<PAGE>
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997
or
/ /Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the transition period from _____________ to _____________
Commission File Number 1-8472
-----------
HEXCEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 94-1109521
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3238
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
Registrant's telephone number, including area code: (203) 969-0666
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes __X__ No _____
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan of reorganization confirmed by a US
Bankruptcy Court.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date.
Class Outstanding at November 7, 1997
----- --------------------------------
COMMON STOCK 36,845,341
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<PAGE>
HEXCEL CORPORATION AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
- Condensed Consolidated Balance Sheets --
September 30, 1997 and December 31, 1996 2
- Condensed Consolidated Statements of
Operations -- Quarter and Year-to-Date Periods Ended
September 30, 1997 and 1996 3
- Condensed Consolidated Statements of
Cash Flows -- Year-to-Date Periods
Ended September 30, 1997 and 1996 4
- Notes to Condensed Consolidated
Financial Statements 5
- Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits 17
SIGNATURES 18
<PAGE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
UNAUDITED
---------------------------
SEPTEMBER 30, December 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,141 $ 7,975
Accounts receivable 183,138 151,263
Inventories 162,298 145,884
Prepaid expenses and other assets 39,095 11,809
- ------------------------------------------------------------------------------------------------
Total current assets 387,672 316,931
- ------------------------------------------------------------------------------------------------
Property, plant and equipment 482,815 468,173
Less accumulated depreciation (159,220) (141,390)
- ------------------------------------------------------------------------------------------------
Net property, plant and equipment 323,595 326,783
- ------------------------------------------------------------------------------------------------
Intangibles and other assets 96,286 58,022
- ------------------------------------------------------------------------------------------------
Total assets $807,553 $ 701,736
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term liabilities $ 16,325 $ 23,835
Accounts payable 62,838 73,117
Accrued liabilities 94,279 91,860
- ------------------------------------------------------------------------------------------------
Total current liabilities 173,442 188,812
- ------------------------------------------------------------------------------------------------
Long-term notes payable and capital lease obligations 325,693 254,919
Indebtedness to related parties 34,347 32,262
Deferred liabilities 39,513 46,414
- ------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $0.01 par value, 100,000 shares authorized, shares
issued and outstanding of 36,828 in 1997 and 36,561 in 1996 368 366
Additional paid-in capital 264,528 259,592
Accumulated deficit (27,864) (89,171)
Cumulative currency translation adjustment (2,474) 8,542
- ------------------------------------------------------------------------------------------------
Total stockholders' equity 234,558 179,329
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $807,553 $ 701,736
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
2
<PAGE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
UNAUDITED
--------------------------------------------------------------
QUARTER ENDED SEPTEMBER 30, YEAR-TO-DATE ENDED SEPTEMBER 30,
--------------------------- --------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 226,611 $ 189,542 $ 682,249 $ 482,730
Cost of sales (171,644) (153,729) (522,577) (384,946)
- -------------------------------------------------------------------------------------------------------------
Gross margin 54,967 35,813 159,672 97,784
Selling, general and administrative expenses (30,203) (25,642) (88,293) (67,003)
Business acquisition and consolidation expenses (15,433) (1,382) (21,150) (35,802)
Other income, net - 142 - 3,127
- -------------------------------------------------------------------------------------------------------------
Operating income (loss) 9,331 8,931 50,229 (1,894)
Interest expense (6,771) (7,173) (18,288) (15,655)
- -------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 2,560 1,758 31,941 (17,549)
Benefit (provision) for income taxes 35,388 (1,412) 29,366 (3,924)
- -------------------------------------------------------------------------------------------------------------
Net income (loss) $ 37,948 $ 346 $ 61,307 $ (21,473)
- -------------------------------------------------------------------------------------------------------------
Net income (loss) per share and equivalent share:
Primary $ 0.99 $ 0.01 $ 1.61 $ (0.66)
Fully Diluted 0.87 0.01 1.47 (0.66)
- -------------------------------------------------------------------------------------------------------------
Weighted average shares and equivalent shares:
Primary 38,418 37,430 38,115 32,305
Fully Diluted 46,610 37,430 45,703 32,305
- -------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
UNAUDITED
------------------
YEAR-TO-DATE ENDED
SEPTEMBER 30,
------------------
(IN THOUSANDS) 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 61,307 $ (21,473)
Reconciliation to net cash provided (used) by operating activities:
Depreciation and amortization 28,011 17,975
Deferred income taxes (39,000) -
Write-off of purchased in-process technologies 8,000 -
Accrued business acquisition and consolidation expenses 21,150 35,802
Business acquisition and consolidation payments (27,342) (4,071)
Working capital changes and other (71,185) (21,442)
- ---------------------------------------------------------------------------------------------------
Net cash (used) provided by operating activities (19,059) 6,791
- ---------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (31,695) (21,338)
Proceeds from the sale of Kyntex joint venture 5,000 -
Cash paid for the Acquired Ciba Business - (25,000)
Cash paid for the Acquired Hercules Business - (141,820)
Cash paid for the Acquired Fiberite Assets (37,000) -
Other (2,000) 1,560
- ---------------------------------------------------------------------------------------------------
Net cash used by investing activities (65,695) (186,598)
- ---------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,530 172,286
Payments of long-term debt (9,276) (59,507)
Proceeds from revolving credit facility and short-term debt, net 80,085 64,196
Proceeds from issuance of common stock 4,938 2,777
- ---------------------------------------------------------------------------------------------------
Net cash provided by financing activities 78,277 179,752
- ---------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 1,643 398
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (4,834) 343
Cash and cash equivalents at beginning of year 7,975 3,829
- ---------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 3,141 $ 4,172
- ---------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE>
HEXCEL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 -- BASIS OF ACCOUNTING
The accompanying condensed consolidated financial statements have been
prepared from the unaudited records of Hexcel Corporation and subsidiaries
("Hexcel" or the "company") in accordance with generally accepted accounting
principles, and, in the opinion of management, include all adjustments
necessary to present fairly the balance sheet of the company as of September
30, 1997, and the results of operations for the quarter and year-to-date
periods ended September 30, 1997 and 1996, and the cash flows for the
year-to-date periods ended September 30, 1997 and 1996. The condensed
consolidated balance sheet of the company as of December 31, 1996 was derived
from the audited 1996 consolidated balance sheet. Certain information and
footnote disclosures normally included in financial statements have been
omitted pursuant to rules and regulations of the Securities and Exchange
Commission. Certain prior period amounts in the condensed consolidated
financial statements and notes have been reclassified to conform to the 1997
presentation. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in the company's 1996 Annual Report on Form 10-K.
As discussed in Note 2, Hexcel acquired the worldwide composites
division of Ciba-Geigy Limited, a Swiss corporation, and Ciba-Geigy
Corporation, a New York corporation (collectively, "Ciba"), including most of
Ciba's composite materials, parts and structures businesses, on February 29,
1996. The company subsequently acquired Ciba's Austrian composites business
on May 30, 1996, and various remaining assets of Ciba's worldwide composites
division (collectively, the "Acquired Ciba Business") at various dates
through February 28, 1997. As also discussed in Note 2, Hexcel acquired the
composite products and carbon fibers businesses of Hercules Incorporated
("Hercules" or the "Acquired Hercules Business") on June 27, 1996.
Accordingly, the accompanying condensed consolidated balance sheets,
statements of operations and cash flows include the financial position,
results of operations and cash flows, respectively, of the businesses
acquired from Ciba and Hercules as of such dates and for such periods that
these businesses were owned by the company.
NOTE 2 -- BUSINESS ACQUISITIONS AND CONSOLIDATION
ACQUIRED BUSINESSES
As described in Note 1, the company acquired the assets and assumed the
liabilities of the Acquired Ciba Business, other than certain excluded assets
and liabilities, in exchange for: (a) 18,022 newly issued shares of Hexcel
common stock; (b) $25,000 in cash; (c) senior subordinated notes in an
aggregate principal amount of approximately $37,650; and (d) senior demand
notes in an aggregate principal amount of $5,329. The aggregate purchase
price for the net assets acquired was approximately $209,100.
On February 21, 1997, Hexcel consented to an assignment by Ciba of
Ciba's rights and obligations under various agreements with the company. As
a result of the assignment of these rights and obligations, the Hexcel common
stock and the senior subordinated notes previously held by Ciba are now
beneficially held by Ciba Specialty Chemicals Holding Inc., a Swiss
corporation ("CSC") (see Note 4).
The Acquired Hercules Business was purchased for $135,000 in cash
subject to certain post-closing adjustments. The adjusted purchase price was
approximately $139,400 as of September 30, 1997, but additional post-closing
purchase price adjustments could subsequently arise.
5
<PAGE>
The pro forma net sales, net loss and net loss per share of Hexcel for
the year-to-date period ended September 30, 1996, giving effect to the
acquisitions of the Acquired Ciba Business and the Acquired Hercules Business
as if they had occurred on January 1, 1996, were:
---------------------------------------------------------------
9/30/96
---------------------------------------------------------------
Pro forma net sales $ 585,994
Pro forma net loss (24,875)
Pro forma net loss per share (0.68)
---------------------------------------------------------------
Weighted average shares and equivalent shares
used in computing pro forma net loss per share 36,424
---------------------------------------------------------------
On September 30, 1997, the company acquired intangible assets
and inventory, consisting of a satellite business and rights to certain
technologies from Fiberite, Inc. ("Fiberite"), in exchange for $37,000 in
cash. The acquisition was substantially downsized from the original
agreement whereby the company had, subject to certain terms and conditions,
committed to purchase selected assets and businesses of Fiberite for
approximately $300,000. As a result of the downsized transaction, the
company wrote-off $4,974 of acquisition and financing costs to business
acquisition and consolidation expenses. In addition, the company expensed
$8,000 of acquired in-process research and technology purchased from Fiberite
which is also included in business acquisition and consolidation expenses.
BUSINESS CONSOLIDATION
In May 1996, in conjunction with the integration of the Acquired Ciba
Business, Hexcel announced the commencement of a plan to consolidate the
company's operations over a period of three years. In December of 1996, the
company announced the commencement of further consolidation activities
identified during the ongoing integration of the acquired businesses. The
total expense of the business consolidation program is estimated to be
approximately $58,000, of which approximately $42,000 relates to cash
expenditures. Of the total estimated expense, $42,370 was incurred in 1996
and $8,176 was incurred in the first nine months of 1997. The company
expects to record the majority of the remaining expenses during the last
quarter of 1997. The business consolidation program will not be
significantly impacted by the Fiberite transaction.
The objective of the business consolidation program is to integrate
acquired assets and operations into Hexcel, and to reorganize the company's
manufacturing and research activities around strategic centers dedicated to
select product technologies. The business consolidation is also intended to
eliminate excess manufacturing capacity and redundant administrative
functions. Specific actions of the consolidation program include the closure
of the Anaheim, California facility acquired in connection with the purchase
of the Acquired Ciba Business, the closure of a portion of the Welkenraedt,
Belgium operations, the reorganization of the company's manufacturing
operations in France, the consolidation of the company's US special process
manufacturing activities, and the integration of sales, marketing and
administrative resources.
Management expects that the business consolidation program will take up
to the end of 1998 to complete, because, among other matters, of the
aerospace industry requirements to "qualify" specific equipment and
manufacturing facilities for the manufacture of certain products and the time
to prepare the site that receives the transferred equipment and production
activities. These qualification requirements increase the complexity, cost
and time of moving equipment and rationalizing manufacturing activities.
After closing the Anaheim facility on schedule in the third quarter of
1997, the company completed the sale of the facility on October 30, 1997.
Net cash proceeds from the sale were approximately $8,500 and no gain or loss
resulted from the sale. The primary remaining activities of the business
consolidation program relate to the Belgium and France operations and the
installation and qualifications related to the equipment transferred from the
Anaheim facility.
6
<PAGE>
The following table sets forth the company's accrued business
acquisition and consolidation expenses for the period from December 31, 1996
to September 30, 1997:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
EMPLOYEE FACILITY
SEVERANCE CLOSURE &
AND EQUIPMENT FIBERITE
RELOCATION RELOCATION OTHER TRANSACTION TOTAL
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF 12/31/96 $ 19,083 $ 5,198 $ 1,076 -- $ 25,357
Business acquisition and
consolidation expenses 206 5,040 2,930 12,974 21,150
Cash expenditures (4,790) (6,558) (3,020) (12,974) (27,342)
Non-cash usage, including
asset write-downs and
currency translation effects (403) (1,351) 2,018 -- 264
- -------------------------------------------------------------------------------------------
BALANCE AS OF 9/30/97 $ 14,096 $ 2,329 $ 3,004 $ -- $ 19,429
- -------------------------------------------------------------------------------------------
</TABLE>
Approximately 75 positions were eliminated during 1996, and another 170
positions were eliminated during the first nine months of 1997.
NOTE 3 -- INVENTORIES
Inventories as of September 30, 1997 and December 31, 1996 were:
----------------------------------------
9/30/97 12/31/96
----------------------------------------
Raw materials $ 92,965 $ 66,055
Work in progress 45,515 45,469
Finished goods 23,818 34,360
----------------------------------------
Total inventories $162,298 $145,884
----------------------------------------
----------------------------------------
7
<PAGE>
NOTE 4 -- NOTES PAYABLE, CAPITAL LEASE OBLIGATIONS AND INDEBTEDNESS TO
RELATED PARTIES
Notes payable, capital lease obligations and indebtedness to related
parties as of September 30, 1997 and December 31, 1996 were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
9/30/97 12/31/96
- ----------------------------------------------------------------------------------
<S> <C> <C>
Revolving credit facility, expires 1999 $178,914 $98,656
European credit and overdraft facilities 20,497 23,405
Convertible subordinated notes, due 2003 114,475 114,500
Convertible subordinated debentures, due 2011 25,625 25,625
Obligations under IDRB variable rate demand notes -- 8,450
Various notes payable 970 1,212
- ----------------------------------------------------------------------------------
Total notes payable 340,481 271,848
Capital lease obligations 1,537 6,906
Senior subordinated notes payable to CSC,
net of unamortized discount of $2,342 and $2,666
as of September 30, 1997 and December 31, 1996, respectively 34,347 32,262
- ----------------------------------------------------------------------------------
Total notes payable, capital lease obligations and
indebtedness to related parties $376,365 $311,016
- ----------------------------------------------------------------------------------
Notes payable and current maturities of long-term liabilities $16,325 $23,835
Long-term notes payable and capital lease obligations,
less current maturities 325,693 254,919
Indebtedness to related parties 34,347 32,262
- ----------------------------------------------------------------------------------
Total notes payable, capital lease obligations and
indebtedness to related parties $376,365 $311,016
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
REVOLVING CREDIT FACILITY
In connection with the acquisition of the Acquired Hercules Business on
June 27, 1996, Hexcel obtained the Revolving Credit Facility to: (a)
refinance certain outstanding indebtedness; (b) finance the purchase of the
Acquired Hercules Business; and (c) provide for the ongoing working capital
and other financing requirements of the company on a worldwide basis. The
Revolving Credit Facility initially provided for borrowing capacity of
$310,000. However, as a result of the company's issuance of convertible
subordinated notes in July of 1996, maximum availability under the Revolving
Credit Facility was reduced from $310,000 to $254,600, in accordance with the
terms of that facility.
As of September 30, 1997, outstanding borrowings and letter of credit
commitments under the Revolving Credit Facility totaled $182,600.
SENIOR SUBORDINATED NOTES PAYABLE TO CSC
In connection with the purchase of the Acquired Ciba Business, Hexcel
delivered to Ciba Senior Subordinated Notes in an aggregate principal amount
of $34,928, and has undertaken to deliver additional Senior Subordinated
Notes in an aggregate principal amount of approximately $2,900.
8
<PAGE>
NOTE 5 -- INCOME TAXES
The benefit for income taxes of $35,388 for the nine months ended
September 30, 1997, included a $39,000 reversal of the US tax valuation
allowance offset by taxes on the income of certain European subsidiaries and
state taxes. The provision for income taxes of $1,412 for the nine months
ended September 30, 1996, consisted primarily of taxes on the income of
certain European subsidiaries. The income tax benefit or provision is
determined by the company's level of profitability in each jurisdiction in
which it is subject to tax. The level of profitability of the company by
country may vary, which could result in changes in the effective tax rate
and could cause the estimated tax rate in interim quarters to vary from the
actual annual effective tax rate for the year.
In accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), the company had fully provided
valuation allowance reserves against its net deferred tax assets in countries
where there were uncertainties in generating sufficient future taxable income
to realize these net deferred tax assets. These reserves were recorded in
the US and Belgium and, as a result, excluding the $39,000 US valuation
allowance reversal, no provision for US federal or Belgium income taxes has
been recorded for the nine months ended September 30, 1997 and 1996 due to
the utilization of net operating loss carryforwards.
Based on the company's improved operating results and its current
business plans, management believes that it is more likely than not that the
company will generate sufficient future US taxable income to realize the
entire US net deferred tax asset. Accordingly, in the third quarter of 1997,
the company released its remaining $39,000 reserve against its US net
deferred tax asset, resulting in a credit to the income tax provision, an
increase to net income and the recognition of a deferred tax asset. Going
forward, the effective US income tax rate will now approximate the statutory
rate. This credit does not change the company's cash flows.
The company still maintains a valuation allowance of approximately
$11,000 against its net deferred tax asset related to its Belgium operations,
which will continue to be periodically reassessed.
NOTE 6 -- EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share". Hexcel is required to adopt SFAS 128 in the
fourth quarter of 1997, and at that time will restate earnings per share
("EPS") data for prior periods to conform with SFAS 128. Earlier application
of the provisions of SFAS 128 is not permitted.
SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income by the weighted average shares of common
stock outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if stock options, convertible debt instruments, or
other securities or contracts to issue common stock were exercised or
converted into common stock.
If SFAS 128 had been in effect during the current and prior year
periods, basic EPS and diluted EPS would have been as follows:
QUARTER ENDED SEPTEMBER 30, YEAR-TO-DATE ENDED SEPTEMBER 30,
1997 1996 1997 1996
- ------------------------------------------------------------------------
Basic $1.03 $0.01 $1.67 ($0.66)
Diluted $0.87 $0.01 $1.48 ($0.66)
- ------------------------------------------------------------------------
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS ACQUISITIONS AND CONSOLIDATION
BUSINESS ACQUISITIONS
Hexcel acquired most of Ciba's composite materials, parts and structures
businesses on February 29, 1996, Ciba's Austrian composites business on May
30, 1996, and various remaining assets of Ciba's worldwide composites
division at various dates through February 28, 1997. The aggregate purchase
price for the net assets acquired was approximately $209.1 million.
Hexcel acquired the assets of the composite products and carbon fibers
businesses of Hercules on June 27, 1996. The Acquired Hercules Business was
purchased for $135.0 million in cash subject to certain post-closing
adjustments. The adjusted purchase price was approximately $139.4 million as
of September 30, 1997, but additional post-closing adjustments could
subsequently arise.
On September 30, 1997, the company acquired intangible assets and
inventory, consisting of a satellite business and rights to certain
technologies from Fiberite, Inc., ("Fiberite") in exchange for $37 million in
cash. The acquisition was substantially downsized from the original
agreement and whereby the company had, subject to certain terms and
conditions, committed to purchase selected assets and businesses of Fiberite
for approximately $300 million. As a result of the downsized transaction,
the company wrote-off $5 million of acquisition and financing costs to
business acquisition and consolidation expenses. In addition, the company
expensed $8 million of acquired in-process research and technology purchased
from Fiberite which is also included in business acquisition and
consolidation expenses.
Further discussion of the business acquisitions is contained in Notes 1
and 2 to the accompanying condensed consolidated financial statements.
BUSINESS CONSOLIDATION
In May 1996, in conjunction with the integration of the Acquired Ciba
Business, Hexcel announced the commencement of a plan to consolidate the
company's operations over a period of three years. In December 1996, the
company announced the commencement of further consolidation activities
identified during the ongoing integration of the acquired businesses. The
total expense of the business consolidation program is estimated to be
approximately $58 million of which approximately $42 million relates to cash
expenditures. Of the total estimated expense, $42.4 million was incurred in
1996 and $8.2 million was incurred in the first nine months of 1997. The
company expects to incur the majority of the remaining expenses during the
last quarter of 1997. The business consolidation program will not be
significantly impacted by the Fiberite transaction.
Further discussion of the business consolidation program is contained in
Note 2 to the accompanying condensed consolidated financial statements.
RESULTS OF OPERATIONS
THIRD QUARTER
NET SALES: Net sales for the third quarter of 1997 were $226.6 million,
compared with net sales for the 1996 third quarter of $189.5 million. The
19.6% increase in 1997 third quarter sales over 1996 third quarter sales was
largely attributable to improved sales of composite materials to commercial
aerospace
10
<PAGE>
customers, and reflects the impact of increases in production rates for
certain aircraft as well as the increased utilization of composite materials
on new generation aircraft. In particular, Hexcel benefited from higher
sales of carbon honeycomb core and carbon fiber based prepregs. The company
also benefited from increased sales of engineered products, largely as a
result of the production of structural and interior components for The Boeing
Company ("Boeing"). These sales gains were partially offset by the
translation impact of a strengthening US dollar on European sales. Sales
to European customers and export sales from European factories comprise
approximately 34% of consolidated third quarter sales. Assuming 1996
exchange rates ("on a constant currency basis"), sales for the third quarter
of 1997 would have been approximately $12 million higher, reflecting a 26%
increase over the third quarter of 1996.
