rights Agreement, or the form of the Senior Subordinated Indenture
or consent to departure from a term or provision hereof or thereof may not: (i)
reduce the principal amount of Bridge Notes whose holders must consent to any
such amendment, modification, termination, waiver or consent; (ii) reduce the
rate of or extend the time for payment of principal or interest on any Bridge
Note; (iii) reduce the principal amount of any Bridge Note; (iv) make any Bridge
Note payable in money other than that stated in the Bridge Note; (v) make any
change in Section 2.4A(iv) or in the definition of Change of Control (it being
understood that this clause (v), as such clause may appear in the Senior
Subordinated Indenture, shall omit references to
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Section 2.4A(iv) and the definition of Change of Control (it being understood
that this clause (v), as it shall appear in the Senior Subordinated Indenture,
shall omit references to Section 2.4A(iv) hereto, as such as such Section shall
appear in the Senior Subordinated Indenture and Change of Control) in the last
paragraph of Section 7 or in Section 8.5, 11.5 or 12.6; (vi) reduce the rate or
extend the time of payment of fees or other compensation payable to the Lenders
hereunder; (vii) modify the provisions of Section 8 or any of the defined terms
related thereto in any manner adverse to the Lenders; or (viii) waive
performance by the Borrowers of their obligations under, or consent to any
departure from any of the terms and provisions of, Section 2.4A(iv) (it being
understood that this clause (viii) shall be omitted from the Senior Subordinated
Indenture); and provided, further, that without the consent of the Agents, no
-------- -------
such amendment, modification, termination or waiver may amend, modify, terminate
or waive any provision of Section 9 as the same applies to the Agents or any
other provision of this Agreement as it relates to the rights or obligations of
the Agents. No amendment, modification or waiver of any provision of this
Agreement, the Bridge Notes, any Guarantee or the form of the Senior
Subordinated Indenture shall adversely affect the rights of the holders of
Senior Indebtedness or the holders of Guarantor Senior Indebtedness without
their consent. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on the Borrowers in any case shall entitle the Borrowers to any further
notice or demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this Section 12.6
shall be binding upon each holder of the Bridge Notes at the time outstanding,
each further holder of the Bridge Notes, and, if signed by the Borrowers or a
Guarantor, on the Borrowers and such Guarantor.
12.7 Independence of Covenants
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitation of, another covenant shall not avoid the occurrence of an Event of
Default or Potential Event of Default if such action is taken or condition
exists.
12.8 Entirety
--------
The Loan Documents and the Amended and Restated Commitment Letter embody
the entire agreement of the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof.
12.9 Notices
-------
Unless otherwise provided herein, any notice or other communications herein
required or permitted to be given shall be in writing and may be personally
served, telecopied, telexed or sent by mail and shall be deemed to have been
given when delivered in person, upon receipt of telecopy or telex against
receipt of answer back or four Business Days after depositing it in the mail,
registered or certified, with postage prepaid and properly addressed; provided
--------
that notices shall not be effective until received. For the purposes hereof,
the addresses of the parties hereto
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(until notice of a change thereof is delivered as provided in this Section 14.9)
shall be set forth under each party's name on the signature pages hereto.
12.10 Survival of Warranties and Certain Agreements
---------------------------------------------
A. All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement and the Amended and
Restated Commitment Letter, the making of the Bridge Loan hereunder and the
execution and delivery of the Bridge Notes and, notwithstanding the making of
the Bridge Loan, the execution and delivery of the Bridge Notes or any
investigation made by or on behalf of any party, shall continue in full force
and effect. The closing of the transactions herein contemplated shall not
prejudice any right of one party against any other party in respect of anything
done or omitted hereunder or in respect of any right to damages or other
remedies.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of the Borrowers set forth in Sections 12.3, 12.4,
12.12, 12.15, 12.17, 12.19, 12.20, 12.22 and 12.23 shall survive the payment of
the Bridge Loan and the Bridge Notes and the termination of this Agreement.
12.11 Failure or Indulgence Not Waiver; Remedies Cumulative
-----------------------------------------------------
No failure or delay on the part of the Agents or any Lender or any holder
of any Bridge Note in the exercise of any power, right or privilege hereunder,
under a Guarantee or under the Bridge Notes shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this Agreement, under a
Guarantee or the Bridge Notes are cumulative to and not exclusive of any rights
or remedies otherwise available.
12.12 Severability
------------
In case any provision in or obligation under this Agreement, under a
Guarantee or the Bridge Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
12.13 Headings
--------
Section and Sub-section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.
12.14 Applicable Law
--------------
THIS AGREEMENT, EACH GUARANTEE AND THE NOTES SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
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<PAGE>
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAW.
12.15 Successors and Assigns; Subsequent Holders of Bridge Notes
----------------------------------------------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of the Lenders. The terms and provisions
of this Agreement and each Guarantee shall inure to the benefit of any assignee
or transferee of the Bridge Notes pursuant to Section 12.2A, and in the event of
such transfer or assignment, the rights and privileges herein conferred upon the
Lenders shall automatically extend to and be vested in such transferee or
assignee which becomes a Lender pursuant to Section 12.2A, all subject to the
terms and conditions hereof. Except as provided in Section 12.6, in determining
whether the holders of a sufficient aggregate principal amount of the Bridge
Loan shall have consented to any action under this Agreement, any amount of the
Bridge Loan owned or held by the Borrowers any Guarantor or any of their
respective Affiliates shall be disregarded. The Borrowers' rights or any
interest therein hereunder may not be assigned without the prior express written
consent of each of the Lenders.
12.16 Counterparts; Effectiveness
---------------------------
This Agreement and any amendments, waivers, consents or supplements may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto, and delivery
thereof to the Agents or, in the case of the Lenders, written telex or facsimile
notice or telephonic notification (confirmed in writing) of such execution and
delivery. The Agents will give the Borrowers and each Lender prompt notice of
the effectiveness of this Agreement.
12.17 Consent to Jurisdiction; Venue; Waiver of Jury Trial
----------------------------------------------------
A. Any legal action or proceeding with respect to this Agreement, any
Bridge Note or any Guarantee 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 parties to this Agreement
hereby irrevocably accepts for itself and in respect of its respective property,
generally and unconditionally, the jurisdiction of the aforesaid courts Each of
the parties to this Agreement hereby further irrevocably waives any claim that
any such courts lack jurisdiction over such party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement, the
Bridge Notes or the Guarantees brought in any of the aforesaid courts, that any
such court lacks jurisdiction over such party. Each of the parties to this
Agreement irrevocably consents to the service of process in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such party, at its respective address for notices pursuant
to Section 14.9, such service to become effective 30 days after such mailing To
the extent permitted by law, each of the parties to this Agreement hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any
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<PAGE>
Bridge Note or any Guarantee that service of process was in any way invalid or
ineffective. Nothing herein shall affect the right of any party to this
Agreement to serve process in any other manner permitted by law or to commerce
legal proceedings or otherwise proceed against any party in any other
jurisdiction.
B. Each of the parties to this Agreement hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement, the Bridge Notes or the Guarantees brought in the courts referred to
in clause A above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
C. Each of the parties to this Agreement hereby irrevocably waives all
right to a trial by jury in any action, proceeding or counterclaim arising out
of or relating to this Agreement, the Bridge Notes or the Guarantees or the
transactions contemplated hereby or thereby.
12.18 Payments Pro Rata
-----------------
A. The Agents agree that promptly after its receipt of each payment of any
interest or premium on or principal of the Bridge Notes from or on behalf of the
Borrowers or any Guarantor, it shall, except as otherwise provided in this
Agreement, distribute such payment to the Lenders (other than any Lender that
has consented in writing to waive its pro rata share of such payment) pro rata
based upon their respective pro rata shares, if any, of such payment.
B. Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of set-off or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Loan Documents, or otherwise)
which is applicable to the payment of the principal of, or interest on, the
Bridge Loan of a sum which with respect to the related sum or sums received by
other Lenders is in a greater proportion than the total of such Obligation then
owed and due to such Lender bears to the total of such Obligation then owed and
due to all of the Lenders immediately prior to such receipt, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the Borrowers
to such Lenders in such amount as shall result in a proportional participation
by all of the Lenders in such amount; provided that, if all or any portion of
--------
such excess amount is thereafter recovered from such Lender, such purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without interest.
12.19 Taxes
-----
A. Each payment by the Borrowers or a Guarantor under this Agreement or
under any of the other Loan Documents shall, except as required by law, be made
without withholding or deduction for or on account of any and all present or
future Taxes. If any Taxes are required to be withheld or deducted from any such
payment, the Borrowers (or, if the payment is made by a Guarantor, such
Guarantor) shall give notice to the Agents (which shall promptly provide a copy
to each Lender) and shall pay such additional amounts as may be necessary to
ensure that the net
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amount actually received by each Lender and the Agents after such withholding or
deduction is equal to the amount that each Lender and the Agents would have
received had no such withholding or deduction been required, provided, however,
-------- -------
that no such additional amounts shall be payable in respect of (i) in the case
of each Lender and the Agents, any Taxes imposed on its net income and franchise
taxes imposed on it by the jurisdiction under the laws of which such Person is
organized (unless such Taxes are imposed solely because the payment was made by
a Guarantor and would not have been imposed had such payment instead been made
by the Borrowers) or (ii) any Taxes imposed on a payee by reason of such payee's
failure or inability to comply with the provisions of Section 12.2E of this
Agreement.
B. The Borrowers shall pay all Taxes referred to in Section 12.19A
before penalties are payable or interest accrues thereon, but if any such
penalties are payable or interest accrues, the Borrowers shall make payment
thereof when due to the appropriate governmental authority.
C. The Borrowers shall pay any present or future stamp, transfer or
documentary taxes or any other excise or property taxes, charges or similar
levies, and any penalties, additions to tax or interest due with respect
thereto, that may be imposed by any jurisdiction (or any political subdivision
or taxing authority thereof or therein) which arise from any payment made by the
Borrowers hereunder or under any of the other Loan Documents or in connection
with the execution, delivery or registration of this Agreement or any of the
other Loan Documents.
D. If any Lender or the Agents pay any Taxes or other amounts that the
Borrowers, Owens Corning or a Guarantor are required to pay pursuant to this
Section 12.19, the Borrowers shall indemnify it on demand in full in the
currency in which such Taxes or other amounts are paid, whether or not such
Taxes were correctly or legally asserted, on an after-tax basis together with
interest thereon from and including the date of payment to but excluding the
date of reimbursement at a rate per annum determined in accordance with Section
2.2.
E. The Borrowers shall furnish to the Agents and each of the Lenders
the original or a certified copy of a receipt evidencing any payment of Taxes
made by the within 30 days after each such payment of taxes.
F. The provisions of this Section 12.19 shall survive the termination
of the Agreement and repayment of all Obligations.
12.20 Waiver of Stay, Extension or Usury Laws
---------------------------------------
The Borrowers covenant (to the extent that they may lawfully do so) that
they will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury law
or other law that would prohibit or forgive the Borrowers from paying all or any
portion of the principal of or interest on the Bridge Loan as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Agreement; and (to the extent
that it may lawfully do so) the Borrowers hereby expressly waive all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to
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the Agents, but will suffer and permit the execution of every such power as
though no such law had been enacted.
12.21 Requirements of Law
-------------------
(a) The Borrowers shall pay to the each Lender on demand the amount such
Lender reasonably determines to be necessary to compensate it fully for all
costs incurred and reductions in amounts received or receivable that are
attributable to the Bridge Loans made by such Lender hereunder or the
performance by such Lender of its obligations under this Agreement and that
occur by reason of the adoption of, or any change in, any law, regulation or
treaty or in the application or interpretation thereof or compliance by such
Lender with any direction, requirement or request of any governmental authority,
including, without limitation, any such cost or reduction resulting from (a) the
imposition, amendment or change in the application or basis of any Taxes other
than (i) any Taxes referred to in Section 12.19A required to be withheld or
deducted from payments by the Borrowers, Owens Corning or a Guarantor or (ii)
any Taxes imposed on or measured by the net income of such Lender and imposed by
the jurisdiction in which such Lender's principal office is situated, (b) the
imposition or amendment of any reserve, special deposit or similar requirement
against assets of, liabilities of, deposits with or for the account of, or loans
by, such Lender or (c) the imposition or amendment of any capital requirements
that have the effect of reducing the rate of return on such Lender's capital as
a consequence of the Bridge Loan made by such Lender hereunder to a level below
that which it could have achieved but for such adoption, change or compliance.
(b) The Borrowers shall not be required to make any payments to any
Lender for any additional amounts pursuant to this Section 12.21 unless such
Lender has given written notice to the Borrowers, through the Agents, of its
intent to request such payments prior to or within 60 days after the date on
which such Lender became entitled to claim such amounts. If any Lender requests
compensation from the Borrowers under this Section 12.21, the Borrowers may, by
notice to such Lender (with a copy to the Agents), suspend the obligation of
such Lender thereafter to make or continue Bridge Loans, until the requirement
of law giving rise to such request ceases to be in effect; provided that such
--------
suspension shall not affect the right of such Lender to receive the compensation
so requested.
12.22 Confidentiality
---------------
Each Lender shall hold all non-public information obtained pursuant to the
requirements of or in connection with this Agreement which has been identified
as confidential by the Borrowers in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, it being understood and agreed
by the Borrowers that (i) in any event a Lender may make disclosures reasonably
required by any bona fide assignee, transferee or participant in connection with
the contemplated assignment or transfer by such Lender of any Bridge Loan or any
participation therein or as required or requested by any governmental agency or
representative thereof or pursuant to legal process; provided, that unless
--------
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrowers of any request by any governmental agency or
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representative thereof (other than any such request in connection with any
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information and (ii) a Lender may share with any of its Affiliates, and
such Affiliates may share with any Lender, any information related to the
Borrowers or any of their Affiliates (including information relating to
creditworthiness), the JV Transactions or the financing therefor; and provided,
--------
further, that in no event shall any Lender be obligated or required to return
- -------
any materials furnished by the Borrowers or any of their Subsidiaries. In
connection with any sales, assignments or transfers referred to in Section
12.2A, a Lender shall obtain agreements from the purchasers, assignees or
transferees, as the case may be, reasonably satisfactory to the Borrowers, that
such parties will comply with this Section 12.22.
