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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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
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HEXCEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-1109521
(State of Incorporation) (I.R.S. Employer Identification No.)
281 TRESSER BOULEVARD
STAMFORD, CONNECTICUT 06901
(Address of principal executive offices and zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 969-0666
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock New York Stock Exchange
Pacific Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
7% Convertible Subordinated Debentures Due 2011
7% Convertible Subordinated Notes Due 2003
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value as of March 16, 1998 of voting stock held by
nonaffiliates of the registrant: $472,793,149
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 U.S. Bankruptcy Court. Yes __X No ____
The number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
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OUTSTANDING AT MARCH 16,
CLASS 1998
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Common Stock 36,866,641
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DOCUMENTS INCORPORATED BY REFERENCE:
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS (TO THE EXTENT SPECIFIED
HEREIN)--PART III.
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PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Hexcel Corporation, founded in 1946, was incorporated in California in 1948,
and reincorporated in Delaware in 1983. Hexcel Corporation and subsidiaries
(herein referred to as "Hexcel" or the "Company") is a leading international
developer and manufacturer of carbon fibers, reinforcement fabrics, and
lightweight, high-performance composite materials, and engineered products for
use in the commercial aerospace, space and defense, recreation, and general
industrial markets. The Company serves international markets through
manufacturing and marketing facilities located in the United States and Europe,
as well as sales offices in Asia, Australia and South America. The Company is
also a participant in one operating joint venture and two additional joint
venture projects in Asia.
BUSINESS ACQUISITIONS
Hexcel acquired the worldwide composites division of Ciba-Geigy Limited, a
Swiss corporation ("CGL"), and Ciba-Geigy Corporation, a New York corporation
("CGC" and together with CGL, "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 at various
dates through February 28, 1997. The composites businesses acquired from Ciba
(collectively, the "Acquired Ciba Business") are engaged in the manufacture and
marketing of reinforcement fabrics and lightweight, high-performance composite
materials, and engineered products for commercial aerospace, space and defense,
recreation, and general industrial markets. Product lines include reinforcement
fabrics, pre-impregnated fabrics ("prepregs"), structural adhesives, honeycomb
core, sandwich panels and fabricated composite parts and structures and
interiors. The aggregate purchase price for the net assets acquired was
approximately $208.7 million.
Hexcel acquired the composite products division of Hercules Incorporated
("Hercules"), including Hercules' carbon fibers and prepreg businesses (the
"Acquired Hercules Business"), on June 27, 1996. The Acquired Hercules Business,
which manufactures carbon fibers and prepregs for commercial aerospace, space
and defense, recreation, and general industrial markets, was purchased for
$139.4 million in cash.
On September 30, 1997, Hexcel acquired from Fiberite, Inc., ("Fiberite") its
satellite business consisting of intangible assets and inventory, and certain
non-exclusive, worldwide rights to other prepreg technologies, for $37.0 million
in cash. The acquisition was substantially downsized from an original agreement
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 $5.0
million of acquisition and financing costs to business acquisition and
consolidation expenses. In addition, the Company expensed $8.0 million of
acquired in process research and technology expenses purchased from Fiberite,
which is also included in business acquisition and consolidation expenses.
Further discussion of the business acquisitions is contained under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and in Notes 1, 2 and 3 to the accompanying consolidated
financial statements included in this Annual Report on Form 10-K.
BUSINESS CONSOLIDATION
In 1996, Hexcel announced plans to consolidate the Company's operations over
a period of three years. The objective of the program is to integrate the
Acquired Ciba Business and the Acquired Hercules Business (collectively, the
"Acquired Businesses") into Hexcel, and to reorganize the Company's
manufacturing and research activities around strategic centers dedicated to
select product technologies.
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The business consolidation program is also intended to eliminate excess
manufacturing capacity and redundant administrative functions.
The total expense of the business consolidation program through December 31,
1997 was $54.7 million, including $13.0 million related to the Fiberite
transaction which was not included in the original program. The Company does not
expect to incur any further significant additional expenses in relation to this
program. As of December 31, 1997, remaining cash expenditures to complete this
program are estimated at $12 million, which approximates amounts accrued. Thus,
when the program is complete, the Company expects that cash expenditures (for
expenses and capital, net of estimated proceeds from asset sales) necessary to
complete the program will approximate the initial estimate of $51 million.
Further discussion of the business consolidation program, including a
description of certain risks, uncertainties and other factors which could cause
the actual expense and cash expenditures of the consolidation program to differ
materially from the estimated amounts, is contained under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and in Note 3 to the accompanying consolidated financial statements
included in this Annual Report on Form 10-K.
RECENTLY ANNOUNCED JOINT VENTURE ACTIVITIES
In January 1998, the Company reached an agreement in principle with The
Boeing Company ("Boeing") and Aviation Industries of China to form a joint
venture, BHA Aero Composite Parts Co., Ltd., to manufacture composite parts for
secondary structures and interior applications on commercial aircraft. This
joint venture will be located in Tianjin, China. In February 1998, the Company
signed an agreement with Boeing, Sime Darby Berhad and Malaysia Helicopter
Services to form another joint venture, Asian Composite Manufacturing Sdn. Bhd.,
to manufacture composite parts for secondary structures on commercial aircraft.
This joint venture will be located in Alor Setar, Malaysia. Products
manufactured by both joint ventures will be shipped to the Company's Kent,
Washington facility for final assembly, inspection and shipment to Boeing as
well as other customers worldwide. It is anticipated that the first parts will
be delivered to customers in 2000. The Company's total estimated financial
commitment to both of these joint ventures will be approximately $31 million,
which is expected to be made in increments through 2000. However, implementation
of these projects, including the related investments, remain subject to certain
significant conditions, including U.S. and foreign government approvals.
BUSINESS SEGMENT
Hexcel is a vertically integrated manufacturer of a variety of products
within a single business segment: Advanced Structural Materials. The Company
manufactures and sells advanced structural materials to commercial aerospace,
space and defense, recreation, and general industrial markets throughout the
U.S. and the world. Net sales, income (loss) before income taxes, total assets,
capital expenditures, and depreciation and amortization for the Company's U.S.
and international geographic segments for the past three years are contained in
Note 18 to the accompanying consolidated financial statements included in this
Annual Report on Form 10-K.
BUSINESS OVERVIEW
In connection with the purchase of the Acquired Ciba Business in 1996,
Hexcel reorganized itself into strategic business units with responsibility for
specific product groups or geographic areas. The research, manufacturing and
marketing activities of each of the strategic business units are supported by
global administrative functions such as human resources, finance and information
systems, legal affairs, and research and technology coordination. The purchase
of the Acquired Ciba Business provided the Company with additional manufacturing
and marketing capabilities for reinforcement fabrics, prepregs, structural
adhesives, and various honeycomb products, in geographically complementary
areas. In addition, this acquisition extended the Company's range of product
offerings to include a variety of engineered products
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made from reinforcement fabrics and composite materials. These engineered
products encompass a number of composite parts and structures, including
finished components for aircraft structures and interiors.
As a result of the purchase of the Acquired Hercules Business, Hexcel
further extended its range of product offerings to include carbon fibers, an
important raw material for many reinforcement fabrics and prepregs. This
acquisition also provided the Company with additional prepreg manufacturing
capabilities and increased the number of products the Company is qualified to
supply for various commercial and military aerospace applications.
As a result of the purchase of the Fiberite assets, Hexcel gained immediate
access to new products and technologies in the commercial aerospace, and space
and defense industries.
Following the acquisitions of the Acquired Businesses, Hexcel is now a
vertically integrated supplier of advanced structural materials to a range of
markets throughout the world. The Company's vertical integration provides it
with an enhanced ability to control the cost, quality and delivery of its
products, and enables the Company to offer its customers a variety of solutions
to their structural materials requirements. The Company sells advanced
structural materials to major airframe manufacturers such as Boeing, Airbus
Industrie ("Airbus"), as well as many other commercial and military aerospace
customers throughout the U.S. and the world. The Company believes that it has
the broadest range of product qualifications for aerospace applications of any
advanced structural materials manufacturer in the world, and supplies material
on every commercial aircraft manufactured by Boeing and Airbus. In addition, the
Company's sales to commercial aerospace and space and defense markets are
complemented by sales of a number of advanced structural materials to recreation
and general industrial markets. Such materials are used in a variety of product
applications, including golf club shafts, fishing rods, tennis rackets, skis,
snowboards, printed circuit boards, window blinds, trains, high-speed ferries,
trucks, automobiles and civil engineering/construction applications.
Hexcel's advanced structural materials business is organized around
strategic business units within three product groups: Fibers and Fabrics,
Composite Materials, and Engineered Products. The following table identifies, by
each of these three product groups, the Company's principal products and
examples of their primary end uses.
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PRODUCT GROUP PRODUCTS PRIMARY END USE
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Fibers and Fabrics Carbon Fibers Raw materials for reinforcement fabrics and prepregs
and for filament winding for various space, defense
and industrial applications.
Reinforcement fabrics Raw materials for prepregs and honeycomb;
Various marine applications;
Printed circuit boards;
Window blinds;
Insulation;
Metal and fume filtration systems;
Soft body armor; and
Civil engineering and construction applications.
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<S> <C> <C>
Composite Materials Prepregs Raw materials for composite structures and interiors
for aircraft, rail, marine, etc.;
Semi-finished aircraft and space components;
Rail, marine and automotive components;
Wind energy turbine blades;
Skis, snowboards, golf club shafts, fishing rods,
tennis rackets, bike frames;
Yacht bows and masts; and
Formula 1 and Indy car components.
Structural Adhesives Bonding of structural materials and components,
including composite panels.
Honeycomb Lightweight, structural core material for composite
structures and interiors for aircraft, rail, marine,
etc.;
Energy absorbers in rail and automotive industries;
Athletic shoe and protective clothing materials; and
Building facia.
Special Process Semi-finished aircraft components used in helicopter
Honeycomb blades;
Space shuttle doors;
Aircraft control surfaces (flaps, wing tips, elevators,
and fairings);
Automotive fuel injection components; and
Industrial components.
Composite Panels Aircraft flooring and interior components;
High speed ferry and train interiors:
Structural panels for train flooring; and
Semi-structural panels for ferry car decks.
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Engineered Products Composite Structures Aircraft structures and finished aircraft
components, including:
Wing-to-body and flap track fairings;
Radomes;
Engine cowls and inlet ducts; and
Wing panels.
Interiors OEM and retrofit aircraft interiors, including:
Overhead stowage compartments;
Lavatories; and
Sidewalls and ceilings.
Composite Systems Structural elements and materials for repair and
and Industrial strengthening applications for civil
Structures engineering/construction; and
Composite structural parts for automotive, truck and
other industrial applications.
</TABLE>
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FIBERS AND FABRICS
The Fibers and Fabrics business units have worldwide responsibility for
manufacturing and marketing carbon fibers and reinforcement fabrics. These
business units operate manufacturing facilities in Decatur, Alabama; Salt Lake
City, Utah; Seguin, Texas; and Les Avenieres and Decines, France.
CARBON FIBERS: Carbon fibers are manufactured for sale to third party
customers and for use by Hexcel in manufacturing certain reinforcement fabrics
and composite materials. Carbon fibers are woven into carbon fabrics, used as
reinforcement in conjunction with a resin matrix to produce prepregs, and used
in filament winding and advanced fiber placement to produce various other
composite materials.
REINFORCEMENT FABRICS: Reinforcement fabrics are made from a variety of
fibers, including several types of fiberglass as well as carbon, aramid,
Thorstrand-Registered Trademark-, quartz, ceramic and other specialty
reinforcements. These fabrics are sold to third-party customers for use in a
wide range of products and are used by the Company to manufacture prepregs and
other composite materials.
Hexcel's net sales of carbon fibers and reinforcement fabrics to third party
customers were $170.1 million in 1997, $155.2 million in 1996 and $119.1 million
in 1995, respectively. The Company acquired its carbon fibers business in
connection with the purchase of the Acquired Hercules Business, and expanded its
reinforcement fabrics business in connection with the purchase of the Acquired
Ciba Business. Pro forma net sales of carbon fibers and fabrics for 1996 and
1995, giving effect to the acquisitions of the Acquired Businesses as if those
transactions had occurred at the beginning of each respective year, were $181.8
million and $194.4 million, respectively. Approximately 44% and 35% of the
Company's production of carbon fibers and reinforcement fabrics was used
internally to manufacture composite materials in 1997 and 1996, respectively.
The percentage of production of carbon fibers and reinforcement fabrics for
internal use increased significantly in 1997, due to the increase in commercial
aerospace composite materials sales.
COMPOSITE MATERIALS
The Composite Materials business units, which are organized around U.S. and
European markets, have worldwide responsibility for manufacturing and marketing
prepregs, structural adhesives, honeycomb, specially machined honeycomb parts
and composite panels. These business units operate manufacturing and research
facilities in Linz, Austria; Welkenraedt, Belgium; Duxford and Swindon, United
Kingdom; Les Avenieres and Dagneux, France; Parla, Spain; Casa Grande, Arizona;
Dublin and Livermore, California; Lancaster, Ohio; Pottsville, Pennsylvania;
Salt Lake City, Utah; and Burlington, Washington.
PREPREGS: Prepregs are manufactured for sale to third party customers and
for use by Hexcel in manufacturing other composite materials and structures,
including finished components for aircraft structures and interiors. Prepregs
are manufactured by combining high performance reinforcement fabrics or
unidirectional fibers with a resin matrix to form a composite material with
exceptional structural properties not present in either of the constituent
materials. Reinforcement fabrics used in the manufacture of prepregs include
S-2-Registered Trademark- and E-type fiberglass, carbon, aramid (including
Kevlar-Registered Trademark-), quartz, ceramic,
Thorstrand-Registered Trademark-, polyethylene and other specialty
reinforcements. Resin matrices include bismaleimide, cyanates, epoxy, phenolic,
polyester, polyimide and other specialty resins.
STRUCTURAL ADHESIVES: As a result of the purchase of the Acquired Ciba
Business, Hexcel designs and markets a comprehensive range of
Redux-Registered Trademark- film adhesives. These structural adhesives, which
bond a wide range of composite, metallic, and honeycomb surfaces, are used in a
variety of product applications.
HONEYCOMB, HONEYCOMB PARTS AND COMPOSITE PANELS: Honeycomb is a unique,
lightweight, cellular structure generally composed of hexagonal cells nested
together. The product is similar in appearance to a cross-sectional slice of a
beehive. The hexagonal cell design gives honeycomb a high strength-to-weight
ratio when used in "sandwich" form and a uniform resistance to crushing. These
basic characteristics are
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combined with the physical properties of the material from which the honeycomb
is made to meet various engineering requirements.
The Composite Materials business units produce honeycomb from a number of
metallic and non-metallic materials. Most metallic honeycomb is made from
aluminum and is available in a selection of alloys, cell sizes and dimensions.
Non-metallic honeycomb materials include fiberglass, carbon, thermoplastics,
Nomex-Registered Trademark- (a non-flammable aramid paper),
Kevlar-Registered Trademark- (an aramid fiber), Korex-Registered Trademark- and
several other specialty materials.
The Composite Materials business units sell honeycomb core material in
standard block and sheet form, and in laminated panel form. In the construction
of composite panels, sheets of aluminum, stainless steel, prepreg or other
laminates are bonded with adhesives to each side of a slice of honeycomb core,
creating a "sandwich" structure. Hexcel also possesses advanced processing
capabilities which enable the Company to design and manufacture complex
fabricated honeycomb parts and bonded assemblies to meet customer
specifications. Such parts and assemblies are used as semi-finished components
in the manufacture of composite structures.
Hexcel's net sales of composite materials to third-party customers, sold
separately and together as complex bonded structures, were $585.4 million in
1997, $438.2 million in 1996 and $231.1 million in 1995. The Company expanded
its composite materials business in connection with the acquisitions of the
Acquired Businesses. Pro forma net sales of composite materials for 1996 and
1995, giving effect to the acquisitions of the Acquired Businesses as if those
transactions had occurred at the beginning of each respective year, were $502.0
million and $463.4 million, respectively. Approximately 11% and 7% of the
Company's production of composite materials was used internally to manufacture
composite structures and interiors in 1997 and 1996, respectively. These
products have benefited from the recent increase in commercial aerospace build
rates as further discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
ENGINEERED PRODUCTS
Hexcel entered the composite structures and interiors businesses in
connection with the purchase of the Acquired Ciba Business. The Engineered
Products business unit has worldwide responsibility for manufacturing and
marketing composite structures and interiors, primarily for commercial and
military aerospace markets, and operates manufacturing facilities in Kent and
Bellingham, Washington. The Company also manufactures composite structures at a
facility in Brindisi, Italy.
COMPOSITE STRUCTURES: Composite structures, and structural parts, are
manufactured from a variety of composite materials (prepregs, honeycomb and
structural adhesives) using such manufacturing processes as autoclave
processing, multi-axis numerically controlled machining, press laminating, heat
forming and other composite manufacturing techniques. Hexcel manufactures a wide
range of composite structures and parts for the commercial and military
aerospace markets.
INTERIORS: The interiors operations of the Engineered Products business
unit design and produce innovative, light weight, high-strength composite
interior systems for aircraft. Interior products are sold to Boeing and other
airframe manufacturers for production on certain aircraft, and to airlines for
replacement of existing interior components. With increasing airline traffic and
the trend of increased use of rolling carry on luggage, airlines are
increasingly requesting larger overhead stowage bins, which will accommodate
these larger bags. Hexcel Interiors has applied for and/or patented a number of
new bin designs for commercial aircraft, which will hold this larger luggage.
Sales of these products will begin in 1998.
Hexcel's net sales of engineered products to third party customers were
$181.4 million in 1997 and $101.9 million in 1996. Pro forma net sales of
engineered products for 1996 and 1995, giving effect to the acquisition of the
Acquired Ciba Business as if it had occurred at the beginning of each respective
year,
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were $114.7 million and $113.5 million, respectively. The improvement for
engineered products in 1997 primarily reflects the production of structural and
interior components outsourced to Hexcel by Boeing starting in the second half
of 1996.
PACIFIC RIM
The Pacific Rim business unit is responsible for business development in the
Asia-Pacific region, and for the sale of all of Hexcel's products within this
region. The Pacific Rim business unit operates sales offices in Sydney,
Australia; Hong Kong; Singapore; Taipei, Taiwan; Shanghai, China; and
Pleasanton, California. This business unit is also responsible for the Company's
participation in a joint venture in Japan to manufacture and market composite
materials in Asia.
Further discussion of Hexcel's business operations is contained under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
RESEARCH AND TECHNOLOGY; PATENTS AND KNOW-HOW
Hexcel's Research and Technology function ("R&T") supports all of the
Company's businesses worldwide. R&T maintains expertise in chemical formulation
and curatives, fabric forming and textile architectures, advanced composites
structures, process engineering, analysis and testing of composite materials,
computational design and prediction, and other scientific disciplines related to
the Company's worldwide business base. Additionally, R&T performs a limited
amount of contract research and development in the U.S. and Europe for
strategically important customers in the areas of ceramics, higher temperature
polymers, advanced textiles and composite structures manufacturing.
Each of Hexcel's strategic business units maintains research and engineering
staff and facilities to support its business operations. Worldwide investment in
research and technology is directed and coordinated by a committee consisting of
R&T representatives from each of the Company's strategic business units. This
committee is responsible for ensuring that R&T investments are targeted towards
maximizing the Company's long-term profitability and strengthening its
competitive position in the marketplace. Additionally, the committee oversees
the Company's portfolio of patents, technology licenses and other intellectual
property.
Hexcel spent $18.4 million for research and technology in 1997, $16.7
million in 1996 and $7.6 million in 1995. These expenditures were expensed as
incurred.
Hexcel's products rely primarily on the Company's expertise in materials
science, textiles, engineering and polymer chemistry. Consistent with market
demand, the Company has been placing more emphasis on cost effective product
design and lean manufacturing in recent years. Towards this end, the Company has
entered into formal and informal partnerships, as well as licensing and teaming
arrangements, with several customers, suppliers, external agencies and
laboratories. Management believes that the Company possesses unique capabilities
to design, develop and manufacture composite materials and engineered products.
In addition to the rights to certain technologies obtained as part of the
Fiberite transaction, the Company owns and maintains in excess of 400 patents
worldwide, has licensed many key technologies, and has granted technology
licenses and patent rights to several third parties in connection with joint
ventures and joint development programs. It is the Company's policy to actively
enforce its proprietary rights. Management believes that the patents and
know-how rights currently owned or licensed by the Company are adequate for the
conduct of its business.
RAW MATERIALS AND PRODUCTION ACTIVITIES
Due to the vertically integrated nature of Hexcel's operations, the Company
produces several materials used in the manufacture of certain reinforcement
fabrics, composite materials and engineered products, as well as the
polyacrylonitrile ("PAN") used as a precursor material in the manufacture of
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carbon fibers. However, the Company purchases most of the raw materials used in
production. Several key materials are available from relatively few sources, and
in many cases the cost of product qualification makes it impractical to develop
multiple sources of supply. The unavailability of these materials, which the
Company does not anticipate, could have a material adverse effect on operations.
The Company coordinates closely with key suppliers in an effort to avoid raw
material shortages.
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 fiber supplier commitments to meet its
estimated 1998 and 1999 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. In early 1997, the Company and various other carbon
fiber manufacturers announced plans to increase carbon fiber production
capacity. During 1997, the Company substantially completed a carbon fiber
capacity expansion program costing approximately $16 million, which has
increased its capacity by 50%.
Hexcel's production activities are generally based on a combination of "make
to order" and "make to forecast" production requirements. Machined and
fabricated honeycomb parts and composite structures and interiors are
manufactured almost entirely on a "make to order" basis.
MARKETS AND CUSTOMERS
Hexcel's products are sold for a broad range of uses. The following tables
summarize net sales to third-party customers by market and by geography for the
three years ended December 31:
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1997 1996 1995
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NET SALES BY MARKET
Commercial aerospace................................................ 64% 56% 45%
Space and defense................................................... 9 11 11
Recreation.......................................................... 7 10 9
General industrial and other........................................ 20 23 35
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Total............................................................. 100% 100% 100%
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NET SALES BY GEOGRAPHY
United States....................................................... 56% 49% 51%
U.S. exports........................................................ 8 8 5
International....................................................... 36 43 44
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Total............................................................. 100% 100% 100%
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</TABLE>
Boeing and related subcontractors accounted for approximately 36% of 1997
sales, and Airbus and related subcontractors accounted for approximately 10% of
1997 sales. The loss of all or a significant portion of the business with Boeing
or Airbus, which Hexcel does not anticipate, could have a material adverse
effect on sales and earnings.
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COMMERCIAL AEROSPACE
Commercial aerospace activity fluctuates in relation to two principal
factors. First, the number of revenue passenger miles flown by the airlines
affects the size of the airline fleets and generally follows the level of
overall economic activity. A recent document, published by Boeing, projects that
revenue passenger miles will increase an average of 6% per year over the next
decade, with the Asian market having the highest growth rate. Recent events in
the Asian market which have occurred after this document was published, may
result in difficulties in achieving this projected growth rate. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for further discussion. The second factor, which is less sensitive
to the general economy, is the replacement and retrofit rates for existing
aircraft. These rates, resulting mainly from obsolescence, are determined in
part by Federal Aviation Administration regulations as well as public concern
regarding aircraft age, safety and noise. These rates may also be affected by
the desire of the various airlines for higher payloads and more fuel efficient
aircraft, which in turn is influenced by the price of fuel.
The number of commercial aircraft delivered by Boeing (the 7-series) and
Airbus declined by nearly 45% from 1992 to 1995. At the lowest point during this
period, Boeing (the 7-series) and Airbus reported combined deliveries of 330
aircraft. Reported aircraft deliveries by Boeing (the 7-series) and Airbus
improved only modestly in 1996, to a combined 344 aircraft. Combined aircraft
deliveries for 1997 were 503, or an increase of 46% over 1996. This increase was
the result of the surge in the commercial aerospace industry. Further, combined
backlog orders at December 31, 1997, were at record levels of 2,608 aircraft;
including 1,599 for Boeing (the 7-series) and 1,009 for Airbus. Published
industry analysis indicates that combined deliveries by these two manufacturers
in 1998 should approximate 730 aircraft. The Company sells material used on
every model of commercial aircraft sold by Boeing and Airbus, with sales per
aircraft ranging from $0.2 million to over $1.0 million per aircraft on the
Boeing 777.
Hexcel's commercial aerospace business volume is expected to increase in
1998 due both in part to the general industry improvement and to the increased
utilization of composite materials on new generation aircraft, which is
attributable to demands for improved aircraft performance. In addition, the
Company began to produce additional structural and interior components for
Boeing in the second half of 1996, and expects to continue producing such
components through 1998. Despite customer preferences for many of the high
performance characteristics of Hexcel's products, the Company must continuously
demonstrate the cost benefits of its products for aerospace applications.
SPACE AND DEFENSE
The space and defense market for composite materials and structures declined
significantly during the early part of this decade, as a result of substantial
decreases in military aircraft procurement that began in the late 1980's. The
current international and domestic political climate suggests that overall
military spending, including aircraft procurement, is not likely to change
significantly from current levels in the near future. Consequently, management
does not expect a significant change in 1998 from the current level of sales to
the space and defense market. However, by the start of the next decade a number
of new military aircraft programs in both the U.S. and Europe are anticipated to
move from development to full scale production. The Company currently has
composite material and carbon fiber qualifications on a number of these
significant military programs, including the European Fighter Aircraft, F-22,
F-18, V-22, C-17 and the Titan and Delta space programs. These programs may be
accomplished without a significant increase in defense expenditures by switching
current cost incurred in their development to funding aircraft production. These
new generation aircraft have a significantly higher portion of their fuselage
built from composite materials than their predecessors or current commercial
aircraft.
Contracts to supply materials for military and some commercial projects
contain provisions for termination at the convenience of the U.S. government or
the buyer. In the case of such a termination, Hexcel is entitled to recover
reasonable incurred cost plus a provision for profit on the incurred cost. In
9
<PAGE>
addition, the Company is subject to U.S. government cost accounting standards,
which are applicable to companies with more than $25 million of government
contract or subcontract awards each year.
RECREATION, GENERAL INDUSTRIAL AND OTHER MARKETS
Hexcel has focused its participation in recreation and general industrial
markets in areas where the application of composites technology offers
significant benefits to the end user. As a result, the Company has chosen to
focus on select opportunities where high performance, cost effective advanced
material situations can be provided to customers. Accordingly, future
opportunities and growth depend primarily upon the success of the individual
programs and industries in which the Company has elected to participate. Within
the recreation market, key industry sectors and product applications in which
the Company is involved include golf club shafts, fishing rods, tennis rackets,
skis, snowboards, and athletic shoes. Within general industrial markets, key
sectors and applications include printed circuit boards, wind energy, civil
engineering/construction and surface transportation. Hexcel's participation in
these markets is a valuable complement to its commercial and military aerospace
businesses, and the Company is committed to the growth of composites technology
in recreation and industrial applications.
HEXCEL VENTURES
In October 1997, the Company created Hexcel Ventures, a new internal
organization responsible for certain entrepreneurial activities, outside of the
Company's aerospace and space and defense markets. This new organization will
focus on leveraging Hexcel's vertically integrated capabilities and geographic
reach to bring cost effective advanced materials solutions to new customers and
applications. In particular, Hexcel Ventures will seek to stimulate internally
and externally driven growth and diversification through targeted projects in
areas such as automotive, civil engineering/construction and composite part
making for industrial applications.
Further discussion of Hexcel's markets and customers, including certain
risks, uncertainties and other factors with respect to "forward-looking
statements" about those markets and customers, is contained under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SALES AND MARKETING
A staff of salaried market managers, product managers and salespeople sell
and market Hexcel products directly to customers worldwide. The Company also
uses independent distributors and manufacturer representatives for certain
products, markets and regions.
10
<PAGE>
BACKLOG
The following table summarizes the backlog of orders by product group as of
December 31, 1997 and 1996 (in millions):
<TABLE>
<CAPTION>
RECREATION &
BACKLOG AT DECEMBER 31, 1997 AEROSPACE(a) INDUSTRIAL TOTAL
- -------------------------------------------------------- ------------- ------------- ---------
<S> <C> <C> <C>
Fibers and Fabrics...................................... $ 33.3 $ 24.4 $ 57.7
Composite Materials..................................... 273.2 19.1 292.3
Engineered Products..................................... 170.0 -- 170.0
------ ------ ---------
Total................................................. $ 476.5 $ 43.5 $ 520.0
------ ------ ---------
------ ------ ---------
<CAPTION>
RECREATION &
BACKLOG AT DECEMBER 31, 1997 AEROSPACE(a) INDUSTRIAL 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>
(a) Includes commercial aerospace and space and defense markets.
The backlog of orders for aerospace materials to be filled within 12 months
was $476.5 million as of December 31, 1997, $347.5 million as of December 31,
1996 and $88.3 million as of December 31, 1995. The significant increase from
the end of 1996 to the end of 1997 is attributable to increased commercial
aircraft build rates. The increase from the end of 1995 to the end of 1996 is
attributable to the acquisitions of the Acquired Businesses and to increased
commercial aircraft build rates. A major portion of the backlog is cancelable by
the Company's customers without penalty.
Orders for aerospace materials generally lag behind the award of orders for
new aircraft by a considerable period. Thus, the level of new aircraft
procurement normally will not have an impact on aerospace orders received by
Hexcel for about one to three years, depending on the nature of the product, the
manufacturer, and delivery schedules. Aerospace orders are generally received by
the Company between one and eighteen months prior to scheduled delivery of the
aircraft to the customer.
Backlog for recreation and general industrial markets amounted to $43.5
million at December 31, 1997 compared with $54.2 million at December 31, 1996
and $33.5 million at December 31, 1995. Most of this backlog is expected to be
filled within six months. Markets for Hexcel products outside of the aerospace
industry are generally highly competitive and require shorter lead times for
delivery or stock for immediate sale.
COMPETITION
In the production and sale of its materials, Hexcel competes with numerous
U.S. and international companies on a worldwide basis. The broad markets for the
Company's products are highly competitive, and the Company has focused on both
specific markets and specialty products within markets to obtain market share.
In addition to competing directly with companies offering similar products, the
Company's products compete with substitute structural materials such as
structural foam, wood, metal, and concrete. Depending upon the material and
markets, relevant competitive factors include price, delivery, service, quality,
product performance and total life cycle costs. The acquisitions of the Acquired
Businesses and the Fiberite assets enhanced the Company's competitive position
by broadening and extending the Company's product portfolio and by strengthening
the Company's position in certain geographic regions, particularly in Europe.
11
<PAGE>
ENVIRONMENTAL MATTERS
To date, environmental control regulations have not had a significant
adverse effect on overall operations. A discussion of environmental matters is
included in Item 3, "Legal Proceedings," and in Note 16 to the accompanying
consolidated financial statements included in this Annual Report on Form 10-K.
EMPLOYEES
As of December 31, 1997, Hexcel employed 5,597 full-time employees, compared
with 5,013 and 2,127 as of December 31, 1996 and 1995, respectively. The
increase from the end of 1996 to the end of 1997 is primarily attributable to
the growth in the Company's sales. As a result of the acquisitions of the
Acquired Businesses, Hexcel added approximately 2,300 employees to its workforce
in 1996.
Approximately 25% of Hexcel's employees have various union affiliations.
Although the Company had a brief strike by certain union affiliated employees at
the Company's Salt Lake City, Utah plant, which was settled in January of 1997,
and had labor disruptions in its Belgium facility in 1997, which have also been
settled, management believes that labor relations in the Company are generally
satisfactory.
ITEM 2. PROPERTIES
Hexcel owns manufacturing and sales offices located throughout the United
States and in other countries as noted below. The corporate offices and
principal corporate support activities for the Company are located in leased
facilities in Stamford, Connecticut and Pleasanton, California. The Company's
corporate research and technology administration and certain composite materials
laboratories are located in Dublin, California.
The following table lists the manufacturing facilities of Hexcel by
geographic location, approximate square footage, and principal products. The
following table does not include a manufacturing facility in Komatsu, Japan that
is owned by a joint venture in which the Company has a 45% equity interest.
12
<PAGE>
MANUFACTURING FACILITIES
<TABLE>
<CAPTION>
APPROXIMATE
FACILITY LOCATION SQUARE FOOTAGE PRINCIPAL PRODUCTS
- ----------------------------------------- -------------- ------------------------------------------------------
<S> <C> <C>
United States:
Decatur, Alabama....................... 159,000 PAN Precursor (used to produce Carbon Fibers)
Salt Lake City, Utah................... 371,000 Carbon Fibers; Prepregs
Seguin, Texas.......................... 204,000 Reinforcement fabrics
Livermore, California.................. 141,000 Prepregs
Lancaster, Ohio........................ 49,000 Prepregs
Casa Grande, Arizona................... 307,000 Honeycomb and Honeycomb Parts
Pottsville, Pennsylvania............... 134,000 Honeycomb Parts
Burlington, Washington................. 73,000 Honeycomb Parts
Kent, Washington....................... 883,000 Composite Structures; Interiors
Bellingham, Washington................. 188,000 Interiors
International:
Les Avenieres, France.................. 476,000 Reinforcement fabrics; Prepregs
Decines, France........................ 90,000 Reinforcement fabrics
Dagneux, France........................ 130,000 Prepregs
Linz, Austria.......................... 163,000 Prepregs
Welkenraedt, Belgium................... 223,000 Honeycomb and Honeycomb Parts
Parla, Spain........................... 43,000 Prepregs
Duxford, United Kingdom................ 440,000 Prepregs; Honeycomb and Honeycomb Parts
Swindon, United Kingdom................ 20,000 Honeycomb Parts
Brindisi, Italy........................ 110,000 Engineered Products
</TABLE>
Hexcel leases the Swindon, U.K. facility and the land on which the
Burlington, Washington facility is located. The Company also leases portions of
the Casa Grande, Arizona; Bellingham and Kent, Washington; Linz, Austria; and
Les Avenieres, France facilities.
ITEM 3. LEGAL PROCEEDINGS.
Hexcel is involved in litigation, investigations and claims arising out of
the conduct of its business, including those relating to government contracts,
commercial transactions, and environmental, health and safety matters. The
Company estimates its liabilities resulting from such matters based on a variety
of factors, including outstanding legal claims and proposed settlements,
assessments by internal and external counsel of pending or threatened
litigation, and assessments by environmental engineers and consultants of
potential environmental liabilities and remediation costs. Such estimates
exclude counterclaims against other third parties. Such estimates are not
discounted to reflect the time value of money due to the uncertainty in
estimating the timing of the expenditures, which may extend over several years.
Although it is impossible to determine the level of future expenditures for
legal, environmental and related matters with any degree of certainty, it is the
Company's opinion, based on available information, that it is unlikely that
these matters, individually or in the aggregate, will have a material adverse
effect on the consolidated financial position, results of operations or cash
flows of the Company.
LEGAL AND ENVIRONMENTAL CLAIMS AND PROCEEDINGS
Hexcel has been named as a potentially responsible party with respect to
several hazardous waste disposal sites that it does not own or possess which are
included on the Superfund National Priority List of the U.S. Environmental
Protection Agency or on equivalent lists of various state governments. The
Company estimates that its liability with respect to these sites is not
material.
13
<PAGE>
Pursuant to the New Jersey Environmental Responsibility and Clean-Up Act,
Hexcel signed an administrative consent order to pay for the environmental
remediation of a manufacturing facility it owns and formerly operated in Lodi,
New Jersey. The Company's estimate of the remaining cost to satisfy this consent
order is accrued in the accompanying consolidated balance sheets. The ultimate
cost of remediating the Lodi site will depend on developing circumstances.
In connection with the purchase of the Acquired Ciba Business, Hexcel
assumed various liabilities including a liability with respect to certain
environmental remediation activities at an acquired facility in Kent,
Washington. The Company is a party to a cost sharing agreement regarding the
operation of certain environmental remediation systems necessary to satisfy a
post-closure care permit issued to a previous owner of the Kent site by the U.S.
Environmental Protection Agency. Under the terms of the cost sharing agreement,
the Company is obligated to reimburse the previous owner for a portion of the
cost of the required remediation activities. The Company's estimate of its share
of the cost is accrued in the accompanying consolidated balance sheets as of
December 31, 1997 and 1996.
PRODUCT CLAIMS
In 1993, Hexcel became aware of an aluminum honeycomb sandwich panel
delamination problem with panels produced by its wholly-owned Belgium
subsidiary, Hexcel Composites S.A., and installed in rail cars in France and
Spain. Certain customers have alleged that Hexcel Composites S.A. is responsible
for the problem. The Company and its insurer continue to investigate these
claims. The Company is also working with the customers to repair or replace
panels when necessary, with certain costs to be allocated upon determination of
responsibility for the delamination. Two customers in France requested that a
court appoint experts to investigate the claims; to date, the experts have not
reported any conclusions. The Company's primary insurer for this matter has
agreed to fund legal representation and to provide coverage of the claim to the
extent of the policy limit. The Company believes that, based on available
information, it is unlikely that these claims will have a material adverse
effect on the consolidated financial position, results of operations or cash
flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
14
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Hexcel common stock is traded on the New York and Pacific Stock Exchanges.
The range of high and low sales prices of Hexcel common stock on the New York
Stock Exchange Composite Tape is contained in Note 23 to the accompanying
consolidated financial statements included in this Annual Report on Form 10-K
and is incorporated herein by reference.
Hexcel did not declare or pay any dividends in 1997, 1996 or 1995. The
payment of dividends is generally prohibited under the terms of certain of the
Company's credit agreements.
On March 16, 1998, there were 2,290 holders of record of Hexcel common
stock.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by Item 6 is contained on page 35 of this Annual
Report on Form 10-K under "Selected Financial Data" and is incorporated herein
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by Item 7 is contained on pages 36 to 47 of this
Annual Report on Form 10-K under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and are incorporated herein by
reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8 is contained on pages 48 to 83 of this
Form 10-K under "Consolidated Financial Statements and Supplementary Data" and
is incorporated herein by reference. The reports of the independent public
accountants for the years ended December 31, 1997, 1996 and 1995 are contained
on pages 50 and 51 of this Annual Report on Form 10-K under "Report of
Independent Accountants" and "Independent Auditors' Report" and are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On July 10, 1997, the Company changed independent auditors. There were no
disagreements or other reportable events related to this change.
15
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Listed below are the directors of Hexcel as of March 16, 1998, the
positions with the Company held by them and a brief description of each
director's prior business experience.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITIONS WITH HEXCEL AND BUSINESS EXPERIENCE
- ----------------------------- --- ----------- ------------------------------------------------------------------
<S> <C> <C> <C>
John J. Lee.................. 61 1993 Has served as Chairman of the Board of Directors of Hexcel since
February 1996, Chief Executive Officer since January 1994,
President since May 1997, Chairman and Chief Executive Officer
from January 1994 to February 1995, Chairman and Co-Chief
Executive Officer from July 1993 to December 1993 and a director
of Hexcel since May 1993. Mr. Lee also serves as Chairman of the
Nominating Committee and a member of the Finance Committee of
Hexcel. In addition, Mr. Lee has served as Chairman of the
Operating Committee of Hexcel since May 1997 (the Operating
Committee is a committee comprised of certain members of senior
management of Hexcel which provides oversight of, and
establishes policies in connection with, Hexcel's worldwide
business operations). Mr. Lee is also a director of Aviva
Petroleum Corporation, an oil and gas exploration company and of
Hvide Marine Incorporated, a marine support and transportation
services company, and has served as Chairman of the Board,
President and Chief Executive Office of Lee Development
Corporation, a merchant banking company, since 1987. Mr. Lee is
a Trustee of Yale University and has been an adviser to the
Clipper Group, a private investment partnership, from 1993 to
December 1997. Mr. Lee served as a director of XTRA Corporation,
a transportation equipment leasing company, from 1990 to January
1996. From July 1989 through April 1993, Mr. Lee served as
Chairman of the Board and Chief Executive Officer of Seminole
Corporation, a manufacturer and distributor of fertilizer. From
April 1988 through April 1993, Mr. Lee served as a director of
Tosco Corporation, a national refiner and marketer of petroleum
products and as President and Chief Operating Officer of Tosco
Corporation from 1990 through 1993. Mr. Lee is also a director
of various privately held corporations.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITIONS WITH HEXCEL AND BUSINESS EXPERIENCE
- ----------------------------- --- ----------- ------------------------------------------------------------------
<S> <C> <C> <C>
John M.D. Cheesmond.......... 48 1996 Has been a director of Hexcel since February 1996. Mr. Cheesmond
also serves as Chairman of the Executive Compensation Committee
and a member of the Finance Committee of Hexcel. Mr. Cheesmond
is Executive Vice President and Head of Corporate Strategy, and
a member of the Executive Committee of Ciba Specialty Chemical
Holding Inc., ("CSCH"), a leading global specialty chemical
company and successor to Ciba's industrial chemicals business.
Mr. Cheesmond also serves as a member of Beirat of TFL, a
European headquartered joint venture in leather chemicals. Mr.
Cheesmond served as Senior Vice President and Head of Regional
Finance and Control of CGL from 1994 to 1996. From 1991 to 1993,
Mr. Cheesmond served as Group Vice President, Planning,
Information and Control at Ciba Vision Corporation.
Marshall S. Geller........... 59 1994 Has been a director of Hexcel since August 1994. Mr. Geller also
serves as a member of the Audit, Executive Compensation and
Nominating Committees of Hexcel. Mr. Geller is currently
Chairman of the Board, Chief Executive Officer and founding
partner at Geller & Friend Capital Partners, Inc., a merchant
banking firm, since November 1995. From 1991 to 1995, Mr. Geller
was Senior Managing Director of Golenberg & Geller, Inc., a
merchant banking firm. From 1988 to 1990, he was Vice Chairman
of Gruntal & Company, an investment banking firm. From 1967 to
1988, he was a Senior Managing Director of Bear, Stearns & Co.
Inc., an investment banking firm. Mr. Geller is currently a
director of Ballantyne of Omaha, iMALL, Inc., Datalink Systems
Corp., Players International, Value Vision International, Inc.,
Cabletel Communications Corp. and various privately-held
corporations and charitable organizations. Mr. Geller currently
serves as Chairmen of the Investment Committee for both Players
International and Value Vision International, Inc.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITIONS WITH HEXCEL AND BUSINESS EXPERIENCE
- ----------------------------- --- ----------- ------------------------------------------------------------------
<S> <C> <C> <C>
Stanley Sherman.............. 59 1996 Has been a director of Hexcel since February 1996. Mr. Sherman
also serves as a member of the Executive Compensation and
Finance Committees of Hexcel. Mr. Sherman is President and Chief
Executive Officer of Ciba Specialty Chemicals Corporation (North
America) and Chairman of the Board of Ciba Specialty Chemicals
Canada Inc., both of which are members of the Ciba group. Mr.
Sherman served as a director and Vice President and Chief
Financial Officer of CGC from 1991 to 1996, serving on the
Finance Committee and the Corporate Management Committee of
CGC's Board of Directors. From 1986 to 1991, Mr. Sherman served
as Vice President-Corporate Planning of CGC. Mr. Sherman also
serves on the Board of the Westchester Educational Coalition and
the Chemical Manufacturers Association.
Martin L. Solomon............ 61 1996 Has been a director of Hexcel since May 1996. Mr. Solomon also
serves as Chairman of the Finance Committee and as a member of
the Audit and Executive Compensation Committees of Hexcel. Since
June 1997, Mr. Solomon has been the Chairman and Chief Executive
Officer of American Country Holdings, Inc., an insurance holding
company. Since 1990, Mr. Solomon has been a private investor.