Approximately 22% of the company's 1996 sales were made to Boeing and
related subcontractors, and this percentage is expected to increase in 1997
and 1998. Boeing recently announced expected delays in delivering aircrafts
in the fourth quarter of 1997, however, there has been no significant impact
on the company's sales, nor has there been any indication that this may have
significant impact in the future. Commercial aerospace accounted for 65% of
net sales in the quarter, compared to 55% of 1996 year-to-date pro forma
sales.
Hexcel believes that the availability of certain carbon fibers, an
important raw material in manufacturing advanced structural materials, is
currently insufficient to satisfy worldwide demand. The company estimates it
has production capacity and sufficient supplier commitments to purchase
carbon fiber to meet its estimated 1997 and 1998 aerospace customer
requirements. However, should customer demand grow faster than expected or
the mix or timing of customer requirements change, the company may not be
able to satisfy all of its customers' requirements. Carbon fiber
manufacturers, including the company, have announced plans to increase carbon
fiber production capacity. During the first six months of 1997, the company
completed the first phase of its previously announced carbon fiber capacity
expansion program, with the balance of the program estimated to be
substantially complete in the fourth quarter of 1997.
The following table summarizes net sales to third-party customers by
product group and market segment for the quarter ended September 30, 1997:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COMMERCIAL SPACE & GENERAL
(IN MILLIONS) AEROSPACE DEFENSE RECREATION INDUSTRIAL TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fibers and Fabrics $ 4.2 $ 4.1 $ 3.5 $ 28.9 $ 40.7
Composite Materials 96.3 15.5 12.5 14.1 138.4
Engineered Products 45.6 1.9 -- -- 47.5
- -------------------------------------------------------------------------------
Total $ 146.1 $ 21.5 $ 16.0 $ 43.0 $ 226.6
65% 9% 7% 19% 100%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
BACKLOG: The backlog of orders for commercial and military aerospace
materials to be filled within 12 months increased from $347.5 million as of
December 31, 1996, to $440.3 million as of September 30, 1997. The 26.7%
increase reflects the impact of increased commercial aircraft build rates, as
well as an increase in orders for engineered products. The order backlog for
non-aerospace materials of $53.3 million as of September 30, 1997 was
comparable to that of December 31, 1996 of $54.2 million.
11
<PAGE>
The following tables summarize the backlog of orders by product group as
of September 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
SEPTEMBER 30, 1997 NON-
(IN MILLIONS) AEROSPACE AEROSPACE TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Fibers and Fabrics $ 45.6 $ 31.0 $ 76.6
Composite Materials 232.5 22.3 254.8
Engineered Products 162.2 -- 162.2
- -------------------------------------------------------------------------------
Total $ 440.3 $ 53.3 $ 493.6
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DECEMBER 31, 1996 NON-
(IN MILLIONS) AEROSPACE AEROSPACE TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Fibers and Fabrics $ 26.9 $ 33.6 $ 60.5
Composite Materials 194.6 15.8 210.4
Engineered Products 126.0 4.8 130.8
- -------------------------------------------------------------------------------
Total $ 347.5 $ 54.2 $ 401.7
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
GROSS MARGIN: Gross margin for the third quarter of 1997 was $55.0
million, or 24.3% of sales, compared with $35.8 million for the third quarter
of 1996, or 18.9% of sales. The improvement in 1997 third quarter gross
margin is the result of higher sales volume, favorable product mix, enhanced
manufacturing productivity resulting from Hexcel's business consolidation
program, and the benefits from the recent investments made in our carbon
fibers business. Due to the highly competitive nature of most of the markets
in which the company competes, product price changes were not a significant
factor in the 1997 gross margin improvement.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"): SG&A expenses were $30.2
million, in the third quarter of 1997, or 13.3% of sales, which includes $4.8
million of research and technology expenses. This compares with 1996 third
quarter SG&A expenses of $25.6 million, or 13.5% of sales, which includes
$5.0 million of research and technology expenses.
OPERATING INCOME: Operating income was $9.3 million in the third quarter
of 1997, compared with $8.9 million in the third quarter of 1996. The 1997
quarter includes a charge for business acquisition and consolidation expenses
of $15.4 million, of which $13.0 million relates to the Fiberite transaction,
compared to $1.4 million for the third quarter of 1996. Excluding the charge
for business acquisition and consolidation expenses, the improvement in
operating income as a percentage of sales (10.9% in third quarter 1997
compared to 5.4% in third quarter 1996) reflects the benefit from the
business consolidation program and improvements in gross margin.
INCOME TAXES: The benefit for income taxes of $35.4 million for the nine
months ended September 30, 1997, included a $39.0 million reversal of the US
valuation allowance offset by taxes on the income of certain European
subsidiaries and state taxes. The provision for income taxes of $1.4 million
for the nine months ended September 30, 1996, consisted primarily of taxes on
the income of certain European subsidiaries. The income tax benefit or
provision is determined by the company's level of profitability in each
jurisdiction in which it is subject to tax. The level of profitability of the
company by country may vary, which could result in changes in the effective
tax rate and could cause the estimated tax rate in interim quarters to vary
from the actual annual effective tax rate for the year.
In accordance with SFAS 109, the company had fully provided valuation
allowance reserves against its net deferred tax assets in countries where
there were uncertainties in generating sufficient future taxable income to
realize these net deferred tax assets. These reserves were recorded in the
US and
12
<PAGE>
Belgium and, as a result, excluding the $39.0 million US tax valuation
allowance reversal, no provision for US federal or Belgium income taxes has
been recorded for the nine months ended September 30, 1997 and 1996 due to
the utilization of net operating loss carryforwards.
Based on the company's improved operating results and its current
business plans, management believes that it is more likely than not that the
company will generate sufficient future US taxable income to realize the
entire US net deferred tax asset. Accordingly, in the third quarter of 1997,
the company released its remaining $39.0 million reserve against its US net
deferred tax asset, resulting in a credit to the income tax provision, an
increase to net income and the recognition of a deferred tax asset. Going
forward, the effective US income tax rate will now approximate the statutory
rate. This credit does not change the company's cash flows.
The company still maintains a valuation allowance of approximately $11.0
million against its net deferred tax asset related to its Belgium operations,
which will continue to be periodically reassessed.
NET INCOME AND NET INCOME PER SHARE: Net income for the 1997 third
quarter was $37.9 million, or $0.87 per share on a fully diluted basis,
compared with net income for the 1996 third quarter of $0.3 million, or $0.01
per share. The 1997 third quarter includes a $39.0 million non-recurring
credit resulting from the reversal of the US tax valuation allowance and
$15.4 million of business acquisition and consolidation expenses. Excluding
these items, earnings for the quarter would have been $0.36 per share on a
fully diluted basis, compared with $0.05 per share on a fully diluted basis
for the third quarter of 1996, excluding business acquisition and
consolidation expenses of $1.4 million. Information regarding the impact of
SFAS 128 on earnings per share is contained in Note 6 to the accompanying
condensed consolidated financial statements.
There were 46.6 million weighted-average shares and equivalent shares
outstanding during the third quarter of 1997, versus 37.4 million during the
third quarter of 1996. The quarter-over-quarter increase in the number of
weighted average shares and equivalent shares is primarily attributable to
the inclusion of 8.1 million common share equivalents from the $114.5 million
and $25.6 million Convertible Subordinated Notes, which were antidilutive in
the 1996 period.
YEAR-TO-DATE
NET SALES AND GROSS MARGIN: Net sales for the first nine months of 1997
were $682.2 million, compared with $482.7 million for the first nine months
of 1996. Pro forma net sales for the first nine months of 1996 were $586.0
million. On a constant currency basis, sales for the the nine months ended
September 30, 1997 would have been approximately $28 million higher,
reflecting a 21.2% increase over 1996 pro forma sales. Gross margin for the
first nine months of 1997 was 23.4% of sales, versus gross margin for the
same period of 1996 of 20.3% of sales. These increases primarily reflect the
same factors noted above.
13
<PAGE>
The following table summarizes net sales to third-party customers
by product group and market segment for the year-to-date period ended
September 30, 1997:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COMMERCIAL SPACE & GENERAL
(IN MILLIONS) AEROSPACE DEFENSE RECREATION INDUSTRIAL TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fibers and Fabrics $ 18.0 $ 10.1 $ 8.0 $ 91.7 $ 127.8
Composite Materials 289.0 45.8 44.9 46.7 426.4
Engineered Products 119.6 7.0 -- 1.4 128.0
- -------------------------------------------------------------------------------
Total $ 426.6 $ 62.9 $ 52.9 $ 139.8 $ 682.2
63% 9% 8% 20% 100%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
OPERATING INCOME: Operating income for the first nine months of 1997 was
$50.2 million, compared with operating loss for the same period of 1996 of
$1.9 million. Results for the nine-month period ended September 30, 1997
include $21.2 million of business acquisition and consolidation expenses, of
which $13.0 million relates to the Fiberite transaction, compared to $35.8
million for the first nine months of 1996. The business acquisition and
consolidation expenses incurred in the first nine months of 1996, included
non-cash expenditures of $3.6 million of compensation expense resulting from
stock options that were granted in 1995 subject to stockholder approval and
stock options which vested in connection with the acquisition of the Acquired
Ciba Business and $11.4 million of write downs on various assets primarily
relating to the disposal of certain manufacturing equipment and a building.
Excluding the business acquisition and consolidation expenses, the
improvement in operating income is the result of the benefit from the
business consolidation program and improvements in gross margin, partially
offset by higher SG&A expenses. SG&A expenses were $88.3 million in the 1997
period, or 12.9% of sales, versus $67.0 million in the 1996 period, or 13.9%
of sales. Results for 1996 include $3.1 million of other income, which was
largely attributable to the receipt of an additional $1.6 million of cash in
connection with the sale of a manufacturing facility and related assets in
1994, and to the partial settlement for $1.1 million of a claim arising from
the sale of certain assets in 1991.
INTEREST EXPENSE: Interest expense for the first nine months of 1997 was
$18.3 million compared with $15.7 million for the 1996 period, and reflects
the additional debt used to finance the business acquisitions. The 1996
period also includes a write-off of $3.4 million of capitalized debt
financing costs in connection with the refinancings of the revolving credit
facilities.
NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE: The 1997 year-to-date
net income was $61.3 million, or $1.47 per share on a fully diluted basis,
versus net loss of $21.5 million, or $0.66 per share, for the comparable
period of 1996. The year-to-date period ended September 30, 1997 includes a
$39.0 million non-recurring credit to the income tax provision resulting from
the reversal of the US tax valuation allowance and $21.2 million of business
acquisition and consolidation expenses. Excluding these items, earnings for
the nine months ended September 30, 1997, would have been $1.07 per share on
a fully diluted basis. Pro forma earnings for the comparable 1996 period
would have been $0.12 per share, excluding business acquisition and
consolidation expenses of $35.8 million.
There were approximately 45.7 million weighted-average shares and
equivalent shares outstanding during the first nine months of 1997, versus
32.3 million during the first nine months of 1996. The difference in the
number of weighted average shares and equivalent shares primarily reflects
the issuance of approximately 18.0 million shares of new common stock to Ciba
on February 29, 1996 in connection with the acquisition of the Acquired Ciba
Business as well as the inclusion of 7.2 million of common share equivalents
from the $114.5 million of Convertible Subordinated Notes, which were
antidilutive in the 1996 period.
14
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Management expects that the financial resources of Hexcel, together with
the available funds under the Revolving Credit Facility, will be sufficient
to fund the company's worldwide operations. Further discussion of the
company's financial resources is contained in Note 4 to the accompanying
condensed consolidated financial statements.
EBITDA AND CASH FLOWS
YEAR-TO-DATE, 1997: Earnings before business acquisition and
consolidation expenses, other income, interest, taxes, depreciation and
amortization ("Adjusted EBITDA") were $99.4 million. Net cash used for
operating activities was $19.1 million, primarily as the result of the
increase in working capital which more than offset net income. The
substantial increase in working capital reflects higher levels of accounts
receivable and inventory resulting from increased sales and production
volumes. The working capital increase also reflects reductions in accrued
liabilities from peak year-end levels, primarily due to the payment in 1997
of obligations incurred during 1996 for capital projects and employee
incentive and benefit programs. The company anticipates modest improvements
in its working capital levels by year end.
Net cash used for investing activities was $65.7 million. This reflects
$31.7 million of capital expenditures, $37.0 million related to the Fiberite
transaction and the receipt of $5.0 million in connection with the sale of a
50% equity interest in the Knytex joint venture. Net cash used for investing
activities were funded by borrowings under the Revolving Credit Facility. On
October 30, 1997, the company sold its Anaheim facility for net cash proceeds
of $8.5 million. These proceeds were subsequently used to reduce borrowings
under the Revolving Credit Facility.
YEAR-TO-DATE, 1996: Adjusted EBITDA was $48.8 million and net cash
provided by operating activities was $6.8 million. Net cash used in
investing activities totaled $186.6 million, including cash payments of
$166.8 million in connection with the purchase of the Acquired Ciba Business
and the Acquired Hercules Business and $21.3 million for capital
expenditures. As noted above, a substantial portion of the consideration
paid for the Acquired Ciba Business was comprised of Hexcel common stock,
senior subordinated notes and senior demand notes. Net cash provided by
financing activities was $179.8 million.
Adjusted EBITDA has been presented to provide a measure of Hexcel's
operating performance that is commonly used by investors and financial
analysts to analyze and compare companies. Adjusted EBITDA does not
represent an alternative measure of the company's cash flows or operating
income and should not be considered in isolation or as a substitute for
measures of performance presented in accordance with generally accepted
accounting principles.
CAPITAL EXPENDITURES
Capital expenditures increased to $31.7 million in the first nine months
of 1997, from $21.3 million in the first nine months of 1996. This increase
is attributable to capital expenditures incurred in connection with the
business consolidation program as well as expenditures to improve
manufacturing processes and to expand production capacity for select product
lines that are in high demand. Management expects capital spending for all of
1997 to be just under $60 million.
15
<PAGE>
RISKS, UNCERTAINTIES AND OTHER FACTORS WITH RESPECT TO "FORWARD-LOOKING
STATEMENTS"
Certain statements contained in this Quarterly Report on Form 10-Q
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of Hexcel, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: General economic and business
conditions; changes in political, social and economic conditions and local
regulations, particularly in Europe and Asia; foreign currency fluctuations;
level of profitability by country; changes in, or failure to comply with,
government regulations; demographic changes; changes in sales mix;
maintaining current pricing levels; the reduction in sales to or loss of any
significant customers, including Boeing or the Airbus Industrie consortium;
changes in methods of distribution and technology; industry capacity;
competition; availability of carbon fiber; capacity constraints; changes in
business strategy or development plans; availability of liquidity sufficient
to meet the company's need for capital; availability of qualified personnel;
and various other factors referenced in this Quarterly Report on Form 10-Q.
The company assumes no obligation to update the forward-looking information
to reflect actual results or changes in the factors affecting such
forward-looking information.
The forward-looking information referred to above includes, but is not
limited to: (a) order backlog information; (b) expectations regarding sales
growth, sales mix, gross margins, manufacturing productivity, and selling,
general and administrative expenses; (c) the availability and utilization of
net operating loss carryforwards and other deferred tax assets for income tax
purposes; (d) expectations regarding Hexcel's financial condition and
liquidity, as well as future cash flows; (e) expectations regarding capital
expenditures; and (f) the estimated total cost of the company's business
consolidation program.
In addition to the risks, uncertainties and other factors referred to
above which may cause the actual costs of the business consolidation program
to differ materially from estimated amounts, such estimated amounts are based
on various factors and were derived utilizing numerous important assumptions,
including: (a) achieving estimated reductions in the number of total
employees within anticipated time frames and at currently projected severance
costs levels, while maintaining work flow in the business areas affected; (b)
the ability to maintain manufacturing know-how with respect to production
processes conducted at facilities that will be closed or at which the number
of employees will be reduced, including cooperation by employees who will be
terminated; (c) the assimilation of the production processes at closed
facilities with production at other company facilities without undue
disruption to the manufacturing, marketing and distribution functions,
including the cooperation of customers in connection with requalifying the
subject products for various customer and government programs; and (d) the
absence of changes in business conditions that would require significant
modifications to the current program. The failure of these assumptions to be
realized may cause the actual total cost or benefit of the consolidation
program to differ materially from the estimates.
16
<PAGE>
PART II. OTHER INFORMATION
HEXCEL CORPORATION AND SUBSIDIARIES
Item 6. EXHIBITS
10.11 Amended and Restated Asset Purchase Agreement, by and
among Stamford FHI Acquisition Corp., Fiberite, Inc. and
Hexcel Corporation, dated as of August 25, 1997.
10.12 License of Intellectual Property Agreement, by and
among Hexcel Corporation and Fiberite, Inc., dated as of
August 29, 1997.
11. Statement Regarding Computation of Per Share Earnings.
27. Financial Data Schedule (electronic filing only).
99 The press release regarding the closing of the
restructured Fiberite transaction, dated September 30,
1997
99.10 Form of Performance Accelerated Restricted Stock
Unit Agreement
99.11 Form of Employee Option Agreement
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, and in the capacity indicated.
HEXCEL CORPORATION
(Registrant)
November 13, 1997 /s/ Wayne C. Pensky
----------------- ------------------------
(Date) Wayne C. Pensky,
Corporate Controller and
Chief Accounting Officer
18
<PAGE>
- -------------------------------------------------------------------------------
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
BY AND AMONG
STAMFORD FHI ACQUISITION CORP.,
FIBERITE, INC.,
FIBERITE HOLDINGS, INC.
AND
HEXCEL CORPORATION
DATED AS OF AUGUST 25, 1997
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
PURCHASE AND SALE OF
ASSETS AND ASSUMPTION OF LIABILITIES
Section 1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Consideration . . . . . . . . . . . . . . . . . . . . . 7
Section 1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.4 Deliveries by Fiberite. . . . . . . . . . . . . . . . . 8
Section 1.5 Deliveries by Buyer . . . . . . . . . . . . . . . . . . 9
ARTICLE II-A
REPRESENTATIONS AND WARRANTIES OF
STAMFORD
Section 2A.1 Organization . . . . . . . . . . . . . . . . . . . . . 9
Section 2A.2 Authority. . . . . . . . . . . . . . . . . . . . . . . 9
Section 2A.3 No Violations. . . . . . . . . . . . . . . . . . . . . 10
Section 2A.4 No Undisclosed Arrangements. . . . . . . . . . . . . . 11
Section 2A.5 Certain Employees. . . . . . . . . . . . . . . . . . . 11
ARTICLE II-B
REPRESENTATIONS AND WARRANTIES OF
FIBERITE
Section 2B.1 Organization . . . . . . . . . . . . . . . . . . . . . 11
Section 2B.2 Authority. . . . . . . . . . . . . . . . . . . . . . . 11
Section 2B.3 No Undisclosed Arrangements. . . . . . . . . . . . . . 12
Section 2B.4 Certain Employees. . . . . . . . . . . . . . . . . . . 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 3.1 Organization. . . . . . . . . . . . . . . . . . . . . . 12
Section 3.2 Authority . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.3 No Violations . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV
COVENANTS
Section 4.1 Conduct of Business . . . . . . . . . . . . . . . . . . 14
i
<PAGE>
Page
----
Section 4.2 Access to Information . . . . . . . . . . . . . . . . . 19
Section 4.3 Commercially Reasonable Efforts; Other Actions. . . . . 19
Section 4.4 Public Announcements. . . . . . . . . . . . . . . . . . 20
Section 4.5 Notification of Certain Matters . . . . . . . . . . . . 20
Section 4.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.7 Insurance . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.8 Intellectual Property; Name . . . . . . . . . . . . . . 21
Section 4.9 Books and Records . . . . . . . . . . . . . . . . . . . 22
Section 4.10 Allocation of the Purchase Price. . . . . . . . . . . . 22
Section 4.11 Assignment of Contracts;
Non-assignability. . . . . . . . . . . . . . . . . . . 23
Section 4.12 Tax Cooperation . . . . . . . . . . . . . . . . . . . . 24
Section 4.13 No Dissolution of Fiberite. . . . . . . . . . . . . . . 24
Section 4.14 Certain Arrangements. . . . . . . . . . . . . . . . . . 25
Section 4.15 Use of Technology . . . . . . . . . . . . . . . . . . . 25
Section 4.16 Closing of Stock Purchase Agreement . . . . . . . . . . 25
Section 4.17 Alternative Transaction . . . . . . . . . . . . . . . . 25
Section 4.18 Cytec Asset Purchase Agreement. . . . . . . . . . . . . 26
ARTICLE V
TERMINATION AND ABANDONMENT
Section 5.1 Termination . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.2 Procedure for Termination . . . . . . . . . . . . . . . 27
Section 5.3 Effect of Termination and Abandonment . . . . . . . . . 27
ARTICLE VI
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 6.1 Survival of Representations and Warranties,
Covenants, etc. . . . . . . . . . . . . . . . . . . . 27
Section 6.2 Fiberite's and Stamford's Agreements to Indemnify . . . 28
Section 6.3 Buyer's Agreement to Indemnify. . . . . . . . . . . . . 29
Section 6.4 Indemnification Based on Net Damage . . . . . . . . . . 29
Section 6.5 Third Party Claims. . . . . . . . . . . . . . . . . . . 30
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees, Expenses and Taxes. . . . . . . . . . . . . . . . 31
Section 7.2 Further Assurances. . . . . . . . . . . . . . . . . . . 32
Section 7.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.4 Severability. . . . . . . . . . . . . . . . . . . . . . 34
ii
<PAGE>
Page
----
Section 7.5 Binding Effect; Assignment. . . . . . . . . . . . . . . 34
Section 7.6 Bulk Sales Law. . . . . . . . . . . . . . . . . . . . . 34
Section 7.7 No Third Party Beneficiaries. . . . . . . . . . . . . . 34
Section 7.8 Interpretation. . . . . . . . . . . . . . . . . . . . . 35
Section 7.9 Jurisdiction and Consent to Service . . . . . . . . . . 35
Section 7.10 Governing Law . . . . . . . . . . . . . . . . . . . . . 35
Section 7.11 Entire Agreement. . . . . . . . . . . . . . . . . . . . 36
Section 7.12 Amendment, Modification and Waiver. . . . . . . . . . . 36
Section 7.13 Specific Performance. . . . . . . . . . . . . . . . . . 36
Section 7.14 Counterparts. . . . . . . . . . . . . . . . . . . . . . 36
Section 7.15 Effective Date. . . . . . . . . . . . . . . . . . . . . 36
Section 7.16 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII
CERTAIN DEFINITIONS
EXHIBITS
EXHIBIT A Stock Purchase and Sale Agreement
EXHIBIT B Bill of Sale and Assignment
EXHIBIT C License Agreement
EXHIBIT D Undertaking
EXHIBIT E Transitional Services Agreement
iii
<PAGE>
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
This AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this
"Agreement"), dated as of August 25, 1997, is by and among Fiberite, Inc., a
Delaware corporation ("Fiberite"), Fiberite Holdings, Inc., a Delaware
corporation ("Fiberite Holdings"), Stamford FHI Acquisition Corp., a Delaware
corporation ("Stamford"), and Hexcel Corporation, a Delaware corporation
("Buyer", together with Fiberite, Fiberite Holdings and Stamford, the
"Parties") and amends and restates that certain Asset Purchase Agreement,
dated as of April 21, 1997, by and among the Stamford, Fiberite and Buyer.