12.23 Compensation
------------
The Borrowers shall compensate each Lender, upon its written request (which
request shall set forth the basis for requesting such compensation), for all
reasonable losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Lender to fund its Bridge Loan but
excluding loss of anticipated profit with respect to any Bridge Loan) which such
Lender may sustain: (i) if for any reason (other than a default by such Lender
or the Agents) a borrowing of the Bridge Loan does not occur on a date specified
therefor in a Notice of Borrowing (whether or not withdrawn by the Borrowers);
(ii) if any repayment of the Bridge Loan occurs on a date which is not the last
day of an Interest Period applicable thereto; (iii) if any prepayment of any
Bridge Loan is not made on any date specified in a notice of prepayment given by
the Borrowers; or (iv) as a consequence of any other default by the Borrowers to
repay its Bridge Loan when required by the terms of this Agreement. Calculation
of all amounts payable to a Lender under this Section 12.23 shall be made as
though that Lender had actually funded the Bridge Loan utilizing the Applicable
LIBOR Based Rate, through the purchase of a LIBOR rate deposit bearing interest
at the Applicable LIBOR Based Rate in an amount equal to the amount of that
Loan, having a maturity comparable to the relevant Interest Period.
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<PAGE>
WITNESS the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORROWERS:
ADVANCED GLASSFIBER YARNS LLC
By:/s/ Robert B. Fisher
-----------------------------
Name: Robert B. Fisher
Title: President
Notice Address:
2556 Wagener Road
Aiken, South Carolina 29801
Attention: Robert B. Fisher
Telephone: (803) 648-8351
Telecopy: (803) 643-1190
AGY CAPITAL CORP.
By:/s/ Robert B. Fisher
-----------------------------
Name: Robert B. Fisher
Title: President
Notice Address:
2556 Wagener Road
Aiken, South Carolina 29801
Attention: Robert B. Fisher
Telephone: (803) 648-8351
Telecopy: (803) 643-1190
<PAGE>
CO-AGENT:
FIRST UNION INVESTORS, INC.
as co-agent
By:/s/ Rick Fogg
-----------------------------------
Name: Rick Fogg
Title: Director
Notice Address:
301 South College Street TW-10
Charlotte, NC 28288-0604
Attention: Kevin Smith
Telephone: (704) 383-0506
Telecopy: (704) 383-9527
<PAGE>
LENDER:
Commitment: FIRST UNION INVESTORS, INC.
By:/s/ Rick Fogg
-----------------------------------
Name: Rick Fogg
Title: Director
Notice Address:
301 South College Street TW-10
Charlotte, NC 28288-0604
Attention: Kevin Smith
Telephone: (704) 383-0506
Telecopy: (704) 383-9527
<PAGE>
LENDER:
WARBURG DILLON READ LLC
By:/s/ Warren M. Eckstein
-------------------------------------
/s/ M. R. Grayer Name: Warren M. Eckstein
Michael R. Grayer Title : Managing Director
Managing Director
Leveraged Finance
Notice Address:
535 Madison Avenue
New York, New York 10022
Attention: Warren Eckstein
Telephone: (212) 906-7288
Telecopy: (212) 906-7727
UBS AG Stamford Branch
By:/s/ Thomas R. Salzano
-------------------------------
Name: Thomas R. Salzano
/s/ M. R. Grayer Title : Associate Director
Michael R. Grayer Loan Portfolio Support U1
Managing Director
Leveraged Finance
Notice Address:
677 Washington Boulevard
Stamford Connecticut 06912
Attention: Lara Kavanaugh
Telephone: (203) 719-4181
Telecopy: (203) 719-4176
<PAGE>
CO-AGENT:
WARBURG DILLON READ LLC
as co-agent
/s/ M. R. Grayer By:/s/ Warren M. Eckstein
Michael R. Grayer -----------------------------------
Managing Director Name: Warren M. Eckstein
Leveraged Finance Title: Managing Director
Notice Address:
535 Madison Avenue
New York, New York 10022
Attention: Warren Eckstein
Telephone: (212) 906-7288
Telecopy: (212) 906-7727
<PAGE>
EXHIBIT 10.15
EXECUTION COPY
ADVANCED GLASSFIBER YARNS LLC
AGY CAPITAL CORP.
$150,000,000
9 7/8% SENIOR SUBORDINATED NOTES DUE 2009
NOTE PURCHASE AGREEMENT
January 15, 1999
First Union Capital Markets
Warburg Dillon Read LLC
c/o First Union Capital Markets
301 South College Street, TW-10
Charlotte, NC 28288-0606
Ladies and Gentlemen:
Advanced Glassfiber Yarns LLC, a limited liability company formed
under the Delaware Limited Liability Company Act (the "Company") and AGY Capital
Corp., a Delaware corporation ("Capital," and together with the Company, the
"Issuers"), propose to issue and sell (the "Initial Placement") to First Union
Capital Markets, a division of Wheat First Securities, Inc., and Warburg Dillon
Read LLC (the "Initial Purchasers"), $150,000,000 principal amount of their
9 7/8% Senior Subordinated Notes Due 2009 (the "Notes"). The Notes are to be
issued under an indenture (the "Indenture") to be dated as of the Closing Date
(as defined below) between the Issuers and The Bank of New York, as trustee (the
"Trustee"). This Agreement, the registration rights agreement, to be dated the
Closing Date, between the Initial Purchasers and the Issuers (the "Registration
Rights Agreement"), the Notes and the Indenture are hereinafter collectively
referred to as the "Transaction Documents" and the transactions contemplated
herein and therein are hereinafter referred to as the "Transactions."
The sale of the Notes to the Initial Purchasers will be made without
registration of the Notes under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon certain exemptions from the registration
requirements of the Securities Act. You have advised the Issuers that you will
offer and sell the Notes purchased by you hereunder in accordance with Section 4
hereof as soon as you deem advisable.
<PAGE>
In connection with the sale of the Notes, the Issuers have prepared a
preliminary offering memorandum, dated December 23, 1998 (the "Preliminary
Memorandum"), and a final offering memorandum, dated January 15, 1999 (the
"Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Issuers, the
Transaction Documents and the Transactions. The Issuers hereby confirm that
they have authorized the use of the Preliminary Memorandum and the Final
Memorandum, and any amendment or supplement thereto, in connection with the
offer and sale of the Notes by the Initial Purchasers. Unless stated to the
contrary, all references herein to the Final Memorandum are to the Final
Memorandum at the Execution Time (as defined below) and are not meant to include
any amendment or supplement, or any information incorporated by reference
therein, subsequent to the Execution Time.
As used herein, "Material Adverse Effect" means (i) a material adverse
effect upon the business, operations, properties, assets, condition (financial
or otherwise) or prospects of the Company or Capital whether before or after the
issue and sale of the Notes and the consummation of the other transactions
contemplated herein or (ii) a material impairment of the ability of the Issuers
to execute, deliver or perform any of their obligations under, or the material
impairment of the ability of the Trustee and the holders of the Notes (the
"Holders") to enforce any obligations under, any of the Transaction Documents.
Capitalized terms used but not defined herein have the meaning ascribed to them
in the Final Memorandum.
1. The Issuers' Representations and Warranties. (A) The Issuers
-------------------------------------------
represent and warrant to the Initial Purchasers the following:
(a) The Preliminary Memorandum, at the date thereof, did not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Final Memorandum, at the
date hereof, does not and at the Closing Date will not (and any amendment
or supplement thereto, at the date thereof and at the Closing Date, will
not), contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
--------
however, that the Issuers make no representation or warranty as to any
-------
statements made in or omissions from the Preliminary Memorandum or the
Final Memorandum (or any amendment or supplement thereto) in reliance upon
and in conformity with information relating to the Initial Purchasers
furnished to the Issuers in writing by the Initial Purchasers, expressly
for use therein.
(b) No holder of securities of the Issuers (other than holders of the
Notes) will be entitled to have such securities registered under any
registration statement required to be filed by the Issuers pursuant to the
Registration Rights Agreement.
(c) None of the Issuers nor any of their Affiliates (as defined in
Rule 501(b) of Regulation D under the Securities Act ("Regulation D")), nor
any person acting on its or
2
<PAGE>
their behalf (other than the Initial Purchasers or any of their Affiliates,
as to whom the Issuers make no representation or warranty) has, directly or
indirectly:
(i) made offers or sales of any security, or solicited offers
to buy any security, which is or will be integrated with the sale of
the Notes in a manner that would require the registration of the Notes
under the Securities Act;
(ii) engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with
any offer or sale of the Notes;
(iii) taken any action designed to cause or result in, or that
has constituted or that might reasonably be expected to constitute,
stabilization or manipulation of the price of the Notes;
(iv) paid or agreed to pay to any person any compensation for
soliciting another to purchase any of the Notes;
(v) engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act ("Regulation S"))
with respect to the Notes, and each of the Issuers and their
Affiliates and any person acting on its or their behalf (other than
the Initial Purchasers or any of their Affiliates, as to whom the
Issuers make no representation) has complied with the offering
restrictions requirement of Rule 903 under Regulation S.
(d) The Notes satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
(e) Each of the Company, Capital and AG Yarns Canada Inc., a Canadian
corporation ("AG Yarns") is duly organized and existing and in good
standing under the laws of its jurisdiction of incorporation or formation,
as the case may be. Each of the Company, Capital and AG Yarns has the full
power and authority to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted and is duly
qualified as a foreign corporation and in good standing under the laws of
all jurisdictions in which it is doing business, except where the failure
to be so qualified or in good standing, individually or in the aggregate,
has not had and would not reasonably be expected to have a Material Adverse
Effect.
(f) Capital and AG Yarns are the only subsidiaries of the Company in
existence on the date of this Agreement and neither is a "significant
subsidiary" of the Company within the meaning of Rule 1-02 of Regulation S-
X under the Securities Act. The capital stock of each of Capital and AG
Yarns is duly authorized, validly issued, fully paid and nonassessable.
All of the outstanding shares of capital stock of each of Capital and AG
Yarns are beneficially owned directly by the Company, free and clear of any
perfected security interest or any other security interests, claims, liens
or encumbrances other than liens granted pursuant to the Senior Secured
Credit Agreement, dated as of September 30,
3
<PAGE>
1998, among the Company, the lenders named therein and First Union National
Bank, as agent (the "Bank Facility").
(g) All of the outstanding shares of capital stock of each of Capital
and AG Yarns have been duly authorized and validly issued and are fully
paid and nonassessable.
(h) Each of the Issuers has the full power and requisite authority to
execute, deliver and perform its obligations under the Transaction
Documents.
(i) Each of the Transaction Documents and each other document or
instrument to be delivered in connection therewith has been duly authorized
by all necessary action of the Issuers; each of the Transaction Documents
and each other document or instrument to be delivered in connection
herewith or therewith to be executed and delivered on or prior to the date
hereof is, and each of the Transaction Documents and each other document or
instrument to be delivered in connection herewith or therewith to be
executed and delivered after the Closing Date, will be, upon such execution
and delivery the legal, valid and binding obligations of the Issuers,
enforceable against the Issuers in accordance with their respective terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
similar laws affecting the enforcement of creditors' rights generally
("Bankruptcy Law") or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law) ("Equity").
(j) The execution, delivery and performance of the Transaction
Documents and each other document and instrument to be executed, delivered
or performed by the Company in connection therewith, the consummation of
the transactions herein and therein contemplated, the compliance with each
of the terms hereof or thereof, and the issuance, delivery and performance
of the Notes do not and on the Closing Date will not (i) violate any
statute, law, rule, regulation, order, judgment or decree (singly, "Law"
and collectively, "Laws") applicable to the Company or the Subsidiary of
any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or any
of its subsidiaries or any of its or their properties (ii) conflict with,
result in a breach or violation of or constitute a default under the
certificate of incorporation or bylaws of the Company or any of its
subsidiaries or any indenture, mortgage, deed of trust, contract,
undertaking, loan agreement, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any of its or their respective
properties are bound ("Contracts"), (iii) result in or require the creation
or imposition of any mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the
foregoing ("Lien"), upon any of the properties or assets of the Company or
any of its subsidiaries.
4
<PAGE>
(k) No consent, approval, authorization or order of any Tribunal or
other person is required in connection with the execution, delivery and
performance by the Issuers of the Transaction Documents or any other
document or instrument to be delivered, executed or performed by the
Issuers in connection therewith or the consummation of the transactions
contemplated hereby or thereby, other than any such consent, approval,
authorization or order which has been obtained and remains in full force
and effect or which has been waived in writing by the Initial Purchasers or
such as may be required under applicable state securities or Blue Sky laws.
(l) The audited financial statements (including the notes thereto) of
the Issuers included in the Final Memorandum comply as to form in all
material respects with the requirements applicable to registration
statements on Form S-1 under the Securities Act and fairly present in all
material respects the financial position of the Issuers and the results of
operations and cash flow of the Issuers as of the dates and for the periods
therein specified. Such financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods involved. Since the date of
the most recent financial statements included in the Final Memorandum,
except as described therein and in the notes thereto or in the Final
Memorandum, (i) neither of the Issuers has incurred any liabilities or
obligations, direct or contingent, or entered into or agreed to enter into
any transactions or Contracts (written or oral) which liabilities,
obligations, transactions or Contracts would, individually or in the
aggregate, have a Material Adverse Effect, (ii) neither of the Issuers has
purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock, (iii) there has not been any material change in the long-term
indebtedness of either of the Issuers and (iv) none of the material assets
of either of the Issuers has materially diminished in value, ordinary wear
and tear excepted. The unaudited pro forma financial statements of the
Issuers included in the Final Memorandum comply as to form in all material
respects with the requirements of the Securities Act; the pro forma
adjustments have been properly applied to the historical amounts in the
compilation of such pro forma statements; the assumptions described in the
notes to such pro forma statements provide a reasonable basis for
presenting the significant direct effects of the transactions contemplated
therein; and such pro forma adjustments comply as to form in all material
respects with the applicable accounting requirements of Regulation S-X
under the Securities Act ("Regulation S-X").
(m) Each of the Issuers maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for inventory assets is compared with the
existing inventory assets at reasonable intervals and appropriate action is
taken with respect to any differences.
5
<PAGE>
(n) Upon giving effect to the issue and sale of the Notes as
contemplated herein and the application of the net proceeds thereof as
contemplated in the Final Memorandum:
(i) The fair saleable value of the assets of the Issuers, on
a stand-alone basis, exceeds the amount that will be required to be
paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Issuers as they mature.
(ii) The assets of each of the Issuers, on a stand-alone
basis, do not constitute unreasonably small capital to carry out their
business as now conducted and as proposed to be conducted including
their capital needs, taking into account the particular capital
requirements of the business conducted by each of the Issuers.
(iii) The Company does not intend to, and will not permit any
of its subsidiaries to, incur debts beyond its or their ability to pay
such debts as they mature (taking into account the timing and amounts
of cash to be payable on or in respect of debt of the Company and its
subsidiaries).