From 1988 to 1990, he was Managing Director and general partner
of Value Equity Associates, L.L.P., an investment partnership.
From 1985 to 1987, Mr. Solomon was an investment analyst and
portfolio manager with Steinhardt Partners, an investment
partnership. From 1985 to 1996, Mr. Solomon was a Director and
Vice-Chairman of the Board of Great Dane Holdings, Inc., a
company engaged in the manufacture of transportation equipment,
automobile stamping, the lease of taxis and insurance. Since
1995, Mr. Solomon has been a Director of DLB Oil and Gas, Inc.,
a company engaged in oil exploration and production, since 1990,
Mr. Solomon has been a Director of XTRA Corporation, a lessor of
truck trailers, marine containers, and intermodal equipment, and
since June 1997, Mr. Solomon has been a Director of Telephone
and Data Systems, Inc., a diversified telecommunications service
company with established wireless and wireline operations. Mr.
Solomon is also a director of various privately held
corporations and civic organizations.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITIONS WITH HEXCEL AND BUSINESS EXPERIENCE
- ----------------------------- --- ----------- ------------------------------------------------------------------
<S> <C> <C> <C>
George S. Springer........... 64 1993 Has been a director of Hexcel since January 1993. Mr. Springer
also serves as Chairman of the Technology Committee of Hexcel.
Mr. Springer is the Paul Pigott Professor and Chairman of the
Department of Aeronautics and Astronautics, and by courtesy,
Professor of Mechanical Engineering and Professor of Civil
Engineering at Stanford University. Mr. Springer joined Stanford
University's faculty in 1983.
Joseph T. Sullivan........... 58 1996 Has been a director of Hexcel since February 1996. Mr. Sullivan
also serves as a member of the Nominating and Technology
Committees of Hexcel. Mr. Sullivan is Joseph H. Colic Professor
of Chemical Engineering at Virginia Polytechnic Institute and
State University in Blacksburg, VA. Mr. Sullivan served as a
director and Senior Vice President of CGC from 1986 to 1996.
Hermann Vodicka.............. 55 1996 Has been a director of Hexcel since February 1996. Mr. Vodicka
also serves as a member of the Nominating and Technology
Committees of Hexcel. From 1996, Mr. Vodicka has served as the
Chief Executive Officer and as a director of Ciba. Mr. Vodicka
served as President of the Polymers Division and a member of the
Executive Committee of CGL from 1993 to 1996. Mr. Vodicka was
the Chairman of the Board of Mettler-Toledo, a leading worldwide
manufacturer of scales and balances and a wholly owned
subsidiary of CGL, until its sale in 1996. From 1988 to 1993,
Mr. Vodicka was President and Chief Executive Officer of
Mettler-Toledo.
Franklin S. Wimer............ 62 1995 Was a director of Hexcel from February 1995 to February 1996 and
was reelected in May 1996. Mr. Wimer is Chairman of the Audit
Committee and also serves on the Technology Committee of Hexcel.
Mr. Wimer is President and Principal of UniRock Management
Corporation ("UniRock"), a private merchant banking firm based
in Denver, Colorado. Mr. Wimer has been with UniRock since 1987.
UniRock acted as strategic planning consultant to Hexcel from
December 1993 through April 1996. Mr. Wimer is currently
Chairman of the Board of Vista Restaurants, Inc., Chairman of
the Board of Colorado Gaming & Entertainment Co. and is a
director of the Denver Paralegal Institute and Foresight
Products, Inc.
</TABLE>
(b) Listed below are the executive officers and other senior management of
Hexcel as of March 16, 1998, the positions held by them and a brief description
of their business experience.
<TABLE>
<CAPTION>
OFFICER
NAME AGE SINCE POSITIONS WITH HEXCEL AND BUSINESS EXPERIENCE
- ----------------------------- --- ----------- ------------------------------------------------------------------
<S> <C> <C> <C>
John J. Lee.................. 61 1993 See Item 10(a) above for a brief description of Mr. Lee's
positions with Hexcel and his business experience.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
OFFICER
NAME AGE SINCE POSITIONS WITH HEXCEL AND BUSINESS EXPERIENCE
- ----------------------------- --- ----------- ------------------------------------------------------------------
<S> <C> <C> <C>
Stephen C. Forsyth........... 42 1994 Has served as Chief Financial Officer of Hexcel since November
1996, Senior Vice President of Finance and Administration of
Hexcel since February 1996 and as a member of the Operating
Committee since May 1997. Mr. Forsyth served as Vice President
of International Operations of Hexcel from October 1994 to
February 1996 and General Manager of Hexcel's Resins Business
and Export Marketing from 1989 to 1994 and held other general
management positions with Hexcel from 1980 to 1989. Mr. Forsyth
joined Hexcel in 1980.
Bruce D. Herman.............. 42 1996 Has served as Treasurer of Hexcel since April 1996. Prior to
joining Hexcel, Mr. Herman served as Vice President of Finance
in the Transportation and Industrial Financing Division of USL
Capitol Corp. (formerly U.S. Leasing Inc.) ("USL") from 1993 to
1996, Vice President of Finance in the Equipment Financing Group
of USL from 1991 to 1993 and as Vice President of Corporate
Analysis from 1988 to 1991.
Ira J. Krakower.............. 57 1996 Has served as Senior Vice President, General Counsel and Secretary
since September 1996. Prior to joining Hexcel, Mr. Krakower
served as Vice President and General Counsel to Uniroyal
Chemical Corporation from 1986 to August 1996 and served on the
Board of Directors of and as Secretary to Uniroyal Chemical
Company, Inc. from 1989 to 1996.
Wayne C. Pensky.............. 42 1993 Has served as Corporate Controller and Chief Accounting Officer of
Hexcel since July 1993. Prior to joining Hexcel in 1993, Mr.
Pensky was a partner at Arthur Andersen & Co., an accounting
firm where he was employed from 1979 to 1993.
Joseph H. Shaulson........... 32 1996 Has served as Vice President of Corporate Development of Hexcel
since April 1996. In addition, Mr. Shaulson served as Acting
General Counsel and Acting Secretary of Hexcel from April 1996
to September 1996. Prior to joining Hexcel, Mr. Shaulson was an
associate in the law firm of Skadden, Arps, Slate, Meagher &
Flom, where he was employed from 1991 to 1996.
David M. Wong................ 53 1996 Has served as Vice President of Corporate Affairs of Hexcel since
February 1996. Mr. Wong served as Hexcel's Director of Special
Projects from July 1993 to February 1996 and Corporate
Controller and Chief Accounting Officer of Hexcel from 1983 to
1993 and held other general management positions from 1979 to
1983. Mr. Wong joined Hexcel in 1979.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
OFFICER
NAME AGE SINCE POSITIONS WITH HEXCEL AND BUSINESS EXPERIENCE
- ----------------------------- --- ----------- ------------------------------------------------------------------
<S> <C> <C> <C>
James N. Burns............... 58 1996 Has served as President of Hexcel's Fibers business unit since
July 1996. Prior to his employment with Hexcel, Mr. Burns served
in a number of management positions with the Composite Products
Division of Hercules Incorporated, including Business Director
from March 1995 through June 1996, Business Unit Director of
Advanced Composite Materials from June 1992 through March 1995
and Vice President of Marketing from June 1986 through June
1992.
Michael Carpenter............ 41 1996 Has served as Vice President of Hexcel's Structures and Interiors
business unit, responsible for the structures business since
February 1996. Mr. Carpenter served as the Vice President of
Structures in the Heath Tecna Division of CGC prior to February
1996. He held various technical and managerial positions with
Heath Tecna from 1983.
Claude Genin................. 62 1996 President of Hexcel's Fabrics business unit since February 1996.
Mr. Genin served as managing director of Hexcel S.A. (France)
from 1977 to 1996. Hexcel S.A. (France) was acquired by Hexcel
in 1985.
William Hunt................. 55 1996 Has served as the President of Hexcel's EuroMaterials business
unit since February 1996, and as a member of the Operating
Committee since October 1997. Mr. Hunt served as the President
of the EuroMaterials unit of the Ciba Composites Business from
1991 to February 1996 and as the Managing Director of Ciba
Plastics from 1990 to 1991. Prior to joining CGP in 1990, Mr.
Hunt held various other technical and managerial positions,
including the position of Managing Director of Illford Limited
(Photographic) Co.
Rodney P. Jenks, Jr.......... 47 1994 Has served as Assistant General counsel from May 1997. Mr. Jenks
served as Vice President and General Counsel of Americas and
Asia-Pacific Operations of Hexcel from April 1996 to May 1997.
From March 1994 to March 1996, Mr. Jenks served as Vice
President, General Counsel and Secretary of Hexcel. Prior to
joining Hexcel in 1994, Mr. Jenks was a partner in the law firm
of Wendel, Rosen, Black & Dean, where he continued to serve as
counsel until March 1996.
James A. Koshak.............. 54 1996 Has served as President of Hexcel's U.S. Materials business unit
since February 1996. Mr. Koshak served as Vice President of the
Ciba Composites Business and General Manager of the U.S.
Materials unit of the Ciba Composites Business from 1993 to
February 1996 and as Vice President of Ciba's Polymers Division
and General Manager of Ciba's Formulated Systems unit from 1988
to 1993. Mr. Koshak held various other sales, marketing and
general managerial positions with Ciba from 1974 to 1988.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
OFFICER
NAME AGE SINCE POSITIONS WITH HEXCEL AND BUSINESS EXPERIENCE
- ----------------------------- --- ----------- ------------------------------------------------------------------
<S> <C> <C> <C>
Thomas J. Lahey.............. 57 1991 Has served as President of Hexcel's Pacific Rim business unit
since February 1996. Mr. Lahey served as Vice President of
Worldwide Sales of Hexcel from April 1993 to February 1996, Vice
President of Advanced Composites of Hexcel from 1992 to 1993,
General Manager of Advanced Composites of Hexcel from 1991 to
1992 and General Manager of Advanced Products of Hexcel from
1989 to 1991. Prior to joining Hexcel in 1989, Mr. Lahey held
the position of Executive Assistant to the President of Kaman
Aerospace Corporation from 1987 to 1988 and was a Vice President
of Grumman Corporation from 1985 to 1987.
Linn Matthews................ 60 1997 Has served as Vice President of Corporate Sales and Marketing and
as a member of the Operating Committee since December 1997.
Prior to joining Hexcel, Mr. Matthews served as Vice President
of Venture Operations for Amoco Chemical Asia Pacific, located
in Hong Kong, from 1994 to 1997. From 1993 to 1994, Mr. Matthews
was Vice President of Marketing and Sales for Amoco Performance
Products. Prior to 1993, he has served in other management
positions in Amoco and Union Carbide Corporation.
William P. Meehan............ 62 1993 Has served as Vice President; Deputy Director of Operations of
Hexcel since November 1996 and as a member of the Operating
Committee since May 1997. He also served as Vice President of
Finance and Chief Financial Officer from September 1993 to
November 1996 and as Treasurer of Hexcel from April 1994 to
April 1996. Prior to joining Hexcel in 1993, Mr. Meehan served
as President and Chief Executive Officer of Thousand Trails and
NACO, a membership campground and resort business from 1990 to
1992. From 1986 to 1989, Mr. Meehan served as Vice President of
Finance and Chief Financial Officer of Hadco Corporation.
Robert A. Petrisko........... 43 1993 Has served as Vice President of Research and Technology of Hexcel
since September 1993. Mr. Petrisko served at Hexcel's Chandler
facility as Manager of the Signature Technology Group from 1989
to April 1993 and as Director of Aerospace and Defense
Technology from April 1993 to September 1993. Mr. Petrisko
joined Hexcel in 1989 after serving as a Research Specialist
with Dow Corning Corporation from 1985 to 1989. He holds a Ph.D.
in Macromolecular Science and Engineering from the University of
Michigan and a B.S. in Chemistry from Case Western Reserve
University.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
OFFICER
NAME AGE SINCE POSITIONS WITH HEXCEL AND BUSINESS EXPERIENCE
- ----------------------------- --- ----------- ------------------------------------------------------------------
<S> <C> <C> <C>
Gary L. Sandercock........... 57 1989 Has served as Vice President of Manufacturing of Hexcel since
October 1996 and as a member of the Operating Committee since
October, 1997. From February 1996 through October 1996, he
served as President of Hexcel's Special Process business unit.
Mr. Sandercock served as Vice President of Manufacturing of
Hexcel from April 1993 to February 1996, Vice President of
Reinforcement Fabrics of Hexcel from 1989 to 1993 and General
Manager of the Trevarno Division of Hexcel from 1985 to 1989 and
held other manufacturing and general management positions from
1967 to 1985. Mr. Sandercock joined Hexcel in 1967.
David Tanonis................ 41 1996 Has served as Vice President of Hexcel's Structures and Interiors
business unit, responsible for the interiors business, since
February 1996. Mr. Tanonis served as the Vice President of
Interiors in the Heath Tecna Division of CGC prior to February
1996. Mr. Tanonis has held various technical and managerial
positions with Heath Tecna since 1987. Mr. Tanonis held various
management positions with Polymer Engineering, Inc. from 1978 to
1987.
Justin Taylor................ 44 1996 Has served as President of Hexcel's Structures and Interiors
business unit since April 1996. From July 1995 to April 1996,
Mr. Taylor served as a member of CGL's strategic planning unit.
Prior to July 1995, Mr. Taylor held various management positions
in the Heath Tecna Division of CGC.
</TABLE>
(c) There are no family relationships among any of Hexcel's directors or
executive officers.
ITEM 11. EXECUTIVE COMPENSATION.
The information required in Item 11 will be contained in Hexcel's definitive
Proxy Statement for the 1998 Annual Meeting of Stockholders. Such information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required in Item 12 will be contained in Hexcel's definitive
Proxy Statement for the 1998 Annual Meeting of Stockholders. Such information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required in Item 13 will be contained in Hexcel's definitive
Proxy Statement for the 1998 Annual Meeting of Stockholders. Such information is
incorporated herein by reference.
23
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
A. FINANCIAL STATEMENTS
The consolidated financial statements of Hexcel, notes thereto, and reports
of independent accountants are listed on page 48 of this Annual Report on Form
10-K and are incorporated herein by reference.
B. REPORTS ON FORM 8-K
None.
C. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Strategic Alliance Agreement dated as of September 29, 1995 among Hexcel, Ciba-Geigy Limited and
Ciba-Geigy Corporation (incorporated herein by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K dated as of October 13, 1995).
2.1(a) Amendment dated as of December 12, 1995 to the Strategic Alliance Agreement among Hexcel, Ciba-Geigy
Limited and Ciba-Geigy Corporation (incorporated herein by reference to Exhibit 2.1(a) to the
Company's Current Report on Form 8-K dated as of March 15, 1996).
2.1(b) Letter Agreement dated as of February 28, 1996 among Hexcel, Ciba-Geigy Limited and Ciba-Geigy
Corporation (incorporated herein by reference to Exhibit 2.1(b) to the Company's Current Report on
Form 8-K dated as of March 15, 1996).
2.1(c) Distribution Agreement dated as of February 29, 1996 among Hexcel, Brochier S.A., Composite Materials
Limited, Salver S.r.l. and Ciba-Geigy Limited (incorporated herein by reference to Exhibit 2.1(c)
to the Company's Current Report on Form 8-K dated as of March 15, 1996).
2.1(d) Consent Letter dated February 21, 1997, between Hexcel and Ciba Specialty Chemicals Holding Inc.
2.2 Sale and Purchase Agreement dated as of April 15, 1996 among Hexcel Corporation, Hercules
Incorporated, Hercules Nederland BV and HISPAN Corporation (incorporated herein by reference to
Exhibit 2.2 to Hexcel's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1996).
2.3 Amendment Number One dated as of June 27, 1996 to the Sale and Purchase Agreement among Hexcel
Corporation, Hercules Incorporated, Hercules Nederland BV and HISPAN Corporation (incorporated
herein by reference to Exhibit 2.2 to Hexcel's Current Report on Form 8-K dated July 12, 1996).
2.4 Letter Agreement dated as of June 27, 1996 among Hexcel Corporation, Hercules Incorporated, Hercules
Nederland BV and HISPAN Corporation (incorporated herein by reference to Exhibit 2.3 to Hexcel's
Current Report on Form 8-K dated July 12, 1996).
3.1 Restated Certificate of Incorporation of Hexcel Corporation (incorporated herein by reference to
Exhibit 1 to Hexcel's Registration Statement on Form 8-A dated July 9, 1996).
3.2 Amended and Restated Bylaws of Hexcel Corporation (incorporated herein by reference to Exhibit 2 to
Hexcel's Registration Statement on Form 8-A dated July 9, 1996).
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
4.1 Indenture dated as of July 24, 1996 between Hexcel Corporation and First Trust of California,
National Association (incorporated herein by reference to Exhibit 4 to Hexcel's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996).
4.2 Indenture dated as of February 29, 1996 between Hexcel and First Trust of California, National
Association, as trustee (incorporated herein by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K dated as of March 15, 1996).
4.2(a) First Supplemental Indenture dated as of June 27, 1996 between Hexcel and First Trust of California,
N.A., as trustee, to the Indenture dated as of February 29, 1996 between Hexcel and First Trust of
California, N.A., as trustee.
4.2(b) Second Supplemental Indenture dated as of March 5, 1998 between Hexcel and First Trust of California,
N.A., as trustee, to the Indenture dated as of February 29, 1996 between Hexcel and First Trust of
California, N.A., as trustee.
4.3 Indenture dated as of August 1, 1986 between Hexcel and the Bank of California, N.A., as trustee.
4.3(a) Instrument of Resignation, Appointment and Acceptance, dated as of October 1, 1988 (incorporated
herein by reference to Exhibit 4.10 to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
10.1 Credit Agreement dated as of February 29, 1996 among Hexcel and certain subsidiaries of the Company,
as borrowers, the lenders and issuing banks party thereto, Citibank, N.A., as U.S. administrative
agent, Citibank International plc, as European administrative agent and Credit Suisse, as
syndication agent (incorporated herein by reference to Exhibit 99.1 to the Company's Current Report
on Form 8-K dated as of March 15, 1996).
10.2 Second Restated and Amended Reimbursement Agreement dated as of February 29, 1996 between Hexcel and
Banque Nationale de Paris (incorporated herein by reference to Exhibit 10.3(a) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
10.2(a) Third Amended and Restated Reimbursement Agreement dated as of June 27, 1996 between Hexcel
Corporation and Banque Nationale de Paris (incorporated herein by reference to Exhibit 10.4 to
Hexcel's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996).
10.3 Credit Agreement dated as of June 27, 1996 among Hexcel and certain of its subsidiaries as borrowers,
the institutions party thereto as lenders, the institutions party thereto as issuing banks,
Citibank, N.A. as collateral agent and Credit Suisse as administrative agent (incorporated herein
by reference to Exhibit 99.2 to Hexcel's Current Report on Form 8-K dated July 12, 1996).
10.4 Consent Number 1 and First Amendment dated as of July 3, 1996 to the Credit Agreement dated as of
June 27, 1996 among Hexcel Corporation and certain of its subsidiaries as borrowers, the
institutions party thereto as lenders, the institutions party thereto as issuing banks, Citibank,
N.A. as collateral agent and Credit Suisse as administrative agent (incorporated herein by
reference to Exhibit 10.2 to Hexcel's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.4(a) Modifications dated as of July 8, 1996 to the First Amendment to the Credit Agreement among Hexcel
Corporation and certain of its subsidiaries as borrowers, the institutions party thereto as
lenders, the institutions party thereto as issuing banks, Citibank, N.A. as collateral agent and
Credit Suisse as administrative agent (incorporated herein by reference to Exhibit 10.3 to Hexcel's
Quarterly Report on Form 10-Q for the Quarter ended June 30, 1996).
10.4(b) Consent Number 2 and Second Amendment dated as of November 12, 1996 to the Credit Agreement dated as
of June 27, 1996 among Hexcel Corporation and certain of its subsidiaries as borrowers, the
institutions party thereto as lenders, the institutions party thereto as issuing banks, Citibank,
N.A. as collateral agent and Credit Suisse as administrative agent (incorporated herein by
reference to Exhibit 10.4(b) to Hexcel's Annual Report on Form 10-K for the year ended December 31,
1996).
10.4(c) Consent Number 3 and Third Amendment dated as of February 27, 1997 to the Credit Agreement dated as
of June 27, 1996 among Hexcel Corporation and certain of its subsidiaries as borrowers, the
institutions party thereto as lenders, the institutions party thereto as issuing banks, Citibank,
N.A. as collateral agent and Credit Suisse as administrative agent (incorporated herein by
reference to Exhibit 10.4(c) to Hexcel's Annual Report on Form 10-K for the year ended December 31,
1996).
10.4(d) Amended and Restated Credit Agreement dated as of March 5, 1998 among Hexcel and certain subsidiaries
as borrowers, the lenders and issuing banks party thereto, Citibank, N.A., as U.S. administrative
agent, Citibank International plc, as European administrative agent and Credit Suisse, as
syndication agent.
10.5 Hexcel Corporation Incentive Stock Plan as amended and restated January 30, 1997 (incorporated herein
by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8, Registration No.
333-36163).
10.5(a) Hexcel Corporation Incentive Stock Plan as amended and restated January 30, 1997 and further amended
December 10, 1997.
10.6 Hexcel Corporation Management Incentive Compensation Plan (incorporated herein by reference to
Exhibit 10.4 to Hexcel's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996).
10.6(a) Hexcel Corporation Management Incentive Compensation Plan, as amended on December 5, 1996
(incorporated herein by reference to Exhibit 10.6(a) to Hexcel's Annual Report on Form 10-K for the
three year ended December 31, 1996).
10.6(b) Hexcel Corporation Management Stock Purchase Plan (incorporated herein by reference to Exhibit 10.9
to Hexcel's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.7 Form of Employee Option Agreement (1997) (incorporated herein by reference to Exhibit 10.4 to
Hexcel's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.7(a) Form of Employee Option Agreement (1996) (incorporated herein by reference to Exhibit 10.5 to
Hexcel's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996).
10.7(b) Form of Employee Option Agreement (1995) (incorporated herein by reference to Exhibit 10.6 to
Hexcel's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996).
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.8 Form of Retainer Fee Option Agreement for Non-Employee Directors (1997).
10.8(a) Form of Option Agreement (Directors) (incorporated herein by reference to Exhibit 10.13 to Hexcel's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
10.9 Form of Short-Term Option Agreement (incorporated herein by reference to Exhibit 10.8 to Hexcel's
Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996).
10.9(a) Form of Performance Accelerated Restricted Stock Unit Agreement (1997) (incorporated herein by
reference to Exhibit 10.5 to Hexcel's Quarterly Report on Form 10-Q for the Quarter ended June 30,
1997).
10.9(b) Form of Performance Accelerated Restricted Stock Unit Agreement (incorporated herein by reference to
Exhibit 10.9 to Hexcel's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996).
10.9(c) Form of Reload Option Agreement (1997) (incorporated herein by reference to Exhibit 10.8 of Hexcel's
Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.9(d) Form of Reload Option Agreement (incorporated herein by reference to Exhibit 10.10 to Hexcel's
Quarterly Report on Form 10-Q for the Quarter ended March 31, 1996).
10.9(e) Form of Performance Accelerated Stock Option Agreement (Director) (incorporated herein by reference
to Exhibit 10.6 to Hexcel's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.9(f) Form of Performance Accelerated Stock Option (Employee) (incorporated herein by reference to Exhibit
10.7 to Hexcel's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.9(g) Form of Grant of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.10
to Hexcel's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.10 Hexcel Corporation 1997 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit
10.2 to Hexcel's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.11 Employment Agreement dated as of February 29, 1996 between Hexcel and John J. Lee (incorporated
herein by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
10.11(a) Employee Option Agreement dated as of February 29, 1996 between Hexcel and John J. Lee (incorporated
herein by reference to Exhibit 10.14(a) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
10.11(b) Bankruptcy Court Option Agreement dated as of February 29, 1996 between Hexcel and John J. Lee
(incorporated herein by reference to Exhibit 10.14(b) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995).
10.11(c) Performance Accelerated Restricted Stock Unit Agreement dated as of February 29, 1996 between Hexcel
and John J. Lee (incorporated herein by reference to Exhibit 10.14(c) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995).
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.11(d) Short-Term Option Agreement dated as of February 29, 1996 between Hexcel and John J. Lee
(incorporated herein by reference to Exhibit 10.14(d) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995).
10.11(e) Form of Reload Option Agreement dated as of February 29, 1996 between Hexcel and John J. Lee
(incorporated herein by reference to Exhibit 10.14(e) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995).
10.12 Agreement dated September 3, 1996 between Hexcel Corporation and Ira J. Krakower.
10.13 Separation and Release Agreement dated as of January 29, 1998 between Hexcel Corporation and Juergen
Habermeier.
10.14 Agreement between Hexcel Corporation and Stephen C. Forsyth (incorporated by reference to Exhibit
10.4(L) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994).
10.15 Agreement between Hexcel Corporation and Gary L. Sandercock (incorporated by reference to Exhibit
10.4(I) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994).
10.16 Governance Agreement dated as of February 29, 1996 between Hexcel and Ciba-Geigy Limited
(incorporated herein by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
10.17 Registration Rights Agreement dated as of February 29, 1996 between Hexcel and Ciba-Geigy Limited
(incorporated herein by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
10.18 Agreement Governing United States Employment Matters dated as of September 29, 1995 between Hexcel
and Ciba-Geigy Corporation (incorporated herein by reference to Exhibit D to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated as of October 13, 1995).
10.18(a) Amendment dated as of November 22, 1995 to the Agreement Governing United States Employment Matters
between Hexcel and Ciba-Geigy Corporation (incorporated herein by reference to Exhibit 10.23(a) to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
10.19 Employment Matters Agreement dated as of February 29, 1996 among Ciba-Geigy PLC, Composite Materials
Limited and Hexcel (incorporated herein by reference to Exhibit 10.24 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995).
10.20 Asset Purchase Agreement by and among Stamford FHI Acquisition Corp., Fiberite, Inc. and Hexcel
Corporation, dated as of April 21, 1997 (incorporated herein by reference to Exhibit 10.1 to
Hexcel's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1997).
10.21 Amended and Restated Asset Purchase Agreement, by and among Stamford FHI Acquisition Corp., Fiberite,
Inc, and Hexcel Corporation, dated as of August 25, 1997 (incorporated herein by reference to
Exhibit 10.11 to Hexcel's Quarterly Report on Form 10-Q for the Quarter ended September 30, 1997).
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.22 License of Intellectual Property agreement, by and among Hexcel Corporation and Fiberite, Inc., dated
as of August 29, 1997 (incorporated herein by reference to Exhibit 10.12 to Hexcel's Quarterly
Report on Form 10-Q for the Quarter ended September 30, 1997).
21. Subsidiaries of Registrant.
23. Consent of Independent Accountants--Price Waterhouse LLP.
23.(2) Independent Auditors' Consent--Deloitte & Touche LLP.
27. Financial Data Schedule (electronic filing only).
</TABLE>
29
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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, IN THE CITY OF
STAMFORD, STATE OF CONNECTICUT.
HEXCEL CORPORATION
March 26, 1998 By: /s/ JOHN J. LEE
------------------------------------------
John J. Lee,
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ --------------
<C> <S> <C>
Chairman of the Board of
Directors,
/s/ JOHN J. LEE Chief Executive Officer and March 26, 1998
------------------------------------ President
(John J. Lee) (PRINCIPAL EXECUTIVE
OFFICER)
Senior Vice President and
/s/ STEPHEN C. FORSYTH Chief March 26, 1998
------------------------------------ Financial Officer
(Stephen C. Forsyth) (PRINCIPAL FINANCIAL
OFFICER)
/s/ WAYNE C. PENSKY Corporate Controller March 26, 1998
------------------------------------ (PRINCIPAL ACCOUNTING
(Wayne C. Pensky) OFFICER)
/s/ JOHN M. D. CHEESMOND March 26, 1998
------------------------------------ Director
(John M. D. Cheesmond)
/s/ MARSHALL S. GELLER March 26, 1998
------------------------------------ Director
(Marshall S. Geller)
/s/ STANLEY SHERMAN March 26, 1998
------------------------------------ Director
(Stanley Sherman)
/s/ MARTIN L. SOLOMON March 26, 1998
------------------------------------ Director
(Martin L. Solomon)
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ --------------
<C> <S> <C>
/s/ GEORGE S. SPRINGER March 26, 1998
------------------------------------ Director
(George S. Springer)
/s/ JOSEPH T. SULLIVAN March 26, 1998
------------------------------------ Director
(Joseph T. Sullivan)
/s/ HERMANN VODICKA March 26, 1998
------------------------------------ Director
(Hermann Vodicka)
/s/ FRANKLIN S. WIMER March 26, 1998
------------------------------------ Director
(Franklin S. Wimer)
</TABLE>
31
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes selected financial data for continuing
operations as of and for the five years ended December 31:
<TABLE>
<CAPTION>
1997 1996(a) 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................................. $ 936,855 $ 695,251 $ 350,238 $ 313,795 $ 310,635
Cost of sales.............................................. 714,223 553,942 283,148 265,367 263,090
---------- ---------- ---------- ---------- ----------
Gross margin............................................... 222,632 141,309 67,090 48,428 47,545
Selling, general and administrative expenses............... 102,449 79,408 41,706 37,584 44,539
Research and technology expenses........................... 18,383 16,742 7,618 8,201 7,971
Business acquisition and consolidation expenses............ 25,343 42,370 -- -- --
Restructuring expenses..................................... -- -- -- -- 46,600
---------- ---------- ---------- ---------- ----------
Operating income (loss).................................... 76,457 2,789 17,766 2,643 (51,565)
Interest expense........................................... 25,705 21,537 8,682 11,846 8,862
Other (income) expense, net................................ -- (2,994) (791) (4,861) 12,780
Bankruptcy reorganization expenses......................... -- -- 3,361 20,152 641
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations before income
taxes.................................................... 50,752 (15,754) 6,514 (24,494) (73,848)
(Benefit) provision for income taxes....................... (22,878) 3,436 3,313 3,586 6,024
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations................... $ 73,630 $ (19,190) $ 3,201 $ (28,080) $ (79,872)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income (loss) per share from continuing operations
Basic.................................................... $ 2.00 $ (0.58) $ 0.21 $ (3.84) $ (10.89)
Diluted.................................................. 1.74 (0.58) 0.20 (3.84) (10.89)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA:
Current assets............................................. $ 387,050 $ 316,931 $ 128,055 $ 148,352 $ 134,710
Non-current assets......................................... 424,536 384,805 102,547 95,105 128,532
---------- ---------- ---------- ---------- ----------
Total assets............................................. $ 811,586 $ 701,736 $ 230,602 $ 243,457 $ 263,242
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Current liabilities........................................ $ 186,356 $ 188,812 $ 66,485 $ 171,307 $ 72,965
Long-term liabilities...................................... 375,329 333,595 115,743 78,035 169,524
Stockholders' equity (deficit)............................. 249,901 179,329 48,374 (5,885) 20,753
---------- ---------- ---------- ---------- ----------
Total liabilities and stockholders' equity............... $ 811,586 $ 701,736 $ 230,602 $ 243,457 $ 263,242
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
OTHER DATA:
Cash dividends per share................................... -- -- -- -- --
Shares outstanding at year-end............................. 36,856 36,561 18,091 7,301 7,310
</TABLE>
- ------------------------
(a) A discussion of the impact of business acquisitions on 1996 selected
financial data is contained in Notes 1, 2 and 3 to the accompanying
consolidated financial statements.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
BUSINESS OVERVIEW
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales.................................................. $ 936.9 $ 695.3 $ 350.2
Gross margin %......................................... 23.8% 20.3% 19.2%
Adjusted EBITDA(a)..................................... $ 137.6 $ 71.9 $ 29.4
Adjusted operating income %(b)......................... 10.9% 6.5% 5.1%
Income (loss) from continuing operations............... $ 73.6 $ (19.2) $ 3.2
---------- ----------- -----------
Diluted earnings (loss) per share from continuing
operations........................................... $ 1.74 $ (0.58) $ 0.20
Pro forma diluted earnings per share(c)................ $ 1.17 $ 0.48 $ 0.38
---------- ----------- -----------
</TABLE>
- ------------------------
(a) Earnings before business acquisition and consolidation expenses, other
income, interest, bankruptcy reorganization expenses, taxes, depreciation
and amortization.
(b) Excludes business acquisition and consolidation expenses.
(c) Excludes business acquisition and consolidation expenses and bankruptcy
reorganization expenses, and assumes a U.S. effective tax provision of 36%
on pro forma basis.
As Hexcel begins its 50th year in 1998, the Company completed 1997 with
record sales, operating income and net income. In just two years since the
bottom of the aerospace cycle, the Company has achieved a 168% increase in
sales, increased its gross margin from 19.2% to 23.8%, and improved its Adjusted
EBITDA from $29.4 million to $137.6 million, or a 368% increase. The Company
expects sales to exceed $1 billion in 1998 for the first time in its history.
The dramatic turnaround was a result of three major factors. First, the
Company led the consolidation of the advanced structural materials industry,
through the acquisitions of the Ciba and Hercules composite materials businesses
in 1996; second, a significant increase in commercial aerospace build
rates--which is expected to lead to record deliveries for Boeing and Airbus in
1998; and third, the Company successfully embarked on a business consolidation
program to eliminate excess capacity and to integrate the Acquired Businesses.
In addition, Hexcel has positioned itself for the future by strengthening its
balance sheet with the issuance of equity to Ciba as part of the consideration
for the Ciba composite materials business, the issuance of $114.5 million of
convertible debt in 1996, and most recently through entering into an amended and
restated credit agreement.
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 were approximately $208.7 million.
Hexcel acquired the assets of the composite products and carbon fibers
businesses of Hercules on June 27, 1996 for $139.4 million in cash.
On September 30, 1997, Hexcel acquired from Fiberite its satellite business
consisting of intangible assets and inventory, and certain non-exclusive,
worldwide rights to other prepreg technologies, for $37.0 million in cash. The
acquisition was substantially downsized from an original agreement whereby the
33
<PAGE>
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 $5.0 million of
acquisition and financing costs to business acquisition and consolidation
expenses. In addition, the Company expensed $8.0 million of acquired in process
research and technology expenses purchased from Fiberite, which was also
included in business acquisition and consolidation expenses.
Hexcel will pursue the continued expansion of its revenues and profitability
through internally generated growth of existing product lines and by selective,
strategic acquisitions or other business combinations. Recognizing the Company's
significant market position in commercial aerospace, the growth potential of
existing product lines in this market is primarily limited by commercial
aircraft build rates and the penetration of advanced structural materials being
limited to the development of new generations of aircraft. Hexcel therefore
anticipates seeking growth through existing, developed and acquired product
lines in space and defense, recreation, electrical, surface transportation,
civil engineering/ construction and other industrial markets. The Company's
objective is to increase sales to non-commercial markets from the 36% of total
revenues reported in 1997 to less than 50% over time. Hexcel also expects to
pursue financing opportunities that would, among other things, provide support
for these objectives. There can be no assurance that growth can be accomplished
in this manner, or that appropriate acquisitions or financing can be
successfully consummated.
Further discussion of the business acquisitions is contained in Notes 1, 2
and 3 to the accompanying consolidated financial statements.
BUSINESS CONSOLIDATION
In May of 1996, 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 through December 31, 1997 was
$54.7 million, including $12.3 million and $42.4 million of expenses incurred in
1997 and 1996, respectively. Total expenses exclude $13.0 million of business
acquisition and consolidation expenses relating to the Fiberite transaction
which was not included in the original program. The Company does not expect to
incur any further significant additional expenses in relation to the business
consolidation program. As of December 31, 1997, remaining cash expenditures to
complete this program are estimated at $12 million, which approximates amounts
accrued. Thus, when the program is complete, the Company expects that cash
expenditures (for expenses and capital, net of estimated proceeds from asset
sales) necessary to complete the program will approximate the initial estimate
of $51 million.
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 included the closure of the Anaheim, California
facility acquired in connection with the purchase of the Acquired Ciba Business,
the reorganization of the Company's manufacturing operations in Europe, the
consolidation of the Company's U.S. special process manufacturing activities,
and the integration of sales, marketing and administrative resources.
As of December 31, 1997, the primary remaining activities of the business
consolidation program relate to the European operations and the installation and
customer qualifications of equipment transferred from the Anaheim facility to
other U.S. locations. These qualification requirements increase the complexity,
cost and time of moving equipment and rationalizing manufacturing activities. As
a result, the Company continues to expect that the business consolidation
program will take to the end of 1998 to complete.
34
<PAGE>
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 $8.5 million, which approximated book
value.
The Company initially estimated that the business consolidation program
would result in annual cost reductions of $32 million per year, beginning in
1999. By the nature of the program (i.e., consolidation of existing and Acquired
Businesses, while at the same time the Company is experiencing an increase in
its commercial aerospace market), the exact amount of annual savings is
difficult to isolate. However, the Company continues to believe that cost
savings have been achieved and, upon completion of the program, estimated cost
savings will equal or exceed the target of $32 million per year. The program was
a key contributor to the Company's improvement in operating margins in 1997.
Further discussion of the business consolidation program is contained in
Note 3 to the accompanying consolidated financial statements.
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
NET SALES: Net sales for 1997 were $936.9 million, compared with net sales
for 1996 of $695.3 million. On a pro forma basis, including full year results of
the Acquired Businesses, 1996 sales were approximately $798.5 million. The 17.4%
increase from pro forma 1996 sales was largely attributable to improved sales of
composite materials to commercial aerospace customers and sales of engineered
products to Boeing, but was partially offset by the translation effect of the
strengthening U.S. dollar. On a constant currency basis, 1997 sales would have
been approximately $38.0 million higher in 1997, reflecting a 22.2% increase
over 1996 pro forma sales.
Approximately 46% of Hexcel's 1997 sales were to Boeing, Airbus, and related
subcontractors, as compared to 32% in 1996. The increase is primarily due to the
growth of the commercial aerospace market and to a much lesser extent Boeing's
acquisition of McDonnell Douglas Corporation, which was completed on August 1,
1997. Reported commercial aircraft deliveries by Boeing (the 7-series) and
Airbus improved significantly in 1997, from a combined 344 aircraft in 1996 to
503 aircraft in 1997, including 321 of the Boeing 7-series and 182 deliveries by
Airbus. Depending on the product, orders placed with Hexcel are received
anywhere between one and eighteen months prior to delivery of the aircraft to
the customer. The Company sells material on every model of commercial aircraft
sold by Boeing and Airbus, with sales per aircraft ranging from $0.2 million to
over $1.0 million per aircraft on the Boeing 777.
The backlog of orders scheduled to be delivered in the next twelve months
was $520 million as of December 31, 1997, a 29% increase over backlog as of
December 31, 1996. In January 1998, Boeing reported that its current planned
production rate for 7-series aircraft is 40 aircraft per month, with plans to
increase this production rate to 43 aircraft per month in the second quarter of
1998. Airbus reported production output of 16.5 aircraft per month in 1997, and
they expect to increase this rate to 24 per month by the end of 1998. Total
estimated Airbus production for 1998 is expected to be 30% greater than that of
1997. Recent announcements regarding delays or cancellations of aircraft orders
from certain Asian airlines have not had an observable impact on Hexcel's sales
or backlog to date. The Company has, however, recently experienced a minor
decline in sales of other materials to the Pacific Rim. Also, should aircraft
orders be delayed or cancelled by the economic situation in Asia, and other
buyers for these orders can not be found, then the Company's sales and earnings
would be negatively impacted.
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 1998 and 1999 aerospace customer requirements. In early
1997, carbon fiber manufacturers, including the Company, announced plans to
increase carbon fiber production capacity.
35
<PAGE>
During 1997, the Company substantially completed a carbon fiber capacity
expansion program costing approximately $16 million, which has increased its
capacity by 50%. 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.
Net sales to third-party customers by product group and market segment for
1997 and on a pro forma basis for 1996, which includes full year results of the
Acquired Businesses, were as follows:
<TABLE>
<CAPTION>
FIBERS AND COMPOSITE ENGINEERED
FABRICS MATERIALS PRODUCTS TOTAL
----------- ----------- ----------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1997 NET SALES
Commercial aerospace...................................... $ 23.7 $ 403.9 $ 169.8 $ 597.4 64%
Space and defense......................................... 13.9 64.2 10.2 88.3 9
Recreation................................................ 13.0 53.4 -- 66.4 7
General industrial and other.............................. 119.5 63.9 1.4 184.8 20
----------- ----------- ----------- --------- ----
Total................................................... $ 170.1 $ 585.4 $ 181.4 $ 936.9 100%
----------- ----------- ----------- --------- ----
----------- ----------- ----------- --------- ----
1996 PRO FORMA NET SALES
Commercial aerospace...................................... $ 17.4 $ 317.1 $ 102.5 $ 437.0 55%
Space and defense......................................... 20.2 60.8 10.4 91.4 11
Recreation................................................ 27.4 63.3 -- 90.7 11
General industrial and other.............................. 116.8 60.8 1.8 179.4 23
----------- ----------- ----------- --------- ----
Total................................................... $ 181.8 $ 502.0 $ 114.7 $ 798.5 100%
----------- ----------- ----------- --------- ----
----------- ----------- ----------- --------- ----
</TABLE>
The 36.7% growth in net sales to the commercial aerospace market from 1996
to 1997 was largely attributable to increased sales of composite materials and
engineered products. The improvement in sales of composite materials reflects
the commercial aircraft build rate increase noted above. The improvement for
engineered products primarily reflects the production of structural and interior
components outsourced to Hexcel by Boeing throughout 1997, as well as strong
shipments of retrofit interiors to airline customers.
Space and defense net sales decreased 3.4% from 1996 to 1997, reflecting a
decrease in sales of fibers and fabrics, which were partially offset by improved
sales of composite materials to select military programs. The Company believes
that military aircraft procurement, in both the U.S. and Europe, is likely to
increase significantly from current levels over the next five years. The Company
has composite material and carbon fiber qualifications on a number of
significant military programs, including the European Fighter Aircraft, F-22,
F-18, V-22, C-17 and the Titan and Delta space programs.
Recreation net sales also decreased from 1996 to 1997, reflecting the shift
in emphasis of production to the commercial aerospace market as a result of the
increased demand. The 3.0% increase in general industrial and other net sales
was largely due to improved sales of fabrics for printed circuit boards and
composite materials for various transportation applications. Hexcel anticipates
sales to the recreation and general industrial and other markets to grow
modestly throughout 1998.
GROSS MARGIN: Gross margin for 1997 was $222.6 million, or 23.8% of net
sales, compared with $141.3 million, or 20.3% of net sales, for 1996. The
improvement in 1997 gross margin relative to 1996 is the result of higher sales
volume, expansion of the Company's fibers capacity and continued advances in
manufacturing productivity resulting from the Company's consolidation and
restructuring activities. Product price changes were not a significant factor in
the 1997 gross margin improvement.
The integration of the Acquired Businesses into Hexcel, including the
consolidation and rationalization of manufacturing facilities and processes, is
a primary objective of the business consolidation program. While the Company has
begun to realize the productivity improvements as a result of the program, these
improvements will not be fully realized until 1999.
36
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses were
$102.4 million in 1997, or 10.9% of net sales. This compares to $79.4 million,
or 11.4% of net sales for 1996. The aggregate dollar increase in SG&A is
primarily attributable to the Acquired Businesses.