RECITALS
A. Stamford has entered into a Stock Purchase and Sale Agreement
(the "Stock Purchase Agreement"), dated as of April 20, 1997, by and among,
Stamford, Fiberite Holdings, and the Selling Stockholders of Fiberite
Holdings providing for, among other things, the purchase and sale of all of
the outstanding shares of Common Stock of Fiberite Holdings and which is
attached hereto as Exhibit A.
B. Upon the closing of the transactions contemplated by the Stock
Purchase Agreement, Fiberite desires to sell to Buyer, and Buyer desires to
purchase from Fiberite, certain assets and operations of Fiberite as more
fully described herein, upon the terms and subject to the conditions set
forth herein.
C. Capitalized terms used but not otherwise defined herein are
defined in Article VIII hereof.
Now, therefore, in consideration of the mutual agreements herein and
in reliance upon the representations and warranties herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and intending to be legally bound hereby, the Parties hereby
agree as follows:
<PAGE>
ARTICLE I
PURCHASE AND SALE OF
ASSETS AND ASSUMPTION OF LIABILITIES
Section I.1 PURCHASE AND SALE.
(a) Subject to the terms and conditions of this Agreement, at
the Closing, Fiberite and Fiberite Holdings will sell, convey, assign,
transfer and deliver to Buyer and Buyer will purchase, acquire and accept
from Fiberite, all of its rights, title and interests in and to all of the
following properties, contracts and other assets (the "Acquired Assets"):
(i) all rights, title, and interests
in and to the assets (of every kind, nature, character and
description, whether accrued, contingent or otherwise and wherever
situated), technology, goodwill, operations and business relating
exclusively to the Satellite Business (as defined herein) other than
(A) any real property or buildings, fixtures or improvements erected
thereon; (B) all leases of real property or contracts, commitments or
other agreements relating to real property; (C) equipment or (D)
accounts receivable (collectively the "Acquired Business");
(ii) the assets of Fiberite listed on Schedule 1.1(a)(ii);
(iii) all rights, claims and causes of action (including,
without limitation, claims and causes of action under insurance policies)
of Fiberite or Fiberite Holdings to the extent related to the Acquired
Business, Acquired Assets or Assumed Liabilities;
(iv) all Intellectual Property used or under development
for use exclusively in the Satellite Business (which is acknowledged to
include all of Fiberite's cyanate ester resin/prepreg technology) (the
"Acquired Intellectual Property");
(b) Such sale, assignment, transfer and
2
<PAGE>
delivery of the Acquired Assets will be effected by delivery by Fiberite and
Fiberite Holdings to Buyer of (i) a duly executed bill of sale and assignment
agreement (the "Bill of Sale and Assignment") substantially in the form set
forth as Exhibit B attached hereto, and (ii) such other duly executed, good
and sufficient instruments of conveyance, transfer and assignment as shall be
necessary to convey to Buyer all of Fiberite's and Fiberite Holdings' rights,
title and interests in and to the Acquired Assets (collectively, the "Other
Instruments").
(c) Notwithstanding anything contained herein to the contrary,
Fiberite and Fiberite Holdings shall not sell, convey, assign, transfer or
deliver, or cause to be sold, conveyed, assigned, transferred or delivered,
to Buyer, and Buyer shall not purchase, acquire or accept from Fiberite or
Fiberite Holdings, the rights, title and interests in and to any and all of
the properties, contracts or other assets of Fiberite or Fiberite Holdings or
any of their respective subsidiaries (including all cash, cash equivalents
and accounts receivable of Fiberite) other than the Acquired Assets (the
"Excluded Assets").
(d) On and as of the Closing Date (as defined in Section 1.3),
Buyer shall assume and agree to perform, pay and discharge, any and all
obligations and liabilities of Fiberite and Fiberite Holdings (whether
liquidated or unliquidated, known or unknown, contingent or otherwise)
arising exclusively from the Acquired Business or relating exclusively to the
Acquired Assets, other than any of the accounts payable of Fiberite
(collectively, the "Assumed Liabilities").
(e) On and as of the Closing Date Buyer shall not assume or
agree to perform, pay or discharge and Fiberite and Fiberite Holdings shall
retain any and all obligations and liabilities which are not Assumed
Liabilities, including without limitation, the following obligations and
liabilities of Fiberite and Fiberite Holdings (whether liquidated or
unliquidated, known or unknown, contingent or otherwise) (collectively, the
"Excluded Liabilities"):
(i) (A) any and all liabilities and obligations, direct
or indirect, fixed or contingent, for federal income taxes or any
3
<PAGE>
state, local or foreign income taxes for any taxable period (or portion
thereof);
(B) notwithstanding anything in this Agreement to
the contrary, any and all liabilities and obligations, direct or
indirect, fixed or contingent, for federal, state, local or foreign
income Taxes due as a result of any of the transactions contemplated
by this Agreement or the Cytec Asset Purchase Agreement (as defined in
Section 1.3) or any transactions occurring on the closing of the Stock
Purchase Agreement;
(ii) all post-retirement liabilities for medical, dental
and life insurance programs, for employees or former employees of Fiberite
Holdings and its subsidiaries;
(iii) all environmental liabilities and obligations,
including, without limitation, those arising from or relating to the
following sites: (A) American Chemical Services, Griffith, Indiana; (B)
Artel Chemical, Nitro, West Virginia; (C) P.C.B. Treatment, Inc., Kansas
City, Kansas and Kansas City, Missouri; (D) an unspecified local municipal
landfill, Winona, Minnesota; (E) Stringfellow Landfill, Glen Avon,
California; (F) Frank R. Bowerman Landfill (formerly known as Bee
Canyon Landfill) near Irvine, Orange County, California; (G) Olinda/Olinda
Alpha Landfill, Brea, Orange County, California; (H) Santiago Canyon
Landfill, Orange County, California and (I) any property owned by or
operated by Fiberite (whether as of the Closing Date or in the future) and
any property formerly owned or operated by Fiberite;
(iv) all liabilities and obligations with respect to the
Fiberite, Inc. Pension Plan, Fiberite, Inc. Service Related Pension Plan,
Fiberite, Inc. 401(k) Plan I and Fiberite, Inc. 401(k) Plan II;
(v) all obligations remaining for the payment of the
purchase price for the
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Ligustica business and for the assets acquired in connection therewith;
(vi) severance for employees who participate in the ICI
Composites Severance Plan (or, if applicable, its successor plan, the
Fiberite, Inc. Severance Plan) other than as provided in the Transitional
Services Agreement (as defined herein);
(vii) all collective bargaining agreements including,
without limitation, the Agreement between Fiberite and General Truck
Drivers, Office, Food and Warehouse Union, Teamsters Local 952; the
Agreement Between ICI Fiberite, A Business Unit of ICI Composites, Inc. and
General Drivers, Helpers, Warehousemen, and Inside Employees Local Union No.
160 affiliated with the International Brotherhood of Teamsters, effective
January 1, 1993 to December 31, 1997; and Agreement Between ICI Fiberite, A
Business Unit of ICI Composites, Inc. and United Steelworkers of America,
AFL-CIO, Local No. 13421, effective March 28, 1993 to March 29, 1998;
(viii) the settlement agreement between Fiberite and Paul
Pendorf;
(ix) all outstanding indebtedness for borrowed money of
Fiberite or the German Subsidiary (together with all interest accrued
thereon);
(x) all Expenses (as defined in the Stock Purchase
Agreement);
(xi) the 11.3% Zero Coupon Subordinated Notes of Fiberite
Holdings due in 2002 and 2003;
(xii) all obligations and liabilities of Stamford, Fiberite
Holdings (or any successor) or Fiberite which may arise in connection with
the transactions contemplated by the Stock Purchase Agreement, the proposed
sale of Fiberite Holdings or Fiberite, or this
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Agreement or the Cytec Asset Purchase Agreement to indemnify, defend and
hold harmless the present and former officers, directors, employees and
agents of Fiberite Holdings, Fiberite and the Selling Stockholders;
(xiii) all obligations and liabilities of Stamford, Fiberite
Holdings (or any successor) or Fiberite arising in connection with the
employment agreements set forth on Schedule 1.1(e)(xiii), including,
without limitation, obligations and liabilities relating to the payment
of "excess parachute payments" within the meaning of Section 280G of the
Code;
(xiv) all accounts payable of Fiberite; and
(xv) all obligations and liabilities of Stamford,
Fiberite Holdings or Fiberite arising under this Agreement, the Cytec
Asset Purchase Agreement or the Stock Purchase Agreement.
(f) Buyer's assumption of the Assumed Liabilities hereunder is
an indemnity and accordingly, upon any payment by Buyer in respect thereof
Buyer shall have the right by way of subrogation to pursue any and all claims
that Fiberite Holdings or Fiberite may assert against any third party for
indemnification or insurance in respect thereof, and Buyer shall be entitled
to pursue any such claim, in the name and on behalf of Stamford, Fiberite
Holdings or Fiberite, as the case may be, and to retain any recovery in
respect thereof; provided that nothing in this sentence shall be deemed to
impair Buyer's obligations pursuant to Section 6.3. To the extent, if any,
that Fiberite Holdings or Fiberite has a claim against a third party in
respect of an Assumed Liability, then, notwithstanding payment by Buyer in
respect of such Assumed Liability, (i) Buyer's liability shall be secondary
to the primary obligation of said third party and, accordingly, (ii) Buyer
shall be entitled to reimbursement from Fiberite Holdings or Fiberite, as the
case may be, to the extent that such indemnitee recovers from the third
party, in respect of the Assumed Liability, any amount in excess of its costs
and expenses; PROVIDED that nothing in this sentence shall impair
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Buyer's obligations pursuant to Section 6.3.
Section I.2 CONSIDERATION. Buyer shall pay the following consideration
(irrespective of whether Buyer acquires any of the Acquired Assets or
Acquired Businesses pursuant to this Agreement or is required to engage in an
Alternative Transaction as contemplated in Section 4.18) for the Acquired
Assets, Acquired Business and the License Agreement substantially in the form
attached hereto as Exhibit C (the "License Agreement") which shall consist of:
(a)(i) $29,000,000.00 for the Acquired Assets and the Acquired
Business and (ii) $8,000,000.00 in connection with the license granted to
Buyer under the License Agreement (the "Purchase Price"), payable by wire
transfer of immediately available funds to such bank account as shall be
designated by Fiberite at least two business days prior to the applicable
payment date provided below against delivery of a receipt duly executed by
Fiberite acknowledging receipt of the same; provided that Fiberite hereby
designates that the portions of the Purchase Price represented by the Deposit
and the Remainder be paid on the applicable payment dates directly to the
creditors in respect of the outstanding principal of the Permitted Debt. The
Purchase Price shall be paid in two installments as follows:
(i) $18,500,000 (the "Deposit") shall be paid on the
first business day after the closing of the Stock Purchase Agreement; and
(ii) $18,500,000 (the "Remainder") shall be paid at Closing,
provided that if the Regulatory Approvals shall not have been obtained within
60 days after the closing of the Stock Purchase Agreement then the Remainder
shall be paid on the first business day following expiration of such 60-day
period.
(b) an undertaking substantially in the form set forth as
Exhibit D attached hereto (the "Undertaking"), whereby Buyer will assume and
agree to pay and discharge the Assumed Liabilities as provided in the
Undertaking.
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(c) Notwithstanding anything in this Agreement to the
contrary, Buyer agrees that the obligation of Buyer to pay the Purchase Price
and deliver the Undertaking as provided in this Section 1.2 is absolute and
is in no way contingent on the occurrence or nonoccurrence of any event,
including, without limitation, the receipt of any necessary consents or
approvals of any United States or any other governmental authority that are
required for the consummation of the transaction contemplated by this
Agreement, the transfer of any of the Acquired Assets by Fiberite to Buyer,
the breach of any representation or warranty by any Party, the failure to
perform or comply with any agreement or covenant by any Party or the
termination of this Agreement (other than pursuant to Article V of this
Agreement).
Section I.3 CLOSING. The Closing of the transactions contemplated
by this Agreement shall take place on the date which is the earlier of (i)
the closing of the Cytec Asset Purchase Agreement and (ii) 60 days after the
closing of the Stock Purchase Agreement; provided that, if the Regulatory
Approvals have not been received as of such date, the Closing of the
transactions contemplated by this Agreement shall take place on the date that
is five business days after the date such Regulatory Approvals have been
received, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP 919
Third Avenue, New York, New York, or on such other date and at such other
time or place as the Parties may agree. The date of the Closing is sometimes
referred to herein as the "Closing Date."
Section 1.4 DELIVERIES BY FIBERITE. At the Closing, Fiberite will
deliver or cause to be delivered to Buyer (unless delivered previously) the
following:
(a) a duly executed Bill of Sale and Assignment;
(b) the books and records of Fiberite that relate exclusively
to the Acquired Business or the Assumed Liabilities;
(c) copies of the books and records of Fiberite that relate
to, but do not relate exclusively to, the Acquired Business or the Assumed
Liabilities; and
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(d) all other documents, instruments and writings (including,
if necessary, the Other Instruments) required to be delivered by Stamford,
Fiberite Holdings and Fiberite at or prior to the Closing pursuant to this
Agreement or otherwise required in connection herewith.
Section I.5 DELIVERIES BY BUYER. At the Closing, Buyer will deliver
or cause to be delivered to Fiberite (unless previously delivered) the
following:
(a) the Remainder referred to in Section 1.2(a) hereof;
(b) the duly executed Undertaking; and
(c) all other documents, instruments or writings required to
be delivered by Buyer at or prior to the Closing pursuant to this Agreement
or otherwise required in connection herewith.
ARTICLE II-A
REPRESENTATIONS AND WARRANTIES OF
STAMFORD
Stamford represents and warrants to Buyer as follows:
Section 2A.1 ORGANIZATION. Stamford is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. True and complete copies of the certificate
of incorporation and by-laws of Stamford, as they are currently in effect and
as they will be in effect at Closing, have been made available to Buyer.
Section 2A.2 AUTHORITY. Stamford has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized and approved by Stamford. No other proceedings on the
part of Stamford are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has
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been duly and validly executed and delivered by Stamford, and, assuming this
Agreement constitutes a legal, valid and binding agreement of Buyer,
constitutes a legal, valid and binding agreement of Stamford, enforceable
against Stamford in accordance with its terms, except that enforcement
thereof may be subject to (i) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
Section 2A.3 NO VIOLATIONS.
(a) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby to be performed by
Stamford nor compliance by Stamford with any of the provisions hereof will
(i) violate any provision of Stamford's certificate of incorporation or
by-laws, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default, or give rise to any
right of termination, cancellation or acceleration or any right that becomes
effective upon the occurrence of a merger, consolidation, sale of assets or
change in control, under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, other instrument of indebtedness for money
borrowed, license, franchise, permit or agreement to which Stamford is a
party, or by which Stamford or any of its properties is bound immediately
prior to the closing of the Stock Purchase Agreement or (iii) violate any
statute, rule, regulation, order or decree of any public body or authority by
which Stamford or any of its properties is bound immediately prior to the
closing of the Stock Purchase Agreement, excluding from the foregoing clauses
(ii) and (iii) violations, breaches, defaults or rights that, either
individually or in the aggregate, would not have a Material Adverse Effect or
materially impair its ability to consummate the transactions contemplated
hereby or for which it has received, or prior to the Closing shall have
received, appropriate consents or waivers.
Section 2A.4 NO UNDISCLOSED ARRANGEMENTS.
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As of the date hereof, there are no existing or contemplated
agreements or arrangements relating to the Acquired Business between or among
Stamford, Fiberite or Cytec Industries Inc., a Delaware corporation
("Cytec"), or any of their respective affiliates, which have not been
disclosed to Buyer.
Section 2A.5 CERTAIN EMPLOYEES.
Stamford has not requested the transfer of, nor has it caused
Fiberite to transfer, any employees of Fiberite who spend a majority of their
time employed in the Satellite Business from the Satellite Business, and to
Stamford's knowledge, no such transfer has occurred.
ARTICLE II-B
REPRESENTATIONS AND WARRANTIES OF
FIBERITE
Fiberite (as of the Effective Date) represents and warrants to Buyer
as follows:
Section 2B.1 ORGANIZATION. Fiberite is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and Fiberite has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. True and complete copies of the certificate
of incorporation and by-laws of Fiberite, as they are currently in effect and
as they will be in effect at Closing, have been made available to Buyer.
Section 2B.2 AUTHORITY. Fiberite has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized and approved by Fiberite. No other proceedings on the
part of Fiberite are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Fiberite, and, assuming this
Agreement constitutes a legal,
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valid and binding agreement of Buyer, constitutes a legal, valid and binding
agreement of Fiberite enforceable against Fiberite in accordance with its
terms, except that enforcement thereof may be subject to (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
Section 2B.3 NO UNDISCLOSED ARRANGEMENTS.
As of the date hereof, there are no existing or contemplated
agreements or arrangements relating to the Acquired Business between or among
Stamford, Fiberite or Cytec or any of their respective affiliates, which have
not been disclosed to Buyer.
Section 2B.4 CERTAIN EMPLOYEES.
Fiberite has not transferred any employees of Fiberite at the
request of Stamford who spend a majority of their time employed in the
Satellite Business from the Satellite Business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Stamford and Fiberite as follows:
Section III.1 ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
Section III.2 AUTHORITY. Buyer has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by Buyer, and no other proceedings on the
part of Buyer are
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necessary to authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Buyer and, assuming this Agreement constitutes a legal, valid
and binding agreement of the other parties hereto, constitutes a legal,
valid, and binding agreement of Buyer, enforceable against Buyer in
accordance with its terms, except that enforcement thereof may be subject to
(i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws nor or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought.
Section III.3 NO VIOLATIONS.
(a) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby nor compliance by
Buyer with any of the provisions hereof will (i) violate any provision of the
certificate of incorporation or by-laws of Buyer, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default, or give rise to any right of termination, cancellation or
acceleration or any right that becomes effective upon the occurrence of a
merger, consolidation, sale of assets or change in control, under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, other
instrument of indebtedness for money borrowed, license, franchise, permit or
agreement to which Buyer is a party, or by which any of their respective
properties is bound, or (iii) violate any statute, rule, regulation, order or
decree of any public body or authority by which Buyer or any of its
properties is bound, excluding from the foregoing clauses (ii) and (iii),
violations, breaches, defaults or rights that, either individually or in the
aggregate, would not materially impair Buyer's ability to consummate the
transactions contemplated hereby or for which Buyer has received or, prior to
the Closing, shall have received appropriate consents or waivers.
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ARTICLE IV
COVENANTS
Section IV.1 CONDUCT OF BUSINESS. (a) During the period from the date
of the closing of the Stock Purchase Agreement to the Closing, Stamford,
Fiberite and Fiberite Holdings shall instruct management of Fiberite (but
shall not be liable for management's acts or omissions) to (i) operate the
Acquired Business only in the ordinary course of business consistent with
past practice, (ii) use their reasonable efforts to preserve intact the
Acquired Assets (except for wear and tear in the ordinary course of business)
and the Acquired Business and keep available the services of the employees in
the Acquired Business, (iii) preserve and maintain the Acquired Assets and
use their reasonable efforts to preserve and maintain satisfactory
relationships with suppliers, distributors and customers in connection with
the Acquired Business, and (iv) take all commercially reasonable steps to
protect the Intellectual Property rights of the Acquired Business and the
Acquired Intellectual Property and the rights of Buyer under the License
Agreement and prevent any of it from falling into the public domain. Neither
Stamford nor Fiberite Holdings shall take any actions to prevent or otherwise
interfere with any of the foregoing.