(o) Each of the Issuers owns, leases or has sufficient rights to use,
and after consummation of the issue and sale of the Notes as contemplated
herein, will own, lease or have sufficient rights to use, such properties
and assets as are necessary to the conduct of its operations as presently
conducted and as contemplated to be conducted immediately following
consummation of the issue and sale of the Notes as contemplated herein, and
neither of the Issuers, and, to the knowledge of the Issuers, any other
party thereto, is in default under any lease, except in each case for such
defects or defaults that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. None of the
material assets of either of the Issuers is subject to any restriction
which would prevent continuation of the use currently made, or contemplated
to be made, thereof or which would materially adversely affect the value
thereof.
(p) Neither of the Issuers is (i) in violation of its charter, bylaws
or other organizational documents, (ii) in breach or violation of any Laws
or (iii) in breach of or default under (nor has any event occurred which,
with notice or the lapse of time or both, would constitute a default under)
or in violation of any of the terms or provisions of any Contract, except
for any such breach, default, violation or event in each case of (i), (ii)
or (iii) which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
(q) There is no action, suit, proceeding, claim, lawsuit and/or
investigation conducted by or before any Tribunal ("Litigation") pending
or, to the best knowledge of the Issuers after due investigation,
threatened, by, against, or which may relate to or affect (a) any benefit
plan or any fiduciary or administrator thereof, (b) the Transactions or (c)
either of the Issuers which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect. There are no
outstanding injunctions or restraining orders prohibiting consummation of
the Transactions or any other transactions
6
<PAGE>
contemplated in connection therewith. Neither of the Issuers is in default
with respect to any judgment, order, writ, injunction or decree of any
Tribunal, and there are no unsatisfied judgments against either of the
Issuers or their respective businesses or properties, which, individually
or in the aggregate, would reasonably be expected to have a Material
Adverse Effect. Neither of the Issuers has been advised that there is a
reasonable likelihood of an adverse determination of any Litigation which
adverse determination, should it occur, could reasonably be expected to
have a Material Adverse Effect.
(r) The proceeds from the issuance and sale of the Notes will be used
solely for the purposes specified in the Final Memorandum. None of the
issuance or sale of the Notes, the application of the proceeds therefrom,
or the consummation of the Transactions or any of the other transactions
contemplated thereby will violate Regulations T, U, or X of the Board of
Governors of the Federal Reserve System.
(s) All material Tax Returns, foreign and domestic, required to be
filed by or on behalf of the Issuers in any jurisdiction have been filed,
and all material Taxes (whether or not actually shown on such Tax Returns)
for which they are liable have been paid other than any Tax (i) the
validity or amount of which is being contested in good faith, (ii) for
which adequate reserve, or other appropriate provision, if any, as required
in conformity with GAAP shall have been made, and (iii) with respect to
which any right to execute upon or sell any assets of the Issuers has not
matured or has been and continues to be effectively enjoined, superseded or
stayed ("Contested Claims"); all such Tax Returns are true, correct and
complete in all material respects. To the knowledge of the Issuers, there
is no material proposed tax assessment with respect to Taxes due by, or on
behalf of, the Issuers, except for Contested Claims.
As used herein, the following terms shall have the respective meaning
ascribed to each below:
"Tax Return" means a report, return or other information (including
any amendments) required to be supplied to a Tribunal with respect to Taxes
including, where permitted or required, combined or consolidated returns
for any group of entities that includes the Issuers.
"Taxes" shall mean any taxes, assessments, fees, levies, imposts,
duties, deductions, liabilities, withholdings or other charges of any
nature whatsoever, penalties and additions thereto from time to time or at
any time imposed by any Law or any Tribunal.
(t) (A) No ERISA Events have occurred or are reasonably expected to
occur which individually or in the aggregate resulted in or might
reasonably be expected to result in a liability of the Issuers or any of
their respective ERISA Affiliates which would reasonably be expected to
have a Material Adverse Effect.
7
<PAGE>
(B) In accordance with the most recent actuarial valuations, the
Amount of Unfunded Benefit Liabilities individually or in the
aggregate for all Pension Plans (excluding for purposes of such
computation any Pension Plans which have a negative Amount of Unfunded
Benefit Liabilities), is not an amount which could reasonably be
expected to have a Material Adverse Effect.
(C) Neither of the Issuers has incurred or is reasonably
expected to incur any liability with respect to any Foreign Plan or
Foreign Plans which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
As used herein, the following terms shall have the respective
meaning ascribed to each below:
"Amount of Unfunded Benefit Liability" means, with respect to any
Pension Plan, (i) if set forth on the most recent actuarial valuation
report with respect to such Pension Plan, the amount of unfunded
benefit liabilities (as defined in Section 4001(a)(18) of ERISA) and
(ii) otherwise, the excess of (a) the greater of the current liability
(as defined in Section 412(1)(7) of the Internal Revenue Code) or the
actuarial present value of the accrued benefits with respect to such
Pension Plan over (b) the market value of the assets of such Pension
Plan.
"Employee Pension Benefit Plan" means any "employee pension
benefit plan" as defined in Section 3(2) of ERISA (i) which is, or, at
any time within the five calendar years immediately preceding the date
hereof, was at any time, sponsored, maintained or contributed to by
the Issuers or any of their ERISA Affiliates or (ii) with respect to
which either of the Issuers retains any liability, including any
potential joint and several liability as a result of an affiliation
with an ERISA Affiliate or a party that would be an ERISA Affiliate
except for the fact the affiliation ceased more than five calendar
years prior to the date hereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder and any successor statute, regulations
and rulings.
"ERISA Affiliate," as applied to any person, means (i) any
corporation which is, or was at any time within the five calendar
years immediately preceding the date hereof, a member of a controlled
group of corporations within the meaning of Section 414(b) of the
Internal Revenue Code of which that person is, or was at any time
within the five calendar years immediately preceding the date hereof,
a member; (ii) any trade or business (whether or not incorporated)
which is, or was at any time within the five calendar years
immediately preceding the date hereof, a member of a group of trades
or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that person is, or was at
any time within the five calendar years immediately preceding the date
hereof, a member; and (iii) any member of an affiliated service group
8
<PAGE>
within the meaning of Section 414(m) or (o) of the Internal Revenue
Code of which that person, any corporation described in clause (i)
above or any trade or business described in clause (ii) above is, or
was at any time within the five calendar years immediately preceding
the date hereof, a member.
"ERISA Event" means (i) a "reportable event" within the meaning
of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision
for 30-day notice to the PBGC has been waived by regulation); (ii) the
failure to meet the minimum funding standard of Section 412 of the
Internal Revenue Code with respect to any Pension Plan (whether or not
waived) or the failure to make any required contribution within 30
days of its due date with respect to any Multiemployer Plan; (iii) the
provision by the administrator of any Pension Plan pursuant to Section
4041(a)(2) of ERISA of a notice of intent to terminate such plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by the Issuers or any of their respective ERISA Affiliates
from any Multiple Employer Plan or the termination of any such
Multiple Employer Plan resulting in liability pursuant to Sections
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings
to terminate any Pension Plan, or the occurrence of any event or
condition which might reasonably be expected to constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (vi) the imposition of liability on the
Issuers or any of their respective ERISA Affiliates pursuant to
Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal by the Issuers or any
of their respective ERISA Affiliates in a complete or partial
withdrawal (within the meaning of Sections 4203 and 4205 of ERISA)
from any Multiemployer Plan if there is any potential liability
therefor, or the receipt by the Issuers or any of their respective
ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA, or that it intends to terminate or has terminated under Section
4041A or 4042 of ERISA; (viii) the occurrence of an act or omission
which could reasonably be expected to give rise to the imposition on
the Issuers or any of their respective ERISA Affiliates of fines,
penalties, taxes or related charges under Chapter 43 of the Internal
Revenue Code or under Sections 406, 409 or 502(i) or (1) of ERISA in
respect of any Employee Benefit Pension Plan; (ix) receipt from the
Internal Revenue Service of notice of the failure of any Pension Plan
(or any other Employee Pension Benefit Plan intended to be qualified
under Section 401(a) of the Internal Revenue Code) to qualify under
Section 401(a) of the Internal Revenue Code, or the failure of any
trust forming part of any Pension Plan or Employee Pension Benefit
Plan to qualify for exemption from taxation under Section 501(a) of
the Internal Revenue Code; or (x) the imposition of a Lien pursuant to
Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant
to ERISA with respect to any Pension Plan.
9
<PAGE>
"Foreign Plan" means any employee benefit plan maintained outside
the U.S. by the Issuers or any of their respective ERISA Affiliates
for employees substantially all of whom are non-resident aliens of the
U.S. and for which the Issuers may be directly or indirectly liable.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time, and any successor code or statute.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any of the Issuers or any of
their respective ERISA Affiliates is making or accruing an obligation
to make contributions, or has within any of the preceding five years
made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined
in Section 4001(a)(15) of ERISA, that (i) is maintained for employees
of the Issuers or any of their respective ERISA Affiliates and at
least one person other than the Issuers and their respective ERISA
Affiliates or (ii) was so maintained and in respect of which such
Issuers or ERISA Affiliates could have liability under Section 4064 or
Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's
functions under ERISA.
"Pension Plan" means a Single Employer Plan or Multiple Employer
Plan.
"Single Employer Plan" means a "single-employer plan," as defined
in Section 4001(a)(15) of ERISA, that (i) is maintained for employees
of the Issuers or any of their respective ERISA Affiliates and no
person other than the Issuers or any of their respective ERISA
Affiliates or (ii) was so maintained and in respect of which the
Issuers or any of their respective ERISA Affiliates could have
liability under Section 4069 of ERISA in the event such plan has been
or were to be terminated.
(u) Neither of the Issuers is subject to regulation under the Public
Utility Holding Company Act of 1935, the Investment Company Act of 1940 (as
any of the preceding acts have been amended) or other Law which regulates
the incurrence by the Issuers of indebtedness, including, but not limited
to, Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
(v) (A) Each of the Issuers owns or is licensed to use all patents,
trademarks, tradenames, copyrights, technology, know-how and processes
necessary for the conduct of the business of the Issuers as currently
conducted ("Intellectual Property"), except
10
<PAGE>
where the failure to own or license such Intellectual Property,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect.
(B) To the knowledge of the Issuers, no material claim has been
asserted by any person with respect to the use of any such
Intellectual Property, or challenging or questioning the validity or
effectiveness of any such Intellectual Property; to the knowledge of
the Issuers, the use of such Intellectual Property by the Issuers does
not infringe on the rights of any person, subject to such claims and
infringements as could not, individually or in the aggregate, have a
Material Adverse Effect; the consummation of the issue and sale of the
Notes as contemplated herein will not impair the ownership of (or the
license to use, as the case may be) such Intellectual Property by the
Issuers.
(w) the operations of each of the Issuers (including, without
limitation, as the term is used throughout this Section 1(w), all
operations and conditions at or in the Facilities) comply in all material
respects with all Environmental Laws except for any such noncompliance
which, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect;
(A) each of the Issuers has obtained all Permits under
Environmental Laws necessary to its operations under currently
applicable Laws, and all such Permits are being maintained in good
standing and each of the Issuers is in compliance with all material
terms and conditions of such Permits except for any such failure to
obtain, maintain or comply which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect;
(B) neither of the Issuers has received (a) any notice or claim
to the effect that it is or may be liable to any person under any
Environmental Law, including without limitation, any notice or claim
relating to any Hazardous Materials except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect or (b) any letter or request for information under Section 104
of the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. (S) 9604) or comparable foreign or state laws
regarding any matter which, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect, and, to
the best knowledge of the Issuers, neither of the Issuers is or will
be involved in any investigation, response or corrective action
relating to or in connection with any Hazardous Materials at any
Facility or at any other location except for such of the foregoing
which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect;
(C) neither of the Issuers is subject to any judicial or
administrative proceeding alleging the violation of or liability under
any Environmental Laws which if adversely determined, individually or
in the aggregate, would reasonably be expected to have a Material
Adverse Effect;
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<PAGE>
(D) neither of the Issuers nor any of their respective Facilities
or operations is subject to any outstanding written order or agreement
with any governmental authority or private party relating to (a) any
actual or potential violation of or liability under Environmental Laws
or (b) any Environmental Claims except for such of the foregoing
which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect;
(E) neither of the Issuers has any contingent liability in
connection with any Release or threatened Release of any Hazardous
Materials by either of the Issuers except for such of the foregoing
which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect;
(F) neither of the Issuers nor any predecessor of either of the
Issuers has filed any notice required under any Environmental Law
indicating past or present treatment, storage or disposal of hazardous
waste, as defined under 40 C.F.R. Parts 260-270 or any state
equivalent, which would reasonably be expected to have a Material
Adverse Effect;
(G) no Hazardous Materials exist on, under or about any Facility
in a manner that, individually or in the aggregate, would reasonably
be expected to give rise to an Environmental Claim having a Material
Adverse Effect; neither of the Issuers has filed any notice or report
of a Release of any Hazardous Materials that, individually or in the
aggregate, would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect;
(H) neither of the Issuers nor, to the best of the knowledge of
the Issuers, any of their respective predecessors, has disposed of any
Hazardous Materials in a manner that, individually or in the
aggregate, would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect;
(I) no unregistered or noncompliant underground storage tanks and
no unmonitored or otherwise noncompliant surface impoundments are on
or at any Facility; and
(J) no Lien in favor of any person relating to or in connection
with any Environmental Claim has been filed or has been attached to
any Facility or other assets of either of the Issuers except for any
such Lien which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
Notwithstanding anything in this Section 1(x) to the contrary, no
event or condition has occurred which may interfere with present compliance
by the Issuers with any Environmental Law or which may give rise to any
liability under any Environmental Law, which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
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<PAGE>
As used herein, the following terms shall have the respective meaning
ascribed to each below:
"Environmental Claim" means any allegation, notice of violation,
claim, demand, abatement order or other order or direction (conditional or
otherwise) by any governmental authority or any person for any response or
corrective action, any damage, including, without limitation, personal
injury (including sickness, disease or death), property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment, nuisance, pollution, contamination or other adverse effects on
the environment, or for fines, penalties or restrictions, in each case
arising under or relating to any Environmental Law, including without
limitation, relating to, resulting from or in connection with Hazardous
Materials and relating to the Issuers or any of their respective Facilities
or predecessors in interest.