RESEARCH AND TECHNOLOGY (R&T) EXPENSES: R&T expenses were $18.4 million in
1997, or 2.0% of net sales. This compares to $16.7 million, or 2.4% of net sales
for 1996. The aggregate dollar increase in R&T is attributable to the additional
activity from the Acquired Businesses. The Company expects to continue to
increase R&T expenditures in 1998.
OPERATING INCOME: Operating income increased from $2.8 million, or 0.4% of
net sales, in 1996 to $76.5 million, or 8.2% of net sales, in 1997. The
aggregate increase in operating income reflects the higher sales volume,
improved gross margins and a $17.0 million decrease in business acquisition and
consolidation expenses. Excluding business acquisition and consolidation
expenses, operating income as a percentage of sales increased from 6.5% in 1996
to 10.9% in 1997.
INTEREST EXPENSE: Interest expense was $25.7 million, or 2.7% of net sales,
for 1997 compared to $21.5 million, or 3.1% of net sales, for 1996. The increase
in interest expense primarily represents the cost of financing the acquisitions
of the Acquired Businesses. The 1996 amount also includes a $3.4 million
write-off of capitalized debt issuance costs.
PROVISION FOR INCOME TAXES: In accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), in
1996 and 1995 the Company had fully provided valuation allowance reserves
against its net deferred tax assets primarily in the U.S. and Belgium where
there were uncertainties in generating sufficient future taxable income. In
1997, the Company reversed $59.9 million of its valuation allowance reserve as
follows: $17.0 million due to current year profitable U.S. operations, $39.0
million due to the Company's assessment that the realization of the remaining
U.S. net deferred tax assets is more likely than not, and $3.9 million in
Belgium due to a gain on sale of tangible and intangible assets to other Hexcel
subsidiaries. The Company continues to reserve the balance of the net deferred
tax assets of its Belgium operations. Going forward, the Company expects that
its effective U.S. income tax rate will approximate the statutory rate.
NET INCOME (LOSS): Net income for 1997 was $73.6 million or $1.74 per
diluted share compared with a net loss of $19.2 million or $0.58 per diluted
share for 1996. Excluding the $25.3 million in business acquisition and
consolidation expenses and assuming a U.S. effective income tax rate of 36%,
1997 pro forma net income would have been $1.17 per share on a diluted basis.
Pro forma net income for 1996 would have been $0.48 per diluted share on a
comparable basis.
There were 36.7 million weighted average shares outstanding in 1997 compared
to 33.4 million during 1996. The increase in the number of weighted average
shares in 1997 is primarily attributable to the full year impact of the delivery
of 18.0 million newly issued shares of Hexcel common stock to Ciba on February
29, 1996 in connection with the purchase of the Acquired Ciba Business. As of
December 31, 1997, there were 36.9 million shares of Hexcel common stock issued
and outstanding. See Note 15 to the accompanying consolidated financial
statements for the calculation and the number of shares used for diluted
earnings per share.
1996 COMPARED TO 1995
NET SALES: Net sales for 1996 were $695.3 million, compared with net sales
for 1995 of $350.2 million. The results for 1996 include the results of the
Acquired Ciba Business and the Acquired Hercules Business for the periods from
the respective acquisition dates through December 31, 1996. Excluding the
results of the Acquired Businesses, 1996 sales were approximately $385 million,
a 10% increase over 1995. This increase was largely attributable to improved
sales of composite materials to commercial aerospace customers, and reflected
the initial impact of increases in production rates for certain aircraft as well
as the increased utilization of composite materials on new generation aircraft.
In particular, the Company
37
<PAGE>
benefited from higher sales of carbon honeycomb core and carbon-based prepregs.
The Company also benefited from improved sales of fabricated honeycomb parts to
the commercial aerospace market, and from increased sales of fabrics for use in
the manufacture of printed circuit boards. Changes in foreign currency exchange
rates did not have a material impact on the level of 1996 sales relative to 1995
sales.
Approximately 32% of Hexcel's 1996 sales were to Boeing, Airbus, and related
subcontractors. Reported commercial aircraft deliveries of Boeing 7-series and
Airbus improved only modestly in 1996, from a combined 330 aircraft in 1995 to
344 aircraft in 1996. However, the 1996 sales benefited from the increase in
scheduled deliveries for 1997 as orders placed with Hexcel are received anywhere
between one and eighteen months prior to delivery of the aircraft to the
customer.
PRO FORMA NET SALES: Pro forma net sales for 1996, giving effect to the
acquisitions of the Acquired Businesses as if those transactions had occurred at
the beginning of the year, were $798.5 million. This compares with pro forma net
sales for 1995 of $771.3 million. Pro forma net sales to third-party customers
by product group and market segment for 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
FIBERS AND COMPOSITE ENGINEERED
FABRICS MATERIALS PRODUCTS TOTAL
----------- ----------- ----------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
1996 PRO FORMA NET SALES
Commercial aerospace...................................... $ 17.4 $ 317.1 $ 102.5 $ 437.0 55%
Space and defense......................................... 20.2 60.8 10.4 91.4 11
Recreation................................................ 27.4 63.3 -- 90.7 11
General industrial and other.............................. 116.8 60.8 1.8 179.4 23
----------- ----------- ----------- --------- ----
Total................................................... $ 181.8 $ 502.0 $ 114.7 $ 798.5 100%
----------- ----------- ----------- --------- ----
----------- ----------- ----------- --------- ----
1995 PRO FORMA NET SALES
Commercial aerospace...................................... $ 14.8 $ 294.7 $ 94.9 $ 404.4 52%
Space and defense......................................... 25.3 49.0 15.8 90.1 12
Recreation................................................ 31.3 74.3 -- 105.6 14
General industrial and other.............................. 123.0 45.4 2.8 171.2 22
----------- ----------- ----------- --------- ----
Total................................................... $ 194.4 $ 463.4 $ 113.5 $ 771.3 100%
----------- ----------- ----------- --------- ----
----------- ----------- ----------- --------- ----
</TABLE>
The growth in pro forma sales to the commercial aerospace market from 1995
to 1996 was largely attributable to increased sales of composite materials and
commercial aerospace engineered products. The improvement in sales of composite
materials reflects the commercial aircraft build rate and product utilization
increases noted above. The improvement for engineered products primarily
reflects the production of structural and interior components outsourced to
Hexcel by Boeing during the second half of 1996, as well as strong shipments of
retrofit interiors to airline customers.
Pro forma space and defense sales were essentially unchanged from 1995 to
1996, reflecting a decline in sales of fibers and fabrics and engineered
structures, offset by improved sales of composite materials to select military
programs.
The decrease in pro forma sales to the recreation market during 1996 is
primarily attributable to reduced demand for composite materials by ski and
snowboard manufacturers due to excess inventories. Pro forma sales of fabrics
for certain marine applications were also slightly lower. The increase in pro
forma general industrial sales reflects improved sales of fabrics for printed
circuit boards and composite materials for various transportation applications,
partially offset by reduced sales of carbon fibers to non-aerospace customers.
GROSS MARGIN: Gross margin for 1996 was $141.3 million, or 20.3% of sales,
compared with $67.1 million for 1995, or 19.2% of sales. Excluding the Acquired
Businesses, 1996 gross margin was approximately 24% of sales. The improvement in
1996 gross margin relative to 1995, excluding the impact
38
<PAGE>
of the Acquired Businesses, is the result of both higher sales volumes and
improved manufacturing productivity, especially for composite materials. Hexcel
also benefited from the cost reductions associated with the completion, in
mid-1995, of a previous restructuring of the Company's composite materials
business. Product price changes were not a significant factor in the 1996 gross
margin improvement.
The aggregate gross margin of the Acquired Businesses from the respective
acquisition dates through December 31, 1996, was approximately 16% of sales. The
integration of the Acquired Businesses into Hexcel, including the consolidation
and rationalization of manufacturing facilities and processes, is a primary
objective of the business consolidation program. Although the consolidation
program commenced in 1996, the productivity improvements expected to result from
this program will not be fully realized until 1999.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses were
$79.4 million in 1996, or 11.4% of sales. This compares with 1995 SG&A expenses
of $41.7 million, or 11.9% of sales. The aggregate dollar increase in SG&A
expenses from 1995 to 1996 is attributable to the acquisitions of the Acquired
Businesses. The slight decrease in SG&A expenses as a percentage of sales
primarily reflects higher sales levels.
RESEARCH AND TECHNOLOGY (R&T) EXPENSES: R&T expenses were $16.7 million in
1996, or 2.4% of net sales. This compares to $7.6 million, or 2.2% of net sales
for 1995. The aggregate dollar increase in R&T is attributable to the
acquisitions of the Acquired Businesses.
OPERATING INCOME: Operating income was $2.8 million in 1996, or 0.4% of
sales, compared with $17.8 million in 1995, or 5.1% of sales. The $74.2 million
increase in gross margin from 1995 to 1996 was more than offset by $37.7 million
in additional SG&A expenses and $42.4 million in business acquisition and
consolidation expenses.
INTEREST EXPENSE: Interest expense totaled $21.5 million in 1996 and $8.7
million in 1995. The year-on-year increase primarily reflects the cost of
financing the acquisitions of the Acquired Businesses. Hexcel financed
approximately $200 million of aggregate purchase price with various debt and
credit facilities, and wrote off $3.4 million of capitalized debt financing
costs in connection with the acquisition-related refinancing of certain debt in
1996.
PROVISION FOR INCOME TAXES: Income tax provisions of $3.4 million in 1996
and $3.3 million in 1995 primarily reflect international taxes on certain
European subsidiaries, state taxes, and the settlement of various tax audits.
The 1996 income tax provision is net of a $2.5 million benefit from the
favorable resolution of a U.S. federal tax audit. As of December 31, 1996,
Hexcel had net operating loss ("NOL") carryforwards for U.S. federal income tax
purposes of approximately $70 million and NOL carryforwards for Belgium income
tax purposes of approximately $22 million. For the years ended December 31, 1996
and 1995, the Company has not recognized any tax benefits in 1996 or 1995
attributable to the potential future realization of these NOL carryforwards or
any other deferred tax assets.
NET INCOME (LOSS): The 1996 net loss was $19.2 million, or $0.58 per
diluted share, compared with net income for 1995 of $2.7 million, or $0.17 per
diluted share. The 1996 net loss includes business acquisition and consolidation
expenses of $42.4 million, or $1.16 per share after income taxes. Net income for
1995 is after bankruptcy reorganization expenses of $3.4 million, or $0.21 per
share.
There were 33.4 million weighted average shares outstanding during 1996,
versus 15.6 million during 1995. The increase in the number of weighted average
shares in 1996 is primarily attributable to the delivery of 18.0 million newly
issued shares of Hexcel common stock to Ciba on February 29, 1996, in connection
with the purchase of the Acquired Ciba Business. As of December 31, 1996, there
were 36.6 million shares of Hexcel common stock issued and outstanding.
39
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL RESOURCES
The Company had a Revolving Credit Facility, which provided up to $254.6
million of borrowing capacity. As of December 31, 1997, outstanding borrowings
and letter of credit commitments under the Revolving Credit Facility totaled
$158.3 million. The Revolving Credit Facility was scheduled to expire in
February of 1999.
On March 5, 1998, the Company amended and restated the Revolving Credit
Facility (the "Amended Facility"). The Amended Facility provides for borrowing
capacity of up to $355 million and extends the expiration date by four years to
March 2003. While the Company continues to be subject to various financial
covenants and restrictions and is generally prohibited from paying dividends or
redeeming capital stock, the Amended Facility provides $100 million in increased
borrowing capacity and more flexibility as to the use of the borrowings than the
Company's prior facility.
The Company expects that the financial resources of Hexcel, including the
Amended Facility, will be sufficient to fund the Company's worldwide operations
for the foreseeable future. Further discussion of the Company's financial
resources is contained in Note 7 to the accompanying consolidated financial
statements.
ADJUSTED EBITDA AND CASH FLOWS
1997: Earnings before business acquisition and consolidation expenses,
other income, interest, bankruptcy reorganization expenses, taxes, depreciation
and amortization ("Adjusted EBITDA") was $137.6 million. Net cash provided from
operations was $26.0 million including $33.6 million of business acquisition and
consolidation payments and a $47.7 million increase in working capital as a
result of the increase in sales volume.
Net cash used for investing activities was $82.9 million, including $57.4
for capital expenditures and $37.0 million for the Fiberite transaction,
partially offset by $13.5 million of proceeds from the sale of the Anaheim
facility and the Company's 50% interest in the Knytex joint venture to Owens
Corning. These investing activities were funded by cash from operations and
$57.2 million of borrowings primarily under the Revolving Credit Facility.
1996: Adjusted EBITDA was $71.9 million. Pro forma Adjusted EBITDA, giving
effect to the acquisitions of the Acquired Businesses as if those transactions
had occurred at the beginning of the year, was approximately $86 million.
Net cash provided by operating activities was $26.5 million. Net cash used
for investing activities was $206.4 million, including $164.4 million used in
connection with the acquisitions of the Acquired Businesses and $43.6 million
for capital expenditures. Net cash provided by financing activities, including
borrowings under the Revolving Credit Facility and proceeds from the issuance of
$114.5 million in convertible subordinated notes, was $181.7 million. Non-cash
financing of the purchase of the Acquired Ciba Business included the issuance of
debt securities valued at $37.2 million and the issuance of 18.0 million shares
of Hexcel common stock valued at $144.2 million.
1995: Adjusted EBITDA was $29.4 million, and pro forma Adjusted EBITDA was
approximately $62 million. Net cash used by operating activities was $2.5
million. Net cash provided by investing activities was $15.7 million, primarily
reflecting $31.9 million in cash proceeds from the sale of various assets and
$12.1 million of capital expenditures. Net cash used by financing activities of
$9.6 million includes proceeds from short-term debt and the issuance of Hexcel
common stock, as well as the repayment of allowed claims in connection with
Hexcel Corporation's emergence from bankruptcy reorganization proceedings.
40
<PAGE>
Adjusted EBITDA and pro forma Adjusted EBITDA have 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 and pro
forma Adjusted EBITDA do not represent alternative measures of the Company's
cash flows or operating income, and should not be considered in isolation or as
substitutes for measures of performance presented in accordance with generally
accepted accounting principles.
CAPITAL EXPENDITURES
Capital expenditures were $57.4 million in 1997 compared with $43.6 million
in 1996 and $12.1 million in 1995. The increase in 1997 expenditures over prior
years reflects the impact of the Acquired Businesses on capital requirements,
including the impact of certain business consolidation activities. The increase
also reflects expenditures on manufacturing equipment necessary to improve
manufacturing processes and to expand production capacity for select product
lines that are in high demand, such as the Company's carbon fiber capacity
expansion. A modest increase in capital spending is expected in 1998 as a result
of ongoing opportunities for additional manufacturing improvements. Such
expenditures will be financed with cash generated from operations and borrowings
under the Amended Facility.
YEAR 2000
The Company is continuing to monitor as well as implement its plan to
resolve the Year 2000 issue in both existing software and other systems with
embedded microprocessors. The Year 2000 issue is the result of computer programs
being written using two digits rather than four to define the applicable year.
Any of the Company's programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a major system failure or miscalculations.
The Company presently believes that, with modifications to existing software
and other systems with embedded microprocessors, and conversion to new software
and other systems, the Year 2000 issue will not pose significant operational
problems for the Company's computer and other systems as so modified and
converted. However, if such modifications and conversions are not completed in a
timely manner, or the Company's customers and suppliers do not successfully
address their Year 2000 issues, the Year 2000 issue may have a material impact
on the operations of the Company. The Company continues to evaluate appropriaste
courses of corrective action, including replacement of certain systems whose
associated costs would be recorded as assets and amortized. The Company does not
expect amounts required to be expensed for Year 2000 issues over the next two
years to have a material effect on its financial position or results of
operations. The amount expensed in 1997 was immaterial.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130"). Hexcel is required to adopt
SFAS 130 in the first quarter of 1998. SFAS 130 establishes standards for
reporting comprehensive income and its components in a full set of general
purpose financial statements. Management does not anticipate that the adoption
of SFAS 130 will have a significant impact on the consolidated financial
statements.
In June 1997, the Financial Accounting Standards Board also issued Statement
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). Hexcel is required to adopt SFAS 131 in its annual consolidated
financial statements covering the year ending December 31, 1998. SFAS 131
establishes standards for the way business enterprises report information about
operating segments in annual financial statements. Beginning in 1999, the
Company will also be required to report selected information about operating
segments in its interim financial reports to stockholders. The Company has not
yet determined the impact, if any, that the adoption of SFAS 131 will have on
the consolidated financial statements.
41
<PAGE>
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," elsewhere in this document, the
Company's annual report or other communications (including press releases and
analysts calls) that are not of historical fact, constitute "forward-looking
statements" regarding events and trends which effect the Company's future
operating results and financial position. Such forward-looking statements
include, but are not limited to: (a) revenue and profitability growth
objectives, including increasing sales to non-commercial aerospace markets as
well as the execution of strategic acquisitions or other business combinations;
(b) estimates of commercial aircraft orders and deliveries; (c) estimates of
government defense procurement budgets and military and space build rates; (d)
expectations regarding sales growth, sales mix, gross margins, manufacturing
productivity, selling, general and administrative and R&T expenses, and capital
expenditures; (e) the availability and utilization of NOL carryforwards for
income tax purposes; (f) expectations regarding Hexcel's financial condition and
liquidity, as well as future cash flows; (g) expectations regarding capital
expenditures; (h) the estimated total cost of the Company's business
consolidation program, the estimated amount of cash expenditure to complete the
program and the estimated annual cost savings resulting from the consolidation
program; and (i) the Year 2000 issue. The words "believes", "estimates",
"anticipate", "expect", "intend" and "project", as well as other words or
expressions of similar meaning, are intended to identify forward-looking
statements. Such statements are based on current expectations, are inherently
uncertain, and are subject to changing assumptions.
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, but are not limited to, the
following: ability to identify and successfully consummate acquisitions and
secure related financing; general economic and business conditions; changes in
political, social and economic conditions and local regulations, particularly in
Asia and Europe; foreign currency fluctuations; level of profitability by
country; changes in, or failure to comply with, government regulations;
demographic changes; changes in customer preferences; changes in build rates;
the loss of any significant customers, particularly Boeing or Airbus; changes in
sales mix; changes in government defense procurement budgets; changes in current
pricing levels; technology; industry capacity; competition; changes in business
strategy or development plans; availability of carbon fiber; disruptions of
established supply channels; manufacturing capacity constraints; indebtedness of
the Company; and the availability, terms and deployment of capital.
Because of the foregoing factors, in addition to other factors that affect
the Company's operating results and financial position, past financial
performance or the Company's expectations should not be considered to be a
reliable indicator of future performance. Investors should not use historical
trends to anticipate results or trends in future periods. Further, the Company's
stock price is subject to volatility. Any of the factors discussed above could
have an adverse impact on the Company's stock price. In addition, failure of
sales or income in any quarter to meet the investment community's expectations,
as well as broader market trends, can have an adverse impact on the Company's
stock price.
The Company does not undertake an obligation to update its forward-looking
statements or risk factors to reflect future events or circumstances.
42
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ------------------------------------------------------------------------ ------
<S> <C>
Management Responsibility for Financial Statements...................... 49
Report of Independent Accountants....................................... 50
Independent Auditor's Report............................................ 51
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1997 and 1996.......... 52
Consolidated Statements of Operations for the three years ended
December 31, 1997................................................... 53
Consolidated Statements of Stockholders' Equity for the three years
ended December 31, 1997............................................. 54
Consolidated Statements of Cash Flows for the three years ended
December 31, 1997................................................... 55
Notes to the Consolidated Financial Statements........................ 56-83
</TABLE>
Financial statement schedules have been omitted because they are not
applicable or the required information is included in the consolidated financial
statements or notes thereto.
43
<PAGE>
MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS
Hexcel management has prepared and is responsible for the consolidated
financial statements and the related financial data contained in this report.
These financial statements, which include estimates, were prepared in accordance
with generally accepted accounting principles. Management uses its best judgment
to ensure that such statements reflect fairly the consolidated financial
position, results of operations and cash flows of the Company.
Hexcel maintains accounting and other control systems, which management
believes provide reasonable assurance that financial records are reliable for
purposes of preparing financial statements and that assets are safeguarded and
accounted for properly. Underlying this concept of reasonable assurance is the
premise that the cost of control should not exceed benefits derived from
control.
The Audit Committee of the Board of Directors reviews and monitors the
financial reports and accounting practices of Hexcel. These reports and
practices are reviewed regularly by management and by the Company's independent
accountants, Price Waterhouse LLP, in connection with the audit of the Company's
financial statements. The Audit Committee, composed solely of outside directors,
meets periodically, separately and jointly, with management and the independent
accountants.
/s/ JOHN J. LEE
- --------------------------------------
(John J. Lee)
CHIEF EXECUTIVE OFFICER
/s/ STEPHEN C. FORSYTH
- --------------------------------------
(Stephen C. Forsyth)
CHIEF FINANCIAL OFFICER
/s/ WAYNE C. PENSKY
- --------------------------------------
(Wayne C. Pensky)
CHIEF ACCOUNTING OFFICER
44
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Hexcel Corporation:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Hexcel
Corporation and its subsidiaries at December 31, 1997, and the results of their
operations and their cash flows for the year in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
The financial statements of Hexcel Corporation for the years ended December
31, 1996 and 1995 were audited by other independent accountants whose report
dated February 28, 1997 expressed an unqualified opinion on those statements.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
San Jose, California
January 28, 1998, except as to
Aggregate Maturities of Notes
Payable in Note 7, which is as
of March 5, 1998
45
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Hexcel Corporation:
We have audited the accompanying consolidated balance sheet of Hexcel
Corporation and subsidiaries as of December 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1996. These financial
statements are the responsibility of Hexcel's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Hexcel Corporation and
subsidiaries at December 31, 1996, and the results of their operations and their
cash flows for each of the two years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Oakland, California
February 28, 1997
46
<PAGE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, December 31,
1997 1996
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 9,033 $ 7,975
Accounts receivable............................................................... 181,192 151,263
Inventories....................................................................... 165,321 145,884
Prepaid expenses and other assets................................................. 6,665 11,809
Deferred tax asset................................................................ 24,839 --
------------ -------------
Total current assets............................................................ 387,050 316,931
------------ -------------
Property, plant and equipment....................................................... 488,916 468,173
------------ -------------
Less accumulated depreciation....................................................... (157,439) (141,390)
------------ -------------
Net property, plant and equipment............................................... 331,477 326,783
------------ -------------
Intangibles and other assets........................................................ 93,059 58,022
------------ -------------
Total assets.................................................................... $ 811,586 $ 701,736
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term liabilities..................... $ 13,858 $ 23,835
Accounts payable.................................................................. 70,011 73,117
Accrued compensation and benefits................................................. 37,306 30,969
Other accrued liabilities......................................................... 65,181 60,891
------------ -------------
Total current liabilities....................................................... 186,356 188,812
------------ -------------
Long-term notes payable and capital lease obligations............................... 304,546 254,919
Indebtedness to related parties..................................................... 34,967 32,262
Other non-current liabilities....................................................... 35,816 46,414
------------ -------------
Stockholders' equity:
Preferred stock, no par value, 20,000 shares authorized, no shares issued or
outstanding in 1997 and 1996.................................................... -- --
Common stock, $0.01 par value, 100,000 shares authorized, shares issued and
outstanding of 36,856 in 1997 and 36,561 in 1996................................ 369 366
Additional paid-in capital........................................................ 266,177 259,592
Accumulated deficit............................................................... (15,541) (89,171)
Cumulative currency translation adjustment........................................ (1,104) 8,542
------------ -------------
Total stockholders' equity...................................................... 249,901 179,329
------------ -------------
Total liabilities and stockholders' equity...................................... $ 811,586 $ 701,736
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
47
<PAGE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales.................................................................. $ 936,855 $ 695,251 $ 350,238
Cost of sales.............................................................. 714,223 553,942 283,148
----------- ----------- -----------
Gross margin............................................................... 222,632 141,309 67,090
Selling, general and administrative expenses............................... 102,449 79,408 41,706
Research and technology expenses........................................... 18,383 16,742 7,618
Business acquisition and consolidation expenses............................ 25,343 42,370 --
----------- ----------- -----------
Operating income........................................................... 76,457 2,789 17,766
Interest expense........................................................... 25,705 21,537 8,682
Other income, net.......................................................... -- (2,994) (791)
Bankruptcy reorganization expenses......................................... -- -- 3,361
----------- ----------- -----------
Income (loss) from continuing operations before income taxes............... 50,752 (15,754) 6,514
(Benefit) provision for income taxes....................................... (22,878) 3,436 3,313
----------- ----------- -----------
Income (loss) from continuing operations................................... 73,630 (19,190) 3,201
Discontinued operations:
Losses during phase-out period........................................... -- -- 468
----------- ----------- -----------
Net income (loss)...................................................... $ 73,630 $ (19,190) $ 2,733
----------- ----------- -----------
----------- ----------- -----------
Net income (loss) per share:
Basic
Continuing operations.................................................... $ 2.00 $ (0.58) $ 0.21
Discontinued operations.................................................. -- -- (0.03)
----------- ----------- -----------
Net income (loss)...................................................... $ 2.00 $ (0.58) $ 0.18
----------- ----------- -----------
----------- ----------- -----------
Diluted
Continuing operations.................................................... $ 1.74 $ (0.58) $ 0.20
Discontinued operations.................................................. -- -- (0.03)
----------- ----------- -----------
Net income (loss)...................................................... $ 1.74 $ (0.58) $ 0.17
----------- ----------- -----------
----------- ----------- -----------
Weighted average shares:
Basic.................................................................... 36,748 33,351 15,605
Diluted.................................................................. 45,997 33,351 15,742
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
48
<PAGE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK MINIMUM CUMULATIVE
-------------------------- ADDITIONAL PENSION CURRENCY
OUTSTANDING PAID-IN ACCUMULATED OBLIGATION TRANSLATION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT ADJUSTMENT
------------- ----------- ----------- ------------ ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995................ 7,301 $ 73 $ 62,626 $ (72,714) $ (137) $ 4,267
Net income............................ 2,733
Sale of new common stock under standby
purchase commitment and subscription
rights offering..................... 10,800 108 48,631
Activity under stock plans............ (10) 2
Pension obligation adjustment......... (398)
Currency translation adjustment....... 3,183
------ ----- ----------- ------------ ----- -----------
BALANCE, DECEMBER 31, 1995.............. 18,091 181 111,259 (69,981) (535) 7,450
Net loss.............................. (19,190)
Issuance of shares to Ciba at $8, net
of issuance costs of $2,993......... 18,022 180 141,001
Activity under stock plans............ 408 4 7,133
Other issuance of shares.............. 40 1 199
Pension obligation adjustment......... 535
Currency translation adjustment....... 1,092
------ ----- ----------- ------------ ----- -----------
BALANCE, DECEMBER 31, 1996.............. 36,561 366 259,592 (89,171) -- 8,542
Net income............................ 73,630
Activity under stock plans............ 292 3 6,535
Conversion of Subordinated Notes...... 3 50
Currency translation adjustment....... (9,646)
------ ----- ----------- ------------ ----- -----------
BALANCE, DECEMBER 31, 1997.............. 36,856 $ 369 $ 266,177 $ (15,541) $ -- $ (1,104)
------ ----- ----------- ------------ ----- -----------
------ ----- ----------- ------------ ----- -----------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCE, JANUARY 1, 1995................ $ (5,885)
Net income............................ 2,733
Sale of new common stock under standby
purchase commitment and subscription
rights offering..................... 48,739
Activity under stock plans............ 2
Pension obligation adjustment......... (398)
Currency translation adjustment....... 3,183
-------------
BALANCE, DECEMBER 31, 1995.............. 48,374
Net loss.............................. (19,190)
Issuance of shares to Ciba at $8, net
of issuance costs of $2,993......... 141,181
Activity under stock plans............ 7,137
Other issuance of shares.............. 200
Pension obligation adjustment......... 535
Currency translation adjustment....... 1,092
-------------
BALANCE, DECEMBER 31, 1996.............. 179,329
Net income............................ 73,630
Activity under stock plans............ 6,538
Conversion of Subordinated Notes...... 50
Currency translation adjustment....... (9,646)
-------------
BALANCE, DECEMBER 31, 1997.............. $ 249,901
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
49
<PAGE>
HEXCEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations.................................... $ 73,630 $ (19,190) $ 3,201
Reconciliation to net cash provided (used) by continuing operations:
Depreciation and amortization............................................. 35,797 26,730 11,623
Deferred income taxes..................................................... (33,203) (520) (329)
Write-off of purchased in-process technologies............................ 8,000 -- --
Accrued business acquisition and consolidation expenses................... 25,343 42,370 --
Business acquisition and consolidation payments........................... (33,595) (11,579) --
Other income.............................................................. -- (1,560) (600)
Changes in assets and liabilities, net of effects of acquisitions:
Increase in accounts receivable......................................... (37,557) (14,695) (1,752)
Increase in inventories................................................. (23,797) (5,072) (8,111)
Decrease (increase) in prepaid expenses and other assets................ 1,667 (1,430) 718
Increase (decrease) in accounts payable and accrued liabilities......... 23,567 15,549 (10,090)
Changes in other non-current assets and long-term liabilities........... (13,878) (4,096) 2,346
---------- ---------- ----------
Net cash provided (used) by continuing operations......................... 25,974 26,507 (2,994)
Net cash provided by discontinued operations.............................. -- -- 486
---------- ---------- ----------
Net cash provided (used) by operating activities.......................... 25,974 26,507 (2,508)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................................................ (57,369) (43,569) (12,144)
Cash paid for business acquisitions......................................... (37,000) (164,400) (4,150)
Proceeds from sale of certain manufacturing facilities and an interest in a
joint venture............................................................. 13,500 1,560 27,294
Proceeds from sale of discontinued resins business.......................... -- -- 4,648
Other....................................................................... (2,000) -- 17
---------- ---------- ----------
Net cash (used) provided by investing activities.......................... (82,869) (206,409) 15,665
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.................................... 3,199 286,974 4,317
Repayments of long-term debt................................................ (9,679) (124,288) (5,402)
Proceeds from the revolving credit facility and short-term debt, net........ 57,186 15,319 20,923
Proceeds from issuance of common stock...................................... 6,538 3,702 48,741
Payments of allowed claims pursuant to the Reorganization Plan.............. -- -- (78,144)
---------- ---------- ----------
Net cash provided (used) by financing activities.......................... 57,244 181,707 (9,565)
---------- ---------- ----------
Effect of exchange rate changes on cash and cash equivalents.................. 709 2,341 (694)
---------- ---------- ----------
Net increase in cash and cash equivalents..................................... 1,058 4,146 2,898
---------- ---------- ----------
Cash and cash equivalents at beginning of year................................ 7,975 3,829 931
---------- ---------- ----------
Cash and cash equivalents at end of year...................................... $ 9,033 $ 7,975 $ 3,829
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
50
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the accounts of
Hexcel Corporation and subsidiaries ("Hexcel" or the "Company"), after
elimination of intercompany transactions and accounts. Hexcel is a leading
international developer and manufacturer of carbon fibers, reinforcement
fabrics, and lightweight, high-performance composite materials, parts and
structures for use in the commercial aerospace, space and defense, recreation,
and general industrial markets. The Company serves international markets through
manufacturing and marketing facilities located in the United States and Europe,
as well as sales offices in Asia, Australia and South America. The Company is
also a partner in a joint venture that manufactures and markets composite
materials in Asia.
As discussed in Note 2, Hexcel acquired the worldwide composites division of
Ciba-Geigy Limited ("CGL"), a Swiss corporation, and Ciba-Geigy Corporation, a
New York corporation ("CGC" and together with CGL, "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 at various dates through February 28, 1997 (the "Acquired Ciba
Business"). As also discussed in Note 2, Hexcel acquired the composite products
division of Hercules Incorporated ("Hercules"), including Hercules' carbon
fibers and prepreg businesses (the "Acquired Hercules Business"), on June 27,
1996, and the satellite business and rights to certain technologies from
Fiberite, Inc. ("Fiberite") on September 30, 1997. Accordingly, the accompanying
consolidated balance sheets, statements of operations, stockholders' equity and
cash flows include the financial position, results of operations and cash flows,
of the businesses acquired from Ciba, Hercules and Fiberite as of such dates and
for such periods that these businesses were owned by the Company.
ESTIMATES AND ASSUMPTIONS
The accompanying consolidated financial statements and related notes reflect
numerous estimates and assumptions made by the management of Hexcel. These
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosures with respect to contingent assets and liabilities, and the
reported amounts of revenues and expenses. Although management believes that the
estimates and assumptions used in preparing the accompanying consolidated
financial statements and related notes are reasonable in light of known facts
and circumstances, actual results could differ from the estimates used.
CASH AND CASH EQUIVALENTS
Hexcel invests excess cash in investments with original maturities of less
than three months. The investments consist primarily of Eurodollar time deposits
and are stated at cost, which approximates fair value. The Company considers
such investments to be cash equivalents for purposes of the statements of cash
flows.
ACCOUNTS RECEIVABLE
Accounts receivable are net of reserves for doubtful accounts of $6,641 and
$6,625 as of December 31, 1997 and 1996, respectively.
51
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are valued at the lower of cost or market, with cost determined
using the first-in, first-out and average cost methods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Repairs and maintenance
are charged to expense as incurred; replacements and betterments are
capitalized.
The Company depreciates property, plant and equipment over estimated useful
lives. Accelerated and straight-line methods are used for financial statement
purposes. The estimated useful lives range from 10 to 40 years for buildings and
improvements and from 3 to 20 years for machinery and equipment.
INTANGIBLES AND OTHER ASSETS
Goodwill and other purchased intangibles are included in "intangibles and
other assets" at cost, less accumulated amortization (see Note 6). Amortization
is provided on a straight-line basis over estimated economic lives which range
from 10 to 20 years.
The Company periodically reviews the recoverability of long-term assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset might not be recoverable.
CURRENCY TRANSLATION
The assets and liabilities of European subsidiaries are translated into U.S.
dollars at year-end exchange rates, and revenues and expenses are translated at
average exchange rates during the year. Cumulative currency translation
adjustments are included in stockholders' equity. Realized gains and losses from
currency exchange transactions are recorded in "selling, general and
administrative expenses" in the accompanying consolidated statements of
operations and were not material to the Company's consolidated results of
operations in 1997, 1996 or 1995.
REVENUE RECOGNITION
Product sales are recognized on the date of shipment.
EARNINGS PER SHARE
The Financial Accounting Standards Board issued Statement No. 128, "Earnings
Per Share" ("SFAS 128"), in March 1997 which is effective for reporting periods
ending after December 15, 1997. The Company adopted SFAS 128 in the fourth
quarter of 1997. SFAS 128 requires the presentation of "Basic" earnings per
share which represents net earnings divided by the weighted average shares
outstanding excluding all potential common shares. A dual presentation of
"Diluted" earnings per share reflecting the dilutive effects of all potential
common shares, is also required. The Diluted presentation is similar to fully
diluted earnings per share under the prior accounting standard (see Note 15).
52
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
In 1996, Hexcel adopted the disclosure requirements of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which provide for the disclosure of pro forma net
earnings and earnings per share as if the fair value method were used to account
for stock-based employee compensation plans (see Note 14). Pursuant to SFAS 123,
the Company has elected to continue to use the intrinsic value method to account
for such plans in the accompanying consolidated financial statements, in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees".
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of trade accounts receivable.
The Company's sales to two customers and their related subcontractors accounted
for approximately 46% and 32% of the Company's 1997 and 1996 net sales,
respectively (see Note 17). The Company performs on-going credit evaluations of
its customers' financial condition but generally does not require collateral or
other security to support customer receivables. The Company establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends and other financial information.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130"). Hexcel is required to adopt
SFAS 130 in the first quarter of 1998. SFAS 130 establishes standards for
reporting comprehensive income and its components in a full set of general
purpose financial statements. Management does not anticipate that the adoption
of SFAS 130 will have a significant impact on the consolidated financial
statements.
In June 1997, the Financial Accounting Standards Board also issued Statement
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"). Hexcel is required to adopt SFAS 131 in its annual consolidated
financial statements covering the year ending December 31, 1998. SFAS 131
establishes standards for the way business enterprises report information about
operating segments in annual financial statements. Beginning in 1999, the
Company will also be required to report selected information about operating
segments in its interim financial reports to stockholders. The Company has not
yet determined the impact, if any, that the adoption of SFAS 131 will have on
the consolidated financial statements.
RECLASSIFICATIONS
Certain prior year amounts in the accompanying consolidated financial
statements and related notes have been reclassified to conform to the 1997
presentation.
NOTE 2 -- BUSINESS ACQUISITIONS
ACQUIRED CIBA BUSINESS
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
53
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 2 -- BUSINESS ACQUISITIONS (CONTINUED)
worldwide composites division at various dates through February 28, 1997. The
Acquired Ciba Business is engaged in the manufacture and marketing of
reinforcement fabrics and lightweight, high-performance composite materials,
parts and structures for commercial aerospace, space and defense, recreation,
and general industrial markets. Product lines include reinforcement fabrics,
pre-impregnated fabrics ("prepregs"), structural adhesives, honeycomb core,
sandwich panels and fabricated components, as well as composite structures and
interiors primarily for the commercial and military aerospace markets.
The acquisition of the Acquired Ciba Business was consummated pursuant to a
Strategic Alliance Agreement dated as of September 29, 1995, among Ciba and
Hexcel, as amended (the "Strategic Alliance Agreement"). Under the Strategic
Alliance Agreement, the Company acquired the assets (including the capital stock
of certain non-U.S. subsidiaries) 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 $34,928,
subject to certain adjustments (the "Senior Subordinated Notes"); and (d) senior
demand notes in an aggregate principal amount equal to the cash on hand at
certain of the non-U.S. subsidiaries included in the Acquired Ciba Business (the
"Senior Demand Notes"). In exchange for assets acquired between January 1, 1997
and February 28, 1997, from Ciba affiliates that continued to act as
distributors for the Acquired Ciba Business (the "Ciba Distributors") throughout
1996, Hexcel undertook to deliver additional Senior Subordinated Notes to Ciba
Specialty Chemicals Holding Inc., a Swiss Corporation ("CSCH"), as successor to
Ciba in an aggregate principal amount of approximately $2,300 which was accrued
in 1997. The aggregate purchase price for the net assets acquired was
approximately $208,700.
ACQUIRED HERCULES BUSINESS
Hexcel acquired the assets of the composite products division of Hercules
(the "Acquired Hercules Business") on June 27, 1996. The Acquired Hercules
Business, which manufactures carbon fibers and prepregs for commercial
aerospace, space and defense, recreation, and general industrial markets, was
purchased for $139,400 in cash.
In connection with the purchase of the Acquired Hercules Business, Hexcel
obtained a new revolving credit facility (the "Revolving Credit Facility"). As
discussed in Note 7, the Revolving Credit Facility was obtained to: (a)
refinance outstanding indebtedness under a senior secured credit facility; (b)
finance the purchase of the Acquired Hercules Business; and (c) provide for the
ongoing working capital and other financing requirements of the Company,
including business consolidation activities, on a worldwide basis (see Note 3).
ACQUIRED FIBERITE ASSETS
On September 30, 1997, the Company acquired from Fiberite its satellite
business consisting of intangible assets and inventory, and certain
non-exclusive worldwide rights to other prepreg technologies, 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 $4,973 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.
54
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 2 -- BUSINESS ACQUISITIONS (CONTINUED)
The acquisition of the satellite business and certain technologies from
Fiberite on September 30, 1997 was accounted for using the purchase method, in
accordance with Accounting Principles Board Opinion No. 16 "Business
Combinations" ("APBO No. 16"). Under this method, substantially all of the
$37,000 purchase price, less the $8,000 write-off of the acquired in-process
research and technology expenses, was allocated to intangible assets.
Transaction costs in relation to the downsized transaction were not material.
ASSETS ACQUIRED AND LIABILITIES ASSUMED OR INCURRED
The acquisitions of the Acquired Ciba Business and the Acquired Hercules
Business (collectively, the "Acquired Businesses"), have been accounted for
using the purchase method, in accordance with APBO No. 16. The assets acquired
and the liabilities assumed or incurred in 1996 were:
<TABLE>
<CAPTION>
ACQUIRED ACQUIRED TOTAL
CIBA HERCULES ACQUIRED
BUSINESS BUSINESS BUSINESSES
---------- ---------- ----------
<S> <C> <C> <C>
Estimated fair values of assets acquired:
Accounts receivable.................................... $ 53,861 $ 16,819 $ 70,680
Inventories............................................ 63,048 22,289 85,337
Property, plant and equipment.......................... 119,446 110,611 230,057
Goodwill and other purchased intangibles............... 48,539 -- 48,539
Other assets........................................... 3,069 642 3,711
---------- ---------- ----------
Total assets acquired.................................. 287,963 150,361 438,324
---------- ---------- ----------
Estimated fair values of liabilities assumed or incurred:
Accounts payable and accrued liabilities............... 62,582 7,688 70,270
Notes payable and capital lease obligations............ 4,743 2,774 7,517
Deferred liabilities................................... 14,233 499 14,732
---------- ---------- ----------
Total liabilities assumed or incurred.................. 81,558 10,961 92,519
---------- ---------- ----------
Estimated fair values of net assets acquired............. $ 206,405 $ 139,400 $ 345,805
---------- ---------- ----------
---------- ---------- ----------
Purchase price:
Cash................................................... $ 25,000 $ 139,400 $ 164,400
Senior Subordinated Notes issued to Ciba, at aggregate
fair value........................................... 31,902 -- 31,902
Senior Demand Notes issued to Ciba..................... 5,329 -- 5,329
Hexcel common stock issued to Ciba, valued at $8 per
share................................................ 144,174 -- 144,174
---------- ---------- ----------
Aggregate purchase price............................... $ 206,405 $ 139,400 $ 345,805
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The acquisitions of the Acquired Businesses were subject to certain
post-closing adjustments, including the adjustment to the Senior Subordinated
Notes discussed above and the pension adjustment discussed in Note 6.
55
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 2 -- BUSINESS ACQUISITIONS (CONTINUED)
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The pro forma net sales, net loss and net loss per share of Hexcel for the
years ended December 31, 1996 and 1995, giving effect to the acquisitions of the
Acquired Businesses and the related issuance of the Convertible Subordinated
Notes (see Note 7) as if those transactions had occurred at the beginning of the
periods presented, were:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Pro forma net sales................................................... $ 798,515 $ 771,325
Pro forma net loss.................................................... (21,191) (10,189)
Pro forma basic and diluted net loss per share........................ (0.59) (0.30)
---------- ----------
---------- ----------
Shares used in computing pro forma basic and diluted net loss per
share............................................................... 36,003 33,614
---------- ----------
---------- ----------
</TABLE>
Pro forma adjustments giving effect to the Fiberite transaction as if it
occurred at the beginning of 1997 and 1996 would not have had a material effect
to the Company's consolidated financial statements.
NOTE 3 -- BUSINESS CONSOLIDATION
In May of 1996, 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 was estimated to be approximately
$58,000. Total expenses through December 31, 1997 were $54,700, excluding costs
associated with the Fiberite transaction which were not included in the original
program. The Company does not expect to incur any further significant additional
expenses in relation to this program. As of December 31, 1997, cash expenditures
remaining to complete this program are estimated at $12,000, which approximates
amounts accrued. Thus, when the program is complete, the Company expects that
cash expenditures (for expenses and capital, net of estimated proceeds from
asset sales) necessary to complete the program will approximate the initial
estimate of $51,000.