(b) during the period from the date of the closing of the
Stock Purchase Agreement to the Closing Stamford and Fiberite Holdings shall
instruct management of Fiberite not to cause (but shall not be liable for
management's acts or omissions), and Stamford and Fiberite Holdings shall not
cause, Fiberite to take any of the following actions to the extent such
actions relate to or affect the Acquired Business, Acquired Assets or Assumed
Liabilities.
(i) declare, set aside, or pay any dividend or make
any other distribution to its stockholders whether or not upon or in
respect of any shares of its capital stock;
(ii) purchase, redeem or otherwise acquire any shares
of (or options, war-
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rants or rights relating to) its capital stock or other securities or
issue any capital stock or any option, warrant or right relating thereto
or any securities convertible into or exchangeable for any shares of
capital stock;
(iii) incur any indebtedness for borrowed money or
guarantee any such indebtedness of any other person (other than short-term
indebtedness incurred in the ordinary course of business consistent with
past practice), issue or sell any debt securities or warrants or other
rights to acquire any debt securities or guarantee any debt securities
of any other person;
(iv) make any payments in respect of any indebtedness
for borrowed money other than scheduled interest payments under the
Permitted Debt;
(v) make or incur any capital expenditure (other than
capital expenditures budgeted for as of the closing of the Stock
Purchase Agreement);
(vi) make any loans, advances or capital contributions
to, or investments in, any other person (other than loans or advances
to employees for normal business expenses in the ordinary course of
business consistent with past practice);
(vii) pay, loan or advance any amount to, or enter
into any agreement or arrangement with, Fiberite Holdings or Stamford
or any Affiliate of Stamford;
(viii) cancel any indebtedness or waive any claims or
rights of substantial value;
(ix) pay, discharge, satisfy or settle any claims,
liabilities or obligations, other than amounts under $25,000 in the
ordinary course of business consistent with past practice;
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(x) make any Tax election or settle or compromise any
income Tax liability;
(xi) employ outside counsel in respect of or make
determinations as to the handling of any pending or threatened
litigation (other than litigation arising in the ordinary course of
business) involving amounts in excess of $25,000 or criminal liability
without consulting in good faith with Buyer in respect thereof
(including the identity of any such counsel);
(xii) cancel or permit to lapse any policies of
insurance;
(xiii) (A) increase in any manner the compensation or
fringe benefits of any of its directors, officers or other employees,
including, without limitation, Affected Employees; (B) pay, modify or
amend any pension, retirement allowance or other employee benefit not
required, or enter into or agree to enter into any agreement or
arrangement with such director, officer or employee, whether past or
present, relating to any such pension, retirement allowance or other
employee benefit, except as required by law or under agreements, plans
or arrangements existing on the date of the closing of the Stock
Purchase Agreement; (C) amend (except as required by applicable law,
with notice to Buyer) or terminate any of the Plans as they apply to
any of the Affected Employees or increase the amount or accelerate the
payment or vesting of any benefits payable thereunder; (D) grant any
severance or termination pay to, or enter into any employment,
consulting or severance agreement with any of its directors, officers
or other employees, including without limitation, Affected Employees;
(E) become obligated under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, benefit arrangement or
similar plan or arrangement that was not in existence on the date of
the closing of the Stock Purchase Agreement or amend any of such plans
or
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arrangements in existence on such date; (F) announce or implement
any layoffs; or (G) terminate the employment of or reassign or change
the duties of any of its officers or make any change in its management
or the composition of its board of directors;
(xiv) authorize, recommend, propose or announce an
intention to authorize, recommend or propose, or enter into any
agreement in principle or an agreement with respect to or consummate,
(A) any plan of liquidation or dissolution; (B) any acquisition of
assets (other than inventory; (C) any acquisition of an interest in
any business or business organization; (D) any merger or consolidation
with any person; or (E) any sale, transfer, lease, license, pledge,
mortgage, the subjection to any Lien other than Permitted Liens, or
other disposition or encumbrance of, any of the Acquired Assets (other
than sales of inventory in the ordinary course of business consistent
with past practice);
(xv) grant any license or sublicense or any rights
under or with respect to any Intellectual Property rights of the
Acquired Businesses or any Acquired Intellectual Property or otherwise
provide any of the foregoing or any other confidential or proprietary
information with respect to the Acquired Businesses or the Acquired
Assets to any person or otherwise take or fail to take any action that
could adversely affect Buyer's rights under the License Agreement;
(xvi) enter into, amend, modify or terminate any
material contract, or take any action or fail to take any action that
to its knowledge, with or without notice or lapse of time, would
constitute a default under any such contract, or waive, release or
assign any material rights or claims under any such contract, or enter
into any classified Government Contract;
(xvii) change any of the ac-
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counting principles or practices applied with respect to the Acquired
Assets or the Acquired Businesses;
(xviii) take any action which could be reasonably
expected to prevent or materially delay the consummation of the
transactions contemplated by this Agreement or to materially impair
the value of the Acquired Assets or the Acquired Businesses or which
would make any representation or warranty of Fiberite contained in
this Agreement untrue or incorrect as of the date when made or as of
the Closing Date or which would reasonably be expected to prevent or
materially delay the satisfaction of any condition to Closing set
forth in Article V hereof; or
(xix) agree to do any of the foregoing.
(c) Notwithstanding anything to the contrary contained in
Section 4.1(b), Stamford, Fiberite Holdings and Fiberite shall be permitted
to, and shall be permitted to cause each of their respective subsidiaries to
take such actions necessary to enable it to, (A) dividend or otherwise
distribute the $200,000 in cash in Fiberite's bank accounts on the closing of
the Stock Purchase Agreement (or the amount actually in such accounts, if
less), (B) incur and guarantee the Permitted Debt (but not to make any
payments in respect thereof other than scheduled interest payments), (C)
consummate the transactions contemplated by the Cytec Asset Purchase
Agreement and perform its obligations thereunder and dividend or otherwise
distribute the amounts received pursuant to Section 1.2 thereof, (D) perform
its obligations under the Stock Purchase Agreement and (E) consummate the
Permitted Merger. In no event shall Stamford, Fiberite Holdings or Fiberite
or any of their respective subsidiaries be deemed to have breached this
Section 4.1 if such breach arises from the performance by or compliance with
any other provision contained in this Agreement.
(d) During the period from the date of the closing of the
Stock Purchase Agreement to the Closing, Stamford shall maintain Fiberite
Holdings as a
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wholly owned subsidiary of Stamford and Fiberite as a wholly owned subsidiary
of Fiberite Holdings provided, that Stamford may consummate the Permitted
Merger.
(e) During the period from the date of this Agreement to the
Closing, Stamford shall not request, cause or instruct the management of
Fiberite to permit any transfer of any employee of Fiberite who spends a
majority of his/her time employed in the Satellite Business from the
Satellite Business.
Section .1 ACCESS TO INFORMATION.
(a) From the date of this Agreement until the closing of the
Stock Purchase Agreement, Stamford shall authorize and provide Buyer and
Buyer's authorized representatives (including counsel, financial advisers,
environmental and other consultants, accountants and auditors) full access to
the information regarding the Acquired Assets, the Acquired Business and the
Assumed Liabilities pursuant to Section 5.02 of the Stock Purchase Agreement
or otherwise and agree to exercise its rights pursuant to Section 5.02 to
obtain promptly such information as Buyer may reasonably request (or to
designate Buyer and Buyer's representatives as its authorized representatives
to obtain such information), subject to the limitations set forth therein.
(b) From the date of the closing of the Stock Purchase
Agreement until the Closing Date, Stamford and Fiberite shall authorize and
provide Buyer and Buyer's authorized representatives (including counsel,
financial advisors, environmental and other consultants, accountants and
auditors) full access to all properties, books, contracts, commitments,
personnel and records of Fiberite and Fiberite Holdings to the extent related
to the Acquired Assets, Acquired Business or the Assumed Liabilities, and
shall furnish or cause to be furnished to Buyer all other information
concerning the Acquired Businesses, the Acquired Assets or Assumed
Liabilities as Buyer shall request.
Section .2 COMMERCIALLY REASONABLE EFFORTS; OTHER ACTIONS.
Subject to the terms and conditions herein provided and applicable law,
Buyer, on the one hand, and Stamford and Fiberite, on the other, shall use
their commercially reasonable efforts promptly to take,
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or cause to be taken, all other actions and do, or cause to be done, all
other things necessary, proper, appropriate or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i) the filing
of Notification and Report Forms under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") and using their commercially reasonable
efforts to respond as promptly as practicable to all inquiries received from
the FTC or the Antitrust Division for additional information or documentation
and (ii) the obtaining of all necessary consents, approvals or waivers under
applicable law or its material contracts; PROVIDED, HOWEVER, the agreement of
the parties contained herein shall not require Buyer to take any action that
would (i) require divestiture by Buyer of any of its existing business
operations or other than as provided herein the Acquired Assets or the
Acquired Business, or (ii) impose a burden on, or restriction upon, Buyer's
existing business operations, the Acquired Business or the Acquired Assets.
Nothing in this Section 4.3 shall be deemed to limit the obligations of Buyer
to pay the Purchase Price in accordance with Section 1.2 or to take the
actions required by Section 4.17.
Section .3 PUBLIC ANNOUNCEMENTS. Except as may be required by
applicable law, rule, regulation or legal process, so long as this Agreement
is in effect, none of Stamford, Fiberite, Buyer or any of their respective
subsidiaries or Affiliates shall issue or cause the publication of any press
release or other public announcement with respect to the transactions
contemplated by this Agreement without first consulting the other parties
hereto.
Section .4 NOTIFICATION OF CERTAIN MATTERS. Stamford shall
provide to Buyer within one business day of receipt thereof a copy of any
notification received by Stamford pursuant to Section 5.05 of the Stock
Purchase Agreement. Stamford shall provide to Buyer such notification in the
manner described in Section 7.3 hereof.
Section .5 EXPENSES. Except as provided herein, Buyer, on the one
hand, and Stamford, Fiberite Holdings and Fiberite, on the other hand, shall
bear their respective expenses incurred in connection with
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this Agreement and the transactions contemplated hereby, and all fees and
expenses of their respective investment bankers, finders, brokers, agents,
representatives, counsel and accountants.
Section .6 INSURANCE. Subsequent to the Closing, neither
Fiberite Holdings (or any successor) nor Fiberite shall surrender their
respective rights under any policies of insurance which were in effect at the
time immediately prior to the Closing Date in respect of risks and losses
arising out of events or occurrences occurring prior to the Closing Date in
the course or as a result of the conduct of the Acquired Business, with
respect to the Acquired Assets or Assumed Liabilities ("Prior Occurrences");
PROVIDED, HOWEVER, that nothing herein shall be deemed to require Fiberite
Holdings (or any successor) or Fiberite to maintain any insurance with
respect to events or occurrences occurring after the Closing Date. Fiberite
Holdings (or any successor) and Fiberite shall cause Buyer to be designated
as loss payee under such policies with respect to the Prior Occurrences, and
shall assign to Buyer, or designate Buyer as their agent with respect to, all
claims and other rights to enforce or assure insurance coverage under such
policies with respect to Prior Occurrences; PROVIDED further, that in the
event Fiberite Holdings (or any successor) or Fiberite is unable to designate
Buyer as loss payee under such policies, Fiberite Holdings (or any successor)
and Fiberite shall cooperate with Buyer and use their commercially reasonable
efforts to provide Buyer the equivalent benefits of such policies.
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Section .7 INTELLECTUAL PROPERTY; NAME. From and after the
Closing Date and consistent with the terms hereof, (i) Buyer shall possess,
to the exclusion of Stamford, Fiberite Holdings and Fiberite and their
respective subsidiaries and Affiliates, all rights to the use of the Acquired
Intellectual Property and (ii) Buyer shall not, pursuant to this Agreement,
possess any rights to the use of the Excluded Intellectual Property (except
as described on Schedule 1.1(a)(ii), pursuant to the License Agreement or
pursuant to any other agreement between the Parties with respect thereto),
including the name "Fiberite." Buyer may continue to use the Fiberite name
and any Trademark not exclusively related to the Acquired Business in the
ordinary course of the Acquired Business for the period terminating on the
six month anniversary of the Closing. For avoidance of doubt, none of
Stamford, Fiberite Holdings and Fiberite and their respective subsidiaries
and Affiliates shall retain any copies of any of the Acquired Intellectual
Property and all such copies shall be delivered to the Buyer on the Closing
Date.
Section .8 BOOKS AND RECORDS. Each of the Parties agree that all
books and records of Fiberite Holdings and Fiberite relating to the Acquired
Business or Assumed Liabilities, wherever located, which a Party acquires
hereunder or under the Stock Purchase Agreement (including, but not limited
to, correspondence, memoranda, books of account, personnel and payroll
records and the like) (the "Business Records") shall be preserved by such
party for a period of at least seven (7) years following the Closing Date.
Following such seven (7) year period, neither Stamford, Fiberite Holdings and
Fiberite (or any successor thereof), on the one hand, nor Buyer, on the other
hand, will dispose of any such books and records without first offering such
books and records to the other Party. After the Closing Date, where there is
some legitimate business purpose, the Party in possession of any Business
Records shall provide the other Party and its authorized representatives with
access, upon prior reasonable notice specifying the need therefor, during
regular business hours, to the Business Records, and the other Party or its
representatives shall have the right to examine and make copies of such
Business Records; provided that the foregoing right shall not be exercisable
in such a manner as to unreasonably inter-
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fere with the normal operations of such Party.
Section .9 ALLOCATION OF THE PURCHASE PRICE. As soon as
practicable after the date hereof, but in no event less than 10 days prior to
the Closing Date, Buyer and Stamford shall mutually agree on an allocation
(the "Allocation Statement") of the Purchase Price payable by Buyer pursuant
to Section 1.2 hereof plus the amount of any Assumed Liabilities
(collectively, the "Allocable Amount") for federal income tax purposes in
accordance with their fair market values and with the requirements of Section
1060 of the Code. Each of Buyer and Fiberite shall (i) report for all Tax
purposes the purchase of the Acquired Assets in a manner consistent with the
Allocation Statement and in a manner consistent with all applicable rules and
regulations; (ii) timely file a Form 8594 in accordance with the requirements
of Section 1060 of the Code and this Section 4.10; (iii) not assert, in
connection with any Return, Tax audit or similar proceedings, any allocation
of the Allocable Amount that differs from that agreed to herein; and (iv)
notify the other in the event any taxing authority is taking or proposing to
take a position inconsistent with such allocation. Each of Buyer and
Stamford shall deliver to the other a copy of its Form 8594 at least 10 days
prior to the filing thereof.
Section .10 ASSIGNMENT OF CONTRACTS; NON-ASSIGNABILITY. From and
after the Closing Date Fiberite shall use commercially reasonable efforts to
obtain all necessary consents, approvals or waivers required for the transfer
to Buyer of the agreements, contracts and commitments, and any other property
interest or right that is included in the Acquired Assets. Notwithstanding
the foregoing, to the extent that any contract, agreement or commitment, or
any other property interest or right included in the Acquired Assets, is not
capable of being assigned or transferred without the consent or waiver of the
other party thereto, or any third person (including a government or
governmental unit), or if such assignment or transfer or attempted assignment
or transfer would constitute a breach thereof or a violation of any law,
decree, order, regulation or other governmental edict or is otherwise not
practicable, this Agreement shall not constitute an assignment, transfer or
sublease thereof, or an attempted assignment, transfer or sublease thereof
prior to the time that the appropriate consent or waiver
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is obtained. To the extent that any contract, agreement or commitment or any
other property interest or right included in the Acquired Assets is not
assigned hereby (the "Non-Assigned Contracts"), then Fiberite shall, and
Stamford shall cause Fiberite to, use commercially reasonable efforts to
provide to Buyer the economic benefit of the Non-Assigned Contracts. The
parties acknowledge that to the extent the rights under an agreement are
validly assigned or to the extent that Buyer receives any of the economic
benefit of any such agreement, the Buyer will assume the obligations under
such agreement, PROVIDED THAT, Buyer will use commercially reasonable
efforts, including where appropriate partial performance, to assist Stamford
and Fiberite to provide to Buyer the economic benefit of any agreement.
Furthermore, the Parties hereto acknowledge and agree that to the extent the
transactions contemplated by this Agreement have closed and there exists any
Non-Assigned Contracts, Buyer does not waive any rights to receive any
assignment of or to receive the economic benefit from the Non-Assigned
Contracts. In the event a contract relating to raw materials is used by both
the Acquired Business and the Excluded Businesses as of the Closing, the
Buyer and Fiberite agree for a commercially reasonable period to share or
otherwise allocate the benefits and obligations under such contract in the
proportion used by the respective businesses over the recent past.
Section .11 TAX COOPERATION. The Parties and their respective
affiliates shall cooperate in the preparation of all Returns relating in
whole or in part to taxable periods ending on or before or including the
Closing Date that are required to be filed after such date. Such cooperation
shall include, but not be limited to, furnishing prior years' Returns or
return preparation packages illustrating previous reporting practices or
containing historical information relevant to the preparation of such
Returns, providing reasonable access to employees with knowledge of such
Returns during regular business hours and furnishing such other information
within such party's possession requested by the party filing such Returns as
is relevant to their preparation. Additionally, a Party filing any such
Returns (the "Filing Party") shall mail a draft copy of such Returns to the
other party (the "Non-Filing Party"), not less than 30 days prior to the
expected filing date and shall provide the Non-Filing Party and its
representatives,
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advisors and agents with such materials and such access to the books and
records of the Filing Party related to such Return so that the Non-Filing
Party may review and comment on such Return prior to the filing thereof. The
Filing Party and the Non-Filing Party shall mutually agree on the final
preparation content and filing of any Return referred to in this Section 4.12.
Section .12 NO DISSOLUTION OF FIBERITE. Stamford agrees not to
cause the dissolution of Fiberite or Fiberite Holdings or otherwise cause the
corporate existence of Fiberite or Fiberite Holdings to cease, and Fiberite
and Fiberite Holdings agree not to dissolve or otherwise cause its corporate
existence to cease, in each case, if such action would adversely affect
Buyer, including, without limitation, in respect of any indemnification
rights provided to Buyer hereunder or assigned to Cytec or any of its
affiliates under the Cytec Asset Purchase Agreement, provided that under no
circumstances shall Fiberite or Fiberite Holdings be dissolved prior to the
second anniversary of the Closing Date. Notwithstanding the foregoing,
Stamford, Fiberite Holdings and Fiberite may consummate the Permitted Merger.
Section .13 CERTAIN ARRANGEMENTS. Fiberite shall execute and
deliver at the Closing of the Stock Purchase Agreement (1) the License
Agreement, and (2) a Transitional Services Agreement addressing the matters
described on Exhibit E, and (3) the Tri-party Agreement.
Section .14 USE OF TECHNOLOGY. Fiberite and any successor to
Fiberite agrees not to use any of the Acquired Intellectual Property.
Section .15 CLOSING OF STOCK PURCHASE AGREEMENT. Buyer agrees to
notify Stamford in writing prior to the closing of the Stock Purchase
Agreement whether the conditions contained in Article VI and VII of the Stock
Purchase Agreement have been satisfied and complied with to the satisfaction
of Buyer. In the event Buyer notifies Stamford that the conditions in Article
VI and VII of the Stock Purchase Agreement have been satisfied to Buyer's
satisfaction, then, upon closing of the Stock Purchase Agreement, Stamford
shall cause Fiberite Holdings and Fiberite to execute and deliver this
Agreement.
Section .16 ALTERNATIVE TRANSACTION. If the
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Regulatory Approvals have not been obtained or have been denied and Buyer
shall determine to cease seeking such approvals or any writ, order, decree or
injunction of a court of competent jurisdiction, governmental entity or
regulatory body shall be in effect against any of the Parties or their
respective subsidiaries which prohibits or restricts the consummation of the
transactions contemplated by this Agreement, then (i) Buyer shall be
permitted to assign its rights under this Agreement to any person or persons
selected by Buyer and (ii) Stamford and Fiberite shall take all actions (and
execute all documents and agreements) reasonably requested by Buyer (at
Buyer's expense) and shall otherwise cooperate with Buyer in the disposition
of all or any part of the Acquired Assets, Assumed Liabilities and the
License Agreement to any person or persons selected by Buyer (an "Alternative
Transaction"), in each case for the account and benefit of Buyer and as
determined by Buyer in its sole discretion. The obligations of Stamford and
Fiberite pursuant to this Section 4.17 shall be subject to the prior payment
by Buyer of the Purchase Price and to Buyer's agreement to indemnify and hold
harmless Stamford, Fiberite and each of their respective Affiliates for any
losses or liability that arises or is incurred by any such person as a result
of or in connection with the consummation of an Alternative Transaction.
Buyer shall be required to consummate an Alternative Transaction no later
than the 270th Day after the closing of the Stock Purchase Agreement if the
Closing shall not have theretofore occurred.
Section .17 CYTEC ASSET PURCHASE AGREEMENT. Buyer acknowledges
that it has reviewed the terms and conditions of the Cytec Asset Purchase
Agreement. As a result, Buyer agrees that it shall not hold Stamford,
Fiberite Holdings or Fiberite or any of their Affiliates liable or pursue any
action against any such person or entity for any breach, violation, or
failure to comply with any of the terms of this Agreement which result from
the compliance or performance by Stamford, Fiberite Holdings or Fiberite or
any of their subsidiaries with the terms and conditions of the Cytec Asset
Purchase Agreement. Stamford shall not amend or modify any provision of the
Cytec Asset Purchase Agreement without prior written consent of Buyer.