"Environmental Laws" means the common law and all statutes,
ordinances, orders, rules, regulations, requirements, judgments, plans,
policies or decrees and the like relating to (i) environmental matters,
including, without limitation, those relating to fines, injunctions,
penalties, damages, contribution, cost recovery compensation, losses or
injuries resulting from the Release or threatened Release of Hazardous
Materials, (ii) the generation, use, storage, transportation or disposal of
Hazardous Materials including, without limitation, investigation, study,
assessment, testing, monitoring, containment, removal, remediation, or
clean-up of any such Release, or (iii) occupational safety and health,
industrial hygiene or the protection of the environment, natural resources,
human, plant or animal health or welfare, including, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. (S) 9601 et seq.), the Hazardous Materials Transportation Act
------
(49 U.S.C. (S) 1801 et seq.), the Resource Conservation and Recovery Act
------
(42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution Control Act (33
------
U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et seq.),
------ ------
the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the Federal
------
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S) 136 et seq.), the
------
Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.) and the
------
Emergency Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et
--
seq.), each as amended or supplemented, and any analogous future or present
---
statutes, orders, rules, regulations, requirements, judgments or decrees
promulgated pursuant thereto, each as in effect as of the date of
determination.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon)
now, hereafter or heretofore owned, leased, operated or used by the Issuers
or any of their respective predecessors in interest.
"Hazardous Materials" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous substance," "restricted hazardous waste," "infectious waste,"
"toxic substances" or any other formulations intended to define, list or
classify substances by reason of deleterious properties such as
ignitability, corrosivity,
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<PAGE>
reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP
toxicity" or "EP toxicity" or words of similar import under any applicable
Environmental Laws or publications issued pursuant thereto; (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any
drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or
geothermal resources; (iv) any flammable substances or explosives; (v) any
radioactive materials or gases; (vi) asbestos in any form; (vii) urea
formaldehyde foam insulation; (viii) electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls
in excess of fifty parts per million; (ix) pesticides; (x) lead-based
paint; and (xi) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any governmental authority or
which may or could pose a hazard to human health or safety or the
environment.
"Permits" has the meaning ascribed to it in Section 1(y) below.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Materials into the indoor or
outdoor environment (including, without limitation, the abandonment or
disposal of any barrels, containers or other closed receptacles containing
any Hazardous Materials), or onto or out of any Facility, including the
movement of any Hazardous Material through the air, soil, surface water,
groundwater or property.
(x) Each of the Issuers has such certificates, permits, licenses,
franchises, consents, approvals, authorizations and clearances ("Permits"), and
is in compliance in all material respects with all Laws as are necessary to own,
lease or operate its properties and to conduct its businesses in the manner as
presently conducted and to be conducted immediately after the consummation of
the issue and sale of the Notes as contemplated herein, except where the failure
to have such Permits or to comply with such Laws would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect, and all
such Permits are valid and in full force and effect. Each of the Issuers is in
compliance in all material respects with its obligations under such Permits and
no event has occurred or will occur as a result of the consummation of the issue
and sale of the Notes and the other transactions contemplated herein, that
allows, or after notice or lapse of time or both would allow, revocation or
termination of such Permits except for any such revocation or termination as
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(y) Each of the Issuers carries insurance or is entitled to the
benefits of insurance in such amounts and covering such risks as is generally
maintained by companies of established repute engaged in the same or similar
businesses, and all such insurance is in full force and effect.
(z) No labor disturbance by the employees of the Issuers exists or,
to the best knowledge of the Issuers, is threatened and the Issuers are not
aware of any existing or imminent labor disturbance which would reasonably be
expected to have a Material Adverse Effect.
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(aa) Any reprogramming and related testing required to permit the
proper functioning of each of the Issuers' computer systems in and following the
year 2000 will be completed in all material respects prior to December 31, 1999
(that is, each of the Issuers will be "Year 2000 Compliant"), and the cost to
each of the Issuers of such reprogramming and testing will not result in a
default under any Contract nor would reasonably be expected to have a Material
Adverse Effect. Except for such reprogramming referred to in the preceding
sentence as may be necessary, the computer and management information systems of
each of the Issuers are adequate for the conduct of its business.
(bb) Except for the fees and expenses payable to the Initial
Purchasers, the Company did not employ any investment banker, broker, finder,
consultant, intermediary or other person in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or other fee or commission in connection with this
Agreement or the transactions contemplated hereby.
Any certificate signed by any officer of the Issuers and delivered to
the Initial Purchasers or their counsel shall be deemed to be a representation
and warranty made as of the date of such certificate by the Issuers to the
Initial Purchasers as to the matters covered thereby.
2. Purchase and Sale. Subject to the terms and conditions and in
-----------------
reliance upon the representations and warranties herein set forth, the Company
agrees to issue and sell to the Initial Purchasers, and the Initial Purchasers
agrees to purchase from the Company at a purchase price equal to 95.25% of the
principal amount thereof, $150,000,000 in principal amount of Notes.
3. Delivery and Payment. Delivery of and payment for the Notes shall
--------------------
be made at 10:00 AM, New York City time, on January 21, 1999, which date and
time may be postponed by agreement between the Initial Purchasers and the
Company (such date and time of delivery and payment for the Notes being herein
called the "Closing Date"). Delivery of the Notes shall be made to the Initial
Purchasers against payment by the Initial Purchasers of the purchase price
thereof to or upon the order of the Company by wire transfer payable in same day
funds or such other manner of payment as may be agreed by the Company and the
Initial Purchasers. Delivery of the Notes and payment for the Notes shall be
made at the offices of Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza,
New York, NY 10006. Certificates for the Notes shall be registered in such
names and in such denominations as the Initial Purchasers may request in writing
not less than two full Business Days in advance of the Closing Date.
The Company agrees to have the Notes available for inspection,
checking and packaging by the Initial Purchasers in New York, New York, not
later than 1:00 PM on the Business Day prior to the Closing Date.
4. Offering of Notes and the Initial Purchasers' Representations and
-----------------------------------------------------------------
Warranties. Each Initial Purchaser represents and warrants to and agrees with
- ----------
the Issuers that:
(a) It has not offered or sold, and it will not offer or sell, any
Notes except (i) to those it reasonably believes to be qualified
institutional buyers (as defined in Rule 144A
15
<PAGE>
under the Securities Act) ("QIBs") in transactions meeting the requirements
of Rule 144A, (ii) to other institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) who
provide to it and to the Company a letter in the form of Exhibit A hereto
or (iii) compliance with Regulation S under the Securities Act and in
accordance with the restrictions set forth in Exhibit B hereto. In
connection with each sale pursuant to clause (i) above, the Initial
Purchasers have taken or will take reasonable steps to ensure that the
purchaser of such Notes is aware that such sale is being made in reliance
upon Rule 144A.
(b) It is an "accredited investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act).
(c) Neither it nor any person acting on its behalf has made or will
make offers or sales of the Notes by means of any form of general
solicitation or general advertising (within the meaning of Regulation D
under the Securities Act).
5. Agreements. The Issuers agree with the Initial Purchasers that:
----------
(a) The Issuers will furnish to the Initial Purchasers and to Cleary,
Gottlieb, Steen & Hamilton ("Counsel for the Initial Purchasers") as soon
as reasonably possible, without charge, during the period referred to in
paragraph (c) below, as many copies of the Final Memorandum and any
amendments and supplements thereto as they may reasonably request. The
Issuers will pay the expenses of printing or other production of all
documents relating to the offering of the Notes and will reimburse the
Initial Purchasers for payment of the required PORTAL filing fee.
(b) The Issuers will not amend or supplement the Final Memorandum
prior to the completion of the distribution of the Notes by the Initial
Purchasers, without the prior written consent of the Initial Purchasers,
which will not be unreasonably withheld.
(c) If at any time prior to the completion of the distribution of the
Notes acquired by the Initial Purchasers pursuant to this Agreement, during
which time you are required to deliver a Final Memorandum in connection
with sales of the Notes by you (as reasonably determined by the Initial
Purchasers, upon the advice of counsel), any event occurs as a result of
which the Final Memorandum, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or if it should be necessary to
amend or supplement the Final Memorandum to comply with applicable law, the
Issuers will promptly notify the Initial Purchasers of the same and,
subject to the requirements of paragraph (b) of this Section 5, will
prepare and provide to the Initial Purchasers pursuant to paragraph (a) of
this Section 5 an amendment or supplement that will correct such statement
or omission or effect such compliance.
(d) The Issuers will arrange for the qualification of the Notes for
sale by the Initial Purchasers under the laws of such jurisdictions as the
Initial Purchasers may
16
<PAGE>
reasonably designate and will maintain such qualifications in effect so
long as required for the sale of the Notes by the Initial Purchasers;
provided, however, that the Issuers will not be required to qualify
-------- -------
generally to do business in any jurisdiction in which they are not then so
qualified, to file any general consent to service of process or to take any
other action which would subject them to general service of process or to
taxation in any such jurisdiction where they are not then so subject. The
Issuers will promptly advise the Initial Purchasers of the receipt by the
Issuers of any notification with respect to the suspension of the
qualification of the Notes for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose.
(e) The Issuers, whenever they publish or make available to the
public (by filing with any regulatory authority or securities exchange or
by publishing a press release or otherwise) any information that would
reasonably be expected to be material in the context of the issue of the
Notes under this Agreement, shall promptly notify the Initial Purchasers as
to the nature of such information or event. The Issuers will likewise
notify the Initial Purchasers of (i) any decrease in the rating of the
Notes or any other debt securities of the Issuers by any nationally
recognized statistical rating organization (as defined in Rule 436(g)(2)
under the Securities Act) or (ii) any notice given of any intended or
potential decrease in any such rating or of a possible change in any such
rating that does not indicate the direction of the possible change, as soon
as the Issuer becomes aware of any such decrease or notice. The Issuers
will also deliver to the Initial Purchasers, as soon as available and
without request, copies of their latest yearly and quarterly financial
statements and any report of their auditors thereon.
(f) The Issuers will not, and will not permit any of their Affiliates
to, resell any of the Notes that have been acquired by any of them, other
than pursuant to an effective registration statement under the Securities
Act.
(g) Except as contemplated in the Registration Rights Agreement, none
of the Issuers or any of their Affiliates, nor any person acting on their
behalf (other than the Initial Purchasers or any of its Affiliates, as to
whom the Issuers express no opinion) will, directly or indirectly, make
offers or sales of any security, or solicit offers to buy any security,
under circumstances that would require the registration of the Notes under
the Securities Act.
(h) None of the Issuers or any of their Affiliates, nor any person
acting on its or their behalf (other than the Initial Purchasers or any of
its Affiliates, as to whom the Issuers express no opinion) will engage in
any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with any offer or sale of the Notes.
(i) So long as any of the Notes are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, the Issuers will
provide at their expense to each holder of the Notes and to each
prospective purchaser (as designated by such holder) of the Notes, upon the
request of such holder or prospective purchaser, any information
17
<PAGE>
required to be provided by Rule 144A(d)(4) under the Securities Act, unless
the Issuers are then subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). This covenant is
intended to be for the benefit of the holders, and the prospective
purchasers designated by such holders, from time to time of the Notes.
(j) The Issuers will cooperate with the Initial Purchasers and use
their best efforts to (i) permit the Notes to be designated PORTAL
securities in accordance with the Rules and regulations of the NASD
relating to trading in the Private Offerings, Resale and Trading through
Automated Linkages market ("PORTAL") and (ii) permit the Notes to be
eligible for clearance and settlement as described under "Book-Entry;
Delivery and Form" in the Final Memorandum.
(k) The Issuers will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(l) The Issuers will conduct their operations in a manner that will
not subject them to registration as an investment company under the
Investment Company Act of 1940, as amended.
(m) Each Note will bear a legend substantially to the following
effect until such legend shall no longer be necessary or advisable because
the Notes are no longer subject to the restrictions on transfer described
therein:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ADOPTED UNDER THE
SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S ADOPTED UNDER THE
SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE
ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
ADOPTED UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, IN EITHER CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE NOTES OF U.S. $250,000, FOR INVESTMENT PURPOSES AND
NOT WITH A VIEW TO OR FOR
18
<PAGE>
OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, AND THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH REGULATION S ADOPTED UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 ADOPTED UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
6. Conditions to the Obligations of the Initial Purchasers. The
-------------------------------------------------------
obligation of the Initial Purchasers to purchase the Notes shall be subject to
the accuracy of the representations and warranties on the part of the Issuers
contained herein at the date and time that this Agreement is executed and
delivered by the parties hereto (the "Execution Time") and the Closing Date, to
the accuracy of the statements of the Issuers made in any certificates pursuant
to the provisions hereof, to the performance by the Issuers of their obligations
hereunder and to the following additional conditions:
(a) The Issuers shall have furnished to the Initial Purchasers the
opinion of Alston & Bird LLP ("Counsel for the Issuers"), dated the Closing
Date, in form and substance satisfactory to the Initial Purchasers, to the
effect set forth in Exhibit C hereto.
(b) The Initial Purchasers shall have received from Counsel for the
Initial Purchasers such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Notes and other related matters as
the Initial Purchasers may reasonably require, and the Issuers shall have
furnished to such counsel such documents as it reasonably requests for the
purpose of enabling it to pass upon such matters.
19
<PAGE>
(c) The Issuers shall each have furnished to the Initial Purchasers a
certificate dated the Closing Date, signed on behalf of each of the Issuers
by any two of their respective Chairman of the Board and Chief Executive
Officers, President, Chief Financial or Accounting Officers and any Vice
President to the effect that the signer of such certificate has carefully
examined the Final Memorandum, any amendment or supplement to the Final
Memorandum and this Agreement and that:
(i) the representations and warranties of the Issuers contained
in this Agreement are, without giving effect to any qualification
regarding a Material Adverse Effect that may be contained in any of
them, true, correct and complete on and as of the Closing Date in all
material respects with the same effect as if made on the Closing Date,
and the Issuers have performed and complied with all the covenants and
agreements and satisfied all the conditions on their part to be
performed or satisfied hereunder at or prior to the Closing Date; and
(ii) since the date of the most recent financial statements
included in the Final Memorandum, there has been no change or
development or event involving a prospective change which,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect, except as set forth in or contemplated by
the Final Memorandum (exclusive of any amendment or supplement
thereto).
(d) At the Execution Time, Arthur Andersen LLP shall have furnished
to the Initial Purchasers a letter or letters, dated as of the Execution
Time, in form and substance satisfactory to the Initial Purchasers,
confirming that they are independent public accountants within the meaning
of Rule 101 of the Code of Professional Conduct of the American Institute
of Certified Public Accountants (the "AICPA") and stating in effect that:
(i) on the basis of their limited review in accordance with the
standards established by the AICPA under Statement on Auditing Standards
No. 71 of the unaudited interim financial statements for the nine-month
periods ended September 30, 1998 and 1997 included in the Final Memorandum;
carrying out certain specified procedures (but not an audit in accordance
with generally accepted auditing standards) that would not necessarily
reveal matters of significance with respect to the comments set forth in
such letter and a reading of the minutes of the meetings of the
stockholders, board of directors and related committees of the Glass Yarns
and Specialty materials Business of Owens Corning (the "Business"), nothing
came to their attention to cause them to believe that any material
modifications should be made to the unaudited financial statements
described in this clause (i), included in the Final Memorandum, for them to
be in conformity with generally accepted accounting principles.