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 included the closure of the Anaheim, California
facility acquired in connection with the purchase of the Acquired Ciba Business,
the reorganization of the Company's manufacturing operations in Europe, the
consolidation of the Company's U.S. special process manufacturing activities,
and the integration of sales, marketing and administrative resources.
As of December 31, 1997, the primary remaining activities of the business
consolidation program relate to the European operations and the installation and
customer qualifications of equipment transferred from the Anaheim facility to
other U.S. locations. These qualification requirements increase the complexity,
cost and time of moving equipment and rationalizing manufacturing activities. As
a result, the Company continues to expect that the business consolidation
program will take to the end of 1998 to complete.
56
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 3 -- BUSINESS CONSOLIDATION (CONTINUED)
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, which approximated book value.
Total accrued business acquisition and consolidation expenses at December
31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
EMPLOYEE FACILITY
SEVERANCE CLOSURE &
AND EQUIPMENT FIBERITE
RELOCATION RELOCATION OTHER TRANSACTION TOTAL
----------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF JANUARY 1, 1996........................ -- -- -- -- --
Business acquisition and consolidation expenses...... $ 17,285 $ 10,488 $ 14,597 $ -- $ 42,370
Liabilities assumed or incurred in business
acquisitions....................................... 7,104 2,497 -- -- 9,601
Cash expenditures.................................... (5,306) (1,109) (5,164) -- (11,579)
Non-cash usage, including asset write-downs.......... -- (6,678) (8,357) -- (15,035)
----------- ----------- --------- ----------- ----------
BALANCE AS OF DECEMBER 31, 1996...................... 19,083 5,198 1,076 -- 25,357
Business acquisition and consolidation expenses...... (25) 7,651 4,744 12,973 25,343
Cash expenditures.................................... (6,644) (8,771) (5,207) (12,973) (33,595)
Non-cash usage, including asset write-downs, currency
translation effects and reclassifications.......... (2,759) (2,068) (105) -- (4,932)
----------- ----------- --------- ----------- ----------
BALANCE AS OF DECEMBER 31, 1997...................... $ 9,655 $ 2,010 $ 508 $ -- $ 12,173
----------- ----------- --------- ----------- ----------
----------- ----------- --------- ----------- ----------
</TABLE>
The consolidation program calls for the elimination of approximately 345
manufacturing, marketing and administrative positions at certain locations,
partially offset by the addition of new positions at other locations. As of
December 31, 1997, approximately 245 positions have been eliminated.
Accrued business consolidation costs of $12,173 as of December 31, 1997 were
included in "other accrued liabilities", and $21,780 and $3,577 as of December
31, 1996, were included in "other accrued liabilities" and "other non-current
liabilities," respectively, in the accompanying consolidated balance sheets.
During 1997 and 1996, business consolidation activities were financed with
operating cash flows and borrowings under the Revolving Credit Facility.
NOTE 4 -- INVENTORIES
Inventories as of December 31, 1997 and 1996, were:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials......................................................... $ 90,429 $ 66,055
Work in progress...................................................... 47,953 45,469
Finished goods........................................................ 26,939 34,360
---------- ----------
Inventories........................................................... $ 165,321 $ 145,884
---------- ----------
---------- ----------
</TABLE>
57
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1997 and 1996, were:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Land.............................................. $ 13,729 $ 19,253
Buildings......................................... 206,900 127,863
Equipment......................................... 268,287 321,057
----------- -----------
Property, plant and equipment..................... 488,916 468,173
Less accumulated depreciation..................... (157,439) (141,390)
----------- -----------
Net property, plant and equipment................. $ 331,477 $ 326,783
----------- -----------
----------- -----------
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1996 and 1995
was $33,214, $24,656 and $11,623, respectively.
NOTE 6 -- INTANGIBLES AND OTHER ASSETS
Intangibles and other assets as of December 31, 1997 and 1996, were:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Goodwill and other purchased intangibles, net of
accumulated amortization of $4,657 and $2,074 as
of December 31, 1997 and 1996, respectively..... $ 67,237 $ 47,692
Debt financing costs, net of accumulated
amortization of $2,487 and $877 as of December
31, 1997 and 1996, respectively................. 4,030 5,915
Prepaid pension asset............................. 8,619 --
Deferred income taxes............................. 9,901 --
Investments in joint ventures..................... -- 1,450
Other assets...................................... 3,272 2,965
---------- ----------
Intangibles and other assets...................... $ 93,059 $ 58,022
---------- ----------
---------- ----------
</TABLE>
GOODWILL AND OTHER PURCHASED INTANGIBLES
Goodwill and other purchased intangibles include certain intellectual
property acquired in connection with the purchases of the Acquired Ciba
Business, the Fiberite assets and the Hexcel-Fyfe joint venture (see below).
Amortization expense for these assets for the years ended December 31, 1997 and
1996, was $2,583 and $2,074, respectively.
DEBT FINANCING COSTS
Debt financing costs are deferred and amortized over the life of the related
debt. Unamortized debt financing costs relate to the Revolving Credit Facility
obtained in June of 1996, and to the Convertible Subordinated Notes issued in
July of 1996 (see Notes 2 and 7).
58
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 6 -- INTANGIBLES AND OTHER ASSETS (CONTINUED)
INVESTMENTS IN JOINT VENTURES
Investments in joint ventures are accounted for by the equity method. Equity
in the earnings of joint ventures were not material to Hexcel's consolidated
results of operations for 1997, 1996 or 1995.
As of December 31, 1997 and 1996, Hexcel owned a 45% and 43% equity interest
in DIC-Hexcel Limited ("DHL"), respectively, a joint venture with Dainippon Ink
and Chemicals, Inc. ("DIC"). On August 12, 1997, the Company sold its 40% equity
interest in Hexcel-Fyfe, LLC, to its joint venture partner, Fyfe Associates
Corporation, for net cash proceeds and the receipt of rights to certain
intangible assets that approximated the Company's investment. On December 31,
1996, the Company sold its 50% equity interest in Knytex Company, LLC to the
joint venture partner, Owens Corning Corporation, for net cash proceeds that
approximated the Company's investment.
The DHL joint venture, which owns and operates a manufacturing facility in
Komatsu, Japan, was formed in 1990 for the production and sale of Nomex
honeycomb, prepregs and decorative laminates for the Japanese market. In
December of 1996, Hexcel and DIC reached an agreement in principle to continue
the DHL joint venture and expand its operations. The Company and DIC agreed to
fund the joint venture's operations through 1998 by each contributing an
additional $3,250 in cash, payable in installments through 1998. Of this amount,
$2,000 was paid in 1997. As of December 31, 1997 and 1996, the Company's
liability with respect to funding the venture's activities, has been accrued for
in the accompanying consolidated balance sheets. In addition, the Company and
DIC agreed to contribute certain additional technology and product manufacturing
rights to DHL. Under the terms of the agreement in principle, the Company
remains contingently liable to pay DIC up to $4,500 with respect to DHL's bank
debt, but the possibility that such repayment will be required has diminished as
a result of the improvement in the venture's business prospects.
PREPAID PENSION ASSET
As part of the Acquired Ciba Business, the Company acquired a net pension
asset from a defined benefit plan covering employees of a United Kingdom
subsidiary. Pursuant to the terms of the purchase agreement, these employees
continued to participate in a defined benefit retirement plan sponsored by Ciba
up to January 1, 1997, at which time, the net pension asset was valued at $8,688
and was transferred to a newly created plan sponsored by the Company.
Accordingly, the Company recorded the $8,688 as a prepaid pension asset with a
corresponding reduction in goodwill. As of December 31, 1997, the prepaid
pension asset was $8,619, reflecting the net change for the year.
59
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7 -- NOTES PAYABLE
Notes payable, capital lease obligations and indebtedness to related parties
as of December 31, 1997 and 1996, were:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Revolving Credit Facility......................... $ 158,267 $ 98,656
European Credit and Overdraft Facilities.......... 13,909 23,405
Convertible Subordinated Notes, due 2003.......... 114,450 114,500
Convertible Subordinated Debentures, due 2011..... 25,625 25,625
Obligations Under IDRB Variable Rate Demand
Notes........................................... -- 8,450
Various notes payable............................. 680 1,212
---------- ----------
Total notes payable............................... 312,931 271,848
Capital lease obligations (see Note 8)............ 5,473 6,906
Senior Subordinated Notes Payable to CSC, net of
unamortized discount of $2,233 and $2,666 as of
December 31, 1997 and 1996, respectively........ 34,967 32,262
---------- ----------
Total notes payable, capital lease obligations and
indebtedness to related parties................. $ 353,371 $ 311,016
---------- ----------
---------- ----------
Notes payable and current maturities of long-term
liabilities..................................... $ 13,858 $ 23,835
Long-term notes payable and capital lease
obligations, less current maturities............ 304,546 254,919
Indebtedness to related parties................... 34,967 32,262
---------- ----------
Total notes payable, capital lease obligations and
indebtedness to related parties................. $ 353,371 $ 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
outstanding indebtedness under its current credit facility; (b) finance the
purchase of the Acquired Hercules Business; and (c) provide for the ongoing
working capital and other financing requirements of the Company, including
business consolidation activities, on a worldwide basis. The Revolving Credit
Facility provided for up to $254,600 of borrowing capacity and would have
expired in February 1999. As discussed in Note 24, the Revolving Credit Facility
was amended and restated in March 1998.
Interest on outstanding borrowings under the Revolving Credit Facility was
computed at an annual rate of 0.4% in excess of the applicable London interbank
rate or, at the option of Hexcel, at the base rate of the administrative agent
for the lenders. In addition, the Revolving Credit Facility was subject to a
commitment fee of approximately 0.2% per annum on the unused portion of the
facility. As of
December 31, 1997, letters of credit with an aggregate face amount of $3,700
were outstanding under the Revolving Credit Facility.
The Revolving Credit Facility was secured by a pledge of stock of certain of
Hexcel's subsidiaries. In addition, the Company was subject to various financial
covenants and restrictions under the Revolving Credit Facility, and was
generally prohibited from paying dividends or redeeming capital stock.
60
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7 -- NOTES PAYABLE (CONTINUED)
As a result of obtaining the Revolving Credit Facility and the corresponding
extinguishment of certain of the Company's credit facilities, Hexcel wrote off
$3,400 of capitalized debt financing costs in 1996. This amount is included in
"interest expense" in the accompanying consolidated statement of operations for
1996.
EUROPEAN CREDIT AND OVERDRAFT FACILITIES
In addition to the Revolving Credit Facility, certain of Hexcel's European
subsidiaries have access to limited credit and overdraft facilities provided by
various local lenders. These credit and overdraft facilities, which are only
available to finance certain activities by specific subsidiaries, are primarily
uncommitted facilities that are terminable at the discretion of the lenders. The
credit and overdraft facilities in use by the Company's European subsidiaries as
of December 31, 1997 and 1996, other than the Revolving Credit Facility, bear
interest at rates between 2.5% and 7.7% per year.
CONVERTIBLE SUBORDINATED NOTES, DUE 2003
In July of 1996, Hexcel completed an offering of $114,500 in convertible
subordinated notes due 2003 (the "Convertible Subordinated Notes"). The
Convertible Subordinated Notes carry an annual interest rate of 7% and are
convertible into Hexcel common stock at a conversion price of $15.81 per share,
subject to adjustment under certain conditions. Net proceeds of $111,351 from
this offering were used to repay outstanding borrowings under the Revolving
Credit Facility.
The Convertible Subordinated Notes are redeemable beginning in August of
1999, in whole or in part, at the option of Hexcel. The redemption prices range
from 103.5% to 100.0% of the outstanding principal amount, depending on the
period in which redemption occurs. As of December 31, 1997, $50 of the
Convertible Subordinated Notes had been converted resulting in the issuance of 3
shares of common stock.
CONVERTIBLE SUBORDINATED DEBENTURES, DUE 2011
The 7% convertible subordinated debentures, due 2011, are redeemable by
Hexcel under certain provisions, although any such redemption is restricted by
the terms of the Revolving Credit Facility. Mandatory redemption is scheduled to
begin in 2002 through annual sinking fund requirements. The debentures are
convertible prior to maturity into common stock of the Company at $30.72 per
share, subject to adjustment under certain conditions.
OBLIGATIONS UNDER IDRB VARIABLE RATE DEMAND NOTES
In 1997, Hexcel repaid in full various industrial development revenue bonds
("IDRBs") to obtain the benefit of reduced administration costs. The IDRBs had
original maturity dates after 2001 and were guaranteed by bank letters of credit
issued under the Revolving Credit Facility. The interest rates on the IDRBs were
variable and averaged 4.0% in 1997, 4.2% in 1996 and 6.2% in 1995.
SENIOR SUBORDINATED NOTES PAYABLE TO CSC
In connection with the purchase of the Acquired Ciba Business, Hexcel
delivered Senior Subordinated Notes to Ciba in an aggregate principal amount of
$34,928. Hexcel has also consented to an assignment by Ciba of Ciba's rights and
obligations under the Alliance Agreement to CSCH, and Ciba Specialty Chemicals
Corporation, a Delaware corporation (collectively "CSC"). In connection with the
assignment
61
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7 -- NOTES PAYABLE (CONTINUED)
of these rights and obligations, the Senior Subordinated Notes that were
previously payable to Ciba are now payable to CSC. In accordance with the terms
of the amended Strategic Alliance Agreement, Hexcel acquired certain assets of
the Ciba Distributors between January 1, 1997 and February 28, 1997, in exchange
for an undertaking to deliver additional Senior Subordinated Notes in an
aggregate principle amount of approximately $2,300. Upon delivery of these
additional Senior Subordinated Notes, the total aggregate principle amount of
Senior Subordinated Notes payable to CSC will be approximately $37,200.
At the date of issue, the aggregate fair value of the Senior Subordinated
Notes was $31,902, or $3,026 less than the aggregate principal amount. The
original discount of $3,026 reflects the absence of certain call protection
provisions from the terms of the Senior Subordinated Notes and the difference
between the stated interest rate on the Senior Subordinated Notes and the
estimated market rate for debt obligations of comparable quality and maturity.
This discount, which is amortized over the life of the Senior
Subordinated Notes, had an unamortized balance of $2,233 and $2,666 as of
December 31, 1997 and 1996, respectively.
The Senior Subordinated Notes are general unsecured obligations of Hexcel
that bear interest for three years at a rate of 7.5% per annum, payable
semiannually from February 29, 1996. The interest rate will increase to 10.5%
per annum on the third anniversary of the purchase of the Acquired Ciba Business
(February 28, 1999), and by an additional 0.5% per year thereafter until the
Senior Subordinated Notes mature in the year 2003.
As discussed in Note 9, Hexcel has various financial and other relationships
with CSC. Accordingly, the Company's net indebtedness to CSC under the Senior
Subordinated Notes has been classified as "indebtedness to related parties" in
the accompanying consolidated balance sheets.
AGGREGATE MATURITIES OF NOTES PAYABLE
Aggregate maturities of notes payable, excluding capital lease obligations
(see Note 8), as of December 31, 1997, were:
<TABLE>
<S> <C>
Payable during years ending December 31:
1998............................................ $ 13,511
1999............................................ 672
2000............................................ 147
2001............................................ 154
2002............................................ 1,856
2003 and thereafter............................. 331,558
---------
Total notes payable........................... $ 347,898
---------
---------
</TABLE>
At December 31, 1997, amounts owed under the Revolving Credit Facility
totaled $158,267. As discussed in Note 24, the Revolving Credit Facility was
amended and restated in March 1998. Under the amended terms, the facility was
extended to 2003, and accordingly, the above table reflects the amended due
date.
62
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 7 -- NOTES PAYABLE (CONTINUED)
ESTIMATED FAIR VALUES OF NOTES PAYABLE
The Revolving Credit Facility, and substantially all of the various European
credit facilities and other notes payable outstanding as of December 31, 1997
and 1996, are variable-rate debt obligations. Accordingly, management believes
that the estimated fair value of each of these debt obligations approximates the
respective book value.
The aggregate fair values of the Convertible Subordinated Notes, due 2003,
and the Convertible Subordinated Debentures, due 2011, are estimated on the
basis of quoted market prices, although trading in these debt securities is
limited and may not reflect fair value. The aggregate fair value of the
Convertible Subordinated Notes, due 2003, was approximately $196,000 and
$141,700 as of December 31, 1997 and 1996, respectively. The aggregate fair
value of the Convertible Subordinated Debentures, due 2011, was approximately
$25,500 and $24,000 as of December 31, 1997 and 1996, respectively.
NOTE 8 -- LEASING ARRANGEMENTS
Assets, accumulated depreciation and related liability balances under
capital leasing arrangements as of December 31, 1997 and 1996, were:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Property, plant and equipment..................... $ 10,197 $ 11,572
Less accumulated depreciation..................... (3,593) (2,927)
--------- ---------
Net property, plant and equipment................. $ 6,604 $ 8,645
--------- ---------
--------- ---------
Capital lease obligations......................... $ 5,473 $ 6,906
less current maturities........................... (347) (768)
--------- ---------
Long-term capital lease obligations, net.......... $ 5,126 $ 6,138
--------- ---------
--------- ---------
</TABLE>
Certain sales and administrative offices, data processing equipment, and
manufacturing facilities are leased under operating leases. Rental expense under
operating leases was $4,559 in 1997, $4,623 in 1996 and $2,871 in 1995.
Future minimum lease payments as of December 31, 1997, were:
<TABLE>
<CAPTION>
TYPE OF LEASE
----------------------
CAPITAL OPERATING
--------- -----------
<S> <C> <C>
Payable during years ending December 31:
1998............................................ $ 858 $ 3,935
1999............................................ 858 3,304
2000............................................ 783 1,987
2001............................................ 512 714
2002............................................ 512 233
2003 and thereafter............................. 5,948 1,402
--------- -----------
Total minimum lease payments.................. $ 9,471 $ 11,575
--------- -----------
--------- -----------
</TABLE>
Total minimum capital lease payments include $3,999 of imputed interest.
63
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 9 -- RELATED PARTIES
In connection with the purchase of the Acquired Ciba Business, Hexcel
delivered 18,022 newly issued shares of Hexcel common stock to Ciba,
representing 49.9% of the Hexcel common stock issued and outstanding at that
date. In addition, the Company and Ciba entered into the Alliance Agreement
which currently provides for, among other things, the designation by Ciba of
four of the Company's ten directors, and the approval of a majority of these
four designated directors for the taking of certain significant actions by the
Company. On February 21, 1997, the Company consented to an assignment by Ciba of
Ciba's rights and obligations under the Alliance Agreement to CSC. In connection
with the assignment of these rights and obligations, all of the Hexcel common
stock previously held by Ciba is now held by CSC.
As discussed in Notes 2 and 7, Hexcel has delivered Senior Subordinated
Notes in an aggregate principal amount of $34,928 to Ciba in connection with the
purchase of the Acquired Ciba Business and has undertaken to deliver
approximately $2,300 additional Senior Subordinated Notes in connection with the
acquisition of certain assets of the Ciba Distributors. In connection with the
assignment of Ciba's rights and obligations under the Alliance Agreement, the
Senior Subordinated Notes that were previously payable to Ciba will be payable
to CSC. During 1996, the Company also delivered Senior Demand Notes to Ciba in
an aggregate principle amount of $5,329. The Senior Demand Notes were presented
for payment and paid in full prior to December 31, 1996. Aggregate interest
expense on the Senior Subordinated Notes in 1997 and 1996 was $2,762 and $2,715,
respectively.
Hexcel purchases certain raw materials from various CSC subsidiaries, as
successor to Ciba subsidiaries. In addition, the Company sells certain finished
products to various CSC subsidiaries, including the Ciba Distributors. The
Company's aggregate purchases from CSC subsidiaries and their predecessor Ciba
subsidiaries for 1997 and for the period from March 1, 1996 through December 31,
1996, were $34,255 and $15,116, respectively. The Company's aggregate sales to
CSC subsidiaries and their predecessor Ciba subsidiaries for the same periods
were $5,620 and $32,408, respectively. These sales were primarily to the Ciba
Distributors pursuant to a distribution agreement, which expired February 28,
1997. In addition, in 1997 and 1996 the Company incurred $1,234 and $214,
respectively, of expenses related to the Acquired Ciba Business that are subject
to reimbursement by CSC as successor to Ciba under the terms of the Strategic
Alliance Agreement. As of December 31, 1997 and 1996, aggregate receivables from
CSC or CSC subsidiaries and their Ciba predecessors included in "accounts
receivable" in the accompanying consolidated balance sheets were $400 and
$5,951, respectively. Aggregate payables to CSC or CSC and their Ciba
predecessors included in "accounts payable" and "accrued liabilities" as of the
same dates were $1,196 and $1,812, respectively.
64
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 10 -- OTHER NON-CURRENT LIABILITIES
Other non-current liabilities as of December 31, 1997 and 1996, were:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Postretirement benefit liability (see Note 12).... $ 14,066 $ 13,726
Liability for environmental remediation
activities...................................... 5,080 7,070
Liability for business consolidation activities
(see Note 3).................................... -- 3,577
Liability for DIC-Hexcel Limited (see Note 6)..... -- 3,250
Pension and retirement liability (see Note 11).... 2,702 2,206
Deferred tax liability (see Note 13).............. 2,970 1,433
Other............................................. 10,998 15,152
--------- ---------
Other non-current liabilities..................... $ 35,816 $ 46,414
--------- ---------
--------- ---------
</TABLE>
NOTE 11 -- RETIREMENT PLANS
Hexcel maintains a retirement savings and contribution plan and a defined
benefit retirement plan covering most U.S. employees, except for certain
employees with union affiliations. In addition, the Company maintains a separate
retirement savings plan available to certain U.S. employees with union
affiliations, and contributes to a union sponsored multi-employer pension plan
covering these same employees. The Company also maintains various retirement
plans covering certain European employees, as well as defined benefit
supplemental retirement plans for eligible senior executives. The net expense to
the Company of all of these retirement plans was $11,500 in 1997, $9,107 in 1996
and $2,768 in 1995.
Under the U.S. retirement savings and contribution plan, eligible employees
may contribute up to 16% of their compensation to an individual retirement
savings account. Hexcel makes matching contributions to individual retirement
savings accounts equal to 50% of employee contributions, not to exceed 3% of
employee compensation. Furthermore, the Company makes profit sharing
contributions of up to an additional 4% of employee compensation when the
Company meets or exceeds certain annual performance targets. Matching
contributions to the U.S. retirement savings and contribution plan were $2,309
for 1997, $2,160 for 1996 and $1,290 for 1995. The profit sharing contributions
were $3,648 for 1997 and $3,236 for 1996. There was no profit sharing
contribution for 1995.
The U.S. defined benefit retirement plan is a career average pension plan
covering both hourly and salaried employees. Benefits are based on years of
service and the annual compensation of the employee. Hexcel's funding policy is
to contribute the minimum amount required by applicable regulations.
Hexcel maintains a separate retirement savings plan available to certain
U.S. employees with union affiliations of the composite structures business
acquired from Ciba on February 29, 1996. Under this plan, employees may
contribute up to 14% of their compensation to an individual retirement savings
account. There are no matching or profit sharing contributions. In addition, the
Company participates in a union sponsored multi-employer pension plan covering
these same employees. The Company's contributions to this plan were $1,326 for
1997 and $731 for 1996.
As part of the Acquired Ciba Business, the Company acquired a net pension
asset from a defined benefit retirement plan covering employees of a United
Kingdom subsidiary. Pursuant to the terms of the purchase agreement, these
employees continued to participate in a defined benefit retirement plan
65
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 11 -- RETIREMENT PLANS (CONTINUED)
sponsored by Ciba up to January 1, 1997, at which time, the accumulated benefit
obligation and net pension asset was valued and transferred to a newly created
plan sponsored by the Company.
The net periodic cost of Hexcel's defined benefit retirement plans for the
years ended December 31, 1997, 1996 and 1995, were:
<TABLE>
<CAPTION>
U.S. Plans European Plans
1997 1996 1995 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Service cost--benefits earned during the year..... $ 2,310 $ 2,365 $ 661 $ 1,933 $ 150
Interest cost on projected benefit obligation..... 817 646 660 2,168 132
Return on plan assets--actual..................... (739) (477) (1,103) (6,799) (109)
Net amortization and deferral..................... 265 273 1,260 4,002 --
--------- --------- --------- --------- ---------
Net periodic pension cost......................... $ 2,653 $ 2,807 $ 1,478 $ 1,304 $ 173
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The following table sets forth the funded status of the plans as of December
31, 1997 and 1996:
<TABLE>
<CAPTION>
U.S. Plans European Plans
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations--
Vested benefit obligation......................... $ 12,424 $ 9,082 $ 22,813 $ 2,760
Non-vested benefit obligation..................... 613 473 -- --
--------- --------- --------- ---------
Accumulated benefit obligation.................... $ 13,037 $ 9,555 $ 22,813 $ 2,760
--------- --------- --------- ---------
--------- --------- --------- ---------
Projected benefit obligation...................... $ 14,910 $ 11,070 $ 32,627 $ 3,494
Plan assets at fair value......................... 8,343 5,974 44,557 2,405
--------- --------- --------- ---------
Plan assets more (less) than projected benefit
obligation...................................... (6,567) (5,096) 11,930 (1,089)
Unrecognized net (gain) loss...................... 1,436 157 (3,311) --
Unrecognized net transition obligation............ 169 212 -- --
Unrecognized prior service cost................... 4 32 -- 1,183
--------- --------- --------- ---------
Prepaid (accrued) pension liability............... (4,958) (4,695) 8,619 94
--------- --------- --------- ---------
less current portion............................ 2,256 2,395 -- --
--------- --------- --------- ---------
Long-term portion prepaid (accrued) pension
liability....................................... $ (2,702) $ (2,300) $ 8,619 $ 94
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
66
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 11 -- RETIREMENT PLANS (CONTINUED)
Assumptions used to estimate the actuarial present value of benefit
obligations as of December 31, 1997, 1996 and 1995, were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
U.S. defined benefit retirement plans:
Discount rate................................... 7.5 % 7.5 % 7.0 %
Rate of increase in compensation.................. 4.5 % 4.5 % 4.0 %
Expected long-term rate of return on plan
assets.......................................... 9.0 % 9.0 % 9.5 %
</TABLE>
<TABLE>
<CAPTION>
1997 1996
------------- --------------
<S> <C> <C>
European defined benefit retirement plans:
Discount rates.................................. 6.5% - 7.0% 6.5% - 7.5%
Rates of increase in compensation............... 2.0% - 5.0% 2.0% - 4.5%
Expected long-term rates of return on plan
assets........................................ 6.5% - 7.5% 6.5% - 9.0%
</TABLE>
NOTE 12 -- POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
Hexcel provides certain postretirement health care and life insurance
benefits to eligible retirees. Substantially all U.S. employees hired on or
before December 31, 1995, are eligible for benefits, as well as certain U.S.
employees hired on February 29, 1996, in connection with the purchase of the
Acquired Ciba Business, and on June 27, 1996, in connection with the purchase of
the Acquired Hercules Business. Effective January 1, 1996, the Company amended
its postretirement benefit program to eliminate any benefits for employees hired
after December 31, 1995, other than senior executives and certain employees
hired in connection with business acquisitions.
Benefits are available to eligible employees who retire on or after age 58
after rendering at least 15 years of service to Hexcel, including years of
service rendered to the Acquired Ciba Business or the Acquired Hercules Business
prior to the dates of acquisition. Benefits consist of coverage of up to 50% of
the annual cost of certain health insurance plans, as well as annual life
insurance coverage equal to 65% of the final base pay of the retiree until the
age of 70. Upon reaching 70 years of age, life insurance coverage is reduced.
Effective January 1, 1996, Hexcel amended its postretirement benefit program to
limit health care benefit coverage to selected health insurance plans for the
majority of active employees.
Hexcel funds postretirement health care and life insurance benefit costs on
a pay-as-you-go basis and, for 1997, 1996 and 1995, made benefit payments of
approximately $750, $400 and $600, respectively. Net defined postretirement
benefit costs for the years ended December 31, 1997, 1996 and 1995, were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost--benefits earned during the year..... $ 91 $ 80 $ 279
Interest cost on accumulated postretirement
benefit obligation.............................. 752 701 780
Net amortization and deferral..................... (213) (222) (201)
--------- --------- ---------
Net periodic postretirement benefit cost.......... $ 630 $ 559 $ 858
--------- --------- ---------
--------- --------- ---------
</TABLE>
67
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 12 -- POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS (CONTINUED)
Defined postretirement benefit liabilities as of December 31, 1997 and 1996,
were:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................ $ 7,483 $ 7,302
Fully eligible active plan participants......... 1,897 1,658
Other active plan participants.................. 1,456 1,031
--------- ---------
10,836 9,991
Unrecognized prior service credit................. 556 890
Unrecognized net gain............................. 3,210 3,567
--------- ---------
Defined postretirement benefit liability.......... 14,602 14,448
less current portion of postretirement benefit
liability....................................... (536) (722)
--------- ---------
Deferred postretirement benefit liability (see
Note 10)........................................ $ 14,066 $ 13,726
--------- ---------
--------- ---------
</TABLE>
Two health care cost trend rates were used in measuring the accumulated
postretirement benefit obligation. For indemnity health care costs, the assumed
cost trend in 1997 was 10.0% for participants less than 65 years of age and 6.0%
for participants 65 years of age and older, gradually declining to 5.0% for both
age groups in the year 2002. For Health Maintenance Organization health care
costs, the assumed cost trend in 1997 was 7.0% for participants less than 65
years of age and 4.0% for participants 65 years of age and older, gradually
declining to 5.0% and 4.0%, respectively, in the year 1999.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% in 1997 and 7.5% in 1996. The rate of
increase in compensation used in determining the obligation was 4.5% in 1997 and
1996 and 4.0% in 1995.
If the health care cost trend rate assumptions were increased by 1.0%, the
accumulated postretirement benefit obligation as of December 31, 1997 would be
increased by 6.1%. The effect of this change on the sum of the service cost and
interest cost would be an increase of 5.6%.
68
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 13 -- INCOME TAXES
PROVISION FOR INCOME TAXES
Income (loss) before income taxes and the (benefit) provision for income
taxes from continuing operations for the years ended December 31, 1997, 1996 and
1995, were:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ---------
<S> <C> <C> <C>
Income (loss) before income taxes:
U.S....................................................... $ 24,197 $ (11,956) $ (1,027)
International............................................. 26,555 (3,798) 7,541
---------- ---------- ---------
Total income (loss) before income taxes..................... $ 50,752 $ (15,754) $ 6,514
---------- ---------- ---------
---------- ---------- ---------
Provision (benefit) for income taxes:
Current:
U.S....................................................... $ 798 $ (1,600) $ 197
International............................................. 9,527 5,556 3,445
---------- ---------- ---------
Current provision for income taxes.......................... 10,325 3,956 3,642
---------- ---------- ---------
Deferred:
U.S....................................................... (33,935) -- --
International............................................. 732 (520) (329)
---------- ---------- ---------
Deferred benefit for income taxes........................... (33,203) (520) (329)
---------- ---------- ---------
Total (benefit) provision for income taxes.................. $ (22,878) $ 3,436 $ 3,313
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
A reconciliation of the (benefit) provision to the U.S. federal statutory
income tax rate of 35%, 34% and 34% for the years ended December 31, 1997, 1996
and 1995, is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Provision (benefit) at U.S. federal statutory rate........... $ 17,763 $ (5,356) $ 2,215
U.S. state taxes, less federal tax benefit................... 519 21 (254)
Impact of different international tax rates, adjustments to
income tax accruals and other.............................. 18,773 (9,656) 492
Valuation allowance.......................................... (59,933) 18,427 860
---------- --------- ---------
Total (benefit) provision for income taxes................... $ (22,878) $ 3,436 $ 3,313
---------- --------- ---------
---------- --------- ---------
</TABLE>
In accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), in 1996 and 1995 the Company had
fully provided valuation allowance reserves against its net deferred tax assets
primarily in the U.S. and Belgium where there were uncertainties in generating
sufficient future taxable income. In 1997, the Company reversed $59.9 million of
its valuation allowance reserve as follows: $17.0 million due to current year
profitable U.S. operations, $39.0 million due to the Company's assessment that
the realization of the remaining U.S. net deferred tax assets is more likely
than not, and $3.9 million in Belgium due to a gain on sale of certain tangible
and intangible assets to other Hexcel subsidiaries. The Company continues to
reserve the balance of the net deferred tax asset related to its Belgium
operations.
69
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 13 -- INCOME TAXES (CONTINUED)
The Company has made no U.S. income tax provision for approximately $46,000
of undistributed earnings of international subsidiaries as of December 31, 1997.
Such earnings are considered to be permanently reinvested. The additional U.S.
income tax on these earnings, if repatriated, would be offset in part by foreign
tax credits.
DEFERRED INCOME TAXES
Deferred income taxes result from temporary differences between the
recognition of items for income tax purposes and financial reporting purposes.
Principal temporary differences as of December 31, 1997 and 1996, were:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net operating loss carryforwards...................................... $ 21,000 $ 33,922
Reserves and other, net............................................... 31,580 37,596
Accrued business acquisition and consolidation expenses............... 4,380 9,128
Accelerated depreciation and amortization............................. (16,690) (13,646)
Valuation allowance................................................... (8,500) (68,433)
---------- ----------
Net deferred tax asset (liability).................................... $ 31,770 $ (1,433)
---------- ----------
---------- ----------
</TABLE>
NET OPERATING LOSS CARRYFORWARDS
As of December 31, 1997, Hexcel had net operating loss ("NOL") carryforwards
for U.S. federal and Belgium income tax purposes of approximately $53,000 and
$5,000, respectively. The U.S. NOL carryforwards, which are available to offset
future taxable income, expire at various dates through the year 2010. As a
result of the ownership change, which occurred in connection with the purchase
of the Acquired Ciba Business, the Company has a limitation on the utilization
of U.S. NOL carryforwards of approximately $12,000 per year.
NOTE 14 -- STOCK-BASED INCENTIVE PLANS
The Hexcel Corporation Incentive Stock Plan as amended and restated
("Incentive Stock Plan"), authorizes the use of Hexcel common stock for
providing a variety of stock-based incentive awards to eligible employees,
officers, directors and consultants. The Incentive Stock Plan provides for
grants of stock options, stock appreciation rights, restricted stock and
restricted stock units, and other stock-based awards. In May 1997, Hexcel's
stockholders increased the aggregate number of shares of Hexcel common stock
available for use under the Incentive Stock Plan by 3,850 to 4,013. As of
December 31, 1997, 1,193 options were vested.
As of December 31, 1997 and 1996, the Company had outstanding a total of 352
and 286, respectively, of performance accelerated restricted stock units
("PARS"). Subject to certain conditions of employment, PARS vest in increments
through 2004, subject to accelerated vesting under certain circumstances, and
are convertible into an equal number of shares of Hexcel common stock. As of
December 31, 1997, no PARS were vested.
In May 1997, Hexcel's stockholders approved the Management Stock Purchase
Plan (the "MSPP"). The MSPP authorizes an aggregate of 150 shares of Hexcel
common stock for use by the Company in
70
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 14 -- STOCK-BASED INCENTIVE PLANS (CONTINUED)
providing stock-based incentive awards to senior executives and certain key
management employees. Eligible executives and employees may purchase Restricted
Stock Units ("Units") for up to 50% of their annual bonus pursuant to an
irrevocable election made previously. Each Unit is purchased at 80% of the fair
market value (as defined in the MSPP) of the Company's common stock at the date
the bonus becomes available and is restricted for a period of three years.
Subject to certain conditions of employment, the Units vest equally over a
period of three years, and upon expiration of the restricted period are
convertible on a one-to-one basis for shares of Hexcel common stock. No Units
had been purchased as of December 31, 1997.
In December 1997, the Board of Directors resolved to permit non-employee
directors to elect to receive a portion or all of their annual retainer fees in
the form of non-qualified stock options issued under the Incentive Stock Plan.
These options may be used to purchase common stock of the Company at a price of
50% of the fair market value at the date of grant. Options vest proportionately
over a period of one year from the date of grant. No such options had been
granted as of December 31, 1997.
Stock option data for the three years ended December 31, 1997, 1996 and
1995, were:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
----------- -----------
<S> <C> <C>
Options outstanding at January 1, 1995............ 468 $ 12.37
Options granted................................... 787 $ 5.63
Options exercised................................. (1) $ 7.56
Options expired or canceled....................... (240) $ 11.80
----------- -----------
Options outstanding at December 31, 1995.......... 1,014 $ 7.27
Options granted................................... 1,577 $ 12.69
Options exercised................................. (447) $ 9.40
Options expired or canceled....................... (85) $ 11.45
----------- -----------
Options outstanding at December 31, 1996.......... 2,059 $ 10.36
Options granted................................... 3,094 $ 18.24
Options exercised................................. (289) $ 9.64
Options expired or canceled....................... (25) $ 15.51
----------- -----------
Options outstanding at December 31, 1997.......... 4,839 $ 15.39
----------- -----------
----------- -----------
</TABLE>
71
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 14 -- STOCK-BASED INCENTIVE PLANS (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- ------------------------
WEIGHTED WEIGHTED
NUMBER OF WEIGHTED AVERAGE AVERAGE NUMBER OF AVERAGE
OPTIONS REMAINING LIFE EXERCISE OPTIONS EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
- ------------------------------------------------- ----------- ----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 4.75 - 5.00................................... 160 7.3 $ 4.75 160 $ 4.75
$ 5.01 - 10.00................................... 373 5.5 $ 5.99 335 $ 6.10
$10.01 - 15.00................................... 1,211 8.0 $ 12.43 648 $ 12.42
$15.01 - 20.00................................... 3,058 9.1 $ 18.13 49 $ 16.71
$20.01 - 25.00................................... 15 9.2 $ 20.13 -- --
$25.01 - 30.00................................... 20 9.6 $ 27.39 1 $ 29.38
$30.01 - 32.06................................... 2 9.2 $ 30.49 -- $ 32.06
--
----------- ----------- ----------- -----------
$ 4.75 - 32.06................................... 4,839 8.5 $ 15.39 1,193 $ 9.80
-- --
--
--
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN ("ESPP")
In July 1997, the Company established an ESPP to provide eligible employees
an additional opportunity to share in the ownership of Hexcel. The maximum
number of shares of common stock reserved for issuance under the ESPP is 200.
Under the ESPP, eligible employees may contribute up to 10% of their base
earnings toward the quarterly purchase of the Company's common stock at a
purchase price equal to 85% of the fair market value of the common stock on the
purchase date. During 1997, approximately 3 shares of common stock were issued
under the ESPP.
PRO FORMA DISCLOSURES
In 1996, Hexcel adopted the disclosure requirements of SFAS 123, which
provide for the disclosure of pro forma net earnings and net earnings per share
as if the fair value method were used to account for stock-based employee
incentive plans. Pursuant to SFAS 123, the Company has elected to continue to
use the intrinsic value method to account for its stock option plans in the
accompanying consolidated financial statements, in accordance with APBO No. 25.
If compensation expense had been determined for stock options granted in
1997, 1996 and 1995 using the fair value method at the date of grant, consistent
with the provisions of SFAS 123, Hexcel's pro forma net income (loss) and
diluted income (loss) per share would have been as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ---------- ---------
<S> <C> <C> <C>
Net income (loss), as reported.................... $ 73,630 $ (19,190) $ 2,733
Pro forma compensation adjustment................. (6,275) (43) (1,029)
--------- ---------- ---------
Pro forma net income (loss)....................... $ 67,355 $ (19,233) $ 1,704
--------- ---------- ---------
--------- ---------- ---------
Diluted net income (loss) per share, as
reported........................................ $ 1.74 $ (0.58) $ 0.17
Pro forma compensation adjustment................. (0.14) 0.02 (0.06)
--------- ---------- ---------
Pro forma diluted net income (loss) per share..... $ 1.60 $ (0.56) $ 0.11
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
72
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 14 -- STOCK-BASED INCENTIVE PLANS (CONTINUED)
The weighted average fair value of options granted during 1997, 1996 and
1995 were $18.24, $12.75 and $5.63, respectively. The following ranges of
assumptions were used in the Black-Scholes pricing models for options granted in
1997, 1996 and 1995: risk-free interest of 5.6% to 6.2%, estimated volatility of
40% to 49%, and an expected life of 3.6 years to 4.7.
During 1996, the Company recognized $3,635 of compensation expense under the
intrinsic value method resulting from stock options which vested in connection
with the purchase of the Acquired Ciba Business. This compensation expense was
based on the difference between the exercise price of the stock options granted
and the market price of Hexcel common stock on the date that the Company's
stockholders approved the Incentive Stock Plan under which these options were
granted. The recognition of compensation expense in connection with these stock
options resulted in a corresponding $3,635 increase in the additional paid-in
capital of the Company.
NOTE 15 -- EARNINGS PER SHARE
In the fourth quarter of 1997, Hexcel adopted SFAS 128. SFAS 128 requires
the presentation of "Basic" earnings per share which represents net earnings
divided by the weighted average shares outstanding excluding all potential
common shares. A dual presentation of "Diluted" earnings per share reflecting
the dilutive effects of all potential common shares is also required. The
Diluted presentation is similar to fully diluted earnings per share under the
prior accounting standard.
73
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 15 -- EARNINGS PER SHARE (CONTINUED)
Computations of basic and diluted earnings (loss) per share for the years
ended December 31, 1997, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ---------- ---------
<S> <C> <C> <C>
Basic earnings (loss) per share:
Net income (loss) from continuing operations...... $ 73,630 $ (19,190) $ 3,201
--------- ---------- ---------
Weighted average common shares outstanding........ 36,748 33,351 15,605
--------- ---------- ---------
Basic earnings (loss) per share................... $ 2.00 $ (0.58) $ 0.21
--------- ---------- ---------
--------- ---------- ---------
Diluted earnings (loss) per share:
Net income (loss) from continuing operations...... $ 73,630 $ (19,190) $ 3,201
Effect of dilutive securities--
Senior Subordinated Notes, due 2003............. 5,087 -- --
Senior Subordinated Debentures, due 2011........ 1,111 -- --
--------- ---------- ---------
Adjusted net income (loss) from
continuing operations........................... $ 79,828 $ (19,190) $ 3,201
--------- ---------- ---------
Weighted average common shares outstanding........ 36,748 33,351 15,605
Effect of dilutive securities--
Stock options................................... 1,176 -- 137
Senior Subordinated Notes, due 2003............. 7,239 -- --
Senior Subordinated Debentures, due 2011........ 834 -- --
--------- ---------- ---------
Adjusted weighted average common shares
outstanding..................................... 45,997 33,351 15,742
--------- ---------- ---------
Diluted earnings (loss) per share................. $ 1.74 $ (0.58) $ 0.20
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The Convertible Subordinated Notes, due 2003, which were issued in 1996, and
the Convertible Subordinated Debentures, due 2011, were excluded from the 1996
and 1995 computations of diluted earnings (loss) per share, as applicable, as
they were antidilutive. Substantially all of the Company's stock options were
included in the calculation of diluted earnings per share for the year ended
December 31, 1997.
NOTE 16 -- CONTINGENCIES
Hexcel is involved in litigation, investigations and claims arising out of
the conduct of its business, including those relating to government contracts,
commercial transactions, and environmental, health and safety matters. The
Company estimates its liabilities resulting from such matters based on a variety
of factors, including outstanding legal claims and proposed settlements,
assessments by internal and external counsel of pending or threatened
litigation, and assessments by environmental engineers and consultants of
potential environmental liabilities and remediation costs. Such estimates
exclude counterclaims against other third parties. Such estimates are not
discounted to reflect the time value of money due to the uncertainty in
estimating the timing of the expenditures, which may extend over several years.