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ARTICLE I
TERMINATION AND ABANDONMENT
Section I.1 TERMINATION. This Agreement may be terminated at any
time prior to the closing of the Stock Purchase Agreement:
(a) by mutual written consent of Stamford and Buyer;
(b) by Stamford or Buyer if, the Stock Purchase Agreement
shall have terminated; or
(c) by Buyer or Stamford, if Buyer notifies Stamford that
pursuant to Section 4.16, the conditions in the Stock Purchase Agreement have
not been satisfied and Buyer notifies Stamford of its intention not to close
the transactions contemplated by this Agreement (Buyer agrees to notify
Stamford of its intention immediately after Cytec informs Buyer as to whether
the conditions in the Stock Purchase Agreement have been satisfied).
Section I.2 PROCEDURE FOR TERMINATION. In the event of
termination and abandonment of the transactions contemplated by this
Agreement by Stamford or Buyer pursuant to this Article V, written notice
thereof shall forthwith be given to the other.
Section I.3 EFFECT OF TERMINATION AND ABANDONMENT. In the event
of proper termination of this Agreement and abandonment of the transactions
contemplated by this Agreement pursuant to this Article V, no Party hereto
(or any of its directors or officers) shall have any liability or further
obligation to any other Party to this Agreement, except that in such event
nothing herein shall relieve any Party from liability for any breach of this
Agreement.
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ARTICLE II
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section II.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES,
COVENANTS, ETC. Except for the respective covenants and other agreements of
the Parties made in this Article VI and Article VII hereof, the respective
representations, warranties, covenants and other agreements of the Parties
shall not survive the Closing or any termination of this Agreement.
Notwithstanding the foregoing, this Section 6.1 shall not limit any covenant
or agreement of the Parties which contemplates performance after the Closing,
including, without limitation, any such covenants and agreements set forth in
Article IV hereof and in the Undertaking; provided, however, that with
respect to the covenants and agreements of Stamford, Fiberite Holdings,
Fiberite and each of their respective subsidiaries, the Parties hereto agree
that irrespective of whether or not any such covenant or agreement
contemplates performance after the Closing, if such performance cannot be
performed as a result of the transactions contemplated by the Cytec Asset
Purchase Agreement, such covenant or agreement shall be deemed not to have
survived the Closing for purposes of determining whether such covenant or
agreement has been breached or violated by Stamford, Fiberite Holdings,
Fiberite or any of their respective subsidiaries.
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Section II.2 (a) FIBERITE'S AND STAMFORD'S AGREEMENTS TO
INDEMNIFY. Subject to the terms, conditions and limitations set forth in
Sections 4.19, 6.1, 6.2(b), 6.2(c) and 6.5, from and after the Closing,
Stamford and Fiberite, jointly and severally, shall defend, indemnify and
hold harmless Buyer, its Affiliates and if applicable, their respective
directors, officers, employees, attorneys, representatives and agents, and
each of the heirs, executors, successors and assigns of any of the foregoing
(each a "Buyer Indemnitee") of Buyer from and against any costs or expenses
(including, without limitation, reasonable attorneys' fees, investigation
costs and remediation costs), judgments, fines, losses, actions, claims,
damages and assessments of any nature (collectively, "Losses") imposed on,
sustained, incurred or suffered by or asserted against any Buyer Indemnitee
that arise out of or relate to (i) any breach of or failure to perform any
covenant (each a "Stamford Covenant") to be performed on or after the closing
date of the Stock Purchase Agreement made by or on behalf of Stamford or
Fiberite under this Agreement, the Other Instruments or in any certificate,
exhibit or other instrument contemplated by this Agreement and delivered by
Stamford or Fiberite in connection herewith and (ii) except as otherwise
provided in Section 6.2(b) the Excluded Liabilities.
(b) Notwithstanding anything in this Agreement to the
contrary, to the extent that (i) any Losses are sustained, incurred or
suffered by or asserted against Buyer or any Buyer Indemnitee and (ii) such
Losses arise out of or relate to any Excluded Liabilities which are assumed
by Cytec pursuant to the Cytec Asset Purchase Agreement, the Parties agree
that (A) neither Stamford or Fiberite shall have any liability under this
Agreement or have any obligation pursuant to the terms of this Agreement or
otherwise to defend, indemnify or hold harmless any of Buyer or any Buyer
Indemnitee with respect to any such Losses and (B) no Buyer Indemnitee shall
have any right to indemnification with respect to any such Losses.
(c) Notwithstanding anything in this Agreement to the
contrary, to the extent that any Losses are sustained, incurred or suffered
by or asserted against any Buyer Indemnitee and such Losses arise out of or
relate to any breach of or failure to perform any
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Stamford Covenant which, as the result of the consummation of the
transactions contemplated by the Cytec Asset Purchase Agreement, cannot be
performed by or on behalf of Stamford or Fiberite, the Parties agree that (i)
neither Stamford or Fiberite shall have any liability under this Agreement or
have any obligation pursuant to the terms of this Agreement to defend,
indemnify or hold harmless any Buyer Indemnitee with respect to any such
Losses and (ii) no Buyer Indemnitee shall have any rights to indemnification
with respect to any such Losses. Moreover, the Parties agree that it shall
not constitute a breach of or a failure by Fiberite or Stamford to perform
any Stamford Covenant if the conduct or action taken or failure to take any
action which would have been the basis for such breach or failure (but for
this sentence) was required to be performed or omitted to be performed in
accordance with the terms of the Cytec Asset Purchase Agreement.
Section .1 BUYER'S AGREEMENT TO INDEMNIFY. Subject to the terms,
conditions and limitations set forth in Sections 6.1 and 6.5, from and after
the Closing, Buyer shall defend, indemnify and hold harmless Stamford and
Fiberite and their respective Affiliates, and if applicable, their respective
directors, officers, attorneys, representatives and agents and each of the
heirs, executors, successors and assigns of any of the foregoing (each a
"Seller Indemnitee") of Stamford, Fiberite Holdings and Fiberite from and
against any Losses imposed on, sustained, incurred or suffered by or asserted
against any Seller Indemnitee that arise out of or are the result of (i) any
breach of or failure to perform any covenant to be preformed on or after the
Closing Date made by or on behalf of Buyer under this Agreement, the Other
Instruments or in any certificate, exhibit or other instrument contemplated
by this Agreement and delivered by Buyer in connection herewith, (ii) Buyer's
pursuit of any claim pursuant to Section 1.1(f) and (iii) the Assumed
Liabilities.
Section .2 INDEMNIFICATION BASED ON NET DAMAGE. In calculating
amounts payable from a party required to indemnify a party under this
Agreement (the "Indemnifying Party") to a party entitled to indemnification
under this Agreement (an "Indemnified Party"), the amount of the indemnified
Losses shall be computed net of payments received by the Indemnified Party
under any
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insurance policy or contract with respect to such Losses.
Section .3 THIRD PARTY CLAIMS. In the event that a claim for
indemnification ("Claim") involves a claim by a Third Party against the
Indemnified Party, the Indemnifying Party shall notify the Indemnified Party
in writing within ten business days after receipt of written notice from the
Indemnified Party if it agrees to undertake the defense thereof. The written
notice provided to the Indemnifying Party from the Indemnified Party shall be
delivered promptly following the Indemnified Party's obtaining knowledge of
the Claim and shall state the basis of the Claim with reasonable specificity,
including the Section or Sections of this Agreement alleged to have been
breached. If the Indemnifying Party so notifies the Indemnified Party, then
the Indemnifying Party shall control such defense and shall bear all costs of
such defense, PROVIDED, that the Indemnified Party may participate in such
settlement or defense through counsel chosen by it (the fees and expenses of
which shall be borne by the Indemnified Party). Notwithstanding anything in
this Section 6.5 to the contrary, the Indemnifying Party may, with the
consent of the Indemnified Party (which consent shall not be unreasonably
withheld), settle or compromise any action or consent to the entry of any
judgment which includes as a term thereof the delivery by the claimant or
plaintiff to the Indemnified Party of a duly executed written unconditional
release of the Indemnified Party from all liability in respect of such
action, which release shall be reasonably satisfactory in form and substance
to counsel for the Indemnified Party. If the Indemnifying Party does not
notify the Indemnified Party within ten business days after the receipt of
the Indemnified Party's notice of a claim of indemnity hereunder that it
elects to undertake the defense thereof, the Indemnified Party shall have the
right to contest, settle or compromise the claim but shall not thereby waive
any right to indemnity therefor pursuant to this Agreement. Notwithstanding
the foregoing, the Indemnified Party, during the period the Indemnifying
Party is determining whether to elect to assume the defense of a matter
covered by this Section 6.5, may take such reasonable actions as it deems
necessary to preserve any and all rights with respect to the matter, without
such actions being construed as a waiver of the Indemnified Party's rights to
defense and indemnification pursuant to this Agreement. No failure to
provide any
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notice required by this Section 6.5 shall relieve the Indemnifying Party of
any obligation to indemnify the Indemnified Party hereunder except to the
extent that the Indemnifying Party is actually prejudiced thereby.
ARTICLE I
MISCELLANEOUS
Section I.1 FEES, EXPENSES AND TAXES.
(a) Whether or not the transactions contemplated herein
are consummated pursuant hereto, except as otherwise provided herein, each of
the Parties shall pay all of its respective fees and expenses incurred by, or
in connection with, or in anticipation of, this Agreement and the
consummation of the transactions contemplated hereby and thereby. Each of
the Parties shall indemnify and hold harmless the other parties from and
against any and all claims or liabilities for brokerage commissions and
financial advisory and finders' fees incurred by reason of any action taken
by such Party or otherwise arising out of the transactions contemplated by
this Agreement by any person claiming to have been engaged by such Party.
Notwithstanding Section 4.6, Buyer shall be responsible for the payment of
any fee, sales tax, transfer tax, filing expense or other charge incurred in
connection with the transfer of the Acquired Assets and/or the Acquired
Business (including legal expenses in respect of the preparation of transfer
documents.
(b) Each of Buyer and Fiberite shall provide the other
with such assistance and documents, without charge, as may be reasonably
requested by either of them in connection with the preparation of any Return,
the conduct of any audit or administrative or court proceeding, and any other
Tax related matter that is a subject of this Agreement. Such cooperation and
assistance shall be provided to the requesting Party promptly upon its
request.
(c) Each of Buyer, Fiberite Holdings (or any successor)
and Fiberite shall notify the others in the event that it is taking, or any
taxing authority is taking or proposing to take, a position inconsistent with
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the treatment of an indemnification payment, as an adjustment to the
Allocable Amount for Tax purposes, including, without limitation, in
connection with all income Tax Returns and all proceedings in connection with
income Taxes.
Section I.2 FURTHER ASSURANCES. From time to time after the
Closing Date, at the request of another Party hereto and at the expense of
the Party so requesting, each of the parties hereto shall execute and deliver
to such requesting Party such documents and take such other action as such
requesting Party may reasonably request in order to consummate more
effectively the transactions contemplated hereby.
Section I.3 NOTICES. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified
mail, postage prepaid, return receipt requested; or (d) overnight delivery
service. Notices shall be sent to the appropriate Party at its address or
facsimile number given below (or at such other address or facsimile number
for such Party as shall be specified by notice given hereunder):
If to Stamford, to:
Stamford FHI Acquisition Corp.
206 Danbury Rd.
Wilton, CT 06899
(203) 834-6360
Attention: President
with copies to:
Latham & Watkins
885 Third Avenue
New York, NY 10022
Fax No.: (212) 751-4864
Attention: Steve Della Rocca, Esq.
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If to Fiberite, to:
Fiberite, Inc.
206 Danbury Rd.
Wilton, CT 06899
(203) 834-6360
Attention: President
with a copy to:
Latham & Watkins
885 Third Avenue
New York, NY 10022
Fax No.: (212) 751-4864
Attention: Steve Della Rocca, Esq.
If to Buyer, to:
Hexcel Corporation
Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901-3238
Fax No.: (203) 358-3972
Attention: Ira J. Krakower, Esq.
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Fax No.: (212) 735-2000
Attention: Joseph A. Coco, Esq.
All such notices, requests, demands, waivers and communications shall be
deemed received upon (i) actual receipt thereof by the addressee, (ii) actual
delivery thereof to the appropriate address or (iii) in the case of a
facsimile transmission, upon transmission thereof by the sender and issuance
by the transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously
mail a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
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Section 1.4 SEVERABILITY. Should any provision of this Agreement
for any reason be declared invalid or unenforceable, such decision shall not
affect the validity or enforceability of any of the other provisions of this
Agreement, which remaining provisions shall remain in full force and effect
and the application of such invalid or unenforceable provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall be valid and enforced to the fullest extent permitted by
law.
Section 1.5 BINDING EFFECT; ASSIGNMENT. This Agreement and all of
the provisions hereof shall be binding upon and shall inure to the benefit of
the Parties and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned, directly or indirectly, including, without limitation, by
operation of law, by any Party hereto without the prior written consent of
the other parties hereto. Notwithstanding anything herein to the contrary but
subject to Section 4.13, this Section 7.5 shall not preclude and Buyer's
consent shall not be required for (a) the Permitted Merger and the transfer
of Stamford's rights hereunder caused thereby or (b) the assignment of
Stamford's or Fiberite's rights hereunder to any lender of Permitted Debt as
collateral security for such Permitted Debt and Buyer agrees to execute any
appropriate agreement or instrument that Stamford or any such lender may
reasonably request to effect or evidence such assignment. Notwithstanding
anything to the contrary, Stamford's, Fiberite's and Fiberite Holdings'
consent shall not be required for any assignment by Buyer of its rights
hereunder in connection with an Alternative Transaction.
Section 1.6 BULK SALES LAW. Buyer hereby waives compliance by
Fiberite with the requirements and provisions of any "bulk-transfer" laws of
any jurisdiction that may otherwise be applicable with respect to the
transactions contemplated by this Agreement.
Section 1.7 NO THIRD PARTY BENEFICIARIES. This Agreement is solely
for the benefit of Stamford, Fiberite and their respective successors and
permitted assigns, with respect to the obligations of Buyer under this
Agreement, and for the benefit of Buyer, and its
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respective successors and permitted assigns, with respect to the obligations
of Stamford and Fiberite, under this Agreement, and this Agreement shall not
be deemed to confer upon or give to any other third party any remedy, claim,
liability, reimbursement, cause of action or other right.
Section 1.8 INTERPRETATION.
(a) The article and Section headings contained in this Agreement
are solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.
(b) As used in this Agreement, the term "person" shall mean and
include an individual, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.
(c) As used in this Agreement, the term "Affiliate" shall have
the meaning set forth in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
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Section 1.9. JURISDICTION AND CONSENT TO SERVICE. Without limiting
the jurisdiction or venue of any other court, each of the Parties (i) agree
that any suit, action or proceeding arising out of or relating to this
Agreement may be brought solely in the state or federal courts of New York;
(ii) consent to the exclusive jurisdiction of each such court in any suit,
action or proceeding relating to or arising out of this Agreement; (iii)
waive any objection which it may have to the laying of venue in any such
suit, action or proceeding in any such court; and (iv) agree that service of
any court paper may be made in such manner as may be provided under
applicable laws or court rules governing service of process.
Section 1.10 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York
(regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof) as to all matters, including but not
limited to matters of validity, construction, effect, performance and
remedies.
Section 1.11 ENTIRE AGREEMENT. This Agreement, the Disclosure
Schedules, and the Exhibits and other documents referred to herein or
delivered pursuant hereto which form a part hereof constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and
oral, between the parties or any of them with respect to the subject matter
hereof. The confidentiality agreement made prior to the date of this
Agreement between Fiberite and Buyer is hereby terminated effective as of the
Closing Date with respect to information included in the Acquired Assets or
disclosed to Buyer in connection with the License Agreement.
Section 1.12 AMENDMENT, MODIFICATION AND WAIVER. This Agreement
may be amended, modified or supplemented at any time only by mutual written
agreement of Stamford and Buyer. Any failure of Stamford and Fiberite, on
the one hand, or Buyer, on the other hand, to comply with any term or
provision of this Agreement may be waived, with respect to Buyer, by Stamford
and, with respect to Stamford or Fiberite, by Buyer, by an instrument in
writing signed by or on behalf of the
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appropriate party, but such waiver or failure to insist upon strict
compliance with such term or provision shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure to comply.
Section 1.13 SPECIFIC PERFORMANCE. The parties acknowledge and
agree that any breach of the terms of this Agreement would give rise to
irreparable harm for which money damages would not be an adequate remedy and
accordingly the parties agree that, in addition to any other remedies, each
shall be entitled to enforce the terms of this Agreement by a decree of
specific performance without the necessity of proving the inadequacy of money
damages as a remedy.
Section 1.14 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 1.15 EFFECTIVE DATE. This Agreement shall be deemed an
agreement between Stamford and Buyer until executed by Fiberite Holdings and
Fiberite at which time it shall be deemed to be an agreement among Buyer,
Stamford, Fiberite Holdings and Fiberite, and Stamford shall cause Fiberite
to execute this Agreement, the License Agreement, the Transitional Services
Agreement and the Tri-party Agreement immediately following the closing of
the Stock Purchase Agreement (the "Effective Date"). Without limiting the
generality of the foregoing, all representations, warranties, covenants or
other obligations of any kind made or incurred by Fiberite as a result of the
execution and delivery of this Agreement shall be deemed to have been made as
of, and Fiberite shall deliver its Schedules applicable to the
representations and warranties it is making at, the time of its delivery of a
signature page hereto.
Section 1.16 RISK OF LOSS. From the date hereof through the
Closing Date, all risk or loss or damage to the properties included in the
Acquired Assets or the Acquired Business shall be borne by Buyer. This
provision shall be of no force or effect if this Agreement is terminated
pursuant to Article V.
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ARTICLE II
CERTAIN DEFINITIONS
For the purposes of this Agreement, the following words and phrases
shall have the following meanings:
"ACQUIRED ASSETS" has the meaning assigned in Section 1.1(a).
"ACQUIRED BUSINESS" has the meaning assigned in Section 1.1(a).
"ACQUIRED INTELLECTUAL PROPERTY" has the meaning assigned in Section
1.1(a)(v).
"AFFILIATE" has the meaning assigned in Section 7.8(c).
"AGREEMENT" means this Amended and Restated Asset Purchase
Agreement, dated as of August 25, 1997, together with any amendments thereto,
by and among Fiberite, Fiberite Holdings, Stamford and Buyer.
"ALLOCABLE AMOUNT" has the meaning assigned in Section 4.10.
"ALLOCATION STATEMENT" has the meaning assigned in Section 4.10.
"ALTERNATIVE TRANSACTION" has the meaning assigned in Section 4.17.
"ANTITRUST DIVISION" has the meaning assigned in Section 4.3.
"ASSUMED LIABILITIES" has the meaning assigned in Section 1.1(d).
"BILL OF SALE AND ASSIGNMENT" means the duly executed bill of sale
and assignment agreement, substantially in the form attached hereto as
Exhibit B, which Stamford and Fiberite will deliver to Buyer effecting the
sale, assignment, transfer and delivery of the Acquired Assets.
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"BUYER" means Hexcel Corporation.
"BUYER INDEMNITEE" has the meaning assigned in Section 6.2.
"CLAIM" has the meaning assigned in Section 6.5.
"CLOSING" means the closing of the transactions described in
Section 1.3.
"CLOSING DATE" means the date of the Closing as determined pursuant
to Section 1.3.
"CODE" means the Internal Revenue Code of 1986, as amended. All
citations to the Code, or to the Treasury Regulations promulgated thereunder,
shall include any amendments or substitute or successor provisions thereto.
"COMMON STOCK" means the shares of Common Stock, par value $.01 per
share, of Fiberite Holdings.
"CYTEC" shall mean Cytec Industries, Inc.
"CYTEC ASSET PURCHASE AGREEMENT" shall mean the Asset Purchase
Agreement, dated as of August 25, 1997 by and among Stamford, Fiberite
Holdings, Fiberite and Cytec.
"DEPOSIT" has the meaning assigned in Section 1.2.
"EFFECTIVE DATE" has the meaning assigned in Section 7.15.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED ASSETS" has the meaning assigned in Section 1.1(c).
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"EXCLUDED BUSINESSES" means the entire business conducted by
Fiberite as of the Closing Date other than the Acquired Business.
"EXCLUDED INTELLECTUAL PROPERTY" shall mean all Intellectual
Property rights and other proprietary rights of Fiberite other than the
Acquired Intellectual Property.
"EXCLUDED LIABILITIES" has the meaning assigned by Section 1.1(e).
"FIBERITE" means Fiberite, Inc.
"FIBERITE HOLDINGS" means Fiberite Holdings, Inc., a Delaware
corporation.
"FILING PARTY" has the meaning assigned in Section 4.12.
"FTC" has the meaning assigned by Section 4.3.
"HSR ACT" has the meaning assigned in Section 2A.3(b).
"HEXCEL" means Hexcel Corporation, a Delaware corporation.
"INDEMNIFIED PARTY" has the meaning assigned in Section 6.4.
"INDEMNIFYING PARTY" has the meaning assigned in Section 6.4.
"INTELLECTUAL PROPERTY" shall mean throughout the world (i) Patents,
(ii) Trademarks, (iii) Trade Names, (iv) Know-how, (v) shop rights and (vi)
copyrights.
"KNOW-HOW" shall mean all trade secrets, know-how (including product
know-how and use and application know-how), formulas, processes, product
designs, specifications, quality control procedures, manufacturing,
engineering and other drawings, technology, technical information, safety
information, lab journals, engineering data and design and engineering
specifications,
41
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research records, market surveys and all promotional literature, customer and
supplier lists and similar data.