(ii) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial
or statistical information derived from the general accounting records of
the Business) set forth in the Final Memorandum, including
20
<PAGE>
without limitation the information set forth under the captions "Offering
Memorandum Summary," "Summary Historical Financial Information," "Risk
Factors," "Use of Proceeds," "Capitalization," "Selected Historical
Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and "Certain Relationships
and Related Party Transactions," in the Final Memorandum agrees with the
accounting records of, or schedules prepared by management of, the
Business, excluding any questions of legal interpretation.
(e) At the Execution Time and at the Closing Date,
PricewaterhouseCoopers LLP shall have furnished to the Initial Purchasers a
letter or letters, dated respectively as of the Execution Time and as of
the Closing Date, in form and substance satisfactory to the Initial
Purchasers, confirming that they are independent public accountants within
the meaning of Rule 101 of the Code of Professional Conduct of the American
Institute of Certified Public Accountants (the "AICPA") and stating in
effect that:
(i) on the basis of a reading of the unaudited financial
statements of the Issuers for the eleven month period ended November
30, 1998 made available by the Company; a reading of the minutes of
the meetings of the board of directors of the Company; and inquiries
of certain officials of the Company and the Business who have
responsibility for financial and accounting matters of the Issuers as
to whether (a) the unaudited financial statements referred to above
are stated on a basis substantially consistent with that of the
audited consolidated financial statements of the Business included in
the Final Memorandum and (b) (1) at November 30, 1998, there was any
change in the members' interests, increase in long-term debt or
decrease in net current assets of the Company, as compared with
amounts shown in the September 30, 1998 unaudited balance sheet of the
Business included in the Final Memorandum or (2) for the period from
October 1, 1998 to November 30, 1998, there were any decreases, as
compared with the corresponding period in the preceding year, in net
sales or total amount of net income, that those officials of the
Company stated that:
(A) except as disclosed in the letter, the unaudited
financial statements refereed to in (i) above are stated on a
basis substantially consistent with that of the audited financial
statements of the Business included in the Final Memorandum,
(B) at November 30, 1998, there was no change in members'
interests, increases in long-term debt, decrease in net current
assets, as compared with amounts shown in the September 30, 1998
unaudited balance sheet included in the Final Memorandum, or for
the period from October 1, 1998 to November 30, 1998, there were
any decreases, as compared with the corresponding period in the
preceding year of the Business, in net sales or in the total
amount of net income, except in all instances for changes or
decreases that the Final memorandum discloses have occurred or
may occur and as set forth in such letter, in which case
21
<PAGE>
the letter shall be accompanied by an explanation by the Company
as to the significance thereof unless said explanation is not
deemed necessary by the Initial Purchaser.
(ii) on the basis of inquiries of certain officials of the
Company and the Business who have responsibility for financial and
accounting matters of the Company as to whether (a) at January 13,
1999, there was any change in members' interests, increase in long-
term debt or decrease in net current assets of the Company, as
compared with amounts shown in the September 30, 1998 unaudited
balance sheet of the Business included in the Final Memorandum or (b)
for the period from October 1, 1998 to January 13, 1999, there were
any decreases, as compared with the corresponding period in the
preceding year, in net sales or total amount of net income, that those
officials stated that sufficient information was not available
regarding any such change, increase or decrease.
(iii) as to pro forma financial information,
(A) they have read the unaudited pro forma financial
information included in the Final Memorandum;
(B) they have inquired of certain officials of the
Company and the Business who have responsibility for financial and
accounting matters as to whether all significant assumptions have been
properly reflected in the pro forma adjustments and whether the pro
forma adjustments were properly applied to the historical amounts in
the compilation of the unaudited pro forma financial statements
included in the Final Memorandum and that those officials stated that
(i) all significant assumptions have been properly reflected in the
pro forma adjustments and (ii) the adjustments were factually
supportable and were properly applied to the historical amounts in the
compilation of the pro forma financial statements included in the
Final Memorandum;
(C) they have proved the arithmetic accuracy of the
application of the pro forma adjustments to the historical financial
amounts in the unaudited pro forma financial statements included in
the Final Memorandum; and
(D) they have performed certain other specified
procedures as a result of which they determined that certain pro forma
information of an accounting, financial, or statistical nature set
forth in the Final Memorandum, including without limitation the
information set forth under the captions "Offering Memorandum
Summary," "Summary Unaudited Pro Forma Financial Information,"
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business" in the Final Memorandum, agrees
to or can be derived from the pro forma financial data of the Company
or the analysis completed in the preparation of such pro forma
financial data, excluding any questions of legal interpretation.
22
<PAGE>
All references in Sections 6(d) and 6(e) to the Final Memorandum shall
be deemed to include any amendment or supplement thereto at the date of the
letter or letters.
(f) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Final Memorandum and prior to the Closing
Date, there shall not have been (i) any change or decrease specified in the
letter or letters referred to in paragraph (d) of this Section 6, or (ii)
any change, or any development involving a prospective change, in or
affecting the business or properties of the Issuers, the effect of which,
in any case referred to in clause (i) or (ii) above, is, in the judgment of
the Initial Purchasers, so material and adverse as to make it impractical
or inadvisable to market the Notes as contemplated by the Final Memorandum.
(g) Subsequent to the respective dates as of which information is
given in the Final Memorandum, after giving effect to the issue and sale of
the Notes as contemplated herein and on or prior to the Closing Date, (i)
neither of the Issuers shall have incurred any material liability or
obligation, direct or contingent, or entered into any material transaction
not in the ordinary course of business; (ii) the Issuers shall not have
purchased any of their outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on their capital
stock; (iii) there shall not have been any material change in the capital
stock of the Issuers or in the short-term debt or long-term debt of the
Issuers; and (iv) none of the material assets of the Issuers shall have
materially diminished in value (ordinary wear and tear excepted, except in
each case as described in or contemplated by the Final Memorandum.
(h) On the Closing Date, the Notes shall have a rating from Standard
& Poor's Corporation at least as favorable as B2 and from Moody's Investors
Service, Inc. at least as favorable as B.
(i) On or prior to the Closing Date, each of the Transaction
Documents (including any amendments thereto) shall have been duly
authorized, executed and delivered by each of the parties thereto, and the
Initial Purchasers shall have received copies of each such Transaction
Document (including any amendments thereto) as so executed and delivered in
the form provided to the Initial Purchasers on or before the date hereof
except for changes approved by the Initial Purchasers.
(j) Concurrently with the consummation of the Transactions, all
amounts due and payable under the Senior Subordinated Credit Agreement
dated as of September 30, 1998 among the Issuers as borrowers, certain
subsidiaries from time to time party thereto as guarantors, First Union
Investors, Inc. and Warburg Dillon Read LLC as co-agents and the lenders
named therein, (the "Senior Subordinated Credit Agreement") shall be paid
on the Closing Date from the proceeds of the sale of the Notes to the
Initial Purchasers and any liens securing amounts due and payable under the
Senior Subordinated Credit Agreement shall have been released effective
upon receipt of such payments.
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<PAGE>
(k) The Issuers shall have been advised by the National Association
of Securities Dealers, Inc. (the "NASD") that the Notes have been
designated PORTAL-eligible securities in accordance with the Rules and
regulations of the NASD relating to trading in the Private Offerings,
Resales and Trading through Automated Linkages Market (the "PORTAL
Market").
(l) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto
after the date hereof), the business or operations of the Issuers shall not
have been interfered with by fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any strike, labor
dispute, slow down or work stoppage or from any legal or governmental
proceeding, order or decree, and the Issuers and their properties shall not
have sustained any loss or damage, whether or not covered by insurance, as
a result of any such occurrence, except for any such interference, loss or
damage which has not had, and could not reasonably be expected to have, a
Material Adverse Effect.
(m) Prior to the Closing Date, the Issuers shall have furnished to
the Initial Purchasers or Counsel for the Initial Purchasers such further
information, certificates and documents as the Initial Purchasers or
Counsel for the Initial Purchasers may reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as provided in this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
satisfactory in form and substance to the Initial Purchasers and Counsel for the
Initial Purchasers, this Agreement and all obligations of the Initial Purchasers
hereunder may be canceled at the Closing Date by the Initial Purchasers. Notice
of such cancellation shall be given to the Issuer in writing or by telephone or
by telegraph confirmed in writing.
The documents required to be delivered by this Section 6 will be
delivered at the office of Cleary, Gottlieb, Steen & Hamilton on the Closing
Date.
7. Reimbursement of Expenses; Fees. (a) The Issuers will, whether or
-------------------------------
not the sale of the Notes provided for herein is consummated, pay all expenses
incident to the performance of its obligations under this Agreement and the
offering documents, including the fees and disbursements of its accountants and
counsel, the costs of printing or other production and delivery of the
Preliminary Memorandum, the Final Memorandum, all amendments thereof and
supplements thereto, each Transaction Document and all other documents relating
to the offering of the Notes, the costs of preparing, printing, packaging and
delivering the Notes, the fees and disbursements, including fees of counsel,
incurred in compliance with Section 5(d), the fees and disbursements of the
Trustee and the fees of any agency that rates the Notes, and the fees and
expenses, if any, incurred in connection with the admission of the Notes for
trading in the PORTAL Market.
(b) If the sale of the Notes provided for herein is not consummated
because any condition to the obligation of the Initial Purchasers set forth in
Section 6 hereof is not satisfied or
24
<PAGE>
because of any refusal, inability or failure on the part of the Issuers to
perform any agreement herein or comply with any provision hereof other than by
reason of a default by the Initial Purchasers, the Issuers shall reimburse the
Initial Purchaser for all reasonable out-of-pocket expenses (including legal
fees and expenses) incurred by the Initial Purchasers in connection with the
proposed purchase and resale of the Notes.
8. Indemnification and Contribution. (a) The Issuers agree to
--------------------------------
indemnify and hold harmless the Initial Purchasers, the directors, officers,
employees and agents of the Initial Purchasers and each person who controls the
Initial Purchasers within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Memorandum, the Final Memorandum or any information provided by the
Issuers to any Holder or prospective purchaser of Notes pursuant to Section
5(i), or in any amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and agree
to reimburse each such indemnified party, as incurred, for any legal or other
expenses incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Issuers
-------- -------
will not be liable in any case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information relating to
the Initial Purchasers furnished to the Issuers by or on behalf of the Initial
Purchasers specifically for inclusion therein; and, provided, further, that with
-------- -------
respect to any untrue statement or omission of material fact made in the
Preliminary Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of the Initial Purchasers to the extent that any
such losses, claims, damages or liabilities asserted against the Initial
Purchasers occurs under circumstances where it shall have been determined by a
court of competent jurisdiction by final and nonappealable judgment that (x) the
Issuers had previously furnished copies of the Final Memorandum to the Initial
Purchasers as required by this Agreement, (y) the untrue statement or omission
of a material fact contained in the Preliminary Memorandum was corrected in the
Final Memorandum and (z) there was not sent or given to such person asserting
any such losses, claims, damages or liabilities, at or prior to the written
confirmation of the sale of Notes to such person, a copy of the Final
Memorandum. This indemnity agreement will be in addition to any liability which
the Issuers may otherwise have.
(b) The Initial Purchasers agree to indemnify and hold harmless the
Issuers, their directors, officers, employees and agents and each person who
controls the Issuers within the meaning of either the Securities Act or the
Exchange Act to the same extent as the foregoing indemnity from the Issuers to
the Initial Purchasers, but only with reference to written information relating
to the Initial Purchasers furnished to the Issuers by or on behalf of the
Initial
25
<PAGE>
Purchasers specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which the Initial Purchasers may otherwise have. The Issuers
acknowledge that the statements set forth in the last paragraph of the cover
page and under the heading "Plan of Distribution" in the Preliminary Memorandum
and the Final Memorandum constitute the only information furnished in writing by
or on behalf of the Initial Purchasers for inclusion in the Preliminary
Memorandum or Final Memorandum (or in any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel (and local counsel) if (i) the use of
counsel chosen by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall have authorized the indemnified
party to employ separate counsel at the expense of the indemnifying party;
provided further, that the indemnifying party shall not be responsible for the
- -------- -------
fees and expenses of more than one separate counsel (together with appropriate
local counsel) representing all the indemnified parties under paragraph (a) or
paragraph (b) above. An indemnifying party will not, without the prior written
consent of the indemnified party, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not an indemnified party is an actual or potential party
to such claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
26
<PAGE>
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable or insufficient to hold harmless an indemnified
party for any reason, the Issuers, on the one hand, and the Initial Purchasers,
on the other, agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Issuers, on the one hand, and the Initial Purchasers, on the other, may be
subject in such proportion as is appropriate to reflect the relative benefits
received by the Issuers, on the one hand, and by the Initial Purchasers, on the
other, from the offering of the Notes; provided, however, that in no case shall
-------- -------
the Initial Purchasers be responsible for any amount in excess of the purchase
discount or commission applicable to the Notes purchased by the Initial
Purchasers hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Issuers, on the one hand, and the
Initial Purchasers, on the other, shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Issuers, on the one hand, and of the Initial Purchasers, on the
other, in connection with the statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. Benefits
received by the Issuers shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses), and benefits received by the
Initial Purchasers shall be deemed to be equal to the total purchase discounts
and commissions received by the Initial Purchasers from the Issuers in
connection with the purchase of the Notes hereunder. Relative fault shall be
determined by reference to, among other things, whether any alleged untrue
statement or omission relates to information provided by the Issuers or the
Initial Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Issuers and the Initial Purchasers agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation that does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), 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. For purposes of this
Section 8, each person who controls the Initial Purchasers within the meaning of
either the Securities Act or the Exchange Act and each director, officer,
employee and agent of the Initial Purchasers shall have the same rights to
contribution as the Initial Purchasers, and each person who controls the Issuers
within the meaning of either the Securities Act or the Exchange Act and each
officer, director, employee and agent of the Issuers shall have the same rights
to contribution as the Issuers, subject in each case to the applicable terms and
conditions of this paragraph (d).
9. Termination. This Agreement shall be subject to termination by
-----------
notice given by the Initial Purchasers to the Issuers prior to delivery of and
payment for the Notes if, after the date hereof and prior to such delivery and
payment, there shall have occurred a material adverse change in the condition of
the financial, banking or capital markets in the United States the effect of
which, in the judgment of the Initial Purchasers, makes it impractical to market
the Notes or to enforce sale contracts with respect to the Notes.
10. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Issuers or their officers and
27
<PAGE>
of the Initial Purchasers set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of the Initial Purchasers or the Issuers or any of their officers,
directors or controlling persons referred to in Section 8 hereof, and will
survive delivery of and payment for the Notes. The provisions of Sections 7 and
8 hereof shall survive the termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Initial Purchasers, will be
mailed, delivered or telecopied and confirmed to them at 301 South College
Street, TW-10, Charlotte, NC 28288-0606, Telecopy No.: (704) 383-9527,
Attention: Kevin Smith; or, if sent to the Issuers, will be mailed, delivered
or telecopied and confirmed to them at 3802 Robert Porcher Way, Greensboro, N.C.
27410, Telecopy No.: (336) 545-7715, Attention: Chief Financial Officer.
12. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and assigns and
the officers and directors and controlling persons referred to in Section 8
hereof, and, except as expressly set forth in Section 5(i) hereof, nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person, firm, corporation or other entity any legal or equitable
right, remedy or claim under or in respect to this Agreement or any provisions
herein contained. No purchaser of Notes from the Initial Purchasers shall be
deemed to be a successor merely by reason of such purchase.
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
--------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.
14. Business Day. For purposes of this Agreement, "Business Day"
------------
means any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of Charlotte, North Carolina or of New York, New York, or is a
day on which banking institutions therein located are authorized or required by
law or other governmental action to close.
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
28
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement among the
Issuers and the Initial Purchasers.
Very truly yours,
ADVANCED GLASSFIBER YARNS LLC
By: /s/ Catherine Cuisson
-------------------------------------------
Name: Catherine Cuisson
Title: CFO
AGY CAPITAL CORP.
By: /s/ Catherine Cuisson
-------------------------------------------
Name: Catherine Cuisson
Title: CFO
The foregoing Agreement is hereby confirmed and accepted as of the date first
written above
FIRST UNION CAPITAL MARKETS,
A DIVISION OF WHEAT FIRST SECURITIES, INC.
By: /s/ Eric Lloyd
----------------------------------
Name: Eric Lloyd
Title: Director
WARBURG DILLON READ LLC
By:/s/ Vincent Lu
-----------------------------------
Name: Vincent Lu
Title: Executive Director
By: /s/ James Stone
----------------------------------
Name: James Stone
Title: Director
29
<PAGE>
EXHIBIT 12
ADVANCED GLASSFIBER YARNS LLC
STATEMENT RE COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratio information)
<TABLE>
<CAPTION>
For the Nine Months
Year Ended December 31, Ended September 30,
---------------------------------------------- -------------------
1997 1996 1995 1994 1993 1998 1997
-------- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income from continuing operations before
income taxes 82,866 83,294 74,535 65,072 45,797 59,235 62,451
Portion of rents representative of interest
factor 1,076 618 457 422 362 898 814
----------------------------------------------------------------------
83,942 83,912 74,992 65,494 46,159 60,133 63,265
======================================================================
FIXED CHARGES:
----------------------------------------------------------------------
Portion of rents representative of interest
factor 1,076 618 457 422 362 898 814
======================================================================
----------------------------------------------------------------------
RATIO OF EARNINGS TO FIXED CHARGES 78x 136x 164x 155x 128x 67x 78x
======================================================================
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES
AGY Capital Corp.
AG Yarns Canada, Inc.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
Registration Statement of our report dated August 14, 1998 included herein and
to all of the references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Toledo, Ohio,
February 11, 1999
<PAGE>
EXHIBIT 25
========================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [__]
__________
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
__________
ADVANCED GLASSFIBER YARNS LLC
(Exact name of obligor as specified in its charter)
Delaware 58-2407014
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
AGY CAPITAL CORP.
(Exact name of obligor as specified in its charter)
Delaware 57-1072917
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Advanced Glassfiber Yarns LLC
2556 Wagener Road
Aiken, South Carolina 29801
(Address of principal executive offices) (Zip code)
_____________
9-7/8% Senior Subordinated Notes due 2009
(Title of the indenture securities)
========================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
- ------------------------------------------
Name Address
- ------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York, N.Y.
New York 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-
29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(D).
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed
with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 3rd day of February, 1999.
THE BANK OF NEW YORK
By: /s/ VAN K. BROWN
-----------------------------
Name: VAN K. BROWN
Title: ASSISTANT VICE PRESIDENT
<PAGE>
EXHIBIT 7
---------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business June 30, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
ASSETS DOLLAR AMOUNTS
IN THOUSANDS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin......... $ 7,301,241
Interest-bearing balances.................................. 1,385,944
Securities:
Held-to-maturity securities................................ 1,000,737
Available-for-sale securities.............................. 4,240,655
Federal funds sold and Securities purchased under
agreements to resell..................................... 971,453
Loans and lease financing receivables:
Loans and leases, net of unearned
income..................................................... 38,788,269
LESS: Allowance for loan and
lease losses............................................... 632,875
LESS: Allocated transfer risk
reserve.................................................... 0
Loans and leases, net of unearned income, allowance, and
reserve.................................................... 38,155,394
Assets held in trading accounts.............................. 1,307,562
Premises and fixed assets (including capitalized leases)..... 670,445
Other real estate owned...................................... 13,598
Investments in unconsolidated subsidiaries and associated
companies.................................................. 215,024
Customers' liability to this bank on acceptances
outstanding................................................ 974,237
Intangible assets............................................ 1,102,625
Other assets................................................. 1,944,777
-----------
Total assets................................................. $59,283,692
===========
LIABILITIES
Deposits:
In domestic offices........................................ $26,930,258
Noninterest-bearing........................................ 11,579,390
Interest-bearing........................................... 15,350,868
In foreign offices, Edge and Agreement subsidiaries, and
IBFs....................................................... 16,117,854
Noninterest-bearing........................................ 187,464
Interest-bearing........................................... 15,930,390
Federal funds purchased and Securities sold under
agreements to repurchase................................... 2,170,238
Demand notes issued to the U.S.Treasury...................... 300,000
Trading liabilities.......................................... 1,310,867
Other borrowed money:
With remaining maturity of one year or less................ 2,548,479
With remaining maturity of more than one year through
three years................................................ 0
With remaining maturity of more than three years........... 48,854
Bank's liability on acceptances executed and outstanding..... 983,398
Subordinated notes and debentures............................ 1,314,000
Other liabilities............................................ 2,295,520
----------
Total liabilities............................................ 54,018,268
==========
EQUITY CAPITAL
Common stock................................................. 1,135,284
Surplus...................................................... 731,319
Undivided profits and capital reserves....................... 3,385,227
Net unrealized holding gains (losses) on
available-for-sale securities.............................. 51,233
Cumulative foreign currency translation adjustments.......... (37,639)
-----------
Total equity capital......................................... 5,265,424
-----------
Total liabilities and equity capital......................... $58,283,692
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot }
Thomas A. Renyi } Directors
Alan R. Griffith }
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE GLASS YARNS AND SPECIALTY MATERIALS BUSINESS, A
BUSINESS UNIT OF OWENS CORNING, FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND
1997, AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1995 DEC-31-1996 DEC-31-1997 SEP-30-1998
<CASH> 0 0 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 24,798 20,691 35,032
<ALLOWANCES> 0 1,490 1,419 1,639
<INVENTORY> 0 21,246 19,168 24,378
<CURRENT-ASSETS> 0 48,992 43,127 59,228
<PP&E> 0 246,756 248,537 298,687
<DEPRECIATION> 0 139,446 142,979 149,229
<TOTAL-ASSETS> 0 163,839 153,961 445,476
<CURRENT-LIABILITIES> 0 53,936 54,999 23,494
<BONDS> 0 0 0 391,250
0 0 0 0
0 0 0 0
<COMMON> 0 0 0 0
<OTHER-SE> 0 36,850 30,940 15,932
<TOTAL-LIABILITY-AND-EQUITY> 0 163,939 153,961 445,476
<SALES> 272,395 274,979 277,357 205,348
<TOTAL-REVENUES> 272,395 274,979 277,357 205,348
<CGS> 187,153 180,343 182,366 134,820
<TOTAL-COSTS> 187,153 180,343 182,366 134,820
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0
<INCOME-PRETAX> 74,535 83,294 82,866 59,235
<INCOME-TAX> 29,594 33,051 32,540 16,226
<INCOME-CONTINUING> 44,941 50,243 50,326 43,009
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 44,941 50,243 50,326 43,009
<EPS-PRIMARY> 0 0 0 0
<EPS-DILUTED> 0 0 0 0
</TABLE>
<PAGE>
EXHIBIT 99
Advanced Glassfiber Yarns LLC
AGY Capital Corp.
LETTER OF TRANSMITTAL
To Tender for Exchange
9 7/8% Senior Subordinated Notes due 2009
for 9 7/8% Series B Senior Subordinated Notes due 2009
Pursuant to the Prospectus Dated ___________, 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should be
completed, signed and submitted timely to The Bank of New York (the "Exchange
Agent") as follows:
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section 7-E
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
For any questions regarding this Letter of Transmittal or for any
additional information, you may contact the Exchange Agent by telephone at (212)
815-____.
The Exchange Offer is not being mailed to, nor will tenders be accepted
from or on behalf of, holders of Old Notes in any jurisdiction in which the
making or acceptance of the Exchange Offer would not be in compliance with the
laws of such jurisdiction.
<PAGE>
Preliminary Instructions
The undersigned hereby acknowledges receipt of the Prospectus dated
_________, 1999 (the "Prospectus") of Advanced Glassfiber Yarns LLC, a Delaware
limited liability company ("AGY") and AGY Capital Corp., a Delaware corporation
("Capital" and, together with AGY, the "Company"), and this Letter of
Transmittal (this "Letter of Transmittal"), which together constitute the
Company's offer to exchange (the "Exchange Offer") its 9 7/8% Series B Senior
Subordinated Notes due 2009 (the "Exchange Notes"), the issuance of which has
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for any and all of its outstanding 9 7/8% Senior Subordinated Notes due
2009 (the "Old Notes"). For each Old Note accepted for exchange, the holder of
such Old Note will receive an Exchange Note having a principal amount equal to
that of the surrendered Old Note. Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus.
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Old Notes, except that (i) the Exchange
Notes will bear a different CUSIP Number from the Old Notes, (ii) the issuance
of the Exchange Notes has been registered under the Securities Act and,
therefore, the Exchange Notes will not bear legends restricting the transfer
thereof and (iii) holders of the Exchange Notes will not be entitled to certain
rights under the Registration Rights Agreement dated as of January 21, 1999 (the
"Registration Rights Agreement") among the Company and First Union Capital
Markets and Warburg Dillon Read LLC, the initial purchasers of the Old Notes.
Holders whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any interest accrued on the Old Notes. See "Exchange Offer"
in the Prospectus.
Notwithstanding the foregoing, valid acceptance of the terms of the
Exchange Offer may be effected by a participant in The Depository Trust Company
("DTC") tendering Notes through the DTC's Automated Tender Offer Program
("ATOP") where the Exchange Agent receives an Agent's Message prior to the
Expiration Date. Accordingly, such participant must electronically transmit its
acceptance to the DTC through ATOP, and then the DTC will edit and verify the
acceptance, execute a book-entry delivery to the Exchange Agent's account at the
DTC and send an Agent's Message to the Exchange Agent for its acceptance. By
tendering through ATOP, participants in the DTC will expressly acknowledge
receipt of this Letter of Transmittal and agree to be bound by its terms and the
Company will be able to enforce such agreement against DTC participants.
The Company reserves the right, at any time and from time to time, to
extend the Exchange Offer, in which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is extended. In order to extend
the Exchange Offer, the Company will notify the Exchange Agent thereof by
written notice and will make a public announcement of such extension, each prior
to 9:00 a.m., New York City time, on the next business day after the previously
scheduled expiration date. The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes being tendered or accepted for
exchange. However, the Exchange Offer is subject to certain conditions. See "The
Exchange Offer --- Conditions" in the Prospectus.
This Letter of Transmittal is to be completed by a holder of Old Notes if
(i) certificates are to be forwarded herewith or (ii) a tender of certificates
for Old Notes is to be made by book-entry transfer to the account maintained by
the Exchange Agent at the DTC pursuant to the book-entry transfer procedures
set forth under "The Exchange Offer --- Procedures for Tendering Old Notes" in
the Prospectus.
Holders who wish to tender their Old Notes but who cannot, prior to 5:00
p.m., New York City time, on the Expiration Date (a) deliver their Old Notes,
this Letter of Transmittal or any other required documents to the Exchange Agent
or (b) deliver a confirmation of the book-entry tender of their Old Notes into
the Exchange Agent's account at DTC (a "Book-Entry Confirmation") and otherwise
complete the procedures for book-entry transfer, may effect a tender of Old
Notes by complying with the guaranteed delivery procedures set forth under "The
Exchange Offer --- Guaranteed Delivery Procedures" in the Prospectus. Delivery
of documents to DTC or the Company does not constitute delivery to the Exchange
Agent. See Instruction 1.
HOLDERS OF OLD NOTES SHOULD COMPLETE THE APPROPRIATE BOXES BELOW AND SIGN
THIS LETTER OF TRANSMITTAL TO INDICATE THE ACTION THE HOLDERS ELECT TO TAKE WITH
RESPECT TO THE EXCHANGE OFFER.
-2-
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the Old Notes described in Box I
(Description of Tendered Notes) (the "Tendered Notes"). The undersigned is the
registered owner of all the Tendered Notes, and the undersigned represents that
it has received from each beneficial owner of the Tendered Notes (a "Beneficial
Owner") a duly completed and executed form of "Instructions to Registered Holder
and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take the
action described in this Letter of Transmittal. Subject to, and effective upon,
the acceptance for exchange of the Tendered Notes, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to the Tendered Notes.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent its agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Company) with respect to the Tendered Notes
with the full power of substitution to (i) deliver certificates for the Tendered
Notes to the Company and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company, (ii) present the Tendered
Notes for transfer on the books of the Company and (iii) receive for the account
of the Company all benefits and otherwise exercise all rights of beneficial
ownership of the Tendered Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be an
irrevocable power coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Tendered Notes
and that the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim when the same are accepted by the Company. The undersigned
further represents and warrants to the Company that (i) the information set
forth in Box II (Beneficial Owner(s)) is correct, (ii) any Exchange Notes to be
received by the undersigned and any Beneficial Owner in exchange for the
Tendered Notes will be acquired in the ordinary course of business of the
undersigned and such Beneficial Owner, (iii) neither the undersigned nor any
Beneficial Owner is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act and (iv) neither the undersigned nor any Beneficial
Owner has any arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes.