Although it is impossible to determine the level of future expenditures for
legal, environmental and related matters with any degree of certainty, it is the
Company's opinion, based on available information, that it is unlikely
74
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 16 -- CONTINGENCIES (CONTINUED)
that these matters, individually or in the aggregate, will have a material
adverse effect on the consolidated financial position, results of operations or
cash flows of the Company.
LEGAL AND ENVIRONMENTAL CLAIMS AND PROCEEDINGS
Hexcel has been named as a potentially responsible party with respect to
several hazardous waste disposal sites that it does not own or possess which are
included on the Superfund National Priority List of the U.S. Environmental
Protection Agency or on equivalent lists of various state governments. The
Company believes that its liability with respect to these sites is not material.
Pursuant to the New Jersey Environmental Responsibility and Clean-Up Act,
Hexcel signed an administrative consent order to pay for the environmental
remediation of a manufacturing facility it owns and formerly operated in Lodi,
New Jersey. The Company's estimate of the remaining cost to satisfy this consent
order is accrued in the accompanying consolidated balance sheets. The ultimate
cost of remediating the Lodi site will depend on developing circumstances.
In connection with the purchase of the Acquired Ciba Business, Hexcel
assumed various liabilities including a liability with respect to certain
environmental remediation activities at an acquired facility in Kent,
Washington. The Company is a party to a cost sharing agreement regarding the
operation of certain environmental remediation systems necessary to satisfy a
post-closure care permit issued to a previous owner of the Kent site by the U.S.
Environmental Protection Agency. Under the terms of the cost sharing agreement,
the Company is obligated to reimburse the previous owner for a portion of the
cost of the required remediation activities. The Company's estimate of its share
of the cost is accrued in the accompanying consolidated balance sheets as of
December 31, 1997 and 1996.
PRODUCT CLAIMS
In 1993, Hexcel became aware of an aluminum honeycomb sandwich panel
delamination problem with panels produced by its wholly-owned Belgium
subsidiary, Hexcel Composites S.A., and installed in rail cars in France and
Spain. Certain customers have alleged that Hexcel Composites S.A. is responsible
for the problem. The Company and its insurer continue to investigate these
claims. The Company is also working with the customers to repair or replace
panels when necessary, with certain costs to be allocated upon determination of
responsibility for the delamination. Two customers in France requested that a
court appoint experts to investigate the claims; to date, the experts have not
reported any conclusions. The Company's primary insurer for this matter has
agreed to fund legal representation and to provide coverage of the claim to the
extent of the policy limit. The Company believes that, based on available
information, it is unlikely that these claims will have a material adverse
effect on the consolidated financial position, results of operations or cash
flows of the Company.
U.S. GOVERNMENT CLAIMS
Hexcel, as a defense subcontractor, is subject to U.S. government audits and
reviews of negotiations, performance, cost classifications, accounting and
general practices relating to government contracts. Under the direction of the
Corporate Administrative Contracting Officer ("CACO"), the Defense Contract
Audit Agency ("DCAA") reviews cost accounting and business practices of
government contractors and subcontractors, including the Company. In 1996, the
Company was engaged in discussions with the CACO and the DCAA regarding a number
of cost accounting issues identified during the course
75
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 16 -- CONTINGENCIES (CONTINUED)
of various audits performed by the DCAA. The Company reached an agreement with
the CACO and the DCAA that resolved the primary issues identified during the
course of these audits. Under the terms of the agreement, the Company paid the
U.S. federal government $1,314 in exchange for the irrevocable discharge of any
claims with respect to the issues that were resolved.
NOTE 17 -- RAW MATERIALS, SIGNIFICANT CUSTOMERS AND MARKETS
Hexcel purchases most of the raw materials used in production. Several key
materials are available from relatively few sources, and in many cases the cost
of product qualification makes it impractical to develop multiple sources of
supply. The unavailability of these materials, which the Company does not
anticipate, could have a material adverse effect on sales and earnings.
The Boeing Company ("Boeing") and Boeing subcontractors accounted for
approximately 36% of 1997 sales, 22% of 1996 sales and 21% of 1995 sales. The
Airbus Industrie ("Airbus") consortium and Airbus subcontractors accounted for
approximately 10% of 1997 and 1996 sales, and less than 10% of 1995 sales. The
loss of all or a significant portion of the business with Boeing or Airbus,
which Hexcel does not anticipate, could have a material adverse effect on sales
and earnings.
Net sales by market for the years ended December 31, 1997, 1996 and 1995,
were:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Commercial aerospace.............................................. 64% 56% 45%
Space and defense................................................. 9 11 11
Recreation........................................................ 7 10 9
General industrial and other...................................... 20 23 35
--------- --------- ---------
Net sales......................................................... 100% 100% 100%
--------- --------- ---------
--------- --------- ---------
</TABLE>
76
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 18 -- BUSINESS SEGMENT DATA
Hexcel operates within a single business segment: Advanced Structural
Materials. The following table summarizes certain financial data for continuing
operations by geographic area as of December 31, 1997, 1996 and 1995, and for
the years then ended:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
Net sales to non-affiliates:
U.S................................................... $ 598,555 $ 394,524 $ 197,665
International......................................... 338,300 300,727 152,573
---------- ----------- ----------
Consolidated.......................................... $ 936,855 $ 695,251 $ 350,238
---------- ----------- ----------
---------- ----------- ----------
Income (loss) before income taxes:
U.S................................................... $ 34,684 $ (2,934) $ 2,912
International......................................... 16,068 (12,820) 3,602
---------- ----------- ----------
Consolidated.......................................... $ 50,752 $ (15,754) $ 6,514
---------- ----------- ----------
---------- ----------- ----------
Total assets:
U.S................................................... $ 547,471 $ 429,025 $ 134,972
International......................................... 264,115 272,711 95,630
---------- ----------- ----------
Consolidated.......................................... $ 811,586 $ 701,736 $ 230,602
---------- ----------- ----------
---------- ----------- ----------
Capital expenditures:
U.S................................................... $ 40,667 $ 27,217 $ 7,729
International......................................... 16,702 16,352 4,415
---------- ----------- ----------
Consolidated.......................................... $ 57,369 $ 43,569 $ 12,144
---------- ----------- ----------
---------- ----------- ----------
Depreciation and amortization:
U.S................................................... $ 22,348 $ 15,239 $ 6,528
International......................................... 13,449 11,491 5,095
---------- ----------- ----------
Consolidated.......................................... $ 35,797 $ 26,730 $ 11,623
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
The international segment is comprised primarily of operations in Western
Europe conducted by various European subsidiaries. International net sales
consist of the net sales of these European subsidiaries, sold primarily in
Europe.
U.S. net sales include U.S. exports to non-affiliates of $70,875 in 1997,
$53,333 in 1996 and $18,092 in 1995. Transfers from the Company's U.S.
subsidiaries to its international subsidiaries for the years ended December 31,
1997, 1996 and 1995 were $44,650, $30,390 and $18,590, respectively. Transfers
from the Company's international subsidiaries to its U.S. subsidiaries for the
years ended December 31, 1997, 1996 and 1995 were $22,700, $11,480 and $4,380,
respectively. Transfers between geographic areas are recorded on the basis of
arm's length prices established by the Company.
To compute income (loss) before income taxes, Hexcel allocated
administrative expenses to the international segment of $10,487 in 1997, $9,022
in 1996 and $3,939 in 1995.
77
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 19 -- SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information, including non-cash financing and
investing activities, for the years ended December 31, 1997, 1996 and 1995,
consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ---------- ---------
<S> <C> <C> <C>
Cash paid for:
Interest..................................................... $ 22,300 $ 14,061 $ 8,345
Taxes........................................................ 3,929 8,911 3,864
--------- ---------- ---------
Non-cash items:
Debt issued in connection with Ciba acquisition.............. -- 37,231 --
Common stock issued in connection with Ciba Acquisition...... -- 144,174 --
Conversion of Senior Subordinated Notes...................... 50 -- --
Compensation expense in connection with the issuance of
common stock (see Note 14)................................. -- 3,635 --
</TABLE>
NOTE 20 -- OTHER INCOME, NET
Other income of $2,994 recognized in 1996 is largely attributable to the
receipt of an additional $1,560 of cash in connection with the disposition of
the Chandler, Arizona manufacturing facility and certain related assets in 1994,
and to the receipt of $1,054 in partial settlement of a claim arising from the
sale of certain assets in 1991.
Other income of $791 recognized in 1995 is largely attributable to the
receipt of an additional $600 of cash in connection with the disposition of the
Chandler, Arizona manufacturing facility and certain related assets in 1994.
Hexcel sold its Chandler, Arizona manufacturing facility and certain related
assets, including technology, to Northrop Grumman Corporation ("Northrop") in
1994. Under the terms of the Chandler transaction, Hexcel retained a
royalty-free, non-exclusive license to use the technology sold to Northrop in
non-military applications. In addition, the Company will receive royalties from
Northrop on certain applications of the technology by Northrop. The Company
received net cash proceeds of $1,560 and $27,294 in relation to this sale in
1996 and 1995, respectively.
NOTE 21 -- BANKRUPTCY REORGANIZATION
On January 12, 1995, the U.S. Bankruptcy Court for the Northern District of
California entered an order dated January 10, 1995, confirming the First Amended
Plan of Reorganization (the "Reorganization Plan") proposed by Hexcel and the
Official Committee of Equity Security Holders (the "Equity Committee"). On
February 9, 1995, the Reorganization Plan became effective and Hexcel
Corporation (a Delaware corporation) emerged from the bankruptcy reorganization
proceedings which had begun on December 6, 1993, when Hexcel filed a voluntary
petition for relief under the provisions of Chapter 11 of the federal bankruptcy
laws.
The Reorganization Plan which became effective on February 9, 1995 provided
for, among other things: (a) the completion of the first closing under a standby
purchase commitment whereby Mutual Series Fund Inc. ("Mutual Series") purchased
1,946 shares of newly issued Hexcel common stock for
78
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 21 -- BANKRUPTCY REORGANIZATION (CONTINUED)
$9,000 and loaned the Company $41,000 as an advance against the proceeds of a
subscription rights offering for additional shares of Hexcel common stock; and
(b) the reinstatement or payment in full, with interest, of all allowed claims,
including prepetition accounts payable and notes payable. The subscription
rights offering concluded on March 27, 1995, with the issuance of an additional
7,156 shares of Hexcel common stock. The resulting cash proceeds of $33,098 were
used to reduce the outstanding balance of the loan from Mutual Series. The
second closing under the standby purchase agreement was completed on April 6,
1995, with the issuance of an additional 1,590 shares of Hexcel common stock to
Mutual Series, the issuance of an additional 108 shares of Hexcel common stock
to John J. Lee, the Company's Chief Executive Officer, and the retirement of the
remaining balance of the Mutual Series loan.
The Reorganization Plan provided for the reinstatement or payment in full,
with interest, of all allowed claims, including prepetition accounts payable and
notes payable. On February 9, 1995, Hexcel paid $78,144 in prepetition claims
and interest, and reinstated another $60,575 in prepetition liabilities. The
payment of claims and interest on February 9, 1995 was financed with: (a) cash
proceeds of $26,694 received in the first quarter of 1995 from the sale of the
Company's Chandler, Arizona manufacturing facility and certain related assets
(see Note 20); (b) the $50,000 in cash received from Mutual Series in connection
with the standby purchase agreement; and (c) borrowings under a $45,000 U.S.
credit facility obtained on February 9, 1995. This $45,000 U.S. credit facility
was subsequently replaced by a secured credit facility on February 29, 1996,
which in turn was replaced by the Revolving Credit Facility on June 27, 1996
(see Notes 2 and 7).
Professional fees and other costs directly related to bankruptcy proceedings
were expensed as incurred, and have been reflected in the accompanying
consolidated statements of operations as "bankruptcy reorganization expenses."
Bankruptcy reorganization expenses consisted primarily of professional fees paid
to legal and financial advisors of Hexcel, the Equity Committee and the Official
Committee of Unsecured Creditors. In addition, these expenses included
incentives for employees to remain with the Company for the duration of
bankruptcy proceedings and the write-off of previously capitalized costs related
to the issuance of prepetition debt.
NOTE 22 -- DISCONTINUED OPERATIONS
In October of 1995, the Company sold its U.S. resins operations for net cash
proceeds that approximated the net book value of the assets sold. This sale,
which completed the divestiture of the Company's resins business, has been
accounted for as a discontinued operation in the accompanying consolidated
statements of operations and cash flows for 1995. The net sales of the
discontinued resins business were $6,944 in 1995.
79
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 23 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for the years ended December 31, 1997 and 1996,
were:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1997
Net sales.................................... $ 214,009 $ 241,629 $ 226,611 $ 254,606
Gross margin................................. 46,889 57,818 54,967 62,958
Business acquisition and consolidation
expenses................................... (2,899) (2,818) (15,433) (4,193)
Operating income............................. 16,384 24,516 9,331 26,226
Net income................................... 8,226 15,135 37,948 12,321
Earnings per share
Basic...................................... $ 0.22 $ 0.41 $ 1.03 $ 0.33
Diluted.................................... 0.22 0.38 0.87 0.30
Dividends per share.......................... -- -- -- --
Market price:
High....................................... $ 21.38 $ 20.00 $ 30.25 $ 31.75
Low........................................ 16.00 16.38 18.75 22.25
1996
Net sales.................................... $ 126,418 $ 166,770 $ 189,542 $ 212,521
Gross margin................................. 26,783 35,188 35,813 43,525
Business acquisition and consolidation
expenses................................... (5,211) (29,209) (1,382) (6,568)
Operating income (loss)...................... 4,090 (17,900) 8,789 7,810
Net income (loss)............................ 1,848 (23,667) 346 2,283
Basic and diluted net income (loss) per
share...................................... $ 0.07 $ (0.65) $ 0.01 $ 0.06
Dividends per share.......................... -- -- -- --
Market price:
High....................................... $ 13.13 $ 16.00 $ 20.00 $ 19.88
Low........................................ 10.63 11.50 12.75 15.75
</TABLE>
For the nine months ended September 30, 1997 and for the year ended December
31, 1996, except for the $39,000 reversal of the U.S. tax valuation allowance
reserve on September 30, 1997, there was no net federal tax provision recorded
on the Company's U.S. income (loss). Third quarter 1997 results include both the
$39,000 reversal of the U.S. tax valuation allowance reserve and an additional
charge of $13,000 to business acquisition and consolidation expenses in
connection with the Company's acquisition of the Fiberite assets. In addition,
first quarter 1996 results include other income of $2,697 (see Note 20).
NOTE 24 -- SUBSEQUENT EVENTS (UNAUDITED)
REVOLVING CREDIT FACILITY
On March 5, 1998, the Company amended and restated its Revolving Credit
Facility (the "Amended Facility"). The Amended Facility provides for borrowing
capacity of up to $355,000 and extends the expiration date to March 2003.
Depending on certain predetermined ratios and other conditions, interest
80
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 24 -- SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
on outstanding borrowings under the Amended Facility is computed at an annual
rate ranging from 0.313 to 1.125% in excess of the applicable London interbank
rate or, at the option of Hexcel, at the base rate of the administrative agent
for the lenders. In addition, the Amended Facility is subject to a commitment
fee ranging from approximately 0.188 to 0.375% per annum of the total facility.
The Amended Facility is secured by a pledge of stock of certain of Hexcel's
subsidiaries. In addition, the Company continues to be subject to various
financial covenants and restrictions, and is generally prohibited from paying
dividends or redeeming capital stock.
JOINT VENTURES
In January 1998, the Company reached an agreement in principle with Boeing
and Aviation Industries of China to form a joint venture, BHA Aero Composite
Parts Co., Ltd., to manufacture composite parts for secondary structures and
interior applications on commercial aircraft. This joint venture will be located
in Tianjin, China. In February 1998, the Company signed an agreement with
Boeing, Sime Darby Berhad and Malaysia Helicopter Services to form another joint
venture, Asian Composite Manufacturing Sdn. Bhd., to manufacture composite parts
for secondary structures for commercial aircraft. This joint venture will be
located in Alor Setar, Malaysia. Products manufactured by both joint ventures
will be shipped to the Company's Kent, Washington facility for final assembly,
inspection and shipment to Boeing as well as other customers worldwide. It is
anticipated that the first parts will be delivered to customers in 2000. The
Company's total estimated financial commitment to both of these joint ventures
will be approximately $31,000, which is expected to be made in increments
through 2000. However, completion of these projects and related investments
remain subject to certain significant conditions, including U.S. and foreign
government approvals.
STOCK-BASED INCENTIVE PLAN
On February 5, 1998, the Company adopted the 1998 Broad Based Stock
Incentive Plan (the "Broad Based Plan"), which authorizes the use of Hexcel
common stock for providing a variety of stock-based incentive awards to eligible
employees and consultants (but not to directors, officers and related
consultants). The Broad Based Plan provides for grants of stock options, stock
appreciation rights, restricted stock and restricted stock units, and other
stock-based awards. The aggregate number of shares of Hexcel common stock
available under the Broad Based Plan is 500.
81
<PAGE>
EXHIBIT 2.1(d)
CIBA SPECIALTY CHEMICALS HOLDING INC.
CH 4002
BASLE, SWITZERLAND
February 21, 1997
LETTER AGREEMENT
Dear Sirs:
We refer to the Strategic Alliance Agreement dated as of September
29, 1995 among Ciba-Geigy Limited ("Ciba"), Ciba-Geigy corporation ("CGC")
and Hexcel Corporation ("Hexcel"), as amended (the "SAA"), the Ancillary
Agreements (as defined in the SAA) and the Retention Agreement dated as of
June 27, 1996, between Hexcel and Ciba (the "Retention Agreement"), and
collectively with the SAA and the Ancillary Agreement, the "Agreements").
Capitalized terms used in this Letter Agreement but not defined herein shall
have the meanings set forth in the SAA.
Ciba and Sandoz Limited ("Sandoz") effected a business combination
on December 20, 1996 (the "Combination"), forming Novartis Inc., a Swiss
corporation ("Novartis"). Ciba previously formed a new subsidiary, Ciba
Specialty Chemicals Holding Inc. ("SpinCo"), the holding company for
Novartis' (formerly Ciba's) specialty chemicals businesses (including its
direct or indirect interest in Hexcel Common and Senior Subordinated Debt and
its rights and obligations under the Agreements) and plans to distribute the
stock of SpinCo on a pro rata basis to the stockholders of Novartis (the
"Spin-off").
In connection with the Spin-off:
1. Hexcel hereby consents to the consummation of the Spin-off
and, in connection therewith, to the assignment to and the assumption by
SpinCo and any of its wholly-owned Subsidiaries (by operation of law or
otherwise in a manner reasonably satisfactory to Hexcel) of the Agreements.
Such consent is being granted by Hexcel subject to the following: (a) the
consummation of the Spin-off and the related assignments and assumptions will
have no adverse consequences to Hexcel under the revolving credit facility as
in effect on the date hereof and entered into by Hexcel and certain of its
Subsidiaries in connection with Hexcel's acquisition of Hercules' Composite
Products Division (the "Credit Facility"), (b) SpinCo will pay (or reimburse
Hexcel for) any and all out-of-pocket fees and/or expenses incurred in
connection with obtaining any required consents to or waivers regarding the
Spin-off and the related and assumptions under the Credit Facility and (c)
immediately after the Spin-off, SpinCo will contain Ciba's former Additives,
Pigments, Polymers, Textile Dyes and Chemicals Divisions. SpinCo
<PAGE>
acknowledges that such consent shall be null and void if any of the foregoing
conditions are not satisfied.
2. As a result of the Combination and the Spin-off, the
Agreements shall be deemed amended so that all references therein to Ciba, a
Subsidiary of Ciba or the term "Ciba" shall, subject to the effectiveness of
the foregoing consents, effective upon consummation of the Spin-off, be
references to SpinCo, a Subsidiary of SpinCo or the name of SpinCo, as the
case may be.
3. Subject to the effectiveness of the foregoing consents, (a)
Hexcel waives any violations of the Agreements that may result solely from
the consummation of the Spin-off, (b) Hexcel confirms that, after giving
effect to this Letter Agreement, consummation of the Spin-off will not
conflict with or give rise to any right of termination, cancellation or
acceleration by Hexcel or any of its Subsidiaries, or the loss by Ciba,
Novartis, SpinCo or any of their respective Subsidiaries of any right (other
than by virtue of having assigned such right to and in favor of SpinCo or any
of its Subsidiaries, as the case may be, as contemplated by this Letter
Agreement), under the Agreements and (c) upon consummation of the Spin-off,
Hexcel releases Novartis and its Subsidiaries from any and all obligations
under the Agreements, whether or not existing on the date of this Letter
Agreement.
4. For purposes of paragraph 1, adverse consequences shall mean
(a) any and all fees, costs, expenses and other adverse consequences
(including any increase in interest rates) under the Credit Facility that
result solely from the Spin-off or a Default or Event of Default under
Sections 15.1(m), (n), (o) or (p) of the Credit Facility resulting solely
from the Spin-off (a "Spin-off Event or Default"), if at the time of the
Spin-off there are no other Defaults or Events of Defaults, as defined in the
Credit Facility, and (b) in the event that any other Default, Event of
Default or other adverse consequence occurs under the Credit Facility (other
than a Spin-off Event of Default), only those fees, costs, expenses and other
adverse consequences (including any increase in interest rates) that the
lenders under the Credit Facility (after having first met in good faith
jointly with SpinCo and Hexcel representatives) specifically identify in
writing as attributable solely to the Spin-off and/or a Spin-off Event of
Default. The fees, costs and expenses required to be paid or reimbursed by
SpinCo or other adverse consequences for which SpinCo is responsible under
this Letter Agreement shall be limited to solely to those fees, costs,
expenses and other adverse consequences as described in this paragraph 4, and
upon (i) payment of all such fees, costs and expenses by SpinCo or (ii)
resolution of each other adverse consequence by SpinCo in a manner reasonably
satisfactory to Hexcel no further action shall be required and no such
adverse consequence shall be deemed to have occurred hereunder.
5. SpinCo agrees to provide reasonable prior notice to Hexcel as
to the timing of the spin-off and, SpinCo and Hexcel agree to cooperate with
each other in negotiating jointly in good faith with the lenders to obtain
any necessary consents or waivers, reduce or obviate any fees, costs and
expenses and minimize and otherwise resolve any other adverse consequences
for which SpinCo is responsible under paragraph 4 of this Letter Agreement.
Notwithstanding anything herein to the contrary, SpinCo shall
retain without prejudice its right to assert that any consent or waiver by
Hexcel referred to in this Letter
<PAGE>
Agreement is not necessary in order to consummate the Spin-off without
affecting any party's rights under any particular Agreement, and Hexcel shall
retain without prejudice its right to assert that any such consent or waiver
is necessary.
The provisions of this Letter Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law.
As used herein, the term "Including" means including, without limitation.
Except as expressly set forth herein, each of the Agreements shall remain in
full force and effect.
If the foregoing is in accordance with your understanding of our
agreement, please sign where indicated below and return a copy of the same to
the undersigned, whereupon this Letter Agreement shall represent a binding
agreement between SpinCo and Hexcel
Very truly Yours,
CIBA SPECIALTY CHEMICALS
HOLDING INC.
by
-------------------------------------
Name: B. Kamm Dr. Peter Rudolf
Title: Head Senior Division Counsel
Affiliate Financing
The foregoing is hereby confirmed and accepted as of the date first above
written:
HEXCEL CORPORATION
by:
-----------------------------
Name: S.C. Forsyth
Title: Senior Vice President
<PAGE>
EXHIBIT 4.2(a)
FIRST SUPPLEMENTAL INDENTURE dated as of June 27, 1996
(this "Supplemental Indenture"), to the Indenture dated as of
February 29, 1996 (the "Indenture"), between HEXCEL CORPORATION,
a Delaware corporation (the "Company"), and FIRST TRUST OF
CALIFORNIA, NATIONAL ASSOCIATION, a national banking association,
as trustee (the "Trustee"). Capitalized terms used but not
defined in this Supplemental Indenture shall have the meanings
ascribed to them in the Indenture.
WHEREAS, the Company desires to amend certain provisions of the
Indenture, among other things, in respect of the Credit Agreement (as defined
in Section 1(b) below) which is being entered into concurrently with this
Supplemental Indenture;
WHEREAS, the Company desires to issue up to $115 million of its
Convertible Subordinated Notes due 2003;
WHEREAS, Section 9.02 of the Indenture authorizes the Company and
the Trustee to amend certain provisions of the Indenture with the consent of
the Securityholders;
WHEREAS, the Company has not issued any Securities under the
Indenture as of the date of this Supplemental Indenture;
WHEREAS, pursuant to the Strategic Alliance Agreement, dated as of
September 29, 1995, and as subsequently amended (the "Strategic Alliance
Agreement"), among Ciba-Geigy Limited ("Ciba"), Ciba-Geigy Corporation and
the Company, all the Securities to be issued under the Indenture shall be
issued to Ciba and its Subsidiaries (as defined in the Strategic Alliance
Agreement); and
WHEREAS, Ciba and the Company have agreed to modify the terms of
the Securities as set forth in this Supplemental Indenture, and accordingly,
Ciba consents to this Supplemental Indenture.
NOW, THEREFORE, the Company and the Trustee hereby agree for the
equal and ratable benefit of the Securityholders as follows:
<PAGE>
2
SECTION 1. AMENDMENT OF INDENTURE. (a) The definition of "Ciba"
contained in Article I of the Indenture is hereby amended to read as follows:
""CIBA" means Ciba-Geigy Limited, a corporation organized
under the laws of Switzerland, together with its successors and
assigns, including, upon consummation of the merger or
combination of Ciba-Geigy Limited and Sandoz Limited, Novartis
Limited."
(b) The definition of "Credit Agreement" contained in Article I of
the Indenture is hereby amended to read as follows:
""CREDIT AGREEMENT" means, collectively, the Credit Agreement
dated as of June 27, 1996, among the Company, certain of its
Subsidiaries, the institutions from time to time party thereto as
Lenders, Citibank, N.A. (or any successor thereto) in its
separate capacity as collateral agent for the Lenders and Credit
Suisse (or any successor thereto) in its separate capacity as
administrative agent for the Lenders, as the same may from time
to time be amended, renewed, supplemented or otherwise modified
at the option of the parties thereto, and any other agreement
pursuant to which any of the Indebtedness, commitments,
obligations, costs, expenses, fees, reimbursements and other
indemnities payable or owing thereunder may be replaced or
refinanced, in any such event having an aggregate principal
amount and availability not in excess of $310,000,000 LESS the
amount of any Indebtedness Incurred by Subsidiaries of the
Company pursuant to Section 13.1(j) of the Credit Agreement (or
any successor provision) PLUS amounts otherwise permitted
pursuant to Section 4.03(b)(i) of this Indenture."
<PAGE>
3
(c) The definition of "Specified Properties" contained in Article
I of the Indenture is hereby amended to read as follows:
""SPECIFIED PROPERTIES" shall mean (i) the Company's
manufacturing plants located in (a) Lancaster, Ohio, (b)
Welkenraedt, Belgium and (c) Graham, Texas, (ii) the
manufacturing plants of Hexcel Omega Corporation located in
Anaheim, California, (iii) the outstanding capital stock of
Hexcel Omega Corporation and (iv) the outstanding capital stock
and intercompany obligations of Hercules Aerospace Espana, S.A.,
a Spanish corporation, to the extent such properties are sold
pursuant to the letter agreement dated June 27, 1996, between the
Company and Hercules Incorporated."
(d) Section 4.03(b)(i) of the Indenture is hereby amended to read
as follows:
"(i) Indebtedness under the Credit Agreement and any other
loan or other agreement in an aggregate principal amount
outstanding at any time not to exceed the sum of (A) the
outstanding Indebtedness under the Credit Agreement and the
unused commitments thereunder as of the date the Credit Agreement
first becomes effective and (B) $12,500,000."
(e) Section 4.03(b)(vi) of the Indenture is hereby amended to read
as follows:
"(vi) Refinancing Indebtedness Incurred in respect of
Indebtedness Incurred pursuant to clause (iv) or (v) above or
Section 13.1(j) of the Credit Agreement as in effect on the date
the Credit Agreement first becomes effective (or any successor
provision having the same terms)."
(f) Section 4.03(b)(x) of the Indenture is hereby amended to read
as follows:
"(x)(A) Guarantees of any Subsidiary in respect of
obligations of the Company, (B) Guarantees of the Company in
respect of Indebtedness of any Subsidiary Incurred pursuant to
Section 13.1(j) of the Credit Agreement as in effect on the date
the Credit Agreement first becomes effective (or any successor
provision having the same terms) and (C) Guarantees of any
partnership or
<PAGE>
4
joint venture (other than Existing Joint Ventures) to the extent
that the Incurrence of such obligations shall not cause to
Maximum Partnership/Joint Venture Amount to exceed $15,000,000 at
any time; PROVIDED that no such Investment may be made as long as
any Default or Event of Default has occurred and is continuing or
would occur as a result of such Investment;"
(g) Section 4.03(b) of the Indenture is hereby amended by
inserting the following new clauses (xv) and (xvi) at the end thereof:
"(xv) Indebtedness of the Company in respect of unsecured
standby and commercial letters of credit issued by Lenders under
the Credit Agreement in an aggregate face amount (including,
without limitation, any reimbursement obligations owing in
respect thereof) not to exceed $10,000,000; or
(xvi) Indebtedness represented by the Company's Convertible
Subordinated Notes due 2003 in an aggregate principal amount not
to exceed $115 million."
(h) The face of Exhibit A to the Indenture is hereby amended to
state that the principal amount of the Securities is payable on March 1, 2003.
(i) The second sentence of Section 1 of Exhibit A to the Indenture
is hereby amended to read as follows:
"On the third anniversary of the date of the Closing (as
defined in the Strategic Alliance Agreement dated as of September
29, 1995, among Ciba-Geigy Limited, Ciba-Geigy Corporation and
the Company), the rate of interest then borne by the Securities
shall increase to 10.5%, and on each subsequent anniversary of
the Closing the rate of interest then borne by the Securities
shall increase by an additional 0.5%."
(j) Exhibit B to the Indenture is hereby amended and restated in
the form of Exhibit B hereto.
SECTION 2. CONFIRMATION. Except as hereby expressly amended, the
Indenture is in all respects ratified and confirmed and all the terms,
conditions and provisions thereof shall remain in full force and effect.
SECTION 3. EFFECTIVENESS. This Supplemental Indenture shall take
effect immediately upon its execution and delivery by the Company, the
Trustee and Ciba.
<PAGE>
5
SECTION 4. COUNTERPARTS. This Supplemental Indenture may be
executed in any number of counterparts, each of which, when so executed,
shall be deemed to be an original, but all of which shall together constitute
but one contract.
SECTION 5. EXECUTION. Delivery of an executed counterpart of a
signature page by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Supplemental Indenture.
SECTION 6. APPLICABLE LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed by their duly authorized officers,
all as of the date and year first above written.
HEXCEL CORPORATION
by
---------------------------------
Name:
Title:
FIRST TRUST OF CALIFORNIA, NATIONAL
ASSOCIATION
by
-----------------------------------
Name:
Title:
<PAGE>
6
CONSENTED AND AGREED TO BY:
CIBA-GEIGY LIMITED
by
----------------------------
Name:
Title:
by
----------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.2(b)
SECOND SUPPLEMENTAL INDENTURE dated as of
March 3, 1998 (this "Supplemental Indenture"), to the Indenture
dated as of February 29, 1996 (the "Indenture"), between HEXCEL
CORPORATION, a Delaware corporation (the "Company"), and FIRST
TRUST OF CALIFORNIA, NATIONAL ASSOCIATION, a national banking
association, as trustee (the "Trustee"), as previously
supplemented. Capitalized terms used but not defined in this
Supplemental Indenture shall have the meanings ascribed to them
in the Indenture.
WHEREAS, the Company desires to amend certain provisions of the
Indenture, among other things, in respect of the Credit Agreement (as defined
in Section 1(a) below) which is being amended and restated concurrently with
this Supplemental Indenture;
WHEREAS, Section 9.02 of the Indenture authorizes the Company and the
Trustee to amend certain provisions of the Indenture with the consent of the
Securityholders; and
WHEREAS, Ciba Specialty Chemical Holding Inc. ("Ciba"), as successor to
Ciba Geigy Limited, and the Company have agreed to modify the terms of the
Securities as set forth in this Supplemental Indenture, and accordingly, Ciba
consents to this Supplemental Indenture.
NOW, THEREFORE, the Company and the Trustee hereby agree for the equal
and ratable benefit of the Securityholders as follows:
SECTION 1. AMENDMENT OF INDENTURE. (a) The definition of "Ciba"
contained in Article I of the Indenture is hereby amended to read as follows:
"CIBA" means Ciba Specialty Chemical Holding Inc., a corporation organized
under the laws of Switzerland, together with its successors and assigns."
(b) The definition of "Credit Agreement" contained in Article I of the
Indenture is hereby amended to read as follows:
<PAGE>
"CREDIT AGREEMENT" means, collectively, the Credit Agreement
dated as of June 27, 1996, among the Company, certain of its
Subsidiaries, the institutions from time to time party thereto as
Lenders, Citibank, N.A. (or any successor thereto) in its
separate capacity as collateral agent for the Lenders and Credit
Suisse (or any successor thereto) in its separate capacity as
administrative agent for the Lenders, including any related
notes, letters of credit, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and
in each case as the same may from time to time be amended,
renewed, replaced, refunded, supplemented, or otherwise modified
at the option of the parties thereto (including, without
limitation, any extension of maturity thereof or increase in
commitments or principal amounts eligible to be borrowed
thereunder), and any other agreement pursuant to which any of the
Indebtedness, commitments, obligations, costs, expenses, fees,
reimbursements and other indemnities payable or owing thereunder
may be replaced or refinanced and the amount of any Indebtedness
incurred by Subsidiaries of the Company pursuant to Section
13.1(j) of the Credit Agreement (or any successor provision)."
(c) In Sections 4.06(a) and (b) the references to "$10 million" are
hereby deleted and the phrase "$20 million" inserted in lieu thereof.
SECTION 2. CONFIRMATION. Except as hereby expressly amended, the
Indenture is in all respects ratified and confirmed and all the terms,
conditions and provisions thereof shall remain in full force and effect.
SECTION 3. EFFECTIVENESS. This Supplemental Indenture shall take
effect immediately up on its execution and delivery by the Company, the
Trustee and Ciba.
SECTION 4. COUNTERPARTS. This Supplemental Indenture may be
executed in any number of counterparts, each of which, when so executed,
shall be deemed to be an original, but all of which shall together constitute
but one contract.
SECTION 5. EXECUTION. Delivery of an executed counterpart of a
signature page by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Supplemental Indenture.
2
<PAGE>
SECTION 6. APPLICABLE LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed by their duly authorized officers, all as of the
date and year first above.
HEXCEL CORPORATION
by__________________________
Name:
Title:
FIRST TRUST OF CALIFORNIA,
NATIONAL ASSOCIATION
by___________________________
Name:
Title:
CONSENTED AND AGREED TO BY:
CIBA SPECIALTY CHEMICAL HOLDING INC.
by______________________________
Name:
Title:
by______________________________
Name:
Title:
4
<PAGE>
OFFICERS' CERTIFICATE
The undersigned hereby certify that they are duly elected officers of
Hexcel Corporation (the "Company"), and in such capacities they state the
following with respect to the Second Supplemental Indenture, dated as of
March ____, 1998 (the "Supplemental Indenture"), between the Company and
First Trust of California, National Association, as trustee (the "Trustees"),
which supplements the Indenture, dated as of February 29, 1996 as previously
supplemented (the "Indenture"), between the Company and the Trustee with
respect to the Increasing Rate Senior Subordinated Notes due 2003 (the
"Notes") of the Company. Ciba Specialty Chemical Holding Inc. has consented
to the Supplemental Indenture.
Based upon the foregoing and the investigation referred to below, the
undersigned certify that:
1. The undersigned have read the Supplemental Indenture and Section
9.02 of the Indenture.
2. The foregoing investigation was, in the opinion of the undersigned,
sufficient to enable to undersigned to express the opinion whether the
provisions of Section 9.02 of the Indenture have been complied with; and
3. The undersigned are of the opinion that the Supplemental Indenture
is permitted by Section 9.02 of the indenture.
IN WITNESS WHEREOF, the undersigned have executed this Officer's
Certificate as of the ____ day of March, 1998.
__________________________
Name:
Title:
__________________________
Name:
Title:
5
<PAGE>
EXHIBIT 4.3
HEXCEL CORPORATION
AND
THE BANK OF CALIFORNIA, N.A.
Trustee
Indenture
Dated as of August 1, 1986
7% Convertible Subordinated Debentures due 2011
<PAGE>
RECONCILIATION AND TIE SHEET*
BETWEEN
PROVISIONS OF THE TRUST INDENTURE ACT OF 1939
AND
INDENTURE, DATED AS OF AUGUST 1, 1986
BETWEEN
HEXCEL CORPORATION
AND
THE BANK OF CALIFORNIA, N.A.
<TABLE>
<CAPTION>
Section Section of
of Act Indenture
----------
<S> <C>
310(a)(1) 9.09
310(a)(2) 9.09
310(a)(3) Inapplicable
310(a)(4) Inapplicable
310(b) 9.08,9.10
310(c) Inapplicable
311(a) 9.13(a), 9.13(c)
311(b) 9.13(b), 9.13(c)
311(c) Inapplicable
312(a) 7.01, 7.02(a)
312(b) 7.02(b)
312(c) 7.02(c)
313(a) 7.4(a)
313(b)(1) Inapplicable
313(b)(2) 7.04(b)
313(c) 7.04(c)
313(d) 7.04(d)
314(a)(1) 7.03(a)
314(a)(2) 7.03(b)
314(a)(3) 7.03(c)
314(b) Inapplicable
314(c)(1) 16.05
314(c)(2) 16.05
314(c)(3) Inapplicable
314(d) Inapplicable
314(e) 16.05
314(f) Omitted
315(a) 9.01
315(b) 8.07
315(c) 9.01
315(d) 9.01
315(e) 8.08
316(a)(1) 8.06,10.04
316(a)(2) Omitted
316(b) 8.04
317(a) 8.02
317(b) 6.04(a)
318(a) 16.07
</TABLE>
* This Reconciliation and Tie Sheet is not a part of the Indenture.
<PAGE>
i
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES 1
RECITALS:
Purpose of Indenture 1
Form of Face of Debenture 1
Form of Reverse of Debenture 3
Form of Trustee's Certificate of Authentication 8
Form of Conversion Notice 9
Compliance with Legal Requirements 10
Purpose of and Consideration for Indenture 10
</TABLE>
ARTICLE ONE
DEFINITIONS
<TABLE>
<S> <C> <C>
SECTION 1.01. Certain Terms Defined 10
Authenticating Agent 10
Bankruptcy Code 10
Board of Directors 10
Business Day 11
Common Stock 11
Company 11
Conversion Price 11
Date of Conversion 11
Debenture or Debentures; outstanding 11
Debentureholder; registered bolder 12
Event of Default 12
Indenture 12
Officers' Certificate 12
Opinion of Counsel 12
Responsible Officer 12
Senior Indebtedness 12
Subsidiary 13
Trustee; Principal Office 13
Trust Indenture Act of 1939 13
SECTION 1.02. References Are to Indenture 13
</TABLE>
* This Table of Contents is not part of the Indenture.