"LIENS" means all mortgages, pledges, security interests, liens,
changes, options, easements, rights of way or other encumbrances.
"LOSSES" has the meaning assigned in Section 6.2.
"MATERIAL ADVERSE EFFECT" means an event which has a material
adverse effect on the business, operations, financial condition or results of
operations of the Acquired Business taken as a whole, or materially impairs
the value or usefulness of the Acquired Assets taken as a whole.
"NON-ASSIGNED CONTRACTS" has the meaning set forth in Section 4.11.
"NON-FILING PARTY" has the meaning assigned in Section 4.12.
"OTHER INSTRUMENTS" has the meaning assigned in Section 1.1(b).
"PARTIES" has the meaning set forth in the preamble.
"PATENTS" shall mean patents (including all reissues, divisions,
re-examinations, continuations, continuations in part and extensions
thereof), patent applications and patent disclosures docketed and all other
patent rights.
"PERMITTED DEBT" means indebtedness to finance the transactions
contemplated by the Stock Purchase Agreement in an amount and on terms
approved by Buyer in writing.
"PERMITTED LIENS" means mechanics', carriers', workers', repairers',
materialmens', warehousemens' and other similar Liens arising or incurred in
the ordinary course of business consistent with past practice and which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
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<PAGE>
"PERMITTED MERGER" means the merger of Stamford and Fiberite
Holdings with and into Fiberite, with Fiberite as the surviving corporation
immediately following the closing of the Stock Purchase Agreement.
"PERSON" has the meaning assigned in Section 7.8(b).
"PLANS" means the Fiberite, Inc. Pension Plan, the Fiberite, Inc.
Service Related Pension Plan, the Fiberite, Inc. 401(k) Plan I, and the
Fiberite, Inc. 401(k) Plan II.
"PRIOR OCCURRENCES" has the meaning assigned by Section 4.7.
"PURCHASE PRICE" has the meaning set forth in Section 1.2(a).
"REGULATORY APPROVALS" means all necessary consents and approvals of
any United States or any other governmental authority that are required for
the consummation of the transactions contemplated by this Agreement, and the
expiration or termination of any waiting period applicable to the
consummation of the transactions contemplated by this Agreement under the HSR
Act and under any applicable Antitrust and competition law statutes and
regulations of foreign jurisdictions, or other applicable law.
"REMAINDER" has the meaning assigned in Section 1.2.
"RETURN" means any report, return or other information filed with or
required to be supplied to a taxing authority in connection with Taxes.
"SATELLITE BUSINESS" shall mean the business of developing,
manufacturing and selling composite materials or components thereof for
incorporation into satellites.
"SCHEDULE(s)" means any schedule(s) included in the Disclosure
Schedule.
"SELLER INDEMNITEE" has the meaning assigned in Section 6.3
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"SELLING STOCKHOLDERS" shall refer to the stockholders and
optionholders of Fiberite Holdings existing immediately prior to the closing
of the Stock Purchase Agreement.
"STAMFORD" means Stamford FHI Acquisition Corp.
"STAMFORD COVENANT" has the meaning assigned in Section 6.2.
"STOCK PURCHASE AGREEMENT" means the Stock Purchase and Sale
Agreement, dated as of April 20, 1997 by and among Stamford, Fiberite and the
Selling Stockholders.
"TAXES" means all taxes, assessments, charges, duties, fees, levies
or other governmental charges, including, without limitation, all Federal,
state, local, foreign and other income, gross receipts, franchise, profits,
capital gains, capital stock, transfer, sales, use, occupation, property,
excise, severance, windfall profits, stamp, license, payroll, withholding,
social security and other taxes, assessments, charges, duties, fees, levies
or other governmental charges of any kind whatsoever (whether payable
directly or by withholding and whether or not requiring the filing of a
Return), and all estimated taxes, deficiency assessments, additions to tax,
penalties and interest.
"THIRD PARTIES" means any parties other than the Parties to this
Agreement and their respective Affiliates.
"TRADEMARKS" shall mean trademarks and service marks, registrations
thereof, pending applications therefor and such unregistered rights as may
exist through use.
"TRADE NAMES" shall mean trade names, brand marks, trade dress,
brand names, logos and all other names and slogans or product goodwill for
which no trademark registration has been obtained and for which no
application is pending.
"TRANSITIONAL SERVICES AGREEMENT" means the Transitional Services
Agreement contemplated by, and on the terms set forth in Exhibit E.
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"TRI-PARTY AGREEMENT" shall mean the agreement dated as of August
25, 1997, by and among Cytec, Buyer and Fiberite, providing for, among other
things, the assumption of the obligations under the License Agreement and
Transitional Services Agreement by Cytec.
"UNDERTAKING" means the duly executed undertaking, substantially in
the form attached hereto as Exhibit D, whereby Buyer will assume and agree to
pay and discharge the Assumed Liabilities.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the
date first above written.
STAMFORD FHI ACQUISITION CORP.
By:
------------------------------
Title:
---------------------------
FIBERITE, INC.
By:
------------------------------
Title:
---------------------------
FIBERITE HOLDINGS, INC.
By:
------------------------------
Title:
---------------------------
HEXCEL CORPORATION
By:
------------------------------
Title:
---------------------------
<PAGE>
Schedule 1.1(a)(ii)
CERTAIN ACQUIRED ASSETS
All of the following assets:
1. All computer software, computer programs and systems,
databases, documentation and resource material relating
thereto to the extent that they relate to the Acquired
Business.
2. All inventory, wherever located, including raw materials,
work-in-progress, finished goods, supplies and other
inventories and any rights of Fiberite to the warranties
received from suppliers and any related claims, credits,
rights of recovery and setoff with respect to such inventory
used or held for use in the Acquired Business.
3. All rights in, to and under all contracts, licenses, leases
(other than leases for real property), commitments, purchase
orders and other agreements to the extent that they relate to
the Acquired Business and to which Fiberite or Fiberite
Holdings is a party or by which Fiberite or Fiberite Holdings
is bound.
4. All customer lists to the extent that they relate to the
Acquired Business.
5. All permits, licenses, approvals and authorizations by
governmental authorities or third parties to the extent that
they relate to the Acquired Business.
6. All books of account and other accounting records (or copies
thereof) of Fiberite to the extent that they relate to the
Acquired Business.
7. All goodwill of the Acquired Business (other than the Fiberite
name).
8. Trademarks and Tradenames that relate exclusively to the
Acquired Business, provided that to the extent that the
Fiberite name is included in any such
<PAGE>
Trademark or Tradename Buyer will discontinue the use of the Fiberite
name in connection therewith in accordance with Section 4.8.
<PAGE>
Schedule 1.1(e)(xiii)
CERTAIN EMPLOYMENT AGREEMENTS
1. Amended Employment Agreement between James E. Ashton and
Fiberite, Inc. effective April 15, 1997, approved and made
effective by the Board of Directors on April 16, 1997.
2. Amended and Restated Executive Employment Agreement between
Ronald M. Miller and Fiberite, Inc. effective April 16, 1997.
3. Amended and Restated Executive Employment Agreement between
Jon DeVault and Fiberite, Inc. effective April 16, 1997.
4. Amended and Restated Executive Employment Agreement between
Michael Bowman and Fiberite, Inc. effective April 16, 1997.
5. Employment Severance Agreement between Carl W. Smith and
Fiberite, Inc., effective April 9, 1997.
<PAGE>
LICENSE OF INTELLECTUAL PROPERTY
BY AND BETWEEN
FIBERITE, INC.
(AS LICENSOR)
AND
HEXCEL CORPORATION
(AS LICENSEE)
<PAGE>
LICENSE OF INTELLECTUAL PROPERTY
THIS AGREEMENT is made and entered into as of this 29th day of August,
1997 by and between:
HEXCEL CORPORATION, a Delaware corporation, having a place of business
at Two Stamford Plaza, 281 Tresser Blvd., 16th Floor, Stamford, CT
06901, (hereinafter referred to as "Hexcel" or "Licensee")
AND
FIBERITE, INC., a Delaware corporation, having a place of business at
2055 East Technology Circle, Tempe, AZ 85284 (hereinafter referred to
as "Fiberite" or "Licensor") (Licensee and Licensor are hereinafter
collectively referred to as the "Parties" and each individually a
"Party").
W I T N E S S E T H:
RECITALS
WHEREAS, Stamford FHI Acquisition Corp. ("Stamford") entered into a
Stock Purchase and Sale Agreement (the "Stock Purchase Agreement"),
dated as of April 20, 1997, by and among Stamford, Fiberite Holdings,
Inc., a Delaware corporation ("Fiberite Holdings") and the holders of
the capital stock of Fiberite Holdings, pursuant to which Stamford has
acquired 100% of the outstanding capital stock of Fiberite Holdings on
the date hereof;
WHEREAS, Fiberite Holdings owns 100% of the outstanding capital stock of
Fiberite.;
WHEREAS, Stamford has entered into an Amended and Restated Asset
Purchase Agreement (the "Hexcel Asset Purchase Agreement"), dated as of
August 25, 1997, by and among Stamford and Hexcel, pursuant to which
Stamford has, as of the date hereof, caused Fiberite to enter into the
Hexcel Asset Purchase Agreement and, subject to the terms and conditions
of the Hexcel Asset Purchase Agreement, to sell to Hexcel certain of
Fiberite's assets (the
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<PAGE>
"Hexcel Assets") as more fully described in the Hexcel Asset Purchase
Agreement;
WHEREAS, Licensee desires to have the right to obtain a license to
certain intellectual property and to certain improvements thereon, and
Licensor is willing to grant such license upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the above, and the mutual promises set forth
below, Licensor and Licensee agree as follows:
1. DEFINITIONS
1.1 "Affiliate" shall mean, when used with respect to a specified Person,
any other Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under direct or indirect
common Control with the Person specified.
1.2 "Control" (including, with correlative meanings, "controlling",
"controlled by" and under "common control with") shall mean 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.
1.3 "Effective Date" shall mean the later of the date of the closing of the
Hexcel Asset Purchase Agreement or the date on which the Remainder portion of
the Purchase Price is due pursuant to the Hexcel Asset Purchase Agreement.
1.4 "Improvements" shall mean evolutionary, but not revolutionary,
improvements in the Intellectual Property developed by Licensor or its
Affiliates on the one hand, or Licensee or its Affiliates on the other hand,
in each case, on or before the third anniversary of the Effective Date.
1.5 "Intellectual Property" shall mean, as shall exist on the Effective
Date, the formulations for the Products together with all classes or types of
patents and patent applications (including all reissues, divisions,
continuations and extensions thereof), test data, know how (whether
patentable or
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<PAGE>
not), trade secrets, process control documents, qualification procedures,
tests and data and other technical information of Fiberite and its Affiliates
relating to the Products or prepregs based on the Products.
1.6 "Person" shall mean any natural person, firm, trust, unincorporated
organization, corporation, business trust, joint venture, association,
company, partnership or government, or any agency or political sub-division
thereof.
1.7 "Products" shall mean the Resin Systems and the Winona carbon/phenolic
mat material.
1.8 "Resin Systems" shall mean the Fiberite resin system families listed on
Schedule A.
1.9 "Satellite Business" shall mean the business of developing,
manufacturing and selling composite materials, or components thereof, for
incorporation into satellites.
1.10 "Satellite Intellectual Property" shall mean all classes or types of
patents and patent applications (including all reissues, divisions,
continuations and extensions thereof), test data, know how (whether
patentable or not), trade secrets, process control documents and other
technical information including without limitation, research and development
information, of Fiberite and its Affiliates used or under development for use
in the Satellite Business on or before the Effective Date, but not acquired
by Licensee under the Hexcel Asset Purchase Agreement.
2. LICENSES
2.1 LICENSE OF INTELLECTUAL PROPERTY
(a) Licensor for itself and its Affiliates hereby grants to Licensee
the following licenses on an irrevocable, perpetual, worldwide, royalty free
basis:
(i) The non-exclusive rights to use the Intellectual Property and
the Improvements developed by Licensor and its Affiliates in any field of
use, provided that with respect to Winona carbon/phenolic mat materials,
Licensee shall have no rights in the field of aircraft interiors.
(ii) The exclusive rights to use the Satellite Intellectual
Property in the Satellite Business.
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<PAGE>
The license granted under this Section 2.1(a) may not be
sublicensed other than to Affiliates of Licensee for as long as such
sublicensee remains an Affiliate and each sublicense shall expressly state
that it is subject to the terms and conditions hereof. Licensee agrees to be
liable for any activities of a sublicensee which, if performed by Licensee,
would be a violation of this Agreement. Licensee shall give Licensor prompt
notice and a copy of any such sublicense and any amendment or modification
thereof.
(b) Licensee for itself and its Affiliates hereby grants to Licensor an
irrevocable, perpetual, worldwide, royalty-free, nonexclusive license to use
the Improvements developed by Licensee or its Affiliates in any field of use.
The license granted under this Section 2.1(b) may not be sublicensed other
than to Affiliates of Licensor for as long as such sublicensee remains an
Affiliate and each sublicense shall expressly state that it is subject to the
terms and conditions hereof. Licensor agrees to be liable for any activities
of a sublicensee which, if performed by Licensor, would be a violation of
this Agreement. Licensor shall give Licensee prompt notice and a copy of any
such sublicense and any amendment or modification thereof.
2.2 EXISTING RIGHTS OF PERSONS
The licenses granted pursuant to Section 2.1 (including any sublicense) shall
be subject to the rights of any Person who is not an Affiliate of Fiberite
Holdings or Fiberite under, or pursuant to, any agreement entered into by
Fiberite Holdings or Fiberite or any Affiliate or predecessor of any of them,
prior to the date hereof (including, without limitation that certain
agreement between Mitsubishi Kasei and ICI Composites Inc. dated September
25, 1992 (the "Mitsubishi Agreement")), or otherwise arising by operation of
law. Licensor and Licensee shall endeavor to meet with Mitsubishi and
discuss in good faith appropriate clarification and separation of rights and
obligations under the Mitsubishi Agreement to reflect the respective
ownership by Licensee of the Hexcel Assets and by Licensor of the remaining
assets of Fiberite, but in any event Licensor will obtain all rights
thereunder to Mitsubishi's Replark system.
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<PAGE>
3. DISCLOSURE
3.1 DELIVERY OF DOCUMENTARY MATERIALS
(a) Licensor agrees to deliver to Licensee (i) as soon as reasonably
practicable after the Effective Date, copies of all documentary materials
listed on Schedule B, but only to the extent containing Intellectual Property
or Satellite Intellectual Property, and (ii) as soon as reasonably
practicable after the development of an Improvement by Licensor or any of its
Affiliates, all documentary materials similar to those listed on Schedule B
to the extent containing Improvements.
(b) Licensee agrees to deliver to Licensor as soon as reasonably
practicable after the development of an Improvement by Licensee or any of its
Affiliates, all documentary materials similar to those listed on Schedule B
to the extent containing Improvements.
3.2 TECHNICAL ASSISTANCE
During the period from the Effective Date to the 18-month anniversary
thereof, Licensor shall furnish Licensee up to 2,500 man hours of technical
assistance, at such times and locations as shall be reasonably requested by
Licensee for the purpose of instructing Licensee's employees in the
manufacture of prepregs based on the Products and using the Intellectual
Property and Improvements and Satellite Intellectual Property in connection
therewith. An additional 1,000 man hours of technical assistance shall be
provided upon reasonable request of Licensee within 36 months after the
Effective Date at a rate of $100 dollars per man hour. Licensee shall
reimburse Licensor for the reasonable costs of travel and subsistence by
Licensor's employees and other direct out-of-pocket expenses (but not
salaries, benefits, overhead and the like) incurred in connection with such
technical assistance.
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<PAGE>
4. SUPPLY OF KM POLYMER
Licensor agrees to supply to Licensee its requirements of KM Polymer from the
Effective Date, solely for use in Products containing KM Polymer; provided,
however, that Licensor's supply obligations shall be subject to equitable
allocation between Licensor and Licensee in the event the quantity of KM
Polymer reasonably available to Licensor is insufficient to meet the needs of
both. The pricing of such KM Polymer shall be at Licensor's out-of-pocket
cost (including without limitation, transportation, handling and similar
costs). Other related terms (such as minimum/maximum orders and timing of
orders) shall be mutually agreed upon by the parties. Licensee agrees that
it will purchase KM Polymer from Licensor solely to meet its own needs (or
the needs of any permitted sublicensee) pursuant to the license granted under
Section 2.1(a) hereof and that it will not sell the KM Polymer purchased
hereunder to any other Person. Licensor will have no liability to Licensee
with respect to the quality of KM Polymer supplied hereunder. Licensor and
Licensee shall cooperate in an effort to arrange for Licensee to acquire all
necessary rights to make, or have made or to purchase, KM Polymer on its own
behalf, without intermediate purchases from Licensor.
5. CONFIDENTIALITY
5.1 CONFIDENTIALITY OBLIGATION
Each of Licensor and Licensee agrees to maintain as confidential, and not to
disclose to any Person (other than any permitted sublicensee or assignee or
their respective Affiliates or representatives of any such Person), all
information it receives from the other Party or its Affiliates under or
pursuant to this Agreement that is designated confidential ("Confidential
Information") to the same extent that it similarly treats its own
confidential information of like nature. The obligations of secrecy imposed
hereby shall survive for 10 years following termination of this Agreement.
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<PAGE>
5.2 EXCEPTIONS
The obligation set forth in Section 5.1 shall not apply with respect to any
Confidential Information which: (a) is generally available to the public
through no breach by the disclosing Party of its obligations hereunder; (b)
is received from a third party who, to the knowledge of the person receiving
such disclosure, is not under a non-disclosure obligation to Licensor or
Licensee, (c) is independently developed by a Party or its Affiliates without
reference to the Confidential Information received from the other Party. A
Party may disclose Confidential Information pursuant to a subpoena or demand
for production of documents in connection with any suit, arbitration
proceeding, or administrative procedure, provided that such Party shall
promptly notify the other Party hereto of the subpoena or demand and provided
further that the disclosing Party will use its commercially reasonable
efforts to maintain the confidential nature of the Confidential Information
by protective order or other means.
6. TERM OF AGREEMENT
Subject to ARTICLE 7.2 hereof, this Agreement shall become effective on the
Effective Date and shall continue in full force and effect in perpetuity.
7. LIABILITY
7.1 NO WARRANTY OR REPRESENTATION
(a) NO WARRANTY OR REPRESENTATION OF ANY KIND, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, WHETHER EXPRESS OR IMPLIED, IS GIVEN BY LICENSOR TO LICENSEE WITH
RESPECT TO THE KM POLYMER OR ANY INTELLECTUAL PROPERTY, IMPROVEMENTS OR
SATELLITE INTELLECTUAL PROPERTY. LICENSOR DISCLAIMS ANY WARRANTY OR
REPRESENTATION THAT ANY OF THE INTELLECTUAL PROPERTY THE IMPROVEMENTS OR THE
SATELLITE INTELLECTUAL PROPERTY IS VALID OR ENFORCEABLE OR THAT NO PERSON
(OTHER THAN LICENSOR AND ITS AFFILIATES) HAS OR MAY ASSERT RIGHTS OF ANY
NATURE TO ANY SUCH INTELLECTUAL PROPERTY OR IMPROVEMENTS OR OTHERWISE HAS OR
MAY ASSERT RIGHTS IN CONFLICT WITH THE LICENSE GRANTED BY LICENSOR HEREBY.
TO THE EXTENT PERMITTED, LICENSOR WILL ASSIGN TO LICENSEE ANY WARRANTY THAT
IT RECEIVES WITH RESPECT TO THE KM POLYMER SUPPLIED TO LICENSEE HEREUNDER.
8
<PAGE>
(b) NO WARRANTY OR REPRESENTATION OF ANY KIND, INCLUDING WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, WHETHER EXPRESS OR IMPLIED, IS GIVEN BY LICENSEE TO LICENSOR WITH
RESPECT TO ANY IMPROVEMENTS. LICENSEE DISCLAIMS ANY WARRANTY OR
REPRESENTATION THAT ANY IMPROVEMENT IS VALID OR ENFORCEABLE OR THAT NO PERSON
(OTHER THAN LICENSEE AND ITS AFFILIATES) HAS OR MAY ASSERT RIGHTS OF ANY
NATURE TO ANY IMPROVEMENT OR OTHERWISE HAS OR MAY ASSERT RIGHTS IN CONFLICT
WITH THE LICENSE GRANTED BY LICENSEE HEREBY.
7.2 MATERIAL BREACH
If either Party commits a breach of any of the material provisions of this
Agreement, and such breach is not cured within ninety (90) days after the
date on which notice of breach is sent to the breaching Party, the
non-breaching Party shall have the right to pursue all remedies available to
it including termination of this Agreement.
7.3 FORCE MAJEURE
Neither Party shall be liable to the other for any failure arising out of a
delay in its performance of this Agreement arising in whole or in part from
causes beyond its reasonable control. Without limiting the generality of the
foregoing, such events include any act of God; accident; explosion; fire;
acts of war; public disorders; earthquake; flood; inability to obtain
supplies; strikes; labor disputes; riots; sabotage; embargo; and any federal,
state, or local legal restriction or limitation. A Party who is prevented
from performing for any reason shall immediately notify the other Party in
writing of the cause for the non-Performance and the anticipated extent of
the delay.
7.4 NO SPECIAL DAMAGES
Neither Party shall be liable to the other for any indirect, special or
consequential damages arising hereunder.