The undersigned agrees that acceptance of any Tendered Notes by the Company
and the issuance of Exchange Notes in exchange therefor will constitute
performance in full by the Company of its obligations under the Registration
Rights Agreement and that the Company will have no further obligations or
liabilities thereunder (except as expressly provided therein).
The undersigned and each Beneficial Owner also acknowledge as follows: The
Exchange Offer is being made in reliance on existing interpretations of the
Securities Act by the staff of the Securities and Exchange Commission (the
"Commission") set forth in several "no-action" letters to third parties and
unrelated to the Company and the Exchange Offer and, based on such
interpretations, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by the holders thereof (other than any such holder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without further compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Any holder which is an affiliate of the Company or which intends to participate
in the Exchange Offer for the purpose of distributing the Exchange Notes (i)
will not be able to rely on the interpretation by the staff of the Commission
set forth in the above-mentioned "no action" letters, (ii) will not be able to
tender its Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer transaction unless such sale or transfer is
made pursuant to an
-3-
<PAGE>
exemption from such requirements. Failure to comply with such requirements may
result in such holder incurring liability under the Securities Act for which the
holder is not indemnified by the Company. The undersigned and each Beneficial
Owner acknowledge that the Company has not sought or received its own "no
action" letter with respect to the Exchange Offer and the related transactions,
and that there can be no assurance that the staff of the Commission will make a
determination in the case of the Exchange Offer and such transactions that is
similar to its determinations in the above-mentioned "no action" letters.
If the undersigned or any Beneficial Owner is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making or other trading activities, the
undersigned acknowledges that it and each such Beneficial Owner will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. However, by so acknowledging and so delivering a
prospectus, neither the undersigned nor any such Beneficial Owner will be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The above-referenced prospectus may be the Prospectus (as it may be amended or
supplemented from time to time) only if it contains a plan of distribution with
respect to such resale transactions (but need not name the undersigned or
disclose the amount of Exchange Notes held by the undersigned or any such
Beneficial Owner).
The undersigned and each Beneficial Owner will, upon request, execute and
deliver any additional documents deemed by the Company or the Exchange Agent to
be necessary or desirable to complete the sale, assignment and transfer of the
Tendered Notes. All authority conferred or agreed to be conferred in this Letter
of Transmittal and every obligation of the undersigned and each Beneficial Owner
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and such Beneficial Owner, and shall not be affected by, and shall
survive the death or incapacity of, the undersigned and such Beneficial Owner .
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Tendered Notes when, as and if the Company has given
written notice thereof to the Exchange Agent.
The undersigned understands that tenders of the Tendered Notes pursuant to
the procedures described in the Prospectus under "The Exchange Offer ---
Procedures for Tendering" and in the Instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Prospectus.
The undersigned recognizes that (i) under certain circumstances set forth
in the Prospectus under "The Exchange Offer --- Conditions," the Company will
not be required to accept the Tendered Notes for exchange and (ii) the
undersigned may withdraw its tender of Tendered Notes only as set forth in the
Prospectus under "The Exchange Offer --- Withdrawal of Tenders." Tendered Notes
not accepted for exchange or which have been withdrawn will be returned, without
expense, to the undersigned as promptly as practicable after the Expiration
Date, in the manner set forth in the next succeeding paragraph.
Unless otherwise indicated in Box V (Special Issuance Instructions), please
issue certificates for the Exchange Notes (and, if applicable, substitute
certificates representing any Old Notes not exchanged) in the name of the
undersigned. Similarly, unless otherwise indicated in Box VI (Special Delivery
Instructions), please (i) send certificates for the Exchange Notes (and, if
applicable, substitute certificates representing Old Notes not exchanged) to the
undersigned at the address indicated in Box I (Description of Tendered Notes) or
(ii) in the case of a book-entry tender of Old Notes, please credit the Exchange
Notes (and, if applicable, Old Notes not exchanged) to the account at DTC
indicated in Box III (Method of Delivery).
-4-
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
ANY BOX BELOW.
- -------------------------------------------------------------------------------
BOX I
DESCRIPTION OF TENDERED NOTES*
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Note Aggregate
Holder(s), exactly as name(s) appear(s) Principal Aggregate
on Old Note Certificate(s) Certificate Amount Principal
Number(s) Represented Amount
of Old by Tendered***
Notes** Certificate(s)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
</TABLE>
* List the Old Notes to which this Letter of Transmittal relates. If the space
provided is inadequate, the Certificate numbers and principal amount of Old
Notes should be listed on a separate signed schedule attached hereto.
** Need not be completed by persons tendering by book-entry transfer.
*** Tenders of Old Notes must be in a minimum principal amount of $1,000 or an
integral multiple of $1,000 in excess thereof. Unless otherwise indicated in
this column, a holder will be deemed to have tendered ALL of the Old Notes
represented by the Certificate(s) set forth above. See Instruction 2.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX II
BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------
State of Principal Residence of Principal Amount of Tendered Notes
Each Beneficial Owner of Tendered Notes Held for Account of Beneficial Owner
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
-5-
<PAGE>
- --------------------------------------------------------------------------------
BOX III
METHOD OF DELIVERY
(See Instruction 1)
- --------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution _____________________________________________
Account Number ____________ Transaction Code Number _____________________
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s) ___________________________________________
Window Ticket Number (if any) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery ________________________
Name of Institution which guaranteed delivery _____________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Name of Tendering Institution ________________________________________
Account Number and Transaction Code Number ___________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX IV
ATTENTION BROKER-DEALERS
- --------------------------------------------------------------------------------
[_] CHECK HERE IF THE UNDERSIGNED OR ANY BENEFICIAL OWNER OF TENDERED NOTES IS
A BROKER-DEALER AND WISHES TO RECEIVE 10 ADDITIONAL COPIES OF THE
PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO:
Name ______________________________________________________________________
Address ___________________________________________________________________
- --------------------------------------------------------------------------------
-6-
<PAGE>
- --------------------------------------------------------------------------------
BOX V
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
- --------------------------------------------------------------------------------
To be completed ONLY if certificates for Exchange Notes and/or certificates
for Old Notes not exchanged are to be issued in the name of someone other than
the person(s) whose signature(s) appear(s) on this Letter of Transmittal in Box
VII (Signature).
Issue: Exchange Notes issued and/or Old Notes not exchanged to:
Name(s) ________________________________________________________________________
(Please Type or Print)
________________________________________________________________________
(Please Type or Print)
Address(es) ____________________________________________________________________
____________________________________________________________________
(Zip Code)
Taxpayer Identification Number or Social Security Number _______________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX VI
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
- --------------------------------------------------------------------------------
To be completed ONLY if (1) certificates for Exchange Notes and/or
certificates for Old Notes not exchanged are to be sent to someone other than
the person(s) whose signature(s) appear(s) on this Letter of Transmittal in Box
VII (Signature) at the address(es) indicated in Box I (Description of Tendered
Notes) or (2) Exchange Notes and/or Old Notes not exchanged are to be issued or
returned, respectively, to an account maintained at DTC other than the account
indicated in Box III (Method of Delivery).
Send: Exchange Notes and/or Old Notes not exchanged to:
Name(s) ________________________________________________________________________
(Please Type or Print)
________________________________________________________________________
(Please Type or Print)
Address(es) ____________________________________________________________________
____________________________________________________________________
(Zip Code)
Credit: Exchange Notes and/or Old Notes not exchanged to DTC account as follows:
Name(s) ________________________________________________________________________
(Please Type or Print)
________________________________________________________________________
(Please Type or Print)
Crediting Instructions _________________________________________________________
Account Number _________________________________________________________________
- --------------------------------------------------------------------------------
-7-
<PAGE>
- --------------------------------------------------------------------------------
BOX VII
SIGNATURE: TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instructions 1 and 3)
In addition, Substitute Form W-9 on the following page
must be completed and signed.
- --------------------------------------------------------------------------------
___________________________________ __________________, 1998
___________________________________ __________________, 1998
___________________________________ __________________, 1998
Signature(s) by Tendering Holder(s) Date
Area Code and Telephone Number _________________________________________________
For any Tendered Notes, this Letter of Transmittal must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Tendered Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents submitted herewith. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please set forth
full title and the other information indicated below and, unless waived by the
Company, submit herewith evidence satisfactory to the Company of authority to so
act. See Instruction 3.
Name(s) ________________________________________________________________________
________________________________________________________________________
(Please Type or Print)
Capacity _______________________________________________________________________
Address(es) ____________________________________________________________________
____________________________________________________________________
(Including Zip Code)
Area Code and Telephone Number _________________________________________________
Tax Identification Number or Social Security Number ____________________________
SIGNATURE GUARANTEE
(if required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution ______________________________________________________
(Authorized Signature)
______________________________________________________
(Print Name)
______________________________________________________
(Title)
______________________________________________________
(Name of Firm--Must be an Eligible
Institution as defined in Instruction 3)
______________________________________________________
(Address)
______________________________________________________
(Area Code and Telephone Number)
- --------------------------------------------------------------------------------
-8-
<PAGE>
- -------------------------------------------------------------------------------
PAYORS' NAMES: ADVANCED GLASSFIBER YARNS LLC/AGY CAPITAL CORP.*
- -------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part 1
below. See instructions if your name has changed)
---------------------------------------------------------
Address
---------------------------------------------------------
SUBSTITUTE City, State and ZIP Code
Form W-9 ---------------------------------------------------------
List account number(s) here (optional)
Department of
the Treasury ---------------------------------------------------------
Internal Revenue Part 1-PLEASE PROVIDE YOUR | Social Security Number
TAXPAYER IDENTIFICATION NUMBER | or TIN
("TIN") IN THE BOX AT RIGHT AND |
Service CERTIFY BY SIGNING AND DATING |
BELOW. |
---------------------------------------------------------
Part 2-Check the box if you are NOT subject to backup
withholding under the provisions of section 3406(a)(I)(C)
of the Internal Revenue Code because (1) you have not
been notified that you are subject to backup withholding
as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup
withholding. [_]
- --------------------------------------------------------------------------------
Part 3-CERTIFICATION--UNDER THE PENALTIES OR PERJURY, I
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE. Awaiting TIN [_]
SIGNATURE __________________ DATE ____________________
- --------------------------------------------------------------------------------
*See Instruction 5.
- --------------------------------------------------------------------------------
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9 ABOVE.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (i) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration office or (ii) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number to the payor, 31% of all payments made
to me pursuant to the Exchange Offer shall be retained until I provide a
taxpayer identification number to the payor and that, if I do not provide my
taxpayer identification number within sixty (60) days, such retained amounts
shall be remitted to the Internal Revenue Service as a backup withholding and
31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a number.
SIGNATURE _______________________ DATE _________________________________
- --------------------------------------------------------------------------------
-9-
<PAGE>
ADVANCED GLASSFIBER YARNS LLC
AGY CAPITAL CORP.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Tendered Notes; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be completed by holders of
Old Notes if (i) certificates are to be forwarded herewith or (ii) a tender of
certificates for Old Notes is to be made by book-entry transfer to the account
maintained by the Exchange Agent at DTC pursuant to the book-entry transfer
procedures set forth under "The Exchange Offer -- Procedures for Tendering Old
Notes" in the Prospectus. Certificates for all physically tendered Old Notes, or
a Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile hereof)
and all other documents required by this Letter of Transmittal, must be received
by the Exchange Agent at the address set forth on the front cover and back cover
hereof prior to 5:00 p.m., New York City time, on the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedures set forth
below.
Holders who wish to tender their Old Notes but who cannot, prior to 5:00
p.m., New York City time, on the Expiration Date (i) deliver their Old Notes,
this Letter of Transmittal or any other documents required by this Letter of
Transmittal to the Exchange Agent or (ii) deliver a Book-Entry Confirmation and
otherwise complete the procedures for book-entry transfer, may effect a tender
of Old Notes by complying with the guaranteed delivery procedures set forth
under "The Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus.
Pursuant to such procedures, (a) the tender must be made through an Eligible
Institution (as defined in Instruction 3); (b) prior to 5:00 p.m., New York City
time, on the Expiration Date, the Exchange Agent must have received from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, registered or certified mail or hand
delivery) setting forth the name and address of the tendering holder, the
certificate number(s) of the Tendered Notes and the principal amount of the
Tendered Notes, stating that the tender is being made thereby and guaranteeing
that, within three New York Stock Exchange trading days after the Expiration
Date, this Letter of Transmittal (or facsimile thereof) together with the
certificates(s) representing the Tendered Notes (or a Book-Entry Confirmation)
and any other documents required by this Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent; and (c) this Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, as
well as the certificates(s) representing the Tendered Notes in proper form for
transfer (or a Book-Entry Confirmation), and all other documents required by
this Letter of Transmittal are received by the Exchange Agent within three New
York Stock Exchange trading days after the Expiration Date.
The method of delivery of this Letter of Transmittal, the Tendered Notes
and all other required documents is at the election and risk of the tendering
holders. The delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. As an alternative to delivery by mail, holders
may wish to consider overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date.
See the discussion set forth under "The Exchange Offer" in the Prospectus.
2. Tender by Registered Holder; Instructions to Beneficial Holders; Partial
Tenders. Only a holder in whose name Old Notes are registered may execute and
deliver this Letter of Transmittal and tender Old Notes in the Exchange Offer.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust, company or other nominee and who wishes to
tender such Old Notes should (i) contact such registered holder promptly and
instruct such registered holder to tender such Old Notes on such beneficial
owner's behalf, (ii) properly complete and duly execute the form
-10-
<PAGE>
of "Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant From Beneficial Owner" accompanying this Letter of Transmittal and
(iii) timely deliver such form to such registered holder. The Company, the
Exchange Agent and the transfer and registrar for the Old Notes shall be
entitled to rely upon all representations, warranties, covenants and
instructions given or made by such registered holder and/or such beneficial
owner. If such beneficial owner wishes to tender Old Notes on its own behalf,
such beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering its Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such beneficial owner's name or obtain
a properly completed bond power from the registered holder. Any such transfer of
registered ownership may take considerable time.
Tendered Notes must be in a minimum principal amount of $1,000 or an
integral multiple of $1,000 in excess thereof. If less than the entire principal
amount of the Old Notes evidenced by a submitted certificate are to be tendered,
the tendering holder(s) should indicate the aggregate principal amount of Old
Notes to be tendered in Box I (Description of Tendered Notes) under the caption
"Aggregate Principal Amount Tendered." The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of Old Notes held by the
tendering holder is not tendered for exchange, then (i) unless otherwise
indicated in Box V (Special Issuance Instructions), certificates evidencing
untendered Old Notes and Exchange Notes issued pursuant to the Exchange Offer
will be issued in the name of the person signing this Letter of Transmittal and
(ii) unless otherwise indicated in Box VI (Special Delivery Instructions), such
certificates will be sent to the person signing this Letter of Transmittal at
the address indicated in Box I (Description of Tendered Notes) (or, in the case
of a book-entry tender of Old Notes, credited to the account at DTC indicated in
Box III (Method of Delivery)).
3. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal is signed by the
registered holder of the Tendered Notes, the signature must correspond exactly
with the name(s) as written on the face of the certificates for the Tendered
Notes without any change whatsoever. If any tendered Old Notes are owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal. If any Tendered Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
certificates.
When this Letter of Transmittal is signed by the registered holder(s) of
the Tendered Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Old Notes are to be reissued, to a
person other than the registered holder, then endorsements of any certificates
transmitted hereby or separate bond powers are required. Signatures on such
certificate(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any certificate(s) specified herein, such certificate(s)
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s) and signatures on each such endorsement or bond power must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on certificates for Tendered Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by a firm which is a
member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., or is a savings institution, commercial
bank or
-11-
<PAGE>
trust company having an office or correspondent in the United States, or is
otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, and which is, in each
case, a member of a recognized signature guarantee program (i.e., Securities
Transfer Agents Medallion Program, Stock Exchange Medallion Program or New York
Stock Exchange Medallion Signature Program) (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Tendered Notes are tendered by: (i) the
registered holder thereof (which term for purposes of the exchange offer
includes any participant of DTC whose name appears on a security position
listing as the holder of such Tendered Notes) who has not completed Box V
(Special Issuance Instructions) or Box VI (Special Delivery Instructions) on
this Letter of Transmittal or (ii) an Eligible Institution.
4. Special Issuance and Delivery Instructions. Tendering holders should
indicate in the applicable boxes the name and address to which Exchange Notes
issued pursuant to the Exchange Offer and/or substitute certificates evidencing
Old Notes not exchanged are to be issued or sent if different from the name or
address of the holder signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification number or social
security number of the person named must also be indicated. If no such
instructions are given, certificates evidencing such Old Notes not exchanged and
Exchange Notes issued pursuant to the Exchange Offer will be returned to the
person signing this Letter of Transmittal at the address indicated in Box I
(Description of Tendered Notes) (or, in the case of a book-entry tender of Old
Notes, credited to the account at DTC indicated in Box III (Method of
Delivery)).
5. Tax Identification Number. Federal income tax law generally requires
that a tendering holder whose Tendered Notes are accepted for exchange must
provide the Company (as payor) with such holder's correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9, which in the case of a
tendering holder who is an individual, is his or her social security number. If
the Company is not provided with the current TIN or an adequate basis for an
exemption, such tendering holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, delivery to such tendering holder of
Exchange Notes may be subject to backup withholding in an amount equal to 31% of
all reportable payments made after the exchange. If withholding results in an
overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9" (the "W-9 Guidelines")
for additional instructions.
To prevent backup withholding, each holder of Tendered Notes must provide
its correct TIN by completing the Substitute Form W-9 set forth above,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the holder of
Tendered Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. This form may be obtained from the Exchange Agent. If the
Tendered Notes are in more than one name or are not in the name of the
Beneficial Owner, the tendering holder should consult the W-9 Guidelines for
information on which TIN to report. If such holder does not have a TIN, such
holders should consult the W-9 Guidelines for instructions on applying for a
TIN, check the box in Part 3 of the Substitute Form W-9 and write "applied for"
in lieu of its TIN. Note: Checking this box and writing "applied for" on the
form means that such holder has already applied for a TIN or that such holder
intends to apply for one in the near future. If such holder does not
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<PAGE>
provide its TIN to the Company within 60 days, backup withholding will begin and
continue until such holder furnishes its TIN to the Company.
6. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the transfer of Tendered Notes to it or its order pursuant to the
Exchange Offer. If, however, Exchange Notes and/or substitute Old Notes not
exchanged are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Tendered Notes, or if the
Tendered Notes are registered in the name of any person other than the person
signing this Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the transfer of Tendered Notes to the Company or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes specified in this Letter
of Transmittal.
7. Waiver of Conditions. The Company reserves the absolute right to amend,
waive or modify any or all conditions relating to the Exchange Offer set forth
in the Prospectus.
8. No Conditional Tenders. No alternative, conditional, irregular or
contingent tenders will be accepted. All holders of Tendered Notes, by execution
of this Letter of Transmittal, shall waive any right to receive notice of the
acceptance of their Tendered Notes for exchange.
9. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address set forth on the front cover and back cover hereof for
further instructions.
10. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Tendered Notes not properly tendered or any Tendered Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in its sole discretion
to waive any defects, irregularities or conditions of tender as to any Tendered
Notes. The Company's interpretation of the terms and conditions of the Exchange
Offer (including the Instructions in this Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with Tendered Notes must be cured within such time as the Company
shall determine. Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Tendered Notes, neither the Company,
the Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Tendered Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Tendered Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in this Letter of Transmittal, as promptly as practicable following the
Expiration Date.
11. Acceptance of Tendered Notes and Issuance of Notes; Return of Notes.
Subject to the terms and conditions of the Exchange Offer, the Company will
accept for exchange all validly tendered Old Notes as promptly as practicable
after the Expiration Date and will issue Exchange Notes therefor as promptly as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted validly tendered Old Notes when, as and if the
Company has given written notice thereof to the Exchange Agent. If any Tendered
Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Tendered Notes will be returned, without expense, to the person
signing this Letter of Transmittal at the address indicated in Box I
(Description of Tendered Notes),
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<PAGE>
except as may otherwise be specified in Box V (Special Issuance Instructions) or
Box VI (Special Delivery Instructions).
12. Withdrawal. Tendered Notes may be withdrawn only pursuant to the
procedures set forth in the Prospectus under "The Exchange Offer -- Withdrawal
of Tenders."
13. Requests for Assistance or Additional Copies. Questions relating to the
procedures for tendering, as well as requests for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery,
may be directed to the Exchange Agent at the address and telephone number set
forth on the front cover and back cover hereof.
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<PAGE>
The Bank of New York, as Exchange Agent
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section 7-E
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-
<PAGE>
Advanced Glassfiber Yarns LLC
AGY Capital Corp.
NOTICE OF GUARANTEED DELIVERY
With Respect to the Tender for Exchange of
9 7/8% Senior Subordinated Notes due 2009
for 9 7/8% Series B Senior Subordinated Notes due 2009
Pursuant to the Prospectus Dated ________, 1999
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
As set forth in the Prospectus dated _________, 1999 (the "Prospectus") of
Advanced Glassfiber Yarns LLC, a Delaware limited liability company ("AGY), and
AGY Capital Corp., a Delaware corporation ("Capital" and, together with AGY, the
"Company"), under the caption "The Exchange Offer--Guaranteed Delivery
Procedures," and in the accompanying Letter of Transmittal (the "Letter of
Transmittal"), this Notice of Guaranteed Delivery or a form substantially
equivalent hereto must be used to accept the Company's offer to exchange (the
"Exchange Offer") its 9 7/8% Series B Senior Subordinated Notes due 2009, the
issuance of which has been registered under the Securities Act of 1933, as
amended, for any and all of its outstanding 9 7/8% Senior Subordinated Notes due
2009 (the "Old Notes") if the tendering holder of Old Notes cannot, prior to
5:00 p.m., New York City time, on the Expiration Date (i) deliver its Old Notes,
the Letter of Transmittal or any other documents required by the Letter of
Transmittal to the Exchange Agent (as defined below) or (ii) deliver a
confirmation of the book-entry tender of its Old Notes into the Exchange Agent's
account at The Depository Trust Company ("DTC") and otherwise complete the
procedures for book-entry transfer. If required, this Notice of Guaranteed
Delivery, properly completed and duly executed, must be delivered to The Bank of
New York (the "Exchange Agent") as set forth below.
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section 7-E
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
For any questions regarding this Notice of Guaranteed Delivery or for any
additional information, please contact the Exchange Agent by telephone at (212)
815-____.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal,
receipt of which is hereby acknowledged, the principal amount of Old Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."
All authority herein conferred or agreed to be conferred in this Notice of
Guaranteed Delivery and every obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators, trustees
in bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive the death or incapacity of, the undersigned.
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s)
or Authorized Signatory ________________________________________
________________________________________
________________________________________
Name(s) of Registered Holder(s) ________________________________________
________________________________________
________________________________________
Principal Amount of Old Notes Tendered _________________________________________
Date ___________________________________________________________________________
Address ________________________________________________________________________
Area Code and Telephone Number _________________________________________________
If Old Notes will be delivered by book-entry transfer, provide the account
number at The Depository Trust Company below:
Depository Account No.__________________________________________________________
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of
the Old Notes tendered hereby exactly as their name(s) appear on the
certificates for such Old Notes or on a security position listing such holder(s)
as the owner(s) of such Old Notes, or by person(s) authorized to become
registered holder(s) of such Old Notes by endorsements and documents submitted
with this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must
provide the following information and, unless waived by the Company, submit with
the Letter of Transmittal evidence satisfactory to the Company of such person's
authority to so act. See Instruction 2.
-2-
<PAGE>
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s)________________________________________________________________________
________________________________________________________________________
Capacity __________________________________________________________________
Address(es) __________________________________________________________________
__________________________________________________________________
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or is a
savings institution, commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, and which is, in each case, a member of a recognized
signature guarantee program (i.e., Securities Transfer Agents Medallion Program,
Stock Exchange Medallion Program or New York Stock Exchange Medallion Signature
Program), guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at DTC as described in the Prospectus under the
caption "The Exchange Offer -- Guaranteed Delivery Procedures" and in the
Letter of Transmittal) and any other required documents, all by 5:00 p.m., New
York City time, within three New York Stock Exchange trading days after the
Expiration Date.
Name of Firm_______________________ Authorized Signature ___________________
Address ___________________________
___________________________ Name __________________________________
Area Code and
Telephone Number___________________ Title__________________________________
Date___________________________________
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
-3-
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents is at the election and risk of the
tendering holders. The delivery will be deemed made only when actually received
or confirmed by the Exchange Agent. As an alternative to delivery by mail,
holders may wish to consider overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificates for such Old Notes without any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
DTC whose name appears on a security position listing as the holder of such Old
Notes, the signature must correspond exactly with the name shown on the security
position listing as the holder of such Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of DTC, this
Notice of Guaranteed Delivery must be accompanied by appropriate bond powers,
signed as the name(s) of the registered holder(s) appear(s) on the certificates
for the Old Notes or signed as the name of the participant is shown on DTC's
security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and unless waived by the Company, submit with the Letter
of Transmittal evidence satisfactory to the Company of such person's authority
to so act.
3. Requests for Assistance or Additional Copies. Questions relating to the
procedures for tendering, as well as requests for additional copies of the
Prospectus, the Letter of Transmittal and this Notice of Guaranteed Delivery,
may be directed to the Exchange Agent at the address and telephone number set
forth on the front cover and back cover hereof.
-4-
<PAGE>
Advanced Glassfiber Yarns LLC
AGY Capital Corp.
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
With Respect to the Tender for Exchange of
9 7/8% Senior Subordinated Notes due 2009
for 9 7/8% Series B Senior Subordinated Notes due 2009
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
________, 1999 (the "Prospectus") of Advanced Glassfiber Yarns LLC, a Delaware
limited liability company ("AGY"), and AGY Capital Corp., a Delaware corporation
("Capital" and, together with AGY, the "Company"), and the accompanying Letter
of Transmittal (the "Letter of Transmittal"), which together constitute the
Company's offer to exchange (the "Exchange Offer") its 9 7/8% Series B Senior
Subordinated Notes due 2009 (the "Exchange Notes"), the issuance of which has
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for any and all of its outstanding 9 7/8% Senior Subordinated Notes due
2009 (the "Old Notes"). For each Old Note accepted for exchange, the holder of
such Old Note will receive an Exchange Note having a principal amount equal to
that of the surrendered Old Note.
This will instruct you, the registered holder and/or participant in the
book-entry transfer facility, which is The Depository Trust Company, as to the
action to be taken by you relating to the Exchange Offer with respect to the Old
Notes held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (insert amount): $________________ of the Company's 9 7/8%
Senior Subordinated Notes due 2009.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] TO TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered, if
any, in integral multiples of $1,000): $________________ of the
Company's 9 7/8% Senior Subordinated Notes due 2009.
[_] NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representations and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of Old Notes, including, but not limited to, the
representations that (i) the information set forth in Box II (Beneficial Owners)
of the Letter of Transmittal with respect to the undersigned is correct, (ii)
any Exchange Notes to be received by the undersigned in exchange for Old Notes
tendered in the Exchange Offer will be acquired in the ordinary course of
business of the undersigned, (iii) the undersigned is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act and (iv) the
<PAGE>
undersigned has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes.
If the undersigned is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Old Notes that were acquired as a result of market-
making or other trading activities, it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. However, by so acknowledging and so delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned acknowledges as follows: The Exchange Offer is being made
in reliance on existing interpretations of the Securities Act by the staff of
the Securities and Exchange Commission (the "Commission") set forth in several
"no-action" letters to third parties and unrelated to the Company and the
Exchange Offer and, based on such interpretations, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by the holders
thereof (other than any such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without further
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of such Exchange Notes. Any holder which is an
affiliate of the Company or which intends to participate in the Exchange Offer
for the purpose of distributing the Exchange Notes (i) will not be able to rely
on the interpretation by the staff of the Commission set forth in the above-
mentioned "no-action" letters, (ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer transaction unless such sale or transfer is made pursuant to an
exemption from such requirements. Failure to comply with such requirements may
result in such holder incurring liability under the Securities Act for which the
holder is not indemnified by the Company. The undersigned acknowledges that the
Company has not sought or received its own "no-action" letter with respect to
the Exchange Offer and the related transactions, and that there can be no
assurance that the staff of the Commission will make a determination in the case
of the Exchange Offer and such transactions that is similar to its
determinations in the above-mentioned "no-action" letters.
- -------------------------------------------------------------------------------
SIGN HERE
Name of Beneficial Owner(s):______________________________________________
Signature(s):_____________________________________________________________
Name(s) (please print):___________________________________________________
Address:__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Area Code and Telephone Number:___________________________________________
Taxpayer Identification Number or Social Security Number:_________________
Date:_____________________________________________________________________
- -------------------------------------------------------------------------------
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<PAGE>
The Bank of New York, as Exchange Agent
By Mail or Hand Delivery: The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Reorganization Section
7-E
Facsimile Transmission: (212) 815-6339
Confirm by Telephone: (212) 815-