<PAGE>
ii
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND
EXCHANGE OF DEBENTURES
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
13 SECTION 2.01. Designation, Amount, Authentication and Delivery of
Debentures
14 SECTION 2.02. Form of Debentures and Trustee's Certificate
14 SECTION 2.03. Date of Debentures and Denominations
15 SECTION 2.04. Execution of Debentures
16 SECTION 2.05. Exchange of Debentures
17 SECTION 2.06. Temporary Debentures
17 SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Debentures
18 SECTION 2.08. Cancellation of Surrendered Debentures
</TABLE>
ARTICLE THREE
SUBORDINATION OF DEBENTURES
<TABLE>
<S> <C> <C>
19 SECTION 3.01. Agreement to Subordinate
19 SECTION 3.02. Distribution on Dissolution, Liquidation and
Reorganization; Subrogation of Debentures
22 SECTION 3.03. Payments on Debentures Prohibited During Event of
Default Under Senior Indebtedness
23 SECTION 3.05. Authorization of Debentureholders to Trustee to Effect
Subordination
23 SECTION 3.06. Notices to Trustee
</TABLE>
<PAGE>
ARTICLE FOUR
CONVERSION OF DEBENTURES
<TABLE>
<S> <C> <C>
23 SECTION 4.01. Conversion Privilege
23 SECTION 4.02. Manner of Exercise of Conversion Privilege
24 SECTION 4.03. Cash Adjustment Upon Conversion
25 SECTION 4.04. Initial Conversion Price
25 SECTION 4.05. Adjustment of Conversion Price . .
28 SECTION 4.06. Effect of Reclassifications, Consolidations, Mergers
or Sales on Conversion Privilege
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
29 SECTION 4.07. Taxes on Conversion
29 SECTION 4.08. Company to Reserve Stock
30 SECTION 4.09. Disclaimer by Trustee of Responsibility for Certain
Matters
30 SECTION 4.10. Company to Give Notice of Certain Events
</TABLE>
ARTICLE FIVE
REDEMPTION OF DEBENTURES-SINKING FUND
<TABLE>
<S> <C> <C>
31 SECTION 5.01. Redemption Prices
31 SECTION 5.02 Notice of Redemption; Selection of Debentures
33 SECTION 5.03. When Debentures Called for Redemption Become Due and
Payable
33 SECTION 5.04. Sinking Fund
35 SECTION 5.05. Application of Sinking Fund Payments
36 SECTION 5.06. Redemption in Event of Default
36 SECTION 5.07 Manner of Redeeming Debentures
37 SECTION 5.08. Cancellation of Redeemed Debentures
37 SECTION 5.09. Conversion Arrangements on Call for Redemption
</TABLE>
ARTICLE SIX
PARTICULAR COVENANTS OF THE COMPANY
<TABLE>
<S> <C> <C>
37 SECTION 6.01. Payment of Principal of (and Premium, if Any) and
Interest on Debentures
37 SECTION 6.02. Maintenance of Office or Agency for Registration of
Transfer, Conversion, Exchange and Payment of
Debentures
<PAGE>
38 SECTION 6.03. Appointment to Fill a Vacancy in the Office of Trustee
38 SECTION 6.04. Provision as to Paying Agent
39 SECTION 6.05. Maintenance of Corporate Existence
39 SECTION 6.06. Further Assurance
40 SECTION 6.07. Officers' Certificates as to Default
</TABLE>
<PAGE>
iv
ARTICLE SEVEN
DEBENTUREHOLDERS' LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE
<TABLE>
<S> <C> <C>
40 SECTION 7.01. Company to Furnish Trustee Information as to Names and
Addresses of Debentureholders
41 SECTION 7.02. Preservation and Disclosure of Lists
42 SECTION 7.03. Reports by the Company
43 SECTION 7.04. Reports by the Trustee
</TABLE>
ARTICLE EIGHT
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
<TABLE>
<S> <C> <C>
44 SECTION 8.01. Events of Default Defined
47 SECTION 8.02. Payment of Debentures on Default; Suit Therefor
49 SECTION 8.03. Application of Moneys Collected by Trustee
50 SECTION 8.04. Limitation on Suits by Holders of Debentures
51 SECTION 8.05. Proceedings by Trustee; Remedies Cumulative and
Continuing
51 SECTION 8.06. Rights of Holders of Majority in Principal Amount of
Debentures to Direct Trustee and to Waive Defaults
52 SECTION 8.07. Trustee to Give Notice of Defaults Known to It, But
May Withhold in Certain Circumstances
52 SECTION 8.08. Requirement of an Undertaking to Pay Costs in Certain
Suits Under the Indenture or Against the Trustee
53 SECTION 8.09. Enforcement of Rights of Conversion by Debentureholders
</TABLE>
ARTICLE NINE
CONCERNING THE TRUSTEE
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 9.01. Duties and Responsibilities of Trustee
53
SECTION 9.02. Reliance on Documents, Opinions, etc
54
SECTION 9.03. No Responsibility for Recitals, etc
56
SECTION 9.04. Trustee, Paying Agent, Conversion Agent or Debenture
Registrar May Own Debentures
56
SECTION 9.05. Moneys Received by Trustee to be Held in Trust Without
Interest
56
</TABLE>
<PAGE>
v
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
57 SECTION 9.06. Compensation and Expenses of Trustee
57 SECTION 9.07. Right of Trustee to Rely on Officers'
Certificate Where No
Other Evidence Specifically Prescribed
57 SECTION 9.08. Conflicting Interest of Trustee
63 SECTION 9.09. Requirements for Eligibility of Trustee
64 SECTION 9.10. Resignation or Removal of Trustee
65 SECTION 9.11. Acceptance by Successor to Trustee; Notice of
Succession of a Trustee
66 SECTION 9.12. Successor to Trustee by Merger, Consolidation or
Succession to Business
66 SECTION 9.13. Limitations on Rights of Trustee as a Creditor
71 SECTION 9.14 Authenticating Agent
</TABLE>
ARTICLE TEN
CONCERNING THE DEBENTUREHOLDERS
<TABLE>
<S> <C> <C>
72 SECTION 10.01. Evidence of Action by Debentureholders
72 SECTION 10.02. Proof of Execution of Instruments and of Holding of
Debentures
73 SECTION 10.03. Who May Be Deemed Owners of Debentures
73 SECTION 10.04. Debentures Owned by Company or Controlled or
Controlling Persons Disregarded for Certain Purposes
74 SECTION 10.05. Record Date for Action by Debentureholders
74 SECTION 10.06. Instruments Executed by Debentureholders Bind
Future Holders
</TABLE>
<PAGE>
ARTICLE ELEVEN
DEBENTUREHOLDERS' MEETINGS
<TABLE>
<S> <C> <C>
75 SECTION 11.01. Purposes for Which Meetings May be Called
75 SECTION 11.02. Manner of Calling Meetings; Record Date
76 SECTION 11.03. Call of Meeting by Company or Debentureholders
76 SECTION 11.04. Who May Attend and Vote at Meetings
76 SECTION 11.05. Regulations
77 SECTION 11.06. Manner of Voting at Meetings and Record to be Kept
78 SECTION 11.07. Exercise of Rights of Trustee and Debentureholders
Not to be Hindered or Delayed
</TABLE>
<PAGE>
vi
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
78 SECTION 12.O1. Purposes for Which Supplemental Indentures May be
Entered into Without Consent of Debentureholders
80 SECTION 12.02. Modification of Indenture with Consent of Holders
of 66 2/3% in Principal Amount of Debentures
81 SECTION 12.03. Effect of Supplemental Indentures
81 SECTION 12.04. Debentures May Bear Notation of Changes by
Supplemental Indentures
81 SECTION 12.05. Opinion of Counsel
</TABLE>
ARTICLE THIRTEEN
CONSOLIDATION, MERGER AND SALE
<TABLE>
<S> <C> <C>
82 SECTION 13.01. Company May Consolidate, etc., on Certain Terms
83 SECTION 13.02. Successor Corporation to be Substituted
83 SECTION 13.03. Opinion of Counsel
</TABLE>
ARTICLE FOURTEEN
SATISFACTION AND DISCHARGE OF INDENTURES;
UNCLAIMED MONEYS
<TABLE>
<S> <C> <C>
84 SECTION 14.01. Satisfaction and Discharge of Indenture
84 SECTION 14.02. Application by Trustee of Funds Deposited for
Payment of Debentures
84 SECTION 14.03. Repayment of Moneys Held by Paying Agent
<PAGE>
85 SECTION 14.04. Repayment of Moneys Held by Trustee
</TABLE>
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDER%
OFFICERS AND DIRECTORS
<TABLE>
<S> <C> <C>
85 SECTION 15.01. Incorporators, Stockholders, Officers and Directors
of Company Exempt from Individual Liability
</TABLE>
<PAGE>
vii
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
<TABLE>
<CAPTION>
Page
- ----
<S> <C> <C>
86 SECTION 16.01. Successors and Assigns of Company Bound by
Indenture
86 SECTION 16.02. Acts of Board, Committee or Officer of Successor
Corporation Valid
86 SECTION 16.03. Required Notices or Demands May be Served by Mail;
Waiver
86 SECTION 16.04. Indenture and Debentures to be Construed in
Accordance with the Laws of the State of California
87 SECTION 16.05. Evidence of Compliance with Conditions Precedent
88 SECTION 16.06. Payments Due on Saturdays, Sundays and Holidays
88 SECTION 16.07. Provisions Required by Trust Indenture Act of 1939
to Control
88 SECTION 16.08. Provisions of the Indenture and Debentures
for the Sole Benefit of the Parties and
the Debentureholders
89 SECTION 16.09. Indenture May be Executed in Counterparts;
Acceptance by Trustee
89 SECTION 16.10. Article and Section Headings
89 SECTION 16.11. Severability
89 TESTIMONIUM
89 SIGNATURES AND SEALS
90 ACKNOWLEDGEMENTS
</TABLE>
<PAGE>
THIS INDENTURE, dated as of the first day of August, 1986, between HEXCEL
CORPORATION, a corporation duly organized and existing under the laws of the
State of Delaware (hereinafter sometimes referred to as the "Company"), party of
the first part, and THE BANK OF CALIFORNIA, N.A., a national banking association
incorporated under the laws of the United States (hereinafter sometimes referred
to as the "Trustee"), party of the second part,
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
an issue of its 7% Convertible Subordinated Debentures due 2011 (hereinafter
referred to as the "Debentures"), for an aggregate principal amount of up to
$35,000,000 to be issued as registered Debentures without coupons, to be
authenticated by the Trustee, to be payable August 1, 2011, to be redeemable as
hereinafter provided, and to be convertible into Common Stock of the Company as
hereinafter provided; and, to provide the terms and conditions upon which the
Debentures are to be authenticated, issued and delivered, the Company has duly
authorized the execution of this Indenture; and
WHEREAS, the Debentures and the Trustee's certificate of authentication to
be borne by the Debentures are to be substantially in the following forms,
respectively:
[FORM OF FACE OF DEBENTURE)
No. $ .....
HEXCEL CORPORATION
7% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2011
HEXCEL CORPORATION, a corporation organized and existing under the laws
of the State of Delaware (hereinafter called the "Company," which term shall
include any successor corporation), for value received, hereby promises to
pay to.........., or registered assigns, the principal sum of................
DOLLARS on August 1, 2011, at the office or agency maintained by the Company
for that purpose in the City of San Francisco, State of California, or in the
Borough of Manhattan, The City of New York, State of New York, in such coin
or currency of the United States of America as at the time of payment is
legal tender for the payment of public and private debts, and to pay to the
registered holder hereof, as hereinafter provided, interest on said principal
sum at the rate per annum specified in the title of this Debenture, in like
coin or currency, from the February 1 or the August 1 next preceding the date
hereof to which interest has been paid or duly provided for (unless the date
hereof is a February 1 or August 1 to which interest has been paid or duly
provided for, in which case
<PAGE>
2
from the date hereof, or unless the date hereof is between the close of business
on January 15 or July 15, as the case may be, and the following February 1 or
August 1, in which case from such February 1 or August 1; provided, however,
that if the Company shall default in payment of the interest due on such
February 1 or August 1, then from the next preceding February 1 or August 1 to
which interest has been paid or duly provided for or, if no interest has been
paid or duly provided for on the Debentures, from August 1, 1986) semi-annually
on February 1 and August 1 in each year, until payment of said principal sum has
been made or duly provided for. The interest so payable on any February 1 or
August 1 will, subject to certain exceptions provided in the Indenture
hereinafter referred to, be paid to the person in whose name this Debenture is
registered at the close of business on the January 15 or July 15, as the case
may be, next preceding such February 1 or August 1 or, if such January 15 or
July 15 is not a business day, the business day next preceding such January 15
or July 15. Interest shall be computed on the basis of a 360-day year of twelve
30-day months. Unless other arrangements are made by the Company, payment of
interest will be made by check mailed by the Company to the registered address
of the person entitled thereto.
This Debenture is continued on the reverse hereof and the additional
provisions there set forth shall for all purposes have the same effect as if set
forth at this place.
This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee or Authenticating Agent under the Indenture.
IN WITNESS WHEREOF, HEXCEL CORPORATION has caused this Debenture to be
executed in its corporate name by the signature of its President or one of its
Vice Presidents manually or in facsimile and a facsimile of its corporate seal
to be imprinted hereon and attested by the signature of its Secretary or one of
its Assistant Secretaries or its Treasurer or one of its Assistant Treasurers,
manually or in facsimile.
HEXCEL CORPORATION
By.....................................
[CORPORATE SEAL]
Attest:
..........................................
<PAGE>
3
[FORM OF REVERSE OF DEBENTURE]
This Debenture is one of a duly authorized issue of Debentures of the
Company known as its 7% Convertible Subordinated Debentures due 2011 (herein
referred to as the "Debentures"), limited (subject to certain exceptions
provided for in the Indenture hereinafter referred to) in aggregate principal
amount to thirty-five million dollars ($35,000,000), all issued or to be issued
under and pursuant to an Indenture dated as of August 1, 1986 (herein referred
to as the "Indenture"), duly executed and delivered between the Company and The
Bank of California, N.A., trustee (herein referred to as the "Trustee"), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a description of the respective rights, limitations of rights, obligations,
duties and immunities thereunder of the Trustee, the Company, the holders of
Senior Indebtedness and the holders of the Debentures.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal hereof may be declared and upon such
declaration shall become due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture. The Indenture provides
that in certain events such declaration and its consequences may be waived by
the holders of a majority in aggregate principal amount of the Debentures then
outstanding or outstanding on the record date, if any, fixed therefor in
accordance with the provisions of the Indenture. It is also provided in the
Indenture that the holders of a majority in aggregate principal amount of the
Debentures then outstanding or outstanding on the record date, if any, fixed
therefor in accordance with the provisions of the Indenture may, on behalf of
the holders of all of the Debentures, waive, prior to such declaration, any past
default under the Indenture and its consequences, except a default in the
payment of the principal of (or premium, if any) or interest on any of the
Debentures or a default in the making of any sinking fund payment.
The payment of the principal of (and premium, if any) and interest on this
Debenture is expressly subordinated, as provided in the Indenture, to the
payment of all Senior Indebtedness, as defined in the Indenture, and by
acceptance of this Debenture the holder hereof agrees, expressly for the benefit
of the present and future holders of Senior Indebtedness, to be bound by the
provisions of the Indenture.
Subject to the provisions of the Indenture, the holder of this Debenture is
entitled, at his option, at any time on or before August 1, 2011 (except that,
in case this Debenture or any portion hereof shall be called for redemption,
such right shall terminate with respect to this Debenture or portion hereof, as
<PAGE>
4
the case may be, so called for redemption at the close of business on the date
fixed for redemption as provided in the Indenture), to convert the principal
amount of this Debenture (or any portion hereof which is $1,000 or a whole
multiple thereof) into shares of Common Stock of the Company, as said shares
shall be constituted at the date of conversion, at the conversion price of
$47.80 principal amount of Debentures for each share of such Common Stock, or at
the adjusted conversion price in effect at the date of conversion determined as
provided in the Indenture, upon surrender of this Debenture to the Company at
the office or agency of the Company in the City of San Francisco, State of
California, or in the Borough of Manhattan, The City of New York, State of New
York, accompanied by written notice of election to convert in the form provided
hereon, duly executed, and (if so required by the Company) by instruments of
transfer, in form satisfactory to the Company, duly executed by the registered
holder or by his duly authorized attorney. Such surrender shall, if made during
the period from the close of business on the January 15 or July 15 next
preceding an interest payment date (or the next preceding business day if such
January 15 or July 15 is a day on which banking institutions in the City of San
Francisco, State of California or The City of New York, State of New York are
authorized or obligated by law to close) to the opening of business on such
interest payment date (unless this Debenture or the portion being converted
shall have been called for redemption on a date fixed for redemption during such
period), also be accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the interest payable
on such interest payment date on the principal amount of this Debenture then
being converted. Subject to the foregoing and the right of the person in whose
name this Debenture is registered at the close of business on the January 15 or
July 15 next preceding an interest payment date to receive the interest payable
on such interest payment date (with certain exceptions provided in the
Indenture), no adjustment is to be made on conversion for interest accrued
hereon or for dividends on Common Stock issued on conversion. The Company is
not required to issue fractional shares upon any such conversion, but shall make
adjustment therefor in cash on the basis of the current market value of such
fractional interest as provided in the Indenture.
The Indenture contains provisions permitting the Company, with the consent
of the holders of not less than a majority in aggregate principal amount of the
Debentures then outstanding or outstanding on the record date, if any, fixed
therefor in accordance with the provisions of the Indenture, to fail or omit to
comply with certain covenants set forth in the Indenture. The Indenture also
contains provisions permitting the Company and the Trustee, with the consent
<PAGE>
5
of the holders of not less than 66 2/3% in aggregate principal amount of the
Debentures then outstanding or outstanding on the record date, if any, fixed
therefor in accordance with the provisions of the Indenture, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
(including, but not limited to, those relating to the Company's Sinking Fund
obligations) or of any supplemental indenture or modifying in any manner the
rights of the holders of the Debentures; provided, however, that no such
supplemental indenture shall (i) extend the stated maturity of any Debenture, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any premium payable upon the redemption
thereof, or alter the provisions of the Indenture so as to affect adversely the
terms of conversion of the Debentures into Common Stock of the Company, without
the consent of the holder of each Debenture so affected, or (ii) reduce the
aforesaid percentage of Debentures, the consent of the holders of which is
required for any such supplemental indenture, without the consent of the holders
of all Debentures then outstanding; and provided further that no change shall
terminate or impair the subordination provisions of the Indenture without the
prior written consent of the holders of Senior Indebtedness.
Any such consent or waiver by the registered holder of this Debenture
(unless effectively revoked as provided in the Indenture) shall be conclusive
and binding upon such holder and upon all future holders of this Debenture and
of any Debenture issued in exchange or substitution herefor, irrespective of
whether or not any notation of such consent or waiver is made upon this
Debenture or such other Debenture.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture (except those provisions by which the Debentures are
subordinated to Senior Indebtedness) shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Debenture at the place, at the respective
times, at the rate and in the currency herein prescribed.
The Debentures are issuable as fully registered Debentures without coupons
in the denominations of $1,000 and any whole multiple thereof, at the office or
agency of the Company referred to on the face hereof, and in the manner and
subject to the limitations provided in the Indenture. Debentures may be
exchanged for a like aggregate principal amount of Debentures of other
authorized denominations, without payment of any charge other than a sum
sufficient to reimburse the Company for any tax or other governmental charge
<PAGE>
6
incident thereto. Principal of (and premium, if any) on this Debenture is
payable at the office or agency of the Company maintained for that purpose in
the City of San Francisco, State of California or in the Borough of Manhattan,
The City of New York, State of New York. Unless other arrangements are made by
the Company, payment of interest hereon will be made by check mailed by the
Company to the registered address of the person entitled thereto.
The Debentures are subject to redemption (otherwise than through the
operation of the Sinking Fund), at the option of the Company, as a whole or in
part at any time, on any date prior to maturity, upon mailing by first-class
mail a notice of such redemption not less than 30 nor more than 60 days prior to
the date fixed for redemption to the holders of Debentures to be redeemed as a
whole or in part at their registered addresses as they shall appear upon the
registry books, all as provided in the Indenture, at the redemption prices set
forth in the following table (expressed in percentages of the principal amount
thereof to be redeemed) together with accrued and unpaid interest on the
principal amount thereof to be redeemed to the date fixed for redemption, except
that Debentures may not be so redeemed before August 1, 1989, unless the closing
price of the Common Stock of the Company on the New York Stock Exchange (or on
any national securities exchange on which the Common Stock may then be listed
or, if the Common Stock shall not then be listed on any exchange, the highest
bid quotation in the over-the-counter market as reported by the National
Association of Securities Dealers, Inc. through NASDAQ, or its successor or such
other generally accepted source of publicly reported bid and ask quotations as
the Company may reasonably designate) shall have equaled or exceeded 150% of the
conversion price then in effect for at least 20 out of 30 consecutive trading
days ending within five business days prior to the date the notice of redemption
is given.
<TABLE>
If redeemed If redeemed
during the twelve during the twelve
months' period months' period
beginning Redemption beginning Redemption
August 1 Price August 1 Price
-------- ----- -------- -----
<S> <C> <C> <C>
1986 105.0% 1991 102.5%
1987 104.5 1992 102.0
1988 104.0 1993 101.5
1989 103.5 1994 101.0
1990 103.0 1995 100.5
</TABLE>
and thereafter at 100% of their principal amount.
<PAGE>
7
Any such notice which is mailed in the manner hereinabove provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives the notice.
The Debentures are entitled to the benefits of a Sinking Fund, beginning on
August 1, 1997, through the operation of which Debentures are subject to
redemption (upon notice as set forth above) at 100% of the principal amount
thereof together with accrued and unpaid interest to the date for redemption,
all as more fully provided in the Indenture.
Any Debentures called for redemption, unless surrendered for conversion on
or before the close of business on the date fixed for redemption, are subject to
being purchased from the holder of such Debentures at the redemption price by
one or more investment bankers or other purchasers who may agree with the
Company to purchase such Debentures and convert them into Common Stock of the
Company.
The transfer of this Debenture is registrable by the registered holder
hereof in person or by his attorney duly authorized in writing on the books of
the Company at the office or agency of the Company referred to on the face
hereof, subject to the terms of the Indenture but without payment of any charge
other than a sum sufficient to reimburse the Company for any tax or other
governmental charge incident thereto, and upon surrender and cancellation of
this Debenture upon any such transfer, a new Debenture or Debentures of
authorized denomination or denominations, for the same aggregate principal
amount, will be issued to the transferee in exchange herefor.
The Company, the Trustee, any paying or conversion agent and any Debenture
registrar may deem and treat the person in whose name this Debenture shall be
registered upon the books of the Company as the absolute owner of this Debenture
(whether or not this Debenture shall be overdue and notwithstanding any notation
of ownership or other writing hereon) for the purpose of receiving payment of or
on account of the principal hereof, premium, if any, and interest due hereon and
for all other purposes, and neither the Company nor the Trustee nor any paying
or conversion agent nor any Debenture registrar shall be affected by any notice
to the contrary. All such payments shall be valid and effectual to satisfy and
discharge the liability on this Debenture to the extent of the sum or sums so
paid.
<PAGE>
8
No recourse shall be had for the payment of the principal of, premium, if
any, or the interest on this Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture or any
indenture supplemental thereto, against any incorporator, stockholder, officer
or director, as such, past, present or future, of the Company or of any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
As provided in the Indenture, this Debenture shall for all purposes be
governed by and construed in accordance with the laws of the State of
California.
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
Dated:
This is one of the Debentures described in the within-mentioned Indenture.
THE BANK OF CALIFORNIA, N.A.,
as Trustee
By...................................
Authorized Officer
OR
THE BANK OF CALIFORNIA, N.A.,
as Trustee
By The Bank of California
New York Trust Company,
Authenticating Agent
By................................
Authorized Officer
<PAGE>
9
[FORM OF CONVERSION NOTICE]
To HEXCEL CORPORATION:
The undersigned owner of this Debenture hereby irrevocably exercises the
option to convert this Debenture, or portion hereof (which is $ 1,000 or a whole
multiple thereof) below designated, into shares of Common Stock of Hexcel
Corporation in accordance with the terms of the Indenture referred to in this
Debenture, and directs that the shares issuable and deliverable upon the
conversion, together with any check in payment for fractional shares and any
Debentures representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. Any amount required to be paid by the undersigned on account
of interest accompanies this Debenture.
Dated: ..........
..................................
Signature
Principal Amount to be Converted
(in a whole multiple of $1,000
if less than All):
..................................
.......................................
Signature Guarantee: All
signature(s) must be
guaranteed by a member of
the New York Stock Exchange
or a commercial bank or
trust company.
Fill in for registration of shares of Common Stock and Debentures if to be
issued other-wise than to the registered holder.
.......................................
(Name)
Social Security or Other
Taxpayer
Identifying Number
..................................
.......................................
Please print name and
address
(including zip code number)
<PAGE>
10
AND WHEREAS, all acts and things necessary to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee or the
Authenticating Agent as in this Indenture provided, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
indenture and agreement according to its terms, have been done and performed,
and the execution of this Indenture and the issue hereunder of the Debentures
have in all respects been duly authorized, and the Company, in the exercise
of the legal right and power vested in it, executes this Indenture and
proposes to make, execute, issue and deliver the Debentures;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the
Debentures are authenticated, issued, delivered and held, and in
consideration of the premises, of the purchase and acceptance of the
Debentures by the holders thereof and of the sum of one dollar to it duly
paid by the Trustee at the execution of these presents, the receipt whereof
is hereby acknowledged, the Company covenants and agrees with the Trustee,
for the equal and proportionate benefit of the respective holders from time
to time of the Debentures, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Certain Terms Defined. The terms defined in this Section
1.01 (except as otherwise expressly provided or unless the context otherwise
requires), for all purposes of this Indenture and of any indenture
supplemental hereto, shall have the respective meanings specified in this
Section 1.01. All other terms used in this Indenture which are defined in the
Trust Indenture Act of 1939 or which are by reference therein defined in the
Securities Act of 1933, as amended (except as herein otherwise expressly
provided or unless the context otherwise requires), shall have the meanings
assigned to such terms in said Trust Indenture Act and in said Securities Act
as they were in force at the date of the execution of this Indenture.
Authenticating Agent. The term "Authenticating Agent" shall mean the
agent or agents, if any, of the Trustee which at any time shall have been
appointed pursuant to Section 9.14.
Bankruptcy Code. The term "Bankruptcy Code" shall mean Title 11, U.S.
Code or any similar Federal or State law for the relief of debtors.
Board of Directors: The term "Board of Directors," when used with
reference to the Company, shall mean the Board of Directors of the Company or
any duly authorized committee of such Board.
<PAGE>
Business Day: The term "business day" shall mean a day other than a
Saturday, a Sunday or a day on which banking institutions in the City of San
Francisco, State of California or The City of New York, State of New York are
authorized or obligated by law to close.
Common Stock The term "Common Stock," when used with reference to stock
of the Company, shall mean all shares now or hereafter authorized of the
class of the Common Stock of the Company presently authorized and stock of
any other class into which such shares may hereafter have been changed.
Company: The term "Company" shall mean HEXCEL CORPORATION, a Delaware
corporation, and, subject to the provisions of Article Thirteen, shall also
include its successors and assigns.
Conversion Price. The term "conversion price" shall mean the price per
share of Common Stock from time to time in effect at which Debentures may be
converted into Common Stock as hereinafter in Article Four provided.
Date of Conversion: The term "date of conversion" shall mean the date on
which any Debenture shall be surrendered for conversion and notice given in
accordance with the provisions of Article Four hereof.
Debenture or Debentures; outstanding: The term "Debenture" or
"Debentures" shall mean any Debenture or Debentures, as the case may be,
authenticated and delivered under this Indenture.
The term "outstanding," when used with reference to Debentures, shall,
subject to the provisions of Section 10.04, mean, as of any particular time,
all Debentures authenticated and delivered by the Trustee under this
Indenture, except
(a) Debentures theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation;
(b) Debentures, or portions thereof, for the payment or redemption
of which moneys in the necessary amount shall have been deposited in trust
with the Trustee or with any paying agent (other than the Company) or
shall have been set aside and segregated in trust by the Company (if the
Company shall act as its own paying agent), provided that such Debentures
shall have reached their stated maturity, or, if such Debentures are to be
redeemed prior to the maturity thereof, notice of such redemption shall
have been given as in Article Five provided, or provision satisfactory to
the Trustee shall have been made for giving such notice; and
(c) Debentures in lieu of or in substitution for which other
Debentures shall have been authenticated and delivered pursuant to the
terms
<PAGE>
12
of Section 2.07, unless proof satisfactory to the Trustee is presented
that any such Debentures are held by bona fide holders in due course.
Debentureholder; registered holder. The term "debentureholder," "holder
of Debentures," "registered holder" or other similar term, shall mean any
person who shall at the time be the registered holder of any Debenture or
Debentures on the books of the Company kept for that purpose in accordance
with the provisions of the Indenture and shall also mean the executors,
administrators and other legal representatives of such person.
Event of Default. The term "Event of Default" shall mean any event
specified in Section 8.01, continued for the period of time, if any, and
after the giving of notice, if any, therein designated.
Indenture. The term "Indenture" shall mean this instrument as
originally executed, or, if amended or supplemented as herein provided, as so
amended or supplemented.
Officers' Certificate. The term "Officers' Certificate" shall mean a
certificate signed by the Chairman of the Board or President or any Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or
an Assistant Secretary of the Company. Each such certificate shall include
the statements provided for in Section 16.05, if and to the extent required
by the provisions thereof.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion
in writing signed by legal counsel, who may be an employee of, or of counsel
to, the Company or may be other counsel and who shall be acceptable to the
Trustee. Each such opinion shall include the statements provided for in
Section 16.05, if and to the extent required by the provisions thereof.
Responsible Officer: The term "responsible officer," when used with
respect to the Trustee, shall mean the chairman of the board of directors,
the president, every vice president, the treasurer, every trust officer, and
every other officer and assistant officer to whom any corporate trust matter
is referred because of his knowledge of and familiarity with the particular
subject.
Senior Indebtedness. The term "Senior Indebtedness" shall mean the
principal of, premium, if any, and unpaid interest on (a) indebtedness of the
Company (including indebtedness of others guaranteed by the Company), other
than the Debentures, whether outstanding on the date hereof or thereafter
created, incurred, assumed, or guaranteed, for (i) money borrowed, (ii)
reimbursement obligations in connection with letters of credit issued for the
account of the Company and bankers' acceptances, (iii) purchase obligations
and (iv) lease obligations (including but not limited to capitalized lease
obligations), unless in the instrument creating or evidencing the same or
<PAGE>
13
pursuant to which the same is outstanding it is provided that such
indebtedness is not superior in right of payment to the Debentures, and (b)
renewals, extensions, modifications and refundings of any such indebtedness.
Senior Indebtedness does not include the 9% Convertible Subordinated
Guaranteed Debentures due 1996 issued by Hexcel International Finance N.V.
and guaranteed by the Company, which debentures rank pari passu with the
Debentures.
Subsidiary: The term "Subsidiary" shall mean any corporation or other
entity at least a majority of the outstanding voting shares of which is at
the time directly or indirectly owned or controlled (either alone or through
Subsidiaries or together with Subsidiaries) by the Company or another
Subsidiary.
Trustee; principal office: The term "Trustee" shall mean The Bank of
California, N.A., and, subject to the provisions of Article Nine, shall also
include its successors. The term "principal office" of the Trustee shall
mean the principal office of the Trustee at which at any particular time its
corporate trust business may be principally administered, which office at the
date hereof is located at 400 California Street, San Francisco, California
94104.
Trust Indenture Act of 1939 The term "Trust Indenture Act of 1939"
shall mean the Trust Indenture Act of 1939 as it was in force at the date of
execution of this Indenture except as provided by Article Twelve.
SECTION 1.02. References are to Indenture. Unless the context
otherwise requires, all references herein to "Articles," "Sections" and other
subdivisions refer to the corresponding Articles, Sections and other
subdivisions of this Indenture, and the words "herein," "hereof," "hereby,"
"hereunder" and words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision hereof.
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF DEBENTURES
SECTION 2.01. Designation, Amount, Authentication and Delivery of
Debentures. The Debentures shall be designated as "7% Convertible
Subordinated Debentures due 2011." Debentures for the aggregate principal
amount of thirty-five million dollars ($35,000,000), upon the execution of
this Indenture, or from time to time thereafter, may be executed by the
Company and delivered to the Trustee or Authenticating Agent for
authentication, and the Trustee or
<PAGE>
14
Authenticating Agent shall thereupon authenticate and deliver said Debentures
to or upon the written order of the Company, signed by its President or a
Vice President without any further corporate action by the Company.
The aggregate principal amount of Debentures authorized by this
Indenture is limited to thirty-five million dollars ($35,000,000) and, except
as provided in Section 2.07, the Company shall not execute and the Trustee or
the Authenticating Agent shall not authenticate or deliver Debentures in
excess of such aggregate principal amount.
Nothing contained in this Section 2.01 or elsewhere in this Indenture,
or in the Debentures, is intended to or shall limit execution by the Company
or authentication or delivery by the Trustee or the Authenticating Agent of
Debentures under the circumstances contemplated by Section 2.05, 2.06, 2.07,
4.02, 5.02 and 12.04.
SECTION 2.02. Form of Debentures and Trustee's Certificate. The
definitive Debentures and the Trustee's or the Authenticating Agent's
certificate of authentication to be borne by the Debentures shall be
substantially of the tenor and purport as in this Indenture above recited,
and may have such letters, numbers or other marks of identification or
designation and such legends or endorsements printed, lithographed or
engraved thereon as the officers executing the same may deem appropriate and
as are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Debentures may be listed, or to conform to usage.
SECTION 2.03. Date of Debentures and Denominations. The Debentures
shall bear interest at the rate per annum set forth in their title, payable
semi-annually on February 1 and August 1, commencing February 1, 1987, shall
mature on August 1, 2011 and shall be issuable as registered Debentures
without coupons in denominations of $1,000 and any whole multiple thereof.
The person in whose name any Debenture is registered at the close of business
on any record date (as hereinbelow defined) with respect to any interest
payment date shall be entitled to receive the interest payable thereon on
such interest payment date notwithstanding the cancellation of such Debenture
upon any registration of transfer, conversion or exchange thereof subsequent
to such record date and prior to such interest payment date, unless such
Debenture shall have been called for redemption on a date fixed for
redemption subsequent to such record date and prior to such interest payment
date, or unless an Event of Default shall have occurred and be continuing as
the result of a default in
<PAGE>
15
the payment of interest due on such interest payment date on any Debenture,
in which case such defaulted interest shall be paid to the person in whose
name such Debenture (or any Debenture or Debentures issued upon registration
of transfer or exchange thereof) is registered on the record date for payment
of such defaulted interest. Unless other arrangements are made by the
Company, payment of interest will be made by check mailed by the Company to
the registered address of the person entitled thereto. The term "record
date" as used in this Section 2.03 with respect to any interest payment date
shall mean the January 15 or July 15, as the case may be, next preceding such
interest payment date, or, if such January 15 or July 15 is not a business
day, the business day next preceding such January 15 or July 15, and such
term, as used in this Section, with respect to the payment of any defaulted
interest shall mean the tenth day next preceding the date fixed by the
Company for the payment of defaulted interest or, if such tenth day is not a
business day, the business day next preceding such tenth day, but in no case
shall such record date be less than 10 days after notice thereof shall have
been mailed by or on behalf of the Company to all registered holders of
Debentures at their registered addresses.
Except as provided in the next sentence, the Debentures shall be dated
the date of authentication and shall bear interest from the February 1 or
August 1 next preceding the date thereof to which interest has been paid or
duly provided for, unless the date of authentication is a February 1 or
August 1 to which interest has been paid or duly provided for, in which case
they shall bear interest from such date. Each Debenture authenticated
between the record date for any interest payment date and such interest
payment date shall be dated the date of its authentication but shall bear
interest from such interest payment date; provided, however, that if and to
the extent the Company shall default in the payment of the interest due on
such interest payment date, then any Debenture so authenticated shall bear
interest from the next preceding February 1 or August 1, as the case may be,
to which interest has been paid or duly provided for or, if no interest has
been paid on the Debentures, from August 1, 1986. Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.
SECTION 2.04. Execution of Debentures. The Debentures shall be signed
on behalf of the Company, manually or in facsimile, by its President or a
Vice President under its corporate seal (which may be in facsimile)
reproduced thereon and attested, manually or in facsimile, by its Secretary
or an Assistant Secretary or its Treasurer or an Assistant Treasurer. Only
such Debentures as shall bear thereon a certificate of authentication
substantially
<PAGE>
16
in the form hereinbefore recited, signed manually by the Trustee or the
Authenticating Agent, shall be entitled to the benefits of this Indenture or
be valid or obligatory for any purpose. Such certificate by the Trustee upon
any Debenture executed by the Company shall be conclusive evidence that the
Debenture so authenticated has been duly authenticated and delivered
hereunder and that the holder is entitled to the benefits of this Indenture.
In case any officer of the Company whose signature appears on any of the
Debentures, manually or in facsimile, shall cease to be such officer before
such Debentures so signed shall have been authenticated and delivered by the
Trustee or the Authenticating Agent, or disposed of by the Company, such
Debentures nevertheless may be authenticated and delivered or disposed of as
though the person whose signature appears on such Debentures had not ceased
to be such officer of the Company; and any Debenture may be signed, and the
corporate seal reproduced thereon may be attested, on behalf of the Company,
manually or in facsimile, by such persons as, at the actual date of the
execution of such Debenture, shall be the proper officers of the Company,
although at the date of the execution of this Indenture any such person was
not such officer.
SECTION 2.05. Exchange of Debentures. Debentures may be exchanged for
a like aggregate principal amount of Debentures of other authorized
denominations. The Debentures to be exchanged shall be surrendered at the
offices or agencies to be maintained by the Company in accordance with the
provisions of Section 6.02, and the Company shall execute and the Trustee or
the Authenticating Agent shall authenticate and deliver in exchange therefor
the Debenture or Debentures which the debentureholder making the exchange
shall be entitled to receive.
The Company shall keep, at one of the offices or agencies to be
maintained by the Company in accordance with the provisions of Section 6.02,
a register or registers in which, subject to such reasonable regulations as
it may prescribe, the Company shall register Debentures and shall register
the transfer of Debentures as in this Article Two provided. Upon surrender
for registration of transfer of any Debenture at such office or agency, the
Company shall execute and the Trustee or the Authenticating Agent shall
authenticate and deliver in the name of the transferee or transferees a new
Debenture or Debentures for a like aggregate principal amount.
All Debentures presented or surrendered for exchange, registration of
transfer, redemption, conversion or payment shall, if so required by the
Company or the Trustee or any Debenture registrar, be accompanied by a
written instrument or instruments of transfer, in form satisfactory to the
<PAGE>
17
Company and the Trustee and such registrar, duly executed by the registered
holder or by his duly authorized attorney.
No service charge shall be made for any exchange or registration of
transfer of Debentures, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto.
The Company shall not be required to issue, register the transfer of or
exchange any Debentures for a period of fifteen days next preceding any date
for the selection of Debentures to be redeemed. The Company shall not be
required to register the transfer of or exchange any Debenture called or
being called for redemption except, in the case of any Debenture to be
redeemed in part, the portion thereof not to be so redeemed.
SECTION 2.06. Temporary Debentures. Pending the preparation of
definitive Debentures, the Company may execute and the Trustee or the
Authenticating Agent shall authenticate and deliver temporary Debentures
(printed, lithographed or typewritten) of any authorized denomination and
substantially in the form of the definitive Debentures, but with or without a
recital of specific redemption prices and with such omissions, insertions and
variations as may be appropriate for temporary Debentures, all as may be
determined by the Board of Directors of the Company. Temporary Debentures
may contain such reference to any provisions of the Indenture as may be
appropriate. Every such temporary Debenture shall be authenticated by the
Trustee or the Authenticating Agent upon the same conditions and in
substantially the same manner, and with the same effect, as the definitive
Debentures. Without unnecessary delay the Company will execute and deliver
to the Trustee or to the Authenticating Agent definitive Debentures and
thereupon any or all temporary Debentures may be surrendered in exchange
therefor, at the offices or agencies to be maintained by the Company in
accordance with the provisions of Section 6.02, and the Trustee or the
Authenticating Agent shall authenticate and deliver in exchange for such
temporary Debentures an equal aggregate principal amount of definitive
Debentures. Until so exchanged, the temporary Debentures shall in all
respects be entitled to the same benefits under this Indenture as definitive
Debentures authenticated and delivered hereunder.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Debentures. In case
any temporary or definitive Debenture shall become mutilated or be destroyed,
lost or stolen, the Company, in the case of any mutilated Debenture shall,
and in the case of any destroyed, lost or stolen Debenture in its discretion
may, in the absence of notice to the Company or the Trustee or the
Authenticating
<PAGE>
18
Agent that such Debenture has been acquired by a bona fide purchaser, execute
and upon its request the Trustee or the Authenticating Agent shall
authenticate and deliver a new Debenture bearing a number not
contemporaneously outstanding in exchange and substitution for the mutilated
Debenture, or in lieu of and substitution for the Debenture so destroyed,
lost or stolen, or, if any such Debenture shall have matured or shall be
about to mature or shall have been selected for redemption, instead of
issuing a substituted Debenture, the Company may pay the same without
surrender thereof except in the case of a mutilated Debenture. In every case
the applicant for a substituted Debenture or for such payment shall furnish
to the Company and to the Trustee and to the Authenticating Agent such
security or indemnity as may be required by them to save each of them
harmless, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Company and to the Trustee and to the
Authenticating Agent evidence to their satisfaction of the destruction, loss
or theft of such Debenture and of the ownership thereof. The Trustee or the
Authenticating Agent may authenticate any such substituted Debenture and
deliver the same, or the Trustee or any paying agent of the Company may make
any such payment, upon the written request or authorization of any officer of
the Company, and shall incur no liability to anyone by reason of anything
done or omitted to be done by it in good faith under the provisions of this
Section 2.07. Upon the issue of any substituted Debenture, the Company may
require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any expenses
connected therewith.
Every substituted Debenture issued pursuant to the provisions of this
Section 2.07 in substitution for any destroyed, lost or stolen Debenture
shall constitute an additional contractual obligation of the Company, whether
or not the destroyed, lost or stolen Debenture shall be found at any time,
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder.
All Debentures shall be held and owned upon the express condition that
the foregoing provisions are exclusive with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures, and shall
preclude (to the extent lawful) any and all other rights or remedies,
notwithstanding any law or statute existing or hereafter enacted to the
contrary with respect to the replacement or payment of negotiable instruments
or other securities without their surrender.
SECTION 2.08. Cancellation of Surrendered Debentures. All Debentures
surrendered for the purpose of payment, redemption, conversion, exchange,
substitution or registration of transfer, or in discharge in whole or
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19
in part of any Sinking Fund payment, shall, if surrendered to the Company or
any paying or conversion agent or registrar, be delivered to the Trustee and
the same, together with Debentures surrendered to the Trustee for
cancellation, shall be promptly cancelled by it, and no Debentures shall be
issued in lieu thereof except as expressly permitted by any of the provisions
of this Indenture. The Trustee shall destroy cancelled Debentures and shall
deliver certificates of destruction thereof to the Company from time to time
unless the Company shall otherwise direct in writing. If the Company shall
purchase or otherwise acquire any of the Debentures, however, such purchase
or acquisition shall not operate as a payment, redemption or satisfaction of
the indebtedness represented by such Debentures unless and until the Company,
at its option, shall deliver or surrender the same to the Trustee for
cancellation.
ARTICLE THREE
SUBORDINATION OF DEBENTURES
SECTION 3.01. Agreement to Subordinate. The Company, for itself, its
successors and assigns, covenants and agrees, and each holder of Debentures,
by his acceptance thereof, likewise covenants and agrees, that the payment of
the principal of and premium, if any, and interest on each and all of the
Debentures, including payment through the operation of the Sinking Fund as
provided in this Indenture, is hereby expressly subordinated, to the extent
and in the manner hereinafter set forth, in right of payment to the prior
payment in full of all Senior Indebtedness and that such subordination is for
the benefit of the holders of Senior Indebtedness. All persons who, in
reliance upon such provisions, become holders of, or continue to hold, Senior
Indebtedness, shall be entitled to rely hereon. and such provisions are made
for the benefit of the holders of Senior Indebtedness, and they or any of
them may proceed to enforce such provisions directly against the holders of
Debentures or the Trustee.
SECTION 3.02. Distribution on Dissolution, Liquidation and
Reorganization; Subrogation of Debentures. Upon any distribution of assets
of the Company upon any dissolution, winding up, liquidation or
reorganization of the Company, whether in bankruptcy, insolvency,
reorganization or receivership proceedings or upon an assignment for the
benefit of creditors or any other marshalling of the assets and liabilities
of the Company or otherwise:
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20
(a) the holders of all Senior Indebtedness shall first be entitled
to receive payment in full of the principal thereof, premium, if any, and
the interest due thereon before the holders of the Debentures are entitled
to receive any payment upon the principal of and premium, if any, or
interest on indebtedness evidenced by the Debentures;
(b) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to which the
holders of the Debentures or the Trustee would be entitled except for the
provisions of this Article Three shall be paid or delivered by the Company
or any liquidating trustee, trustee in bankruptcy, receiver, agent or
other person making such payment or distribution directly to the holders
of Senior Indebtedness or their representative or representatives or to
the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, as their
interests appear, to the extent necessary to make payment in full of all
Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Company of any kind or character, whether
in cash, property or securities, shall be received by the Trustee or
holders of the Debentures before all Senior Indebtedness is paid in full,
such payment or distribution shall be paid over or delivered to the
holders of such Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may have
been issued, as their interests appear, for application to the payment of
all Senior Indebtedness remaining unpaid until all such Senior
Indebtedness shall have been paid in full, after giving effect to any
concurrent payment or distribution to the holders of such Senior
Indebtedness.
The consolidation of the Company with, or the merger of the Company
into, another corporation or the liquidation or dissolution of the Company
following the sale or conveyance of its property or assets as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Thirteen shall not be deemed a dissolution,
winding up, liquidation or reorganization of the Company for the purposes of
this Article Three if such other corporation shall, as a part of such
consolidation, merger, sale or conveyance, comply with the conditions stated
in Article Thirteen.
<PAGE>
21
Subject to the payment in full of all Senior Indebtedness, the holders
of the Debentures shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Indebtedness until the
principal of, premium, if any, and interest on the Debentures shall be paid
in full and no such payments or distributions to the holders of the
Debentures of cash, property or securities otherwise distributable to the
Senior Indebtedness shall, as between the Company, its creditors other than
the holders of Senior Indebtedness, and the holders of the Debentures, be
deemed to be a payment by the Company to or on account of the Debentures. It
is understood that the provisions of this Article Three are and are intended
solely for the purpose of defining the relative rights of the holders of the
Debentures, on the one hand, and the holders of Senior Indebtedness, on the
other hand. Nothing contained in this Article Three or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Indebtedness, and the
holders of the Debentures, the obligation of the Company, which is
unconditional and absolute, to pay to the holders of the Debentures the
principal of, premium, if any, and interest on the Debentures as and when the
same shall become due and payable in accordance with their terms or to affect
the relative rights of the holders of the Debentures and creditors of the
Company other than the holders of Senior Indebtedness, nor shall anything
herein or in the Debentures prevent the Trustee or the holder of any
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article Three of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy. Upon any payment or distribution of assets of the Company referred to
in this Article Three, the Trustee, subject to the provisions of Section
9.01, and the holders of the Debentures shall be entitled to rely upon any
order or decree of a court of competent jurisdiction in which any proceedings
of the nature referred to in this Section are pending or upon a certificate
of the liquidating trustee, trustee in bankruptcy, receiver, agent or other
person making any distribution to the Trustee or to the holders of the
Debentures, for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
others facts pertinent thereto or to this Article Three. In the event that
the Trustee determines, in good faith, that evidence is required with respect
to the right of any person as a holder of Senior Indebtedness to participate
in any payment or distribution
<PAGE>
22
pursuant to this Section, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such person, as to the extent to which such
person is entitled to participate in such payment or distribution, and as to
other facts pertinent to the rights of such person under this Section, and if
such evidence is not furnished, the Trustee may defer any payment to such
person pending judicial determination as to the right of such person to
receive such payment.
The Trustee, however, shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to or on behalf of
holders of Debentures or the Company moneys or assets to which any holders of
Senior Indebtedness shall be entitled by virtue of this Article Three.
SECTION 3.03. Payments on Debentures Prohibited During Event of Default
Under Senior Indebtedness. In the event and during the continuation of any
default in the payment of principal of, or premium, if any, or interest on,
any Senior Indebtedness beyond any applicable period of grace, or in the
event that any other event of default (as defined in the instrument governing
such Senior Indebtedness) with respect to any Senior Indebtedness shall have
occurred and be continuing, or would occur as a result of the payment
referred to hereinafter, permitting the holders of such Senior Indebtedness
(or a trustee on behalf of the holders thereof) to accelerate the maturity
thereof, then, unless and until such default or event of default shall have
been cured or waived or shall have ceased to exist, no payment of principal
of, premium, if any, or interest on the Debentures and no Sinking Fund
payment shall be made by the Company (except Sinking Fund payments made on
Debentures redeemed or acquired or converted prior to the happening of such
default or event of default), nor shall Debentures be directly or indirectly
purchased by the Company or any Subsidiary.
SECTION 3.04. Payments on Debentures Permitted. Nothing contained in
this Indenture or in any of the Debentures shall (a) affect the obligation of
the Company to make, or prevent the Company from making, at any time except
as provided in Sections 3.02 and 3.03, payments of principal of, premium, if
any, or interest on the Debentures, or (b) prevent the application by the
Trustee or any paying agent of any moneys deposited with it hereunder to the
payment of or on account of the principal of, premium, if any, or interest on
the Debentures, if, prior to mailing or otherwise effecting distribution of
checks or other instruments representing such payment, the Trustee or paying
agent, as the case may be, did not have written notice of any event
prohibiting the making of such deposit by the Company.
<PAGE>
23
SECTION 3.05. Authorization of Debentureholders to Trustee to Effect
Subordination. Each Holder of Debentures by his acceptance thereof
authorizes and directs the Trustee in his behalf to take such action as may
be necessary or appropriate to effectuate the subordination as provided in
this Article Three and appoints the Trustee his attorney-in-fact for any and
all such purposes.
SECTION 3.06. Notices to Trustee. The Company shall give prompt notice
to the Trustee of any fact known to the Company which would prohibit the
making of any payment to or by the Trustee or any paying agent in respect of
the Debentures pursuant to the provisions of this Article Three.
Notwithstanding the provisions of this Article Three or any other provisions
of this Indenture, neither the Trustee nor any paying agent (other than the
Company) shall be charged with knowledge of the existence of any Senior
Indebtedness or of any event which would prohibit the making of any payment
of moneys to or by the Trustee or such paying agent, unless and until the
Trustee or such paying agent shall have received written notice thereof at
the principal office of the Trustee from the Company or from the holder of
any Senior Indebtedness or from the representative of any such holder.
ARTICLE FOUR
CONVERSION OF DEBENTURES
SECTION 4.01. Conversion Privilege. Subject to and upon compliance
with the provisions of this Article Four, at the option of the holder, any
Debenture or any portion of the principal amount thereof which is $1,000 or a
whole multiple thereof, may, at any time on or before August 1, 2011, or in
case such Debenture or some portion thereof shall be called for redemption
prior to such date, then, with respect to such Debenture or portion thereof
so called for redemption, until and including, but not after, the close of
business on the date fixed for such redemption, be converted at the principal
amount thereof into Common Stock at the conversion price in effect at the
date of conversion.
SECTION 4.02. Manner of Exercise of Conversion Privilege. In order to
exercise the conversion privilege, the holder of any Debenture to be
converted shall surrender such Debenture to the Company at the office or
agency to be maintained by the Company in accordance with the provisions of
Section 6.02, together with the conversion notice, which shall be
irrevocable, in the form provided on the Debentures duly executed, and, if so
required by the Company, the Debenture shall also be accompanied by proper
assignments thereof to the Company or in blank for transfer and any requisite
Federal and State transfer
<PAGE>
24
tax stamps. Debentures so surrendered during the period from the close of
business on the record date preceding an interest payment date to the opening
of business on such interest payment date shall (unless any such Debenture or
the portion thereof being converted shall have been called for redemption on
a date fixed for redemption during such period) also be accompanied by
payment in New York Clearing House funds, or other funds acceptable to the
Company, of an amount equal to the interest payable on such interest payment
date on the principal amount of such Debenture then being converted. As
promptly as practicable after the surrender of such Debenture for conversion
as aforesaid, the Company shall issue and shall deliver at said office or
agency to such holder, or on his written order, a certificate or certificates
for the number of full shares issuable upon the conversion of such Debenture
or portion thereof and a check or cash in respect of any fraction of a share
of Common Stock issuable upon such conversion, all as provided in this
Article Four, together with a Debenture or Debentures in principal amount
equal to the unconverted and unredeemed portion, if any, of the Debenture so
converted. Such conversion shall be deemed to have been effected on the date
on which such notice shall have been received at said office or agency and
such Debenture shall have been surrendered as aforesaid, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder or holders of record of the shares represented
thereby; provided, however, that any such surrender on any date when the
stock transfer books of the Company shall be closed shall constitute the
person or persons in whose name or names the certificates are to be issued as
the record holder or holders thereof for all purposes on the next succeeding
day on which such stock transfer books are open, but on such conversion shall
be at the conversion price in effect on such next succeeding day on which
such transfer books are open. Subject to the foregoing, no adjustment shall
be made for interest accrued on any Debenture that shall be converted or for
dividends on any Common Stock that shall be issued upon the conversion of
such Debenture.
SECTION 4.03. Cash Adjustment Upon Conversion. The Company shall not
be required to issue Fractions of shares of Common Stock upon conversion of
Debentures. If more than one Debenture shall be surrendered for conversion
at one time by the same holder, the number of full shares which shall be
issuable upon conversion thereof shall be computed on the basis of the
aggregate principal amount of the Debentures so surrendered. If any
fractional interest in a share of Common Stock would be deliverable upon the
conversion of any
<PAGE>
25
Debenture or Debentures, the Company shall make an adjustment therefor in
cash equal to the current market value of such fractional interest computed
to the nearest one-hundredth of a share either on the basis of the last
reported sale price regular way of the Common Stock on the New York Stock
Exchange (or, if not listed on the New York Stock Exchange, then on such
other exchange on which the Common Stock is listed as the Company may
designate) on the last business day prior to the date of conversion or, if
there shall not have been a sale on such last business day, on the basis of
the average of the bid and ask quotations therefor on such exchange on such
last business day or, if the Common Stock shall not then be listed on any
exchange, at the highest bid quotation in the over-the-counter market on such
last business day as reported by the National Association of Securities
Dealers, Inc. through NASDAQ, its automated system for reporting quotes, or
its successor or such other generally accepted source of publicly reported
bid and ask quotations as the Company may reasonably designate.
SECTION 4.04. Initial Conversion Price. The conversion price shall be
as specified in the form of Debenture hereinabove set forth or, after
adjustment as provided in this Article Four, the conversion price as so
adjusted.
SECTION 4.05. Adjustment of Conversion Price. The conversion price
shall be adjusted from time to time as follows:
(a) In case the Company shall, at any time or from time to time
while any of the Debentures are outstanding, (i) pay a dividend in shares
of its Common Stock, (ii) subdivide its outstanding shares of Common
Stock, or (iii) combine its outstanding shares of Common Stock into a
smaller number of shares, the conversion price in effect immediately prior
thereto shall be adjusted so that the holder of any Debenture thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Company which he would
have owned or been entitled to receive after the happening of any of the
events described above, had such Debenture been converted immediately
prior to the happening of such event. Any adjustment made pursuant to this
subdivision (a) shall become effective, in the case of a dividend, on the
payment date retroactively to immediately after the opening of business on
the day following the record date for the determination of shareholders
entitled to receive such dividend, subject to the provisions of
subdivision (f) of this Section 4.05, and shall become effective in the
case of a subdivision or combination immediately after the opening of
business on the day following the day when such subdivision or
combination, as the case may be, becomes effective.
<PAGE>
26
(b) In case the Company shall, at any time or from time to time
while any of the Debentures are outstanding, issue rights or warrants to
all holders of shares of its Common Stock entitling them (for a period
expiring within 45 days of the record date mentioned below) to subscribe
for or purchase shares of Common Stock at a price per share less than
the current market price per share of Common Stock (as defined in
subdivision (d) below) at such record date, the conversion price in
effect immediately prior to the issuance of such right or warrants shall
be adjusted as follows: the number of shares of Common Stock into which
$1,000 principal amount of Debentures was theretofore convertible shall
be multiplied by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such record
date plus the number of additional shares of Common Stock offered for
subscription or purchase, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
record date plus the number of shares which the aggregate offering price
of the total number of shares so offered would purchase at such current
market price; and the conversion price shall be adjusted by dividing
$1,000 by the new number of shares into which $1,000 principal amount of
Debentures shall be convertible as aforesaid. Such adjustment shall
become effective on the date of such issuance retroactively to
immediately after the opening of business on the day following the
record date for the determination of shareholders entitled to receive
such rights or warrants, subject to the provisions of subdivision (f) of
this Section 4.05.
(c) In case the Company shall, at any time or from time to time
while any of the Debentures are outstanding, distribute to all holders
of shares of its Common Stock evidences of its indebtedness or
securities (excluding those referred to in subdivision (a) above) or
assets (excluding cash dividends or cash distributions payable out of
consolidated earnings or retained earnings, or dividends payable in
shares of Common Stock) or rights to subscribe (excluding those referred
to in subdivision (b) above), the conversion price in effect immediately
prior to such distribution shall be adjusted by multiplying the number
of shares of Common Stock into which $1,000 principal amount of
Debentures was theretofore convertible by a fraction, the numerator of
which shall be the current market price per share of Common Stock (as
defined in subdivision (d) below) on the record date for such
distribution, and the denominator of which shall be such current market
price per share of the Common Stock, less the then
<PAGE>
27
fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the portion of such
assets or securities or evidences of indebtedness so distributed or of
such subscription rights applicable to one share of Common Stock; and
the conversion price shall be adjusted by dividing $1,000 by the new
number of shares into which $1,000 principal amount of Debentures shall
be convertible as aforesaid. Such adjustment shall become effective on
the date of such distribution retroactively to immediately after the
opening of business on the day following the record date for the
determination of shareholders entitled to receive such distribution,
subject to the provisions of subdivision (f) of this Section 4.05. For
the purposes of this subdivision (c), consolidated earnings or retained
earnings shall be computed by adding thereto all charges against
retained earnings on account of dividends paid in shares of Common Stock
in respect of which the conversion price has been adjusted, all as
determined by the independent public accountants then regularly auditing
the accounts of the Company, whose determination shall be conclusive.
(d) For the purpose of any computation under subdivisions (b) and
(c) above, the current market price per share of Common Stock at any
date shall be deemed to be the average of the market values of the
Common Stock for the ten consecutive business days immediately preceding
the day in question. The market value of the Common Stock for each day
shall be determined as provided in Section 4.03 hereof.
(e) Except as herein otherwise provided, no adjustment in the
conversion price shall be made by reason of the issuance in exchange for
cash, property or services, of shares of Common Stock, or any securities
convertible into or exchangeable for shares of Common Stock, or carrying
the right to purchase any of the foregoing. Notwithstanding the other
provisions of this Article Four, no adjustment in the conversion price
shall be made for (i) rights to purchase Common Stock pursuant to a plan
for reinvestment of dividends or interest, including optional cash
purchases, or (ii) a change in the par value of, or a change to or from
no par value for, the Common Stock.
(f) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any dividend
or any subscription or purchase rights or any distribution and shall,
thereafter and before the distribution to stockholders of any such
dividend, subscription or purchase rights or distribution, legally
abandon its plan to pay or deliver such dividend, subscription or
purchase rights or distribution, then no adjustment of the conversion
price shall be required by reason of the taking of such record.
<PAGE>
28
(g) No adjustment in the conversion price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of
this subdivision (g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. Except as
provided in Section 4.03, all calculations under this Article Four shall
be made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
(h) Whenever the conversion price is adjusted as herein provided,
the Company shall (i) forthwith place on file at the principal office of
the Trustee a statement signed by the President or a Vice President of
the Company and by its Treasurer or an Assistant Treasurer showing in
detail the facts requiring such adjustment and the conversion price
after such adjustment and the Trustee shall exhibit the same from time
to time to any Debentureholder desiring an inspection thereof, and (ii)
cause a notice stating that such adjustment has been effected and the
adjusted conversion price to be mailed to the holders of Debentures at
their last addresses as they shall appear on the registry books.
(i) No adjustment in the conversion price shall be required for a
transaction specified in subdivisions (a), (b) or (c) above if
debentureholders, upon conversion, are permitted to participate in the
transactions on a basis and with notice that the Board of Directors
determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction.
SECTION 4.06. Effect of Reclassifications, Consolidations, Mergers or
Sales on Conversion Privilege. In case of any reclassification or change of
outstanding shares of Common Stock issuable upon conversion of the Debentures
(other than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or combination),
or in case of any consolidation of the Company with one or more other
corporations (other than a consolidation in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding shares of Common Stock issuable upon conversion of the
Debentures), or in case of the merger of the Company into another
corporation, or in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety,
the Company, or such successor or purchasing corporation, as the case may be,
shall execute with the Trustee a supplemental indenture (which shall conform
to the Trust Indenture Act of 1939 as in force at the date of the execution
of such supplemental indenture) providing that the holder of each Debenture
then
<PAGE>
29
outstanding shall have, in lieu of the right to convert such Debenture into
Common Stock of the Company, the right to convert such Debenture into the
kind and amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock into which
such Debenture might have been converted immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Such
supplemental indenture shall provide for adjustments which shall be as
nearly, equivalent as may be practicable to the adjustments provided for in
this Article Four and any such adjustments which shall be approved by the
Board of Directors and set forth in such supplemental indenture shall be
conclusive for all purposes of this Section 4.06, and the Trustee shall not
be under any responsibility to determine the correctness of any provision
contained in such supplemental indenture relating to either the kind or
amount of shares of stock or securities or property receivable by
debentureholders upon the conversion of their Debentures after any such
reclassification, change, consolidation, merger, sale or conveyance. To the
extent the Debentures become convertible into cash, no adjustment need be
made thereafter as to the cash, and interest will not accrue on the cash.
The above provisions of this Section 4.06 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, sales and
conveyances.
SECTION 4.07. Taxes on Conversion. The issue of stock certificates on
conversion of Debentures shall be made without charge to the converting
debentureholder for any issue tax in respect of the issue thereof. The
Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares in
any name other than that of the holder of any Debenture converted, and the
Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issue thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
SECTION 4.08. Company to Reserve Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares, for the
purpose of effecting the conversion of the Debentures, such number of its
duly authorized shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding Debentures.
If any shares of Common Stock reserved or to be reserved for the purpose
of conversion of Debentures hereunder require registration with or approval
of any governmental authority under any Federal or State law before such
shares may be validly issued upon conversion, then the Company covenants
<PAGE>
30
that it will in good faith and as expeditiously as practicable endeavor to
secure such registration or approval, as the case may be.
The Company covenants that all shares of Common Stock which may be
issued upon conversion of Debentures shall upon issue be fully paid and
nonassessable by the Company and free from all taxes, liens and charges with
respect to the issue thereof.
SECTION 4.09. Disclaimer by Trustee of Responsibility for Certain
Matters. Neither the Trustee nor any conversion agent shall at any time be
under any duty or responsibility to any holder of Debentures to determine
whether any facts exist which may require any adjustment of the conversion
price, or with respect to the nature, accuracy or extent of any such
adjustment when made, or with respect to the method employed, or herein or in
any supplemental indenture provided to be employed, in making the same,
subject, however, to the provisions of Section 9.01 of this Indenture.
Neither the Trustee nor any conversion agent shall be accountable with
respect to the validity or value (or the kind or amount) of any shares of
Common Stock, or of any securities or property, which may at any time be
issued or delivered upon the conversion of any Debenture; and neither of them
makes any representations with respect thereto. Neither the Trustee nor any
conversion agent shall be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any shares of Common Stock
or stock certificates or other securities or property upon the surrender of
any Debenture for the purpose of conversion or, subject to Section 9.01, to
comply with any of the covenants of the Company contained in this Article
Four.
SECTION 4.10. Company to Give Notice of Certain Events. In the event
(1) that the Company shall pay any dividend or make any
distribution to the holders of Common Stock otherwise than in cash out
of its retained earnings; or
(2) that the Company shall offer for subscription, pro rata, to
the holders of Common Stock any additional shares of stock of any class
or any other right; or
(3) that the Company shall effect any reclassification or change
of outstanding shares of the Common Stock issuable upon the conversion
of the Debentures (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or any consolidation of the Company with,
or merger of the Company into, another corporation (other than a
consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or change
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31
of outstanding shares of Common Stock issuable upon conversion of the
Debentures), or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety;
then, and in any one or more of such events, the Company will give to
the Trustee and any conversion agent written notice thereof at least ten
days (or such shorter period acceptable to the Trustee) prior to (i) the
record date fixed with respect to any of the events specified in (1) and
(2) above, and (ii) the effective date of any of the events specified in
(3) above; and shall mail a copy of such notice to the holders of
Debentures at their last addresses as they shall appear upon the
registry books.
ARTICLE FIVE
REDEMPTION OF DEBENTURES - SINKING FUND
SECTION 5.01. Redemption Prices. (a) The Company may, at its option,
redeem all or from time to time any part of the Debentures, otherwise than
through the operation of the Sinking Fund provided for in this Article Five,
subject to the conditions and at the prices specified in the form of
Debenture hereinbefore set forth for redemption otherwise than through the
operation of the Sinking Fund, together with interest accrued and unpaid
thereon to the date fixed for redemption.
(b) The Debentures are also subject to redemption in part on August 1,
1997 and on each August 1 thereafter to and including August 1, 2010, through
the operation of the Sinking Fund described in Section 5.04, at 100% of the
principal amount thereof, together with interest accrued and unpaid thereon
to the date fixed for redemption.
SECTION 5.02. Notice of Redemption; Selection of Debentures. In case
the Company shall desire to exercise such right to redeem all or, as the case
may be, any part of the Debentures in accordance with the right reserved so
to do, it shall give notice of such redemption to the Trustee, and the
Trustee shall thereupon, in the name of and at the expense of the Company,
give notice on behalf of the Company of such redemption to the holders of the
Debentures to be !redeemed as hereinafter in this Section 5.02 provided.
Notice of redemption shall be given to the holders of Debentures to be
redeemed as a whole or in part by mailing by first-class mail a notice of
such redemption not less than thirty nor more than sixty days prior to the
date fixed for redemption to their last addresses as they shall appear upon
the registry books, but failure to give such notice by mailing to the holder
of any Debenture designated for redemption as a whole or in part, or any
defect therein, shall not affect the validity of the proceedings for the
redemption of any other Debentures.
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Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
receives the notice.
Each such notice of redemption shall specify the total principal amount
to be redeemed, the date fixed for redemption and the redemption price at
which Debentures are to be redeemed, and shall state that payment of the
redemption price of the Debentures to be redeemed will be made at the office
or agency to be maintained by the Company in accordance with the provisions
of Section 6.02, upon presentation and surrender of such Debentures, that
interest accrued to the date fixed for redemption will be paid as specified
in said notice, that on and after said date interest thereon will cease to
accrue and such notice shall state the current conversion price, the date on
which the right to convert the Debentures or portion of the principal amount
thereof to be redeemed will terminate and the places where such Debentures
may be surrendered for conversion. If less than all the Debentures are to be
redeemed, the notice of redemption to each holder shall specify the numbers
of such Debentures to be redeemed. In case any Debenture is to be redeemed
in part only, the notice which relates to such Debenture shall state the
portion of the principal amount thereof to be redeemed (which shall be
$1000 or a whole multiple thereof), and shall state that on and after the date
fixed for redemption, upon surrender of such Debenture, the holder will
receive the redemption price together with accrued interest in respect of the
principal amount thereof called for redemption and, without charge, a new
Debenture or Debentures of authorized denominations for the principal amount
thereof remaining unredeemed.
On or prior to the redemption date specified in the notice of redemption
given as provided in this Section 5.02, the Company will deposit with the
Trustee or with one or more paying agents an amount of money in immediately
available funds sufficient to redeem on the redemption date all the
Debentures or portions of Debentures so called for redemption at the
appropriate redemption price, together with accrued interest to the date
fixed for redemption.
If all the Debentures are to be redeemed, the Company shall give the
Trustee notice thereof at least thirty-five days (or such shorter period
acceptable to the Trustee) in advance of the date fixed for redemption. If
less than all the Debentures are to be redeemed, the Company shall give the
Trustee, at least forty-five days (or such shorter period acceptable to the
Trustee) in advance of the date fixed for redemption, notice of the aggregate
principal amount of Debentures to be redeemed, and thereupon the Trustee
shall select by lot or in such other manner as it shall deem appropriate and
fair, in its discretion, the Debentures or portions thereof to be redeemed
and shall thereafter promptly
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33
notify the Company in writing of the number of the Debentures or portions
thereof to be redeemed. For the purpose of any redemption of less than all
the Debentures, the Company and the Trustee may treat as outstanding
Debentures surrendered for conversion during the period of fifteen days
immediately preceding the mailing of the notice of redemption.
If any Debenture selected for redemption in part is surrendered for
conversion in part on or before the close of business on the third business
day next preceding the date fixed for redemption, the part of such Debenture
converted shall be applied first to the part to be redeemed.
SECTION 5.03. When Debentures Called for Redemption Become Due and
Payable. If the giving of notice of redemption shall have been completed as
above provided, the Debentures or portions of Debentures specified in such
notice shall, unless theretofore converted into Common Stock, become due and
payable on the date and at the place stated in such notice at the applicable
redemption price, together with interest accrued to the date fixed for
redemption, and (i) on and after such date fixed for redemption (unless the
Company shall default in the payment of such Debentures at the redemption
price, together with interest accrued to the date fixed for redemption)
interest on the Debentures or portions of Debentures so called for redemption
shall cease to accrue, and (ii)any right to convert the Debentures or
portions of Debentures so called for redemption shall terminate at the close
of business on the date fixed for redemption. On presentation and surrender
of such Debentures at said place of payment in said notice specified, the
said Debentures shall be paid and redeemed by the Company at the applicable
redemption price, together with interest accrued to the date fixed for
redemption. Upon presentation of any Debenture which is redeemed in part
only, the Company shall execute and register and the Trustee or the
Authenticating Agent shall authenticate and deliver at the expense of the
Company, a new Debenture or Debentures in principal amount equal to the
unredeemed portion of the Debenture so presented.
SECTION 5.04. Sinking Fund. (a) As and for a Sinking Fund for the
retirement of Debentures, the Company covenants that, on or before August 1,
1997, and annually on or before August 1 of each year thereafter to and
including August 1, 2010, it will pay to the Trustee a sum in immediately
available funds sufficient to retire by redemption 5% of the aggregate
principal amount of Debentures issued at a redemption price which shall be
100% of the principal amount thereof, provided, however, that in any such
year in which August 1 is not a business day, such payment shall be made to
the Trustee on or before the last business day preceding such August 1; and
provided, further,
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34
that such principal amount of Debentures may, at the option of the Company,
be reduced by an amount not exceeding the sum of the following:
(i) the principal amount of Debentures theretofore issued and
reacquired (otherwise than through redemption pursuant to this Article
Five) by the Company and delivered to the Trustee for cancellation and not
theretofore made the basis for the reduction of a Sinking Fund payment;
(ii) the principal amount of Debentures theretofore converted into
Common Stock pursuant to Article Four and not theretofore made the basis
for the reduction of a Sinking Fund payment pursuant to this subparagraph
(ii), or Section 5.05(b) or otherwise;
(iii) the principal amount of Debentures redeemed and paid pursuant
to the provisions of this Article Five (otherwise than through the
operation of the Sinking Fund), or which shall have been duly called for
redemption (otherwise than through the operation of the Sinking Fund) and
the redemption price of which shall have been deposited in trust for that
purpose, and which have not theretofore been made the basis for the
reduction of a Sinking Fund payment; and
(iv) the principal amount of Debentures redeemed through optional
Sinking Fund payments made pursuant to Section 5.04(b) and not theretofore
made the basis for the reduction of a Sinking Fund payment.
On or before June 1 in each year, beginning June 1, 1997 to and including
June 1, 2010, the Company shall deliver to the Trustee an Officer's
Certificate stating whether it elects to reduce the amount to be paid to the
Trustee in cash on the next succeeding August 1 and, if it elects to make
such a reduction, setting forth the amount of the reduction and the basis or
bases provided above for such reduction, together with any Debentures
theretofore issued and reacquired (otherwise than through redemption pursuant
to this Article Five) by the Company and not theretofore delivered to the
Trustee for cancellation, which are to be made the basis for such reduction
of a Sinking Fund payment.
(b) In addition to the funds required to be paid to the Trustee pursuant to
paragraph (a) of this Section 5.04, the Company may at its option on or
before August 1, 1997, and annually on or before August 1 of each year
thereafter to and including August 1, 2010, pay to the Trustee as and for the
Sinking Fund a sum in immediately available funds not exceeding the amount
required to retire by redemption an additional 5% of the aggregate principal
amount of Debentures issued at a redemption price which shall be 100% of the
principal
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35
amount thereof on such August 1. Any such election by the Company shall be
evidenced by an Officers' Certificate delivered to the Trustee not later than
the June 1 next preceding the August I in question and shall be irrevocable
upon such delivery. The right granted in this paragraph (b) shall be
noncumulative so that the failure to exercise such right in any year, in
whole or in part, shall not increase the maximum amount which may be paid to
the Trustee in any subsequent year.
(c) All funds paid to the Trustee pursuant to the provisions of this
Section 5.04 shall be applied in accordance with the provisions of this
Article Five.
SECTION 5.05. Application of Sinking Fund Payments. (a) In each year
commencing with 1997, as soon as practicable after June 1, the Trustee shall
take the action herein specified to call for redemption on the next
succeeding August 1, at a redemption price which shall be 100% of the
principal amount thereof, an amount of Debentures sufficient to exhaust, as
nearly as may be practicable, the sums then held by it in the Sinking Fund or
required to be paid to it for the Sinking Fund pursuant to Sections 5.04(a)
and (b) prior to such August 1; provided, however, that such action shall be
taken only if such sums shall be sufficient to redeem $25,000 principal
amount of Debentures or more.
(b) In the event that any Debenture or portion thereof called for
redemption through operation of the Sinking Fund pursuant to paragraph (a) of
this Section 5.05 is converted into Common Stock of the Company after being
so called for redemption, the Company may, at its option, reduce in whole or
part the amount of the payment currently required or payable under Section
5.04(a) (and Section 5.04(b) if applicable) by an amount equal to the
principal amount of such Debenture or portion thereof so converted, provided
that the Company shall notify the Trustee in writing at the time any Sinking
Fund payment is made whether the Company elects to reduce such payment, and,
if so, the amount of the reduction.
(c) Any unused balance of moneys remaining in the hands of the Trustee
on the June 1 preceding the Sinking Fund payment date in any year shall be
added to any Sinking find payment to be made I immediately available funds in
that year, and together with such payment, if any, shall be applied to the
redemption of Debentures in accordance with the provisions of this Section
5.05.
The Company will pay to the Trustee, with respect to any Debentures to
be redeemed pursuant to this Section 5.05, accrued interest to be paid by the
Trustee in respect of such Debentures, it being the intention that accrued
interest and any other expenses shall not be charged against Sinking Fund
moneys.
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36
SECTION 5.06. Redemption in Event of Default. The Trustee shall not
redeem any Debentures with Sinking Fund moneys or mail any notice of
redemption of Debentures by operation of the Sinking Fund during any period
in which the Trustee is charged with knowledge of the continuance of either a
default in payment of interest on the Debentures or of any Event of Default
(other than an Event of Default occurring as a consequence of this
paragraph), except that if the notice of redemption of any Debentures shall
theretofore have been mailed in accordance with the provisions hereof, the
Trustee shall redeem such Debentures if funds sufficient for that purpose
shall be paid to the Trustee for that purpose in accordance with the terms of
this Article Five. Except as aforesaid, any moneys in the Sinking Fund
during any period in which the Trustee is charged with the knowledge of the
continuance of any such default or Event of Default shall, during such
period, be held as security for the payment of all the Debentures; provided,
however, that in case such Event of Default shall have been cured or waived
as provided herein, such moneys shall thereafter be applied on the next
August 1 on which such moneys may be applied pursuant to the provisions of
this Section 5.06.
For the purposes of this Section 5.06 and of Section 8.07, the Trustee
shall not be charged with knowledge of the continuance either of default in
payment of interest on the Debentures or of any Event of Default unless
either (a) a responsible officer of the Trustee assigned to its corporate
trust department shall, as such officer, have actual knowledge thereof or (b)
written notice of such continuance shall have been given to the Trustee by
the Company or by the holders of at least five percent of the aggregate
principal amount of the Debentures at the time outstanding.
SECTION 5.07. Manner of Redeeming Debentures. The Debentures to be
redeemed from time to time as in Section 5.05 provided shall be selected by
the Trustee for redemption in the manner provided in Section 5.02 and notice
thereof shall be given by the Trustee to the Company, and the Company hereby
authorizes the Trustee, in the name of and at the expense of the Company, to
give notice on behalf of the Company of the call of such Debentures, all in
the manner and with the effect in this Article Five specified except that, in
addition to the matters required to be included in such notice by Section
5.02, such notice shall also state that the Debentures therein designated for
redemption are to be redeemed through operation of the Sinking Fund. Subject
to the provisions of Section 5.06 and to the receipt by the Trustee of the
funds and the accrued interest to be paid to the Trustee pursuant to Sections
5.04 and 5.05, the Trustee shall cause such Debentures to be so redeemed and
paid in accordance with such notice in the manner and with the effect
provided in Sections 5.02 and 5.03
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37
SECTION 5.08. Cancellation of Redeemed Debentures. All Debentures
surrendered to the Trustee, pursuant to the provisions of this Article Five,
shall be forthwith cancelled by it, and shall be destroyed by the Trustee,
which shall, upon request, deliver its certificate thereof to the Company.
SECTION 5.09. Conversion Arrangements on Call for Redemption. In
connection with any redemption of Debentures, the Company may arrange for the
purchase and conversion of any Debentures by an agreement with one or more
investment bankers or other purchasers to purchase such Debentures by paying
to debentureholders, or to the Trustee in trust for the debentureholders, on
or before the close of business on the date fixed for redemption, an amount
not less than the redemption price payable by the Company on redemption of
such Debentures. Notwithstanding anything to the contrary contained in this
Article Five, the obligation of the Company to pay the redemption price of
such Debentures shall be satisfied and discharged to the extent such amount
is so paid by such purchasers. Pursuant to such an agreement, any Debentures
tendered by the holder for redemption or not duly surrendered for conversion
by the holder shall be deemed acquired by such purchasers from such holders
and surrendered by such purchasers for conversion, all as of immediately
prior to the close of business on the date fixed for redemption, subject to
payment of the above as aforesaid.
ARTICLE SIX
PARTICULAR COVENANTS OF THE COMPANY
The Company covenants as follows:
SECTION 6.01. Payment of Principal of (and Premium, if Any) and
Interest on Debentures. The Company will duly and punctually pay or cause to
be paid the principal of (and premium, if any) and interest on each of the
Debentures at the time and place and in the manner provided in the Debentures
and this Indenture.
SECTION 6.02. Maintenance of Office or Agency for Registration of
Transfer, Conversion Exchange and Payment of Debentures. So long as any of
the Debentures shall remain outstanding, the Company will maintain an office
or agency in the City of San Francisco, the State of California and in the
Borough of Manhattan, The City of New York, State of New York, where the
Debentures may be surrendered for exchange, conversion or registration of
transfer as in this Indenture provided, and where notices and demands to or
upon the Company in respect of the Debentures or of this Indenture may be
served, and where the Debentures may be presented or surrendered for payment.
The Company initially appoints each of the Trustee and the Authenticating
Agent its office or agency for each of said purposes. The
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38
Company will give to the Trustee notice of the location of any such office or
agency and of any change of location thereof. In case the Company shall fail
to maintain any such office or agency or shall fail to give such notice of
the location or of any change in the location thereof, such surrenders,
presentations and demands may be made and notices may be served at the
principal office of the Trustee in the City of San Francisco, and the Company
hereby appoints the Trustee its agent to receive at the aforesaid office all
such surrenders, presentations, notices and demands. Unless other
arrangements are made by the Company, payment of interest will be made by
check mailed by the Company to the registered address of the person entitled
thereto.
The Company may from time to time designate one or more other offices or
agencies (in or outside of the Borough of Manhattan, The City of New York)
where the Debentures may be presented or surrendered for any or all of such
purposes, and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve
the Company of its obligation to maintain an office or agency in the City of
San Francisco and in the Borough of Manhattan, The City of New York, for such
purposes as stated in this Section. The Company will give prompt written
notice to the Trustee of any such designation and any change in the location
of any such office or agency.
SECTION 6.03. Appointment to Fill a Vacancy in the Office of Trustee.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 9.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 6.04. Provision as to Paying Agent. (a) If the Company shall
appoint a paying agent other than the Trustee, it will cause such paying
agent to execute and deliver to the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 6.04,
(1) that it will hold all sums held by it as such agent for the
payment of the principal of (and premium, if any) or interest on the
Debentures (whether such sums have been paid to it by the Company or by
any other obligor on the Debentures) in trust for the benefit of the
persons entitled thereto, and
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Debentures) to make any payment
of the principal of (and premium, if any) or interest on the Debentures
when the same shall be due and payable, and
(3) that it will, at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust, by such paying agent.
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39
(b) Whenever the Company shall have one or more paying agents, it will,
on or prior to each due date of the principal of (and premium, if any) or
interest on any Debentures, deposit with a paying agent a sum sufficient to
pay the principal (and premium, if any) or interest so becoming due, such sum
to be held ins trust for the benefit of the holders of Debentures entitled to
such principal, premium or interest, and (unless such paying agent is the
Trustee) the Company will promptly notify the Trustee of its failure so to
act.
(c) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of (and premium, if any) or interest on
the Debentures, set aside, segregate wad hold in trust for the benefit of the
persons entitled thereto, a sum sufficient to pay such principal (and
premium, if any) or interest so becoming due and will notify the Trustee of
any failure to take such action.
(d) Anything in this Section 6.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid
to the Trustee all sums held in trust by it, or any paying agent hereunder,
as required by this Section 6.04, such sums to be held by the Trustee upon
the trusts herein contained.
(e) Anything in this Section 6.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 6.04 is subject
to the provisions of Sections 14.03 and 14.04.
SECTION 6.05. Maintenance of Corporate Existence. So long as any of
the Debentures shall remain outstanding, the Company will at all times
(except as otherwise provided or permitted in this Section 6.05 or elsewhere
in this Indenture) do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence and franchises and
the corporate existence and franchises of each Subsidiary; provided that
nothing herein shall require the Company to continue the corporate existence
or franchises of any Subsidiary if in the judgment of the Company it shall be
necessary, advisable or in the interest of the Company to discontinue the
same.
SECTION 6.06. Further Assurance. From time to time whenever reasonably
demanded by the Trustee the Company will make, execute and deliver or cause
to be made, executed and delivered any and all such further and other
instruments and assurances as may be reasonably necessary or proper to carry
out the intention of or to facilitate the performance of the terms of this
Indenture or to secure the rights and remedies hereunder of the holders of
the Debentures.
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40
SECTION 6.07. Officers' Certificate as to Default. The Company will, so
long as any of the Debentures are outstanding:
(a) deliver to the Trustee, forthwith upon becoming aware of any
default or defaults in the performance of any covenant, agreement or
condition contained in this Indenture, an Officers' Certificate specifying
such default or defaults,
(b) deliver to the Trustee, forthwith upon becoming aware of any
default or defaults under Section 8.01(d) of this Indenture, an Officers'
Certificate specifying such default or defaults, and
(c) deliver to the Trustee within 90 days after the end of each
fiscal year of the Company, which on the date hereof ends December 31,
beginning with the fiscal year 1986, an Officers' Certificate stating that:
(1) a review of the activities of the Company during such
year and of performance under this Indenture has been made under his
supervision; and
(2) to the best of his knowledge, based on such review, the
Company has fulfilled all its obligations under this Indenture
throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known
to him and the nature and status thereof.
ARTICLE SEVEN
DEBENTUREHOLDERS' LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 7.01. Company to Furnish Trustee Information as to Names and
Addresses of Debentureholders. The Company will furnish or cause to be
furnished to the Trustee:
(a) semi-annually, not more than 15 days after each January 15 and
July 15, beginning January 15, 1987, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the debentureholders
as of such January 15 and July 15, as the case may be (or if such January
15 or July 15 is not a business day, as of the business day next preceding
such January 15 or July 15), and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a list
of similar form and content as of a date not more than 15 days prior to the
time such list is furnished.
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41
provided, however, that so long as the Trustee is the Debenture registrar, no
such lists shall be required to be furnished.
SECTION 7.02. Preservation and Disclosure of Lists. (a) The Trustee shall
preserve, in as current a form as is reasonably practicable, all information as
to the names and addresses of the holders of Debentures (1) contained in the
most recent list furnished to it as provided in Section 7.01 and (2) received by
it in the capacity of paying agent (if so acting) or Debenture registrar.
The Trustee may destroy any list furnished to it as provided in Section
7.01 upon receipt of a new list so furnished.
(b) In case three or more holders of Debentures (hereinafter referred to
as "applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Debenture for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other holders of
Debentures with respect to their rights under this Indenture or under the
Debentures, and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall,
within five business days after the receipt of such application, at its election
either
(1) afford such applicants access to the information preserved at
the time by the Trustee in accordance with the provisions of subsection (a)
of this Section 7.02, or
(2) inform such applicants as to the approximate number of holders
of Debentures whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with the provisions of subsection
(a) of this Section 7.02, and as to the approximate cost of mailing to such
debentureholders the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each debentureholder whose name and address appears in the information
preserved at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 7.02, a copy of the form of proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to the Trustee of the material to be mailed and of payment, or
provision for the payment, of the reasonable expenses of mailing, unless within
five days after such tender, the Trustee shall mail to such applicants
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and file with the Securities and Exchange Commission, together with a copy of
the material to be mailed, a written statement to the effect that, in the
opinion of the Trustee, such mailing would be contrary to the best interests of
the holders of Debentures or would be violation of applicable law. Such written
statement shall specify the basis of such opinion. If said Commission, after
opportunity for a hearing upon the objections specified in the written statement
so filed, shall enter an order refusing to sustain any of such objections or if,
after the entry of an order sustaining one or more of such objections, said
Commission shall find, after notice and opportunity for hearing, that all the
objections so sustained have been met and shall enter an order so declaring, the
Trustee shall mail copies of such material to all such debentureholders with
reasonable promptness after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any obligation or duty to
such applicants respecting their application. All notices, demands, filings or
other documents received by the Trustee from, or sent by the Trustee to,
debentureholders or said Commission pursuant to subsection (b) shall also be
sent to the Company by the Trustee promptly after receipt or concurrently with
sending.
(c) Each and every holder of the Debentures, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any paying agent nor the Debenture registrar shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the holders of Debentures in accordance with the provisions of
subsection (b) of this Section 7.02, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under said subsection
(b).
SECTION 7.03. Reports by the Company. (a) The Company covenants and agrees
to file with the Trustee within fifteen days after the Company is required to
file the same with the Securities and Exchange Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as said Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file with
said Commission pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended; or, if the Company is not required to file
information, documents or reports pursuant to either of such sections, then to
file with the Trustee and said Commission, in accordance with rules and
regulations prescribed from time to time by said Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended, in respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and regulations.
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43
(b) The Company covenants and agrees to file with the Trustee and the
Securities and Exchange Commission, in accordance with the rules and regulations
prescribed from time to time by said Commission, such additional information,
documents, and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Indenture as may be required from
time to time by such rules and regulations.
(c) The Company covenants and agrees to transmit to the holders of
Debentures within thirty days after the filing thereof with the Trustee, in the
manner and to the extent provided in subsection (c) of Section 7.04 with respect
to reports pursuant to subsection (a) of said Section 7.04, such summaries of
any information, documents and reports required to be filed by the Company
pursuant to subsections (a) and (b) of this Section 7.03 as may be required by
rules and regulations prescribed from time to time by the Securities and
Exchange Commission.
SECTION 7.04. Reports by the Trustee. (a) On or before July 15, 1987, and
on or before July 15 in every year thereafter, so long as any Debentures are
outstanding hereunder, the Trustee shall transmit to the debentureholders, as
hereinafter in this Section 7.04 provided, and to the Company, a brief report
dated as of May 15 of the year in which such report is made with respect to:
(1) its eligibility under Section 9.09, and its qualifications
under Section 9.08, or in lieu thereof, if to the best of its knowledge it
has continued to be eligible and qualified under such Sections, a written
statement to such effect;
(2) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the date of such report,
and for the reimbursement of which it claims or may claim a lien or charge,
prior to that of the Debentures, on any property or funds held or collected
by it as Trustee, except that the Trustee shall not be required (but may
elect) to state such advances if such advances so remaining unpaid
aggregate not more than one-half of one per cent of the principal amount of
the Debentures outstanding on the date of such report;
(3) the amount, interest rate, and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Debentures) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in paragraph (2), (3), (4) or
(6) of subsection (b) of Section 9.13;
(4) the property and funds of the Company, if any, physically in
the possession of the Trustee (as such) on the date of such report;
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44
(5) any additional issue of Debentures which the Trustee has not
previously reported; and
(6) any action taken by the Trustee in the performance of its
duties under this Indenture which it has not previously reported and which
in its opinion materially affects the Debentures, except action in respect
of a default, notice of which has been or is to be withheld by it in
accordance with the provisions of Section 8.07.
(b) The Trustee shall transmit to the debentureholders, as hereinafter
provided, and to the Company, a brief report with respect to the character and
amount of any advances (and if the Trustee elects so to state, the circumstances
surrounding the making thereof) made by the Trustee (as such) since the date of
the last report transmitted pursuant to the provisions of subsection (a) of this
Section 7.04 (or if no such report has yet been so transmitted, since the date
of execution of this Indenture), for the reimbursement of which it claims or may
claim a lien or charge prior to that of the Debentures on property or funds held
or collected by it as Trustee, and which it has not previously reported pursuant
to this subsection, except that the Trustee shall not be required (but may
elect) to report such advances if such advances remaining unpaid at any time
aggregate ten per cent or less of the principal amount of Debentures outstanding
at such time, such report to be transmitted within ninety days after such time.
(c) Reports pursuant to this Section 7.04 shall be transmitted by mail to
all holders of Debentures, as the names and addresses of such holders appear
upon the registry books of the Company, and to the Company in accordance with
Section 16.03.
(d) A copy of each such report shall, at the time of such transmission to
debenturebolders, be filed by the Trustee with each stock exchange upon which
the Debentures are listed and also with the Securities and Exchange Commission.
The Company will notify the Trustee when and as the Debentures become listed on
any stock exchange.
ARTICLE EIGHT
REMEDIES OF THE TRUSTEE AND DEBENTUREHOLDERS
ON EVENT OF DEFAULT
SECTION 8.01. Events of Default Defined. In case one or more of the
following Events of Default shall have occurred and be continuing, that is to
say:
(a) default in the payment, whether or not prohibited by the
provisions of Article Three, of any instalment of interest upon any of the
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45
Debentures as and when the same shall become due and payable, and
continuance of such default for a period of thirty days; or
(b) default in the payment, whether or not prohibited by the
provisions of Article Three, of the principal of (and premium, if any, on)
any of the Debentures as and when the same shall become due and payable
either at maturity, upon redemption, by declaration or otherwise, or in the
making of any Sinking Fund payment; or
(c) failure on the part of the Company duly to observe or perform
in any material respect any other of the covenants or agreements on the
part of the Company in the Debentures or in this Indenture contained for a
period of sixty days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Company by the Trustee, or to the Company and the Trustee by the holders of
at least twenty-five per cent in aggregate principal amount of the
Debentures at the time outstanding; or
(d) If an event of default as defined in any mortgage, indenture or
instrument, under which there may be issued, or by which there may be
secured or evidenced, any indebtedness of the Company or any Subsidiary
(other than indebtedness owing to a seller or any of its affiliates,
successors and assigns for real or personal property (including
intangibles) and other than indebtedness owing to a lessor or any of its
affiliates, successors and assigns under any lease of real or personal
property (including, but not limited to any capitalized lease)), whether
such indebtedness now exists or shall hereafter be created, shall happen
and shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and
payable, provided that (i) such acceleration shall not be rescinded or
annulled within thirty days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the holders of at least 25% in aggregate principal amount of the
Debentures a written notice specify in such event of default and requiring
the Company to cause such acceleration to be rescinded or annulled and (ii)
the amount of the indebtedness subject to acceleration equals or exceeds
15% of the consolidated total indebtedness of the Company as of the last
date of the next preceding fiscal quarter of the Company; or
(e) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company in an involuntary case
under
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46
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or for any
substantial part of its property, or ordering the winding-up or liquidation
of its affairs, and such decree or order shall remain unstayed and in
effect for a period of sixty consecutive days; or
(f) the Company shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or similar official) of the Company or for any
substantial part of its property, or shall make any general assignment for
the benefit of creditors, or shall fail generally to pay is debts as they
become due or shall take any corporate action in furtherance of any of the
foregoing,
then and in each and every such case, unless the principal of all the Debentures
shall have already become due and payable, either the Trustee or the holders of
not less than twenty-five per cent in aggregate principal amount of the
Debentures then outstanding hereunder, by notice in writing to the Company (and
to the Trustee if given by debentureholders), may declare the principal of all
the Debentures to be due and payable immediately, and upon any such declaration
the same shall become and shall be immediately due and payable, anything in this
Indenture or in the Debentures contained to the contrary notwithstanding. This
provision, however, is subject to the condition that if, at any time after the
principal of the Debentures shall have been so declared due and payable, and
before any judgment or decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, the Company shall pay or shall
deposit with the Trustee a sum sufficient to pay all matured instalments of
interest upon all the Debentures and the principal of (and premium, if any, on)
any and all Debentures which shall have become due otherwise than by declaration
(with interest on overdue instalments of interest to the extent permitted by
law, and on such principal and premium, if any, at the rate of interest borne by
the Debentures to the date of such payment or deposit) and the expenses of the
Trustee, and any and all defaults under the Indenture, other than the nonpayment
of principal of and accrued interest on Debentures which shall have become due
by declaration, shall have been remedied-then and in every such case the holders
of a majority in aggregate principal amount of the Debentures then outstanding,
by written notice to the Company and to the Trustee, may waive all defaults and
rescind and annul
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47
such declaration and its consequences; but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default, or shall
impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Company,
the Trustee and the holders of the Debentures shall be restored respectively to
their former positions and rights hereunder, and all rights, remedies and powers
of the Company and the Trustee shall continue as though no such proceedings had
been taken.
SECTION 8.02. Payment of Debentures on Default; Suit Therefor. The
Company covenants that (1) in case default shall be made in the payment of any
instalment of interest on any of the Debentures, as and when the same shall
become due and payable, and such default shall have continued for a period of
thirty days, or (2) in case default shall be made in the payment of the
principal of (and premium, if any, on) any of the Debentures when the same shall
have become due and payable, whether upon maturity of the Debentures or upon
redemption or upon declaration or otherwise-then, upon demand of the Trustee, or
upon the request of 25% of the debentureholders the Company will pay to the
Trustee, for the benefit of the holders of the Debentures, the whole amount that
then shall have become due and payable on all such Debentures for principal (and
premium, if any) or interest, or both, as the case may be, with interest upon
the overdue principal (and premium, if any) and instalments of interest (to the
extent permitted by law) at the rate of interest borne by the Debentures; and,
in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including a reasonable compensation to the
Trustee, its agents, attorneys and counsel, and any expenses or liabilities
incurred by the Trustee hereunder other than through its negligence or bad
faith.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in is own name and as trustee of an express trust, shall be
entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor upon the
Debentures, and collect in the manner provided by law out of the
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48
property of the Company or any other obligor upon the Debentures wherever
situated the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor upon the Debentures under the
Bankruptcy Code or any other applicable law or in connection with the insolvency
of the Company or any other obligor upon the Debentures or in case a receiver or
trustee shall have been appointed for any substantial part of its property, or
in case of any other judicial proceedings of a similar nature relative to the
Company or any other obligor upon the Debentures or to creditors or property of
the Company or such other obligor, the Trustee, irrespective of whether the
principal of the Debentures shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand pursuant to the provisions of this Section 8.02, shall be
entitled and empowered by intervention in such proceedings or otherwise, to file
and prove a claim or claims for the whole amount of principal, premium, if any,
and interest owing and unpaid in respect of the Debentures, and to file such
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee and of the debentureholders allowed in any such judicial
proceedings relative to the Company or any other obligor upon the Debentures,
its creditors, or its property, and to collect and receive any moneys or other
property payable or deliverable on any such claims, and to distribute the same
after the deduction of its charges and expenses and any other amounts due the
Trustee pursuant to Section 9.06; and any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized by each of the
debentureholders to make such payments to the Trustee, and, in the event that
the Trustee shall consent to the making of such payments directly to the
debentureholders, to pay to the Trustee any amount due it for compensation and
expenses, including counsel fees incurred by it up to the date of such
distribution and any other amounts due the Trustee pursuant to Section 9.06. To
the extent that such payment of reasonable compensation, expenses, liabilities
and counsel fees out of the estate in any such proceedings shall be denied for
any reason, payment of the same shall be secured by a lien on, and shall be paid
out of, any and all distributions, dividends, moneys, securities and other
property which the holders of the Debentures may be entitled to receive in such
proceedings, whether in liquidation or under any plan of reorganization or
arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any debentureholder
<PAGE>
49
any plan of reorganization, arrangement, adjustment or composition affecting the
Debentures or the rights of any holder thereof, or to authorize the Trustee to
vote in respect of the claim of any debentureholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under
any of the Debentures, may be enforced by the Trustee without the possession of
any of the Debentures, or the production thereof at any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as Trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the holders of the
Debentures and the Trustee.
SECTION 8.03. Application of Moneys Collected by Trustee. Subject to the
provisions of Article Three, any moneys collected by the Trustee pursuant to
section 8.02 shall be applied in the order following, at the date or dates fixed
by the Trustee for the distribution of such moneys, upon presentation of the
several Debentures, and stamping thereon the payment, if only partially paid,
and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
9.06;
SECOND: In case no principal of the outstanding Debentures shall
have become due and be unpaid, to the payment of interest on the
Debentures, in the order of the maturity of the instalments of such
interest, with interest upon the overdue instalments of interest (so far as
permitted by law and to the extent that such interest has been collected by
the Trustee) at the rate of interest borne by the Debentures, such payments
to be made ratably to the persons entitled thereto, without discrimination
or preference;
THIRD: In case any principal of the outstanding Debentures shall have
become due, by declaration or otherwise, to the payment of the whole amount
then owing and unpaid upon the Debentures for principal (and premium, if
any) and interest, with interest on the overdue principal (and premium, if
any) and instalments of interest (so far as permitted by law and to the
extent that such interest has been collected by the Trustee) at the rate of
interest borne by the Debentures; and in case such moneys shall be
insufficient to pay in full the whole amount so due and unpaid upon the
Debentures, then to the payment of such principal (and premium, if any) and
interest, without preference or priority of principal (and premium, if any)
over interest, or of interest over principal (and premium, if any), or of
any instalment of interest over any other instalment of interest,
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50
ratably to the aggregate of such principal (and premium, if any) and
accrued and unpaid interest; and
FOURTH: To the payment of the remainder, if any, to the Company, its
successors or assigns, or to whosoever may be lawfully entitled to receive
the same, or as a court of competent jurisdiction may direct.
SECTION 8.04. Limitation on Suits by Holders of Debentures. No holder of
any Debenture shall have any right by virtue or by availing of any provision of
this Indenture to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Indenture or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless such holder
previously shall have given to the Trustee written notice of default and of the
continuance thereof, as hereinabove provided, and unless also the holders of not
less than twenty-five per cent in aggregate principal amount of the Debentures
then outstanding shall have made written request upon the Trustee to institute
such action, suit or proceeding in its own name as Trustee hereunder and shall
have offered to the Trustee such reasonable indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby, and the
Trustee, for sixty days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding and no direction inconsistent with such written request shall have
been given to the Trustee pursuant to Section 8.06; it being understood and
intended, and being expressly covenanted by the holder of every Debenture with
every other debentureholder and the Trustee, that no one or more holders of
Debentures shall have any right in any manner whatever by virtue or by availing
of any provision of this Indenture to affect, disturb or prejudice the rights of
the holders of any other of such Debentures, or to obtain or seek to obtain
priority over or preference to any other such holder, or to enforce any right
under this Indenture, except in the manner herein provided and for the equal,
ratable and common benefit of all holders of Debentures. For the protection and
enforcement of the provisions of this Section 8.04, each and every
debentureholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.
Notwithstanding any other provisions in this Indenture, but subject to the
provisions of Article Three, the right of any holder of any Debenture to receive
payment of the principal of (and premium, if any) and interest on such
Debenture, on or after the respective due dates expressed in such Debenture, or
to institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
holder.
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51
SECTION 8.05. Proceedings by Trustee: Remedies Cumulative and Continuing.
In case of a default hereunder the Trustee may in its discretion proceed to
protect and enforce the rights vested in it by this Indenture by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any of such rights, either by suit in equity or by action at
law or by proceeding in bankruptcy or otherwise whether for the specific
enforcement of any covenant or agreement contained in this Indenture or in aid
of the exercise of any power granted in this Indenture, or to enforce any other
legal or equitable right vested in the Trustee by this Indenture or by law. All
powers and remedies given by this Article Eight to the Trustee or to the
debentureholders shall, to the extent permitted by law, be deemed cumulative and
not exclusive of any thereof or of any other powers and remedies available to
the Trustee or the holders of the Debentures, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture, and no delay or omission of the Trustee
or of any holder of any of the Debentures to exercise any right or power
accruing upon any default occurring and continuing as aforesaid shall impair any
such right or power, or shall be construed to be a waiver of any such default or
an acquiescence therein; and, subject to the provisions of Section 8.04, every
power and remedy given by this Article Eight or by law to the Trustee or to the
debentureholders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the debentureholders.
SECTION 8.06. Rights of Holders of Majority in Principal Amount of
Debentures to Direct Trustee and to Waive Defaults. The holders of a majority
in aggregate principal amount of the Debentures at the time outstanding
(determined as provided in Section 10.04), or, if a record date is set in
accordance with Section 10.05, as of such record date, shall have the right to
direct the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that subject to the provisions of Section 9.01, the
Trustee shall have the right to decline to follow any such direction if the
Trustee being advised by counsel shall determine that the action so directed may
not lawfully be taken, or if the Trustee in good faith shall, by a responsible
officer or officers of the Trustee, determine that the proceedings so directed
would be illegal or subject it to any personal liability or be unjustly
prejudicial to the debentureholders not consenting, and provided further that
nothing in this Indenture shall impair the right of the Trustee in its
discretion to take any action deemed proper by the Trustee and which is not
inconsistent with such direction by the debentureholders. Prior to the
declaration of the maturity of the
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Debentures as provided in Section 8.01, the holders of a majority in aggregate
principal amount of the Debentures at the time outstanding (determined as
provided in Sections 10.04 and 10.05) may on behalf of the holders of all of the
Debentures waive any past default hereunder and its consequences, except a
default in the payment of interest or premium on, or the principal of, any of
the Debentures or the making of any Sinking Fund payment or a default in respect
of a covenant or provision hereof which under Article Twelve cannot be modified
or amended without the consent of each outstanding Debenture so affected. In
the case of any such waiver the Company, the Trustee and the holders of the
Debentures shall be restored to their former positions and rights thereunder,
respectively; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
SECTION 8.07. Trustee to Give Notice of Defaults Known to It, But May
Withhold in Certain Circumstances. The Trustee shall, within ninety days after
the occurrence of a default hereunder, give to the debentureholders, in the
manner and to the extent provided in subsection (c) of Section 7.04 with respect
to reports pursuant to subsection (a) of Section 7.04, notice of such defaults
known to the Trustee unless such defaults shall have been cured or waived before
the giving of such notice (the term "defaults" for the purposes of this Section
8.07 being hereby defined to be the events specified in clauses (a), (b), (c),
(d), (e) and (f) of Section 8.01, not including any periods of grace provided
for in clauses (a), (c), (d) and (e), respectively, and irrespective of the
giving of notice specified in clause (c)); provided that, except in the case of
default in the payment of the principal of (and premium, if any) or interest on
any of the Debentures or any Sinking Fund payment, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or responsible
officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the debentureholders.
SECTION 8.08. Requirement of an Undertaking to Pay Costs in Certain Suits
Under the Indenture or Against the Trustee. All parties to this Indenture
agree, and each holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made
<PAGE>
53
by such party litigant; but the provisions of this Section 8.08 shall not
apply to any suit instituted by the Trustee, to any suit instituted by any
debenturebolder, or group of debentureholders, holding in the aggregate more
than ten per cent in aggregate principal amount of the Debentures
outstanding, or to any suit instituted by any debentureholder for the
enforcement of the payment of the principal of (and premium, if any) or
interest on any Debenture, on or after the due date expressed in such
Debenture, or for the enforcement of the right to convert any Debenture as
provided in Article Four.
SECTION 8.09. Enforcement of Rights of Conversion by Debentureholders.
Anything in this Indenture to the contrary notwithstanding, the holder of any
Debenture, without reference to and without the consent of either the Trustee or
the holder of any other Debenture, in his own behalf and for his own benefit may
enforce, and may institute and maintain any proceedings suitable to enforce, his
right to convert his Debenture into Common Stock as provided in Article Four.
ARTICLE NINE
CONCERNING THE TRUSTEE
SECTION 9.01. Duties and Responsibilities of Trustee. The Trustee, prior
to the occurrence of an Event of Default and after the curing or waiving of all
Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture. In case an
Event of Default has occurred (which has not been cured or waived) the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to
act, or its own willful misconduct, provided, however, that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture, and the
Trustee shall only be liable for the performance of such duties and
obligations as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
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(2) in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a responsible officer or officers of the Trustee, unless
it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(c) the Trustee shall not be liable with respect to any action
taken, suffered or omitted to be taken by it in good faith in accordance
with the direction of the holders of not less than a majority in principal
amount of the Debentures at the time outstanding (determined as provided in
Sections 10.04 and 10.05) relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if there is reasonable ground for
believing that the repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
Whether or not therein expressly provided, every provision of this
Indenture relating to the conduct or affecting the liability of, or affording
protection to, the Trustee shall be subject to the provisions of this Section
9.01.
SECTION 9.02. Reliance on Documents, Opinions, etc. Subject to the
provisions of Section 9.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture or other paper or document believed by it to be genuine
and to, have been signed or presented by the proper party or parties;
(b) any request direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an instrument signed
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55
in the name of the Company by the President or any Vice President and the
Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer (unless other evidence in respect thereof be herein specifically
prescribed); and any resolution of the Board of Directors of the Company
may be evidenced to the Trustee by a copy thereof certified by the
Secretary or any Assistant Secretary of the Company;
(c) The Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or Opinion of
Counsel;
(d) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the debentureholders, pursuant to the provisions of
this Indenture, unless such debentureholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;
(e) The Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture;
(f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, debenture or other paper or document, unless requested in writing so
to do by the holders of not less than a majority in aggregate principal
amount of the Debentures then outstanding (determined as provided in
Sections 10.04 and 10.05); provided, however, that if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation is, in the opinion
of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a condition to so
proceeding. The reasonable expense of every such examination made at the
request of holders of not less than a majority in aggregate principal
amount of the Debentures then outstanding (determined as provided in
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56
Sections 10.04 and 10.05) shall be paid by the Company or, if paid by the
Trustee, shall be repaid by the Company upon demand; and
(g) The Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys. The Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 9.03. No Responsibility for Recitals, etc. The recitals
contained herein and in the Debentures (other than the certificate of
authentication of the Debentures) shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for the correctness of the
same. The Trustee makes no representation as to the validity or sufficiency
of this Indenture or of the Debentures. The Trustee shall not be accountable
for the use or application by the Company of any of the Debentures or of the
proceeds of such Debentures, or for the use or application of any moneys paid
over by the Trustee in accordance with any provision of this Indenture, or
for the use or application of any moneys received by any paying agent other
than the Trustee.
SECTION 9.04. Trustee, Paying Agent, Conversion Agent or Debenture
Registrar May Own Debentures. The Trustee or any Authenticating Agent,
paying agent, conversion agent or Debenture registrar, in its individual or
any other capacity, may become the owner or pledgee of Debentures with the
same rights it would have if it were not Trustee, Authenticating Agent,
paying agent, conversion agent or Debenture registrar.
The Trustee shall be entitled to all rights set forth in Article Three
in respect of any Senior Indebtedness at any time held by it, to the same
extent as any other holder of Senior Indebtedness and nothing in Section 9.13
or elsewhere in this Indenture shall be construed to deprive the Trustee of
any rights as such holder.
SECTION 9.05. Moneys Received by Trustee to be Held in Trust Without
Interest. Subject to the provisions of Section 14.04, all moneys received by
the Trustee shall, until used or applied as herein provided, be held in trust
for the purposes for which they were received, but need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on moneys received by it hereunder except
such as it may agree with the Company to pay thereon. So long as no Event of
Default shall have occurred and be continuing, all interest allowed on any
such moneys shall be paid from time to time upon the written order of the
Company, signed by its President or any Vice President or its Treasurer or
any Assistant Treasurer.
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57
SECTION 9.06. Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation (which shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust), and the Company will pay or reimburse the Trustee upon its request
for all reasonable expenses, disbursements and advances incurred or made by
the Trustee in connection with the acceptance or administration of its trust
under this Indenture (including the reasonable compensation and the expenses
and disbursements of its counsel and of all persons not regularly in its
employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith. The Company also covenants to indemnify the
Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Trustee and
arising out of or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself against any claim
of liability in the premises. The obligations of the Company under this
Section 9.06 to compensate the Trustee and to pay or reimburse the Trustee
for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of
this indenture. Such additional indebtedness shall be secured by a lien
prior to that of the Debentures upon all property and funds held or collected
by the Trustee as such, except funds held in trust for the benefit of the
holders of particular Debentures.
SECTION 9.07. Right of Trustee to Rely on Officers' Certificate Where
No Other Evidence Specifically Prescribed. Subject to the provisions of
Section 9.01, whenever in the administration of the provisions of this
Indenture the trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking, suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on
the part of the Trustee, be deemed to be conclusively proved and established
by an Officers' Certificate delivered to the Trustee, and such Certificate,
in the absence of negligence or bad faith on the part of the Trustee, shall
be full warrant to the Trustee for any action taken, suffered or omitted by
it under the provisions of this Indenture upon the faith thereof.
SECTION 9.08. Conflicting Interest of Trustee. (a) If the Trustee has
or shall acquire any conflicting interest, as defined in this Section 9.08,
it shall, within ninety days after ascertaining that it has such conflicting
interest, either eliminate such conflicting interest or resign in the manner
and with the effect specified in Section 9.10, such resignation to become
effective upon the
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58
appointment of a successor trustee and such successor's acceptance of such
appointment, and the Company shall take prompt steps to have a successor
appointed in the manner provided in Section 9.10.
(b) In the event that the Trustee shall fail to comply with the
provisions of subsection (a) of this Section 9.08, the Trustee shall, within
ten days after the expiration of such ninety-day period, transmit notice of
such failure to the debentureholders in the manner and to the extent provided
in subsection (c) of Section 7.04 with respect to reports pursuant to
subsection (a) of Section 7.04.
(c) For the purposes of this Section 9.08 the Trustee shall be deemed
to have a conflicting interest if
(1) the Trustee is trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the Company, are outstanding, unless such other indenture is
a collateral trust indenture under which the only collateral consists of
Debentures issued under this Indenture, provided that there shall be
excluded from the operation of this paragraph any other indenture or
indentures under which other securities, or certificates of interest or
participation in other securities, of the Company are outstanding if (i)
this Indenture and such other indenture or indentures are wholly unsecured
and such other indenture or indentures are hereafter qualified under the
Trust Indenture Act of 1939, unless the Securities and Exchange Commission
shall have found and declared by order pursuant to subsection (b) of
Section 305 or subsection (c) of Section 307 of the Trust Indenture Act of
1939 that differences exist between the provisions of this Indenture and
the provisions of such other indenture or indentures which are so likely to
involve a material conflict of interest as to make it necessary in the
public interest or for the protection of investors to disqualify the
Trustee from acting as such under this Indenture and such other indenture
or indentures, or (ii) the Company shall have sustained the burden of
proving, on application to the Securities and Exchange Commission and after
opportunity for hearing thereon, that the trusteeship under this Indenture
and such other indenture is not so likely to involve a material conflict of
interest as to make it necessary in the public interest or for the
protection of investors to disqualify the Trustee from acting as such under
one of such indentures;
(2) the Trustee or any of its directors or executive officers is an
obligor upon the Debentures or an underwriter for the Company;
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59
(3) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with
the Company or an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee, or representative of the
Company, or of an underwriter (other than the Trustee itself) for the
Company who is currently engaged in the business of underwriting, except
that (A) one individual may be a director and/or an executive officer of
the Trustee and a director and/or an executive officer of the Company, but
may not be at the same time an executive officer of both the Trustee and
the Company; (B) if and so long as the number of directors of the Trustee
in office is more than nine, one additional individual may be a director
and/or executive officer of the Trustee and a director of the Company; and
(C) the Trustee may be designated by the Company or by an underwriter for
the Company to act in the capacity of transfer agent, registrar, custodian,
paying agent, fiscal agent, escrow agent, or depositary, or in any other
similar capacity, or, subject to the provisions of paragraph (1) of this
subsection (c), to act as trustee whether under an indenture or otherwise;
(5) ten per cent or more of the voting securities of the Trustee is
beneficially owned either by the Company or by any director, partner, or
executive officer thereof, or twenty per cent or more of such voting
securities is beneficially owned, collectively, by any two or more of such
persons; or ten per cent or more of the voting securities of the Trustee is
beneficially owned either by an underwriter for the Company or by any
director, partner, or executive officer thereof, or is beneficially owned,
collectively, by any two or more such persons;
(6) the Trustee is beneficial owner of, or holds as collateral
security for an obligation which is in default, (A) five per cent or more
of the voting securities, or ten per cent or more of any other class of
security, of the Company, not including the Debentures issued under this
Indenture and securities issued under any other indenture under which the
Trustee is also trustee, or (B) ten per cent or more of any class of
security of an under-writer for the Company;
(7) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, five per cent or more of
the voting securities of any person who, to the knowledge of the Trustee,
owns ten per cent or more of the voting securities of, or controls directly
or indirectly or is under direct or indirect common control with, the
Company;
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(8) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default, ten per cent or more of any
class of security of any person who, to the knowledge of the Trustee, owns
fifty per cent or more of the voting securities of the Company; or
(9) the Trustee owns on May 15 in any calendar year, in the
capacity of executor, administrator, testamentary or inter vivos trustee,
guardian, committee or conservator, or in any other similar capacity, an
aggregate of twenty-five per cent or more of the voting securities, or of
any class of security, of any person, the beneficial ownership of a
specified percentage of which would have constituted a conflicting interest
under paragraph (6), (7), or (8) of this subsection (c). As to any such
securities of which the Trustee acquired ownership through becoming
executor, administrator, or testamentary trustee of an estate which
included them, the provisions of the preceding sentence shall not apply,
for a period of two years from the date of such acquisition, to the extent
that such securities included in such estate do not exceed twenty-five per
cent of such voting securities or twenty-five per cent of any such class of
security. Promptly after May 15, in each calendar year, the Trustee shall
make a check of its holdings of such securities in any of the
above-mentioned capacities as of May 15. If the Company fails to make
payment in full of principal of or interest on any of the Debentures when
and as the same becomes due and payable and such failure continues for
thirty days thereafter, the Trustee shall make a prompt check of its
holdings of such securities in any of the above-mentioned capacities as of
the date of the expiration of such thirty-day period, and after such date,
notwithstanding the foregoing provisions of this paragraph (9), all such
securities so held by the Trustee, with sole or joint control over such
securities vested in it, shall, but only so long as such failure shall
continue, be considered as though beneficially owned by the Trustee for
the purposes of paragraphs (6), (7) and (8) of this subsection (c).
The specifications of percentages in paragraphs (5) to (9), inclusive,
of this subsection (c) shall not be construed as indicating that the
ownership of such percentages of the securities of a person is or is not
necessary or sufficient to constitute direct or indirect control for the
purposes of paragraph (3) or (7) of this subsection (c).
For the purposes of paragraphs (6), (7), (8), and (9) of this subsection
(c) only, (A) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay
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61
moneys lent to a person by one or more banks, trust companies or banking
firms, or any certificate of interest or participation in any such note or
evidence of indebtedness; (B) an obligation shall be deemed to be in default
when a default in payment of principal shall have continued for thirty days
or more and shall not have been cured; and (C) the Trustee shall not be
deemed to be the owner or holder of (i) any security which it holds as
collateral security (as trustee or otherwise) for an obligation which is not
in default as defined in clause (B) above, or (ii) any security which it
holds as collateral security under this Indenture, irrespective of any
default hereunder, or (iii) any security which it holds as agent for
collection, or as custodian, escrow agent, or depository, or in any similar
representative capacity.
Except as above provided, the word "security" or "securities" as used in
this Indenture shall mean any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, preorganization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for security, fractional
undivided interest in oil, gas, or other mineral rights, or, in general, any
interest or instrument commonly known as a "security," or any certificate of
interest or participation in, temporary or interim certificate for, receipt
for, guarantee of, or warrant or right to subscribe to or purchase, any of
the foregoing.
(d) For the purposes of this Section 9.08:
(1) The term "underwriter" when used with reference to the Company
shall mean every person who within three years prior to the time as of
which the determination is made has purchased from the Company with a view
to, or has offered or sold for the Company in connection with, the
distribution of any security of the Company outstanding at such time, or
has participated or has had a direct or indirect participation in any such
undertaking, or has participated or has had a participation in the direct
or indirect underwriting of any such undertaking, but such term shall not
include a person whose interest was limited to a commission from an
underwriter or dealer not in excess of the usual and customary
distributors' or sellers' commission.
(2) The term "director" shall mean any director of a corporation or
any individual performing similar functions with respect to any
organization whether incorporated or unincorporated.
(3) The term "person" shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an
unincorporated organization, or a government or political subdivision
thereof. As
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used in this paragraph, the term "trust" shall include only a trust where
the interest or interests of the beneficiary or beneficiaries are evidenced
by a security.
(4) The term "voting security" shall mean any security presently
entitling the owner or holder thereof to vote in the direction or
management of the affairs of a person, or any security issued under or
pursuant to any trust, agreement or arrangement whereby a trustee or
trustees or agent or agents for the owner or holder of such security are
presently entitled to vote in the direction or management of the affairs of
a person.
(5) The term "Company" shall mean any obligor upon the Debentures.
(6) The term "executive officer" shall mean the president, every
vice-president, every trust officer, the cashier, the secretary, and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the board of
directors.
The percentages of voting securities and other securities specified in
this Section 9.08 shall be calculated in accordance with the following
provisions:
(A) A specified percentage of the voting securities of the Trustee,
the Company or any other person referred to in this Section 9.08 (each of
whom is referred to as a "person" in this paragraph) means such amount of
the outstanding voting securities of such person as entitles the holder or
holders thereof to cast such specified percentage of the aggregate votes
which the holders of all outstanding voting securities of such person are
entitled to cast in the direction or management of the affairs of such
person.
(B) A specified percentage of a class of securities of a person
means such percentage of the aggregate amount of securities of the class
outstanding.
(C) The term "amount," when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of
shares if relating to capital shares, and the number of units if relating
to any other kind of security.
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63
(D) The term "outstanding" means issued and not held by or for the
account of the issuer. The following securities shall not be deemed
outstanding within the meaning of this definition:
(i) Securities of an issuer held in a sinking fund relating
to securities of the issuer of the same class;
(ii) Securities of an issuer held in a sinking fund relating
to another class of securities of the issuer, if the obligation
evidenced by such other class of securities is not in default as to
principal or interest or otherwise;
(iii) Securities pledged by the issuer thereof as security
for an obligation of the issuer not in default as to principal or
interest or otherwise; and
(iv) Securities held in escrow if placed in escrow by the
issuer thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise the
voting rights thereof.
(E) A security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges, provided, however, that, in
the case of secured evidences of indebtedness, all of which are issued
under a single indenture, differences in the interest rates or maturity
dates of various series thereof shall not be deemed sufficient to
constitute such series different classes, and provided, further, that, in
the case of unsecured evidences of indebtedness, differences in the
interest rates or maturity dates thereof shall not be deemed sufficient to
constitute them securities of different classes, whether or not they are
issued under a single indenture.
SECTION 9.09. Requirements for Eligibility of Trustee. The Trustee
hereunder shall at all times be a national banking association or corporation
organized and doing business under the laws of the United States or any State
or territory thereof or of the District of Columbia authorized under such
laws to exercise corporate trust powers, having a combined capital and
surplus of at least one hundred million dollars, subject to supervision or
examination by Federal, State, Territorial, or District of Columbia
authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then for the purposes of this Section 9.09, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth
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64
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 9.09, the Trustee shall resign immediately in the manner and with the
effect specified in Section 9.10.
SECTION 9.10. Resignation or Removal of Trustee. (a) The Trustee, or
any trustee hereafter appointed, may at any time resign by giving written
notice of such resignation to the Company and to the debentureholders, such
notice to the debentureholders to be given by mailing (by first-class mail)
the same within thirty days after such notice is given to the Company. Upon
receiving such notice of resignation and evidence satisfactory to it of such
mailing, the Company shall promptly appoint a successor trustee by written
instrument, in duplicate, executed by order of the Board of Directors of the
Company, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment within sixty days after
the mailing of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor
trustee, or any debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months may, subject to the
provisions of Section 8.08, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper
and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur-
(1) the Trustee shall fail to comply with the provisions of
subsection
(a) of Section 9.08 after written request therefor by the Company or by
any debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 9.09 and shall fail to resign after written request
therefor by the Company or by any such debentureholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of a
substantial portion of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of a substantial
portion of its property or affairs far the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of
the
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65
Board of Directors of the Company, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee,
or, subject to the provisions of Section 8.08, any debentureholder who has
been a bona fide holder of a Debenture or Debentures for at least six months
may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, remove the Trustee and
appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures then outstanding (determined as provided in Sections 10.04 and
10.05) may at any time remove the Trustee and appoint a successor trustee by
written instrument or instruments signed by such holders or their
attorneys-in-fact duly authorized, or by the affidavits of the permanent
chairman and secretary of a meeting of the debentureholders evidencing the
vote upon a resolution or resolutions submitted thereto with respect to such
removal and appointment (as provided in Article Eleven), and by delivery
thereof to the Trustee so removed, to the successor trustee and to the
Company.
(d) Any resignation or removal of the Trustee and appointment of any
successor trustee pursuant to any of the provisions of this Section 9.10
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 9.11.
SECTION 9.11. Acceptance by Successor to Trustee; Notice of Succession
of a Trustee. Any successor trustee appointed as provided in Section 9.10
shall execute, acknowledge and deliver to the Company and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as trustee
herein; but, nevertheless, on the written request of the Company or of the
successor trustee, the trustee ceasing to act shall, upon payment of any
amounts then due it pursuant to the provisions of Section 9.06, execute and
deliver an instrument transferring to such successor trustee all the rights
and powers of the trustee so ceasing to act. Upon request of any such
successor trustee, the Company shall execute any and all instruments in
writing for more fully and certainly vesting in and confirming to such
successor trustee all such rights and powers. Any trustee ceasing to act
shall, nevertheless, retain a lien upon all property or funds held or called
by such trustee to secure any amounts then due it pursuant to the provisions
of Section 9.06.
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66
No successor trustee shall accept appointment as provided in this
Section 9.11 unless at the time of such acceptance such successor trustee
shall be qualified under the provisions of Section 9.08 and eligible under
the provisions of Section 9.09.
Upon acceptance of appointment by a successor trustee as provided in
this Section 9.11, the Company shall mail to the debentureholders by
first-class mail notice thereof. If the Company fails to mail such notice
within thirty days after acceptance of appointment by the successor trustee,
the successor trustee shall, in its discretion, cause such notice to be
mailed at the expense of the Company.
SECTION 9.12. Successor to Trustee by Merger, Consolidation or
Succession to Business. Any corporation into which the Trustee may be merged
or converted or with which it may be consolidated, or any corporation
resulting from any merger or conversion or consolidation to which the Trustee
shall be a party, or any corporation succeeding to the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be qualified under the provisions of Section
9.08 and eligible under the provisions of Section 9.09, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor Trustee, and deliver
such Debentures so authenticated; and in case at that time any of the
Debentures shall not have been authenticated, any successor to the Trustee
may authenticate such Debentures either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Debentures
or in this Indenture provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of authentication
of any predecessor Trustee or authenticate Debentures in the name of any
predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
SECTION 9.13. Limitations on Rights of Trustee as a Creditor. (a)
Subject to the provisions of subsection (b) of this Section 9.13, if the
Trustee shall be or shall become a creditor, directly or indirectly, secured
or unsecured, of the Company or of any other obligor on the Debentures within
four months prior to a default, as defined in subsection (c) of this Section
9.13, or subsequent to such a default, then, unless and until such default
shall be cured or waived,
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the Trustee shall se apart and hold in a special account for the benefit of
the Trustee individually, the holders of the Debentures, and the holders of
other indenture securities (as defined in subsection (c) of this Section
9.13):
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such four months' period, and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
paragraph (2) of this subsection, or from the exercise of any right of
set-off which the Trustee could have exercised if a petition in bankruptcy
had been filed by or against the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any claims
as such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such four months'
period, or an amount equal to the proceeds of any such property if disposed
of, subject, however, to the rights, if any, of the Company and its other
creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee
(A) to retain for its own account (i) payments made on account of
any such claim by any person (other than the Company) who is liable
thereon, and (ii) the proceeds of the bona fide sale of any such claim by
the Trustee to a third person, and (iii) distributions made in cash,
securities, or other property in respect of claims filed against the
Company in bankruptcy or receivership or in proceedings for reorganization
pursuant to the Bankruptcy Code or applicable State laws;
(B) to realize, for its own account, upon any property held by it
as security for any such claim, if such property was so held prior to the
beginning of such four months' period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such four
months' period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving at the time such property was so received the Trustee
had no reasonable cause to believe that a default, as defined in subsection
(c) of this Section 9.13, would occur within four months; or
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(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such claim as
provided in such paragraph (B) or (C), as be one may be, to be extent of
the fair value of such property.
For the purposes of paragraphs (B), (C), and (D), property substituted
after the beginning of such four months' period for property held as security
at the time of such substitution shall, to the extent of the fair value of
the property released, have the same status as the property released, and to
the extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any pre-existing claim of the Trustee as such creditor, such claim shall have
the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property held
in such special account and the proceeds thereof shall be apportioned between
the Trustee, the debentureholders, and the holders of other indenture
securities in such manner that the Trustee, the debentureholders and the
holders of other indenture securities realize, as a result of payments from
such special account and payments of dividends on claims filed against the
Company in bankruptcy or receivership or in proceedings for reorganization
pursuant to the Bankruptcy Code or applicable State law, the same percentage
of their respective claims, figured before crediting to the claim of the
Trustee anything on account of receipt by it from the Company of the funds
and property in such special account and before crediting to the respective
claims of the Trustee, the debentureholders, and the holders of other
indenture securities dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
the Bankruptcy Code or applicable State law, but after crediting thereon
receipts on account of the indebtedness represented by their respective
claims from all sources other than from such dividends and from the funds and
property so held in such special account; provided, however, that if such
other indenture securities constitute or represent Senior Indebtedness, such
funds and property shall be apportioned in a manner that gives the holders
thereof the benefits provided by Article Three. As used in this paragraph,
with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Bankruptcy Code or applicable
State law, whether such distribution is made in cash, securities, or other
property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceeding for reorganization is pending shall have
jurisdiction
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(i) to apportion between the Trustee, the debentureholders, and the holders
of other indenture securities, in accordance with the provisions of this
paragraph, the funds and property held in such special account and the
proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part,
to give to the provisions of this paragraph due consideration in determining
the fairness of the distributions to be made to the Trustee, the
debentureholders and the holders of other indenture securities with respect
to their respective claims, in which event it shall not be necessary to
liquidate or to appraise the value of any securities or other property held
in such special account or as security for any such claim, or to make a
specific allocation of such distributions as between the secured and
unsecured portions of such claims, or otherwise to apply the provisions of
this paragraph as a mathematical formula.
Any Trustee who has reigned or been removed after the beginning of such
four months' period shall be subject to the provisions of this subsection (a)
as though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such four months' period,
it shall be subject to the provisions of this subsection (a) if and only if
the following conditions exist:
(i) the receipt of property or reduction of claim which would have
given rise to the obligation to account, if such Trustee had continued as
trustee, occurred after the beginning of such four months' period; and
(ii) such receipt of property or reduction of claim occurred within
four months after such resignation or removal.
(b) There shall be excluded from the operation of subsection (a) of this
Section 9.13 a creditor relationship arising from
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advance and of the circumstances surrounding the
making thereof is given to the debentureholders at the time and in the
manner provided in Section 7.04 with respect to reports pursuant to
subsections (a) and (b) thereof, respectively;
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(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c) of this
Section 9.13;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25 (a) of the Federal Reserve
Act, as amended, which is directly or indirectly a creditor of the Company;
or
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in subsection (c) of
this Section 9.13.
(c) As used in this Section 9.13:
(1) The term "default" shall mean any failure to make payment in
full of the principal of or interest upon any of the Debentures or upon the
other indenture securities when and as such principal or interest becomes
due and payable.
(2) The term "other indenture securities" shall mean securities
upon which the Company is an obligor (as defined in the Trust Indenture Act
of 1939 as then in effect) outstanding under any other indenture (A) under
which the Trustee is also trustee, (B) which contains provisions
substantially similar to the provisions of subsection (a) of this Section
9.13, and (C) under which a default exists at the time of the apportionment
of the funds and property held in said special account.
(3) The term "cash transaction" shall mean any transaction in which
full payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand.
(4) The term "self-liquidating paper" shall mean any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacture, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of goods, wares or
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merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation.
(5) The term "Company" shall mean any obligor upon the Debentures.
SECTION 9.14. Authenticating Agent. The Trustee shall appoint an
Authenticating Agent for the Debentures to act on its behalf and subject to
its direction in connection with the authentication of the Debentures as set
forth in Article Two. Such Authenticating Agent shall at all times be a
corporation organized and doing business under the laws of the United States
or of the State of New York, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of at least one
million dollars ($1,000,000), being subject to supervision or examination by
Federal or state authority and having its principal office and place of
business in the Borough of Manhattan, The City of New York, State of New
York. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 9.14 the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating
Agent shall be a party, or any corporation succeeding to the corporate agency
business of any Authenticating Agent, shall continue to be the Authenticating
Agent without the execution or filing of any paper or any further act on the
part of the Trustee or the Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written notice
of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written
notice of termination to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case
at any time any Authenticating Agent shall cease to be eligible in accordance
with the provisions of this Section 9.14, the Trustee promptly shall appoint
a successor Authenticating Agent, shall give written notice of such
appointment to the Company and shall mail notice of such appointment to all
Debentureholders as their names and addresses appear in the registry books
for the Debentures.
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Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers, duties and
responsibilities of its predecessor hereunder, with like effect as if
originally named authenticating Agent herein. No successor Authenticating
Agent shall be appointed unless eligible under the provision of this Section
9.14.
The Trustee, with the consent of the Company, hereby appoints The Bank
of California New York Trust Company as Authenticating Agent for the
Debentures.
The Trustee agrees to pay to the Authenticating Agent, if any, thus
appointed, from time to time reasonable compensation for its services, and
the Trustee shall be entitled to be reimbursed for such payments as provided
in Section 9.06. The Authenticating Agent shall have no responsibility or
liability for any action taken by it as such at the direction of the Trustee.
ARTICLE TEN
CONCERNING THE DEBENTUREHOLDERS
SECTION 10.01. Evidence Of Action Debentureholders. Whenever in this
Indenture it is provided that the holders of a specified percentage in
aggregate principal amount of the Debentures may take any action (including
the making of any demand or request, the giving of any notice, consent, or
waiver or the taking of any other action) the fact that the holders of such
specified percentage, determined as of the time such action was taken or, if
a record date was set with respect thereto pursuant to Section 10.05, as of
such record date, have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor executed by debentureholders in
person or by agent or proxy appointed in writing, or (b) by the record of the
holders of Debentures voting in favor thereof at any meeting of
debentureholders duly called and held in accordance with the provisions of
Article Eleven, or (c) by a combination of such instrument or instruments and
any such record of such a meeting of debentureholders.
SECTION 10.02. Proof of Execution of Instruments and of Holding of
Debentures. Subject to the provisions of Sections 9.01, 9.02 and 11.05,
proof of the execution of any instrument by a debentureholder or his agent or
proxy shall be sufficient if made in accordance with such reasonable rules
and regulations as may be prescribed by the Trustee or in such manner as
shall be satisfactory to the Trustee.
The ownership of Debentures shall be proved by the register of such
Debentures, or by a certificate of the registrar thereof.
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The Trustee may accept such other proof or require such additional proof