8. NOTICES
Notices or requests to be given or made hereunder shall be delivered in
person or sent by registered mail or telefax or telex acknowledged by the
operator of the addressee that each Party may from time to time designate.
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<PAGE>
9. EXPORTATION CONTROL
Each of Licensor and Licensee agrees not to export or reexport, or cause to
be exported, any Intellectual Property or Improvement furnished hereunder by
the other Party or the equipment constructed on the basis of such
Intellectual Property or Improvement or the products manufactured with such
Intellectual Property or Improvement to any country to which, under the laws
of the country of origin of the Intellectual Property or Improvement, it is
or may be prohibited from so doing. Each of Licensor and Licensee also
agrees to comply with all filing and other requirements of applicable export
control laws.
10. ASSIGNMENT
Neither Licensor nor Licensee may assign this Agreement except in its
entirety and then only to (i) an Affiliate or (ii) to a Person that acquires
all or substantially all of Licensee's or Licensor's (or any such assignee
Affiliate's), as applicable, prepreg business. Notwithstanding the
foregoing, either Licensor or Licensee may assign all (but not less than all)
of its rights to the license granted by the other Party hereunder for one or
more Products in conjunction with a divestment of the line of business
comprising prepregs based on such Products. Licensee may assign its rights
to obtain KM Polymer as provided in Article 4 in connection with the
divestment of its prepreg business based on KM Polymer. Any assignment in
violation of this Article 10 shall be considered void.
11. MISCELLANEOUS
11.1 ENTIRE AGREEMENT
The Agreement embodies the entire understanding of the Parties related to the
subject matter hereof. No amendment or modification of the Agreement shall
be valid or binding upon the Parties unless it is in writing and signed by
the respective duly authorized officers of the Parties. Headings and
subheadings are used for convenience only and are not intended as limitations
in the Agreement or for use in interpreting the Agreement.
10
<PAGE>
11.2 PARTIES ARE INDEPENDENT
The Agreement does not and shall not be deemed to make either Party the
agent, legal representative or partner of the other Party for any purpose
whatsoever, and neither Party shall have the right or authority to assume or
create any obligation or responsibility whatsoever, expressed or implied, on
behalf of or in the name of the other Party or to bind the other Party in any
respect whatsoever.
11.3 WAIVER
The failure of either Party at any time to require performance by the other
Party of any provision hereof shall in no way affect the full right to
require such performance within a reasonable time or thereafter the
performance of that and all other provisions, nor shall the waiver of any
succeeding breach of such provision or any other provision operate as a
waiver of the provision itself.
11.4 SEVERABILITY
The invalidity or unenforceability of any one or more of the provisions of
the Agreement shall not affect the validity or enforceability of the
remaining provisions.
11.5 GOVERNING LAW
This Agreement shall be construed and governed, in all respects, by the law
of the State of New York applicable to contracts made and to be performed in
that state without reference to any provisions relating to conflicts of law.
Each Party hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court sitting in the City of New York.
11
<PAGE>
11.5.1 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of this shall constitute one and the
same instrument.
IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be
executed in duplicate as of the date first written above.
HEXCEL CORPORATION FIBERITE, INC.
Name Name
---------------- ------------------
Title Title
--------------- -----------------
Date Date
---------------- ------------------
12
<PAGE>
SCHEDULE A
1. 934
2. 935
3. 970
4. 976
5. 997
6. 7740
7. 3501-6
8. 7714
9. 97714
10. 937A
11. 977
12. E767
13. E773
14. E7K8
15. E7T1-2
The foregoing are intended to represent families of the indicated resin
system such that, for example, 977 would also include 977-2, 977-3 and 977-6
as members of the 977 family. In addition, the license for the hot melt form
of a resin system would also include the corresponding solution form of the
resin system, and vice versa.
13
<PAGE>
SCHEDULE B
To the extent containing Intellectual Property:
1. Laboratory notebooks
2. Invention disclosures
3. Patent and patent application files
4. Process control documents
5. Bill of materials/mix cards
6. Qualification procedures and data
(including applicable test data)
7. Quality control procedures and data
(including applicable test data)
8. Equipment specifications
9. Material purchase specifications
14
<PAGE>
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS - UNAUDITED
The company reports net income (loss) per share data on a primary and fully
diluted bases. Primary net income (loss) per share is based upon the weighted
average number of outstanding common shares and common equivalent shares from
stock options. Fully diluted net income (loss) per share is based upon (a)
the weighted average number of outstanding common shares and common equivalent
shares from stock options and the assumed conversion of the 7% convertible
subordinated notes and convertible subordinated debentures, due 2003 and
2011, respectively, and (b) net income (loss) increased by the expenses on
the notes and debentures, due 2003 and 2011, respectively. Computations of
net income (loss) per share on the primary and fully diluted bases for the
third quarter and first nine months of 1997 and 1996 were:
<TABLE>
<CAPTION>
THE QUARTERS ENDED SEPTEMBER 30, YEAR-TO-DATE ENDED SEPTEMBER 30,
-------------------------------- --------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY NET INCOME (LOSS) PER SHARE
AND EQUIVALENT SHARE
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ 37,947 $ 346 $ 61,307 $ (21,473)
- ------------------------------------------------------------------------------------------------------------
Weighted average common shares
outstanding 36,805 36,322 36,716 32,305
Weighted average common equivalent
shares from stock options 1,613 1,108 1,399 --
- ------------------------------------------------------------------------------------------------------------
Weighted average common shares and
equivalent shares 38,418 37,430 38,115 31,305
- ------------------------------------------------------------------------------------------------------------
Primary net income (loss) per share
and equivalent share (1) $ 0.99 $ 0.01 $ 1.61 $ (0.66)
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
FULLY DILUTED NET INCOME (LOSS) PER
SHARE AND EQUIVALENT SHARE
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ 37,947 $ 346 $ 61,307 $ (21,473)
Interest and issuance costs - 7%
convertible subordinated notes,
due 2003 2,042 986 5,994 986
Interest and issuance costs - 7%
convertible subordinated debentures,
due 2011 (2) 457 295 - 885
- ------------------------------------------------------------------------------------------------------------
Adjusted net income (loss) $ 40,446 $ 1,627 $ 67,301 $ (19,602)
- ------------------------------------------------------------------------------------------------------------
Weighted average common shares
outstanding 36,805 36,322 36,716 32,305
Weighted average common equivalent
shares
Stock options 1,730 1,299 1,746 1,159
7% convertible subordinated notes,
due 2003 7,241 5,411 7,241 1,804
7% convertible subordinated
debentures, due 2011 (2) 834 834 - 834
- ------------------------------------------------------------------------------------------------------------
Weighted average common shares and
equivalent shares 46,610 43,866 45,703 36,102
- ------------------------------------------------------------------------------------------------------------
Primary net income (loss) per share and
equivalent share (1) 0.87 $ 0.01 $ 1.47 $ (0.66)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The computation of fully diluted net loss per share for the third quarter
and the first nine months of 1996 was antidilutive. Accordingly, the
amounts reported for primary and fully diluted net loss per share are the
same.
(2) The calculation of fully diluted net income per share for the first nine
months of 1997 excludes the assumed conversion of the 7% convertible
subordinated debentures, due 2011, because the computation is antidilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,141
<SECURITIES> 0
<RECEIVABLES> 190,107
<ALLOWANCES> 6,969
<INVENTORY> 162,298
<CURRENT-ASSETS> 387,672
<PP&E> 482,815
<DEPRECIATION> 159,220
<TOTAL-ASSETS> 807,553
<CURRENT-LIABILITIES> 173,442
<BONDS> 360,040
0
0
<COMMON> 368
<OTHER-SE> 234,190
<TOTAL-LIABILITY-AND-EQUITY> 807,553
<SALES> 682,249
<TOTAL-REVENUES> 682,249
<CGS> 522,577
<TOTAL-COSTS> 522,577
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,288
<INCOME-PRETAX> 31,941
<INCOME-TAX> (29,366)
<INCOME-CONTINUING> 61,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,307
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.47
</TABLE>
<PAGE>
CONTACT: RONALD S. ZIEMBA
HEXCEL CORPORATION
203-969-0666 EXT. 405
HEXCEL COMPLETES ACQUISITION OF FIBERITE'S SPACE SATELLITE
BUSINESS, ACQUIRES RIGHTS TO STRUCTURAL PREPREG TECHNOLOGY
STAMFORD, CT, September 30, 1997 -- Hexcel Corporation (NYSE/PCX: HXL) announced
today that it has completed its previously announced acquisition of certain
assets of Fiberite, Inc. for about $37 million in cash. The assets are:
- Exclusive ownership of Fiberite's space satellite business line, and
- A worldwide, perpetual and royalty-free license to a broad range of
Fiberite's structural prepreg technology, including both existing
products and those under development. The acquired prepreg license is
free from geographic and field-of-use restrictions.
This transaction was originally announced August 25, 1997.
1
<PAGE>
John J. Lee, Hexcel's chairman, president and chief executive officer, said,
"This transaction is a great strategic fit for Hexcel, especially considering
the modest investment we have made. It provides Hexcel with immediate access
to new products and technologies for our customers in the commercial
aerospace, space and defense industries."
"We are particularly enthusiastic about the opportunity to become an
important player in current and future space satellite programs. This is a
natural extension of our existing product lines, and it gives us as
attractive position in this growing market," Mr. Lee added.
"The licensing agreement, which encompasses both existing commercial products
and those under development, provides a cost-effective way for us to gain
access to important prepreg technology. It will broaden our product offering
to customers and help us maintain our global leadership position. We are
looking forward to manufacturing these prepreg products in Hexcel
facilities," Mr. Lee said.
Hexcel Corporation manufactures lightweight, high performance carbon fibers,
structural fabrics, composite materials and engineered parts and structures.
Hexcel sells these products to customers in the commercial aerospace, space
and defense, recreation and general industrial markets. Hexcel's 1996 pro
forma revenues, including full year sales from the businesses acquired during
that year, were $799 million.
#
2
<PAGE>
Exhibit 99.10
PERFORMANCE ACCELERATED
RESTRICTED STOCK UNIT AGREEMENT
PERFORMANCE ACCELERATED RESTRICTED STOCK UNIT AGREEMENT (the
"Agreement"), restated as of the Grant Date (as defined below), by and
between Hexcel Corporation, a Delaware corporation (the "Company"), and the
Grantee.
WHEREAS, pursuant to the Hexcel Corporation Incentive Stock Plan (the
"Plan"), the Executive Compensation Committee (the "Committee") of the Board
of Directors of the Company (the "Board") granted Performance Accelerated
Restricted Stock Units ("PARS") to the Grantee on ____, 1996 (the "Grant
Date"); and
WHEREAS, the Committee has determined that it is desirable and in the
best interests of the Company to restate the grant of PARS; and WHEREAS, the
Company and Grantee desire to restate the prior grant in its entirety as
provided herein;
NOW, THEREFORE, the parties agree as follows:
1. NOTICE OF GRANT; INCORPORATION OF PLAN. A Notice of Grant is attached
hereto as Annex A and incorporated by reference herein. Unless otherwise
provided herein, capitalized terms used in this Agreement and set forth in
the Notice of Grant shall have the meanings ascribed to them in the Notice of
Grant and capitalized terms used in this Agreement and set forth in the Plan
shall have the meanings ascribed to them in the Plan. The Plan is
incorporated by reference and made a part of this Agreement, and this
Agreement shall be subject to the terms of the Plan, as the Plan may be
amended from time to time, provided that any such amendment of the Plan must
be made in accordance with Section X of the Plan. The PARS granted herein
constitute an Award within the meaning of the Plan.
2. TERMS OF RESTRICTED STOCK. The grant of PARS provided in Section 1
hereof shall be subject to the following terms, conditions and restrictions:
(a) The Grantee shall not possess any incidents of ownership (including,
without limitation, dividend and voting rights) in shares of Common Stock
in respect of the PARS until such PARS have vested and been distributed to
the Grantee in the form of shares of Common Stock.
(b) Except as provided in this Section 2 (b), the PARS and any interest
therein may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and
distribution, prior to the distribution of
<PAGE>
the Common Stock in respect of such PARS and subject to the conditions
set forth in the Plan and this Agreement. Any attempt to transfer PARS
in contravention of this Section is void AB INITIO. PARS shall not be
subject to execution, attachment or other process. Notwithstanding the
foregoing, the Grantee shall be permitted to transfer PARS to members
of this or her immediate family (I.E., children, grandchildren or
spouse), trusts for the benefit of such family members, and
partnerships whose only partners are such family members; provided,
however, that no consideration can be paid for the transfer of the PARS
and the transferee of the PARS shall be subject to all conditions
applicable to the PARS (including all of the terms and conditions of
this Agreement) prior to transfer.
3. VESTING AND CONVERSION OF PARS. The PARS shall vest on (a) March
1, 2003, or (b) on an earlier date or dates to the extent certain
pre-determined performance criteria (the "PARS Goals") are achieved. The
PARS Goals shall be as follows: if earnings of the Company before interest
and taxes (determined by reference to the Company's audited financial
statements) ("EBIT") equal or exceed $70 million for any fiscal year of the
Company, 33-1/3% (or, if applicable, an additional 33 1/3%) of the total
number of PARS shall become vested; if EBIT for any fiscal year of the
Company equals or exceeds $80 million, 66-2/3% (or, if applicable, up to an
additional 66 2/3%) of the total number of PARS shall become vested; and if
EBIT for any fiscal year of the Company equals or exceeds $90 million, 100%
of the total number of PARS shall become vested; PROVIDED, HOWEVER, that no
more than 100% of the total number of PARS may become vested. Upon the later
to occur of (i) March 1, 1999 or (ii) the vesting of a certain number of
PARS, such vested PARS shall be converted into an equivalent number of shares
of Common Stock that will be immediately distributed to the Grantee;
PROVIDED, HOWEVER, that, to the extent that (and only to the extent that) the
Company would be precluded from deducting the associated compensation expense
because of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), such PARS shall be converted and distributed to the Grantee on
the first business day of the first year (or years, if the first deferred
distribution shall not include all of such PARS) in which the Company will
not be so precluded; and PROVIDED FURTHER, that no PARS shall be converted
and distributed to the Grantee unless the Grantee is an employee of the
Company (or a Subsidiary) on December 31, 1998. On each dividend payment
date with respect to the Common Stock subsequent to any PARS becoming fully
vested but not yet converted and distributed by virtue of the immediately
preceding proviso, the Company shall credit the Grantee with an additional
number of fully vested whole and partial PARS (assuming each such PARS unit
was a share of Common Stock) equal in value to the amount of dividends which
the Grantee would have received on such dividend payment date if all such
vested PARS (including PARS previously credited to the Grantee pursuant to
this section) which had not yet been converted into shares had been so
converted prior to the record date of such dividend. Such dividends will be
credited as vested PARS as of the payment date of such
2
<PAGE>
dividends and such vested PARS shall thereafter be treated in the same manner
as other PARS under this Agreement (the foregoing method of dividend
crediting being referred to herein as being credited with the "Dividend
Equivalent").
Upon the distribution of the shares of Common Stock in respect of the PARS,
the Company shall issue to the Grantee or the Grantee's personal
representative a stock certificate representing such shares of Common Stock,
free of any restrictions.
4. TERMINATION OF EMPLOYMENT; CHANGE OF CONTROL.
(a) For purposes of the grant hereunder, any transfer of employment by
the Grantee among the Company and its Subsidiaries shall not be considered
a termination of employment. Notwithstanding any other provision contained
herein or in the Plan, (i) if the Grantee dies or terminates employment due
to Disability (as defined in the last Section hereof), all PARS shall vest,
be converted into shares of Common Stock and be immediately distributed to
the Grantee, (ii) if the Grantee's employment with the Company is
involuntarily terminated other than for Cause (as defined in the last
Section hereof), all PARS shall vest, be converted into shares of Common
Stock and be immediately distributed to the Grantee, (iii) if the Grantee
voluntarily terminates employment with the Company, all vested PARS shall
be converted into shares of Common Stock and be immediately distributed to
the Grantee, provided that the Grantee is an employee of the Company (or a
Subsidiary) on December 31, 1998, and (iv) if the Grantee's employment
with the Company terminates due to the Grantee's Retirement (as defined in
the last Section hereof), all PARS shall vest, be converted in shares of
Common Stock and be immediately distributed to the Grantee; PROVIDED,
HOWEVER, that in each case an appropriate number of such PARS shall not be
converted and distributed to the Grantee until the first business day of
the first year in which the Company is not precluded from deducting the
associated compensation expense under Section 162(m) of the Code, but only
to the extent such number of PARS would not be deductible until such time;
FURTHER, PROVIDED, that the Grantee shall, if applicable, be credited with
the Dividend Equivalent with respect to such PARS.
If the Grantee's employment with the Company is involuntarily terminated
for Cause or the Grantee voluntarily terminates his employment with the Company,
the Grantee shall forfeit all PARS which have not yet become vested as of the
date of termination of employment.
(b) In the event of a Change in Control (as defined in the last
Section hereof), all PARS shall vest, be converted into shares of Common
Stock and be immediately distributed to the Grantee.
3
<PAGE>
5. EQUITABLE ADJUSTMENT. The aggregate number of shares of Common Stock
subject to the PARS shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a
subdivision or consolidation of shares or other capital adjustment, or the
payment of a stock dividend or other increase or decrease in such shares,
effected without the receipt of consideration by the Company, or other change in
corporate or capital structure. The Committee shall also make the foregoing
changes and any other changes, including changes in the classes of securities
available, to the extent reasonably necessary or desirable to preserve the
intended benefits under this Agreement in the event of any other reorganization,
recapitalization, merger, consolidation, spin-off, extraordinary dividend or
other distribution or similar transaction involving the Company.
6. TAXES. The Grantee shall pay to the Company promptly upon request any
taxes the Company reasonably determines it is required to withhold under
applicable tax laws with respect to the PARS. Such payment shall be made as
provided in Section IX(f) of the Plan.
7. NO GUARANTEE OF EMPLOYMENT. Nothing set forth herein or in the Plan
shall confer upon the Grantee any right of continued employment for any period
by the Company, or shall interfere in any way with the right of the Company to
terminate such employment.
8. NOTICES. Any notice required or permitted under this Agreement shall
be deemed given when delivered personally, or when deposited in a United States
Post Office, postage prepaid, addressed, as appropriate, to the Grantee at the
last address specified in Grantee's employment records, or such other address as
the Grantee may designate in writing to the Company, or to the Company,
Attention: Corporate Secretary, or such other address as the Company may
designate in writing to the Grantee.
9. FAILURE TO ENFORCE NOT A WAIVER. The failure of either party hereto
to enforce at any time any provision of this Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.
10. GOVERNING LAW. This Agreement shall be governed by and construed
according to the laws of the State of Delaware, without regard to the conflicts
of laws provisions thereof.
11. INCORPORATION OF PLAN. The Plan is hereby incorporated by reference
and made a part of this Agreement, and this Agreement shall be subject to the
terms of the Plan, as the Plan may be amended from time to time, provided that
any such
4
<PAGE>
amendment of the Plan must be made in accordance with Section X of the
Plan. The PARS granted herein constitute Awards within the meaning of the Plan.
12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original but all of which together shall
represent one and the same agreement.
13. MISCELLANEOUS. This Agreement cannot be changed or terminated orally.
This Agreement and the Plan contain the entire agreement between the parties
relating to the subject matter hereof. The section headings herein are intended
for reference only and shall not affect the interpretation hereof.
14. DEFINITIONS. For purposes of this Agreement:
(I) the term "Beneficial Owner" (and variants thereof) shall have the
meaning given in Rule 13d-3 promulgated under the Exchange Act;
(II) the term "Cause" shall mean (A) the willful and continued failure by
the Grantee to substantially perform the Grantee's duties with the Company
(other than any such failure resulting from the Grantee's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to the Grantee by the Company, which demand
specifically identifies the manner in which the Company believes that the
Grantee has not substantially performed the Grantee's duties, or (B) the
willful engaging by the Grantee in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (A) and (B) of this definition, no act,
or failure to act, on the Grantee's part shall be deemed "willful" unless
done, or omitted to be done, by the Grantee not in good faith and without
the reasonable belief that the Grantee's act, or failure to act, was in the
best interest of the Company;
(III) the term "Change in Control" shall mean any of the following events:
(A)(i) any Person (as defined in this Section), is or becomes the
Beneficial Owner of 20% or more of either (x) the then outstanding
Common Stock of the Company (the "Outstanding Common Stock") or (y)
the combined voting power of the then outstanding securities entitled
to vote generally in the election of directors of the Company (the
"Total (Voting Power"); excluding, however, the following: (1) any
acquisition by the Company or any of its affiliates or (2) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any of its affiliates and (ii) Ciba
(as defined in this Section) beneficially
5
<PAGE>
owns, in the aggregate, a lesser percentage of the Total Voting
Power than such Person beneficially owns; or
(B) a change in the composition of the Board such that the
individuals who, as of the effective date of this Agreement,
constitute the Board (such individuals shall be hereinafter referred
to as the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board; PROVIDED, HOWEVER, for purposes of this
definition, that any individual who becomes a director subsequent to
such effective date, whose election, or nomination for election by the
Company's stockholders, was made or approved pursuant to the
Governance Agreement (as defined in this Section) or by a vote of at
least a majority of the Incumbent Directors (or directors whose
election or nomination for election was previously so approved) shall
be considered a member of the Incumbent Board; but, PROVIDED, FURTHER,
that any such individual whose initial assumption of office occurs as
a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person or legal entity other than the
Board shall not be considered a member of the Incumbent Board; or
(C) the approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company ("Corporate
Transaction"); excluding, however, such a Corporate Transaction
(i)pursuant to which all or substantially all of the individuals and
entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and Total Voting Power immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 50%, respectively, of the outstanding common
stock and the combined voting power of the then outstanding securities
entitled to vote generally in the election of directors of the company
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such
Corporate Transaction of the Outstanding Common Stock and Total Voting
Power, as the case may be, or (ii) after which no Person beneficially
owns a greater percentage of the combined voting power of the then
outstanding securities entitled to vote generally in the election of
directors of such corporation than does Ciba; or
6
<PAGE>
(D) Ciba shall become the Beneficial Owner of more than 57.5% of
the Total Voting Power; or
(E) the approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(IV) the term "Ciba" shall mean Ciba-Geigy Limited, a Swiss corporation, or
such corporation or corporations as are substituted for Ciba-Geigy Limited,
together with their respective affiliates and any former affiliates holding
Company voting securities pursuant to Section 4.01(b) of the Governance
Agreement;
(V) the term "Disability" shall mean that, as a result of the Grantee's
incapacity due to physical or mental illness or injury, the Grantee shall
not have performed all or substantially all of the Grantee's usual duties
as an employee of the Company for a period of more than one-hundred-fifty
(150) days in any period of one-hundred-eighty (180) consecutive days;
(VI) the term "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended;
(VII) the term "Governance Agreement" shall have the meaning given in the
Strategic Alliance Agreement (as defined in this Section);
(VIII) the term "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) of the
Exchange Act, but excluding Ciba for so long as Ciba is subject to the
restrictions imposed by the Governance Agreement;
(IX) the term "Retirement" shall mean termination of the Grantee's
employment, other than by reason of death or Cause, either (A) at or after
age 65 or (B) at or after age 55 after five (5) years of employment by the
Company (or a Subsidiary thereof); and
(X) the term "Strategic Alliance Agreement" shall mean the Strategic
Alliance Agreement among the Company, Ciba-Geigy Limited and Ciba-Geigy
Corporation, dated as of September 29, 1995, as amended.
7
<PAGE>
Annex A
-------
NOTICE OF GRANT
PERFORMANCE ACCELERATED RESTRICTED STOCK UNITS
HEXCEL CORPORATION INCENTIVE STOCK PLAN
The following employee of Hexcel Corporation, a Delaware corporation
("Hexcel") or a Subsidiary, has been granted performance accelerated restricted
stock units in accordance with the terms of this Notice of Grant and the
Agreement (as restated) to which this Notice of Grant is attached.
The terms below shall have the meanings ascribed to them below when used in
the Agreement.
---------------------------------------------------------------------------
| Grantee | |
---------------------------------------------------------------------------
| Address of Grantee | |
---------------------------------------------------------------------------
| Employee Number | |
---------------------------------------------------------------------------
| Employee ID Number | |
---------------------------------------------------------------------------
| Foreign Sub Plan, if applicable | |
---------------------------------------------------------------------------
| Grant Date | |
---------------------------------------------------------------------------
| Aggregate Number of PARS | |
| Granted | |
---------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereby agree to the terms of this Notice of
Grant and the Agreement (as restated) to which this Notice of Grant is attached
and execute this Notice of Grant and the Agreement as of the Grant Date.
__________________________ HEXCEL CORPORATION
Grantee
By:_________________________
Name:_______________________
Title:_________________________
8
<PAGE>
Exhibit 99.11
EMPLOYEE OPTION AGREEMENT
EMPLOYEE OPTION AGREEMENT, restated as of the Grant Date (as defined below),
by and between the Optionee and Hexcel Corporation, a Delaware corporation
(the "Corporation").
W I T N E S S E T H:
WHEREAS, the Corporation has adopted the Hexcel Corporation Incentive Stock Plan
(the "Plan"); and
WHEREAS, the Executive Compensation Committee (the "Committee") of the Board of
Directors of the Corporation (the "Board") granted the Optionee the Option
(defined below) on ____, 1996 (the "Grant Date"); and
WHEREAS, the Committee has determined that it is desirable and in the best
interests of the Corporation to restate the Option; and
WHEREAS, the Corporation and Optionee desire to restate the Option in its
entirety as provided herein;
NOW, THEREFORE, the parties agree as follows:
1. NOTICE OF GRANT; INCORPORATION OF PLAN. A Notice of Grant is attached
hereto as Annex A and incorporated by reference herein. Unless otherwise
provided herein, capitalized terms used herein and set forth in such Notice of
Grant shall have the meanings ascribed to them in the Notice of Grant and
capitalized terms used herein and set forth in the Plan shall have the meanings
ascribed to them in the Plan. The Plan is incorporated by reference and made a
part of this Employee Option Agreement, and this Employee Option Agreement shall
be subject to the terms of the Plan, as the Plan may be amended from time to
time, provided that any such amendment of the Plan must be made in accordance
with Section X of the Plan. The Option granted herein constitutes an Award
within the meaning of the Plan.
2. GRANT OF OPTION. Pursuant to the Plan and subject to the terms and
conditions set forth herein and therein, the Corporation hereby grants to the
Optionee the right and option (the "Option") to purchase all or any part of
the Option Shares of the Corporation's common stock, $.01 par value per share
(the "Common Stock"), which Option is not intended to qualify as an incentive
stock option, as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
3. PURCHASE PRICE. The purchase price per share of the Option Shares shall
be the Purchase Price.
<PAGE>
4. TERM OF OPTION.
(a) EXPIRATION DATE; TERM. Subject to Section 4(c) below, the Option
shall expire on, and shall no longer be exercisable following, the
tenth anniversary of the Grant Date. The ten-year period from the
Grant Date to its tenth anniversary shall constitute the "Term" of
the Option.
(b) VESTING PERIOD; EXERCISABILITY. Subject to Section 4(c) below, the
Option shall vest and become exercisable at the rate of 33-1/3% of
the Option Shares on each of the first three anniversaries of the
Grant Date.
(c) TERMINATION OF EMPLOYMENT; CHANGE IN CONTROL.
(i) For purposes of the grant hereunder, any transfer of employment by the
Optionee among the Corporation and the Subsidiaries shall not be considered
a termination of employment. If the Optionee's employment with the
Corporation is terminated for Cause (as defined in the last Section
hereof), the Option, whether or not then vested, shall be automatically
terminated as of the date of such termination of employment. If the
Optionee's employment with the Corporation shall terminate other than by
reason of Retirement (as defined in the last Section hereof), Disability
(as defined in the last Section hereof), death or Cause, the Option (to the
extent then vested) may be exercised at any time within ninety (90) days
after such termination (but not beyond the Term of the Option). The
Option, to the extent not then vested, shall immediately expire upon such
termination.
If the Optionee dies or becomes Disabled (A) while employed by the
Corporation or (B) within 90 days after the termination of his or her
employment other than for Cause or Retirement, the Option (to the extent
then vested) may be exercised at any time within one year after the
Optionee's death or Disability (but not beyond the Term of the Option).
The Option, to the extent not then vested, shall immediately expire upon
such death or disability.
If the Optionee's employment terminates by reason of Retirement, the Option
shall (A) become fully and immediately vested and exercisable and (B)
remain exercisable for three years from the date of such Retirement (but
not beyond the Term of the Option).
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(ii) In the event of a Change in Control (as defined in the last Section
hereof), the Option shall immediately become fully vested and exercisable
and the post-termination periods of exercisability set forth in Section 4
(c) (i) hereof shall apply, except that the post-termination period of
exercisability shall be extended and the Option shall remain exercisable
for a period of three years from the date of such termination of
employment, if, within two years after a Change in Control, (A) the
Optionee's employment is terminated by the Company other than by reason
of Retirement, Cause, Disability or death or (B) the Optionee terminates
the Optionee's employment for Good Reason (as defined in the last Section
hereof).
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) The aggregate number of Option Shares and the Purchase Price shall be
appropriately adjusted by the Committee for any increase or decrease in the
number of issued shares of Common Stock resulting from a subdivision or
consolidation of shares or other capital adjustment, or the payment of a
stock dividend or other increase or decrease in such shares, effected
without receipt of consideration by the Corporation, or other change in
corporate or capital structure. The Committee shall also make the
foregoing changes and any other changes, including changes in the classes
of securities available, to the extent reasonably necessary or desirable to
preserve the intended benefits under this Employee Option Agreement in the
event of any other reorganization, recapitalization, merger, consolidation,
spin-off, extraordinary dividend or other distribution or similar
transaction involving the Corporation.
(b) Any adjustment under this Section 5 in the number of Option Shares
and the Purchase Price shall apply to only the unexercised portion of
the Option. If fractions of a share would result from any such adjustment,
the adjustment shall be rounded down to the nearest whole number of
shares.
6. METHOD OF EXERCISING OPTION AND WITHHOLDING.
(a) The Option shall be exercised by the delivery by the Optionee to the
Corporation at its principal office (or at such other address as may be
established by the Committee) of written notice of the number of Option
Shares with respect to which the Option is exercised, accompanied by
payment in full of the aggregate Purchase Price for such Option Shares.
Payment for such Option Shares shall be made (i) in U.S. dollars by
personal check, bank draft or money order payable to the order of the
Corporation, or by money transfers or direct account debits to an account
designated by the Corporation; (ii) through the delivery of shares of
Common Stock with a Fair Market Value equal to the total payment due from
the Optionee; (iii) pursuant to a "cashless exercise" program if such a
program is established by the Corporation; or (iv) by any combination of
the methods described in (i) through (iii) above.
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(b) The Corporation's obligation to deliver shares of Common Stock upon
the exercise of the Option shall be subject to the payment by the Optionee
of applicable federal, state and local withholding tax, if any. The
Corporation shall, to the extent permitted by law, have the right to deduct
from any payment of any kind otherwise due to the Optionee any federal,
state or local taxes required to be withheld with respect to such payment.
7. TRANSFER. Except as provided in this Section 7, the Option is not
transferable otherwise than by will or the laws of descent and
distribution, and the Option may be exercised during the Optionee's
lifetime only by the Optionee. Any attempt to transfer the Option in
contravention of this Section 7 is void AB INITIO. The Option shall not be
subject to execution, attachment or other process. Notwithstanding the
foregoing, the Optionee shall be permitted to transfer the Option to
members of his or her immediate family (I.E., children, grandchildren or
spouse), trusts for the benefit of such family members, and partnerships
whose only partners are such family members; provided, however, that no
consideration can be paid for the transfer of the Option and the transferee
of the Option shall be subject to all conditions applicable to the Option
prior to its transfer.
8. NO RIGHTS IN OPTION SHARES. The Optionee shall have none of the rights
of a stockholder with respect to the Option Shares unless and until shares
of Common Stock are issued upon exercise of the Option.
9. NO RIGHT TO EMPLOYMENT. Nothing contained herein shall be deemed to
confer upon the Optionee any right to remain as an employee of the
Corporation.
10. GOVERNING LAW/JURISDICTION. This Employee Option Agreement shall be
governed by and construed in accordance with the laws of the State of
Delaware without reference to principles of conflict of laws.
11. RESOLUTION OF DISPUTES. Any disputes arising under or in connection
with this Employee Option Agreement shall be resolved by binding
arbitration before a single arbitrator, to be held in New York in
accordance with the commercial rules and procedures of the American
Arbitration Association. Judgment upon the award rendered by the arbitrator
shall be final and subject to appeal only to the extent permitted by law.
Each party shall bear such party's own expenses incurred in connection
with any arbitration; PROVIDED, HOWEVER, that the cost of the arbitration,
including without limitation, reasonable attorneys' fees of the Optionee,
shall be borne by the Corporation in the event the Optionee is the
prevailing party in the arbitration. Anything to the contrary
notwithstanding, each party hereto has the right to proceed with a court
action for injunctive relief or relief from violations of law not within
the jurisdiction of an arbitrator.
12. NOTICES. Any notice required or permitted under this Employee Option
Agreement shall be deemed given when delivered personally, or when
deposited in a United States Post Office, postage prepaid, addressed, as
appropriate, to the Optionee at the last address specified in Optionee's
employment
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records, or such other address as the Optionee may designate in writing to
the Corporation, or to the Corporation, Attention: Corporate Secretary,
or such other address as the Corporation may designate in writing to the
Optionee.
13. FAILURE TO ENFORCE NOT A WAIVER. The failure of either party hereto to
enforce at any time any provision of this Employee Option Agreement shall
in no way be construed to be a waiver of such provision or of any other
provision hereof.
14. COUNTERPARTS. This Employee Option Agreement may be executed in two
or more counterparts, each of which shall be an original but all of which
together shall represent one and the same agreement.
15. MISCELLANEOUS. This Employee Option Agreement cannot be changed or
terminated orally. This Employee Option Agreement and the Plan contain the
entire agreement between the parties relating to the subject matter hereof.
The section headings herein are intended for reference only and shall not
affect the interpretation hereof.
16. DEFINITIONS. For purposes of this Employee Option Agreement:
(I) the term "Beneficial Owner" (and variants thereof) shall have the
meaning given in Rule 13d-3 promulgated under the Exchange Act;
(II) the term "Cause" shall mean (A) the willful and continued failure by
the Optionee to substantially perform the Optionee's duties with the
Corporation (other than any such failure resulting from the Optionee's
incapacity due to physical or mental illness) after a written demand for
substantial performance is delivered to the Optionee by the Corporation,
which demand specifically identifies the manner in which the Corporation
believes that the Optionee has not substantially performed the Optionee's
duties, or (B) the willful engaging by the Optionee in conduct which is
demonstrably and materially injurious to the Corporation or its
subsidiaries, monetarily or otherwise. For purposes of clauses (A) and
(B) of this definition, no act, or failure to act, on the Optionee's
part shall be deemed "willful" unless done, or omitted to be done, by
the Optionee not in good faith and without the reasonable belief that
the Optionee's act, or failure to act, was in the best interest of the
Corporation;
(III) the term "Change in Control" shall mean any of the following
events:
(1)(a) any Person (as defined in this Section) is or becomes the
Beneficial Owner of 20% or more of either (i) the then outstanding
Common Stock of the Corporation (the "Outstanding Common Stock") or
(ii) the combined voting power of the then outstanding securities
entitled to vote generally in the election of directors of the
Corporation (the "Total Voting Power"); excluding, however, the
following: (A) any acquisition by the Corporation or any of its
affiliates
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or (B) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any of its
affiliates and (b) Ciba (as defined in this Section) beneficially
owns, in the aggregate, a lesser percentage of the Total Voting
Power than such Person beneficially owns; or
(2) a change in the composition of the Board such that the
individuals who, as of the effective date of this Employee Option
Agreement, constitute the Board (such individuals shall be hereinafter
referred to as the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board; PROVIDED, HOWEVER, for
purposes of this definition, that any individual who becomes a
director subsequent to such effective date, whose election, or
nomination for election by the Corporation's stockholders, was made or
approved pursuant to the Governance Agreement (as defined in this
Section) or by a vote of at least a majority of the Incumbent
Directors (or directors whose election or nomination for election was
previously so approved) shall be considered a member of the Incumbent
Board; but, PROVIDED, FURTHER, that any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a
person or legal entity other than the Board shall not be considered a
member of the Incumbent Board; or
(3) the approval by the stockholders of the Corporation of a
reorganization, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Corporation
("Corporate Transaction"); excluding, however, such a Corporate
Transaction (a) pursuant to which all or substantially all of the
individuals and entities who are the beneficial owners, respectively,
of the Outstanding Common Stock and Total Voting Power immediately
prior to such Corporate Transaction will beneficially own, directly or
indirectly, more than 50%, respectively, of the outstanding common
stock and the combined voting power of the then outstanding securities
entitled to vote generally in the election of directors of the company
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns
the Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately
prior to such Corporate Transaction of the Outstanding Common Stock
and Total Voting Power, as the case may be, or (b) after which no
Person beneficially owns a greater percentage of the combined voting
power of the then outstanding securities entitled to vote generally in
the election of directors of such corporation than does Ciba; or
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(4) Ciba shall become the Beneficial Owner of more than 57.5% of
the Total Voting Power; or
(5) the approval by the stockholders of the Corporation of a
complete liquidation or dissolution of the Corporation;
(IV) the term "Ciba" shall mean Ciba-Geigy Limited, a Swiss corporation, or
such corporation or corporations as are substituted for Ciba-Geigy Limited,
together with their respective affiliates and any former affiliates holding
Corporation voting securities pursuant to Section 4.01(b) of the Governance
Agreement;
(V) the term "Disability (or becoming Disabled)" shall mean that, as a
result of the Optionee's incapacity due to physical or mental illness or
injury, he or she shall not have performed all or substantially all of his
or her usual duties as an employee of the Corporation for a period of more
than one-hundred-fifty (150) days in any period of one-hundred-eighty (180)
consecutive days;
(VI) the term "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time;
(VII) the term "Good Reason" for termination by the Optionee of the
Optionee's employment shall mean the occurrence (without the Optionee's
express written consent) of any one of the following acts by the
Corporation, or failures by the Corporation to act, unless, in the case of
any act or failure to act described in paragraphs (1), (5) or (6) below,
such act or failure to act is corrected prior to the date of termination of
the Optionee's employment:
(1) a significant adverse alteration in the nature or
status of the Optionee's responsibilities, position or authority from
those in effect immediately prior to the Change in Control;
(2) a reduction by the Corporation in the Optionee's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time;
(3) the relocation of the Optionee's principal place of
employment to a location more than fifty (50) miles from the
Optionee's principal place of employment immediately prior to the
Change in Control or the Corporation's requiring the Optionee to work
anywhere other than at such principal place of employment (or
permitted relocation thereof) except for required travel on the
Corporation's business to an extent substantially consistent with the
Optionee's present business travel obligations;
(4) the failure by the Corporation to pay to the Optionee
any portion of the Optionee's current compensation, or to pay to the
Optionee any portion of an installment of deferred com-
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pensation under any deferred compensation program of the Corporation,
within seven (7) days of the date such compensation is due;
(5) the failure by the Corporation to continue in effect
any compensation plan in which the Optionee participates immediately
prior to the Change in Control which is material to the Optionee's
total compensation, or any substitute plans adopted prior to the
Change in Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Corporation to continue the
Optionee's participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the
amount or timing of payment of benefits provided and the level of the
Optionee's participation relative to other participants, as existed
immediately prior to the Change in Control; or
(6) the failure by the Corporation to continue to provide
the Optionee with benefits substantially similar to those enjoyed by
the Optionee under any of the Corporation's pension, savings, life
insurance, medical, health and accident, or disability plans in which
the Optionee was participating immediately prior to the Change in
Control (except for across-the-board changes similarly affecting all
senior executives of the Corporation and all senior executives of any
Person in control of the Corporation), the taking of any other action
by the Corporation which would directly or indirectly materially
reduce any of such benefits or deprive the Optionee of any material
fringe benefit enjoyed by the Optionee at the time of the Change in
Control, or the failure by the Corporation to provide the Optionee
with the number of paid vacation days to which the Optionee is
entitled on the basis of years of service with the Corporation in
accordance with the Corporation's normal vacation policy in effect at
the time of the Change in Control.
The Optionee's right to terminate the Optionee's employment for Good Reason
shall not be affected by the Optionee's incapacity due to physical or
mental illness. The Optionee's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to
act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good Reason,
any claim by the Optionee that Good Reason exists shall be presumed to be
correct unless the Corporation establishes to the Board by clear and
convincing evidence that Good Reason does not exist;
(VIII) the term "Governance Agreement" shall have the meaning given in the
Strategic Alliance Agreement (as defined in this Section);
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(IX) the term "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and 14(d) of the
Exchange Act, but excluding Ciba for so long as Ciba is subject to the
restrictions imposed by the Governance Agreement;
(X) the term "Retirement" shall mean termination of the Optionee's
employment, other than by reason of death or Cause, either (A) at or after
age 65 or (B) at or after age 55 after five (5) years of employment by the
Corporation (or a Subsidiary thereof); and
(XI) the term "Strategic Alliance Agreement" shall mean the Strategic
Alliance Agreement among the Corporation, Ciba-Geigy Limited and Ciba-Geigy
Corporation, dated as of September 29, 1995, as amended.
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ANNEX A
NOTICE OF GRANT
EMPLOYEE STOCK OPTION
HEXCEL CORPORATION INCENTIVE STOCK PLAN
The following employee of Hexcel Corporation, a Delaware corporation
("Hexcel") or a Subsidiary, has been granted an option to purchase shares of the
Common Stock of Hexcel, $.01 par value, in accordance with the terms of this
Notice of Grant and the Employee Option Agreement (as restated) to which this
Notice of Grant is attached.
The terms below shall have the meanings ascribed to them below when used in
the Employee Option Agreement.
- ----------------------------------------------------------------------------
| Optionee | |
- ----------------------------------------------------------------------------
| Address of Optionee | |
- ----------------------------------------------------------------------------
| Employee Number | |
- ----------------------------------------------------------------------------
| Employee ID Number | |
- ----------------------------------------------------------------------------
| Foreign Sub Plan, if applicable | |
- ----------------------------------------------------------------------------
| Grant Date | |
- ----------------------------------------------------------------------------
| Purchase Price | |
- ----------------------------------------------------------------------------
| Aggregate Number of Shares | |
| Granted (the "Option Shares") | |
- ----------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereby agree to the terms of this Notice
of Grant and the Employee Option Agreement (as restated) to which this Notice
of Grant is attached and execute this Notice of Grant and Employee Option
Agreement as of the Grant Date.
HEXCEL CORPORATION
Optionee
By:
Name:
Title:
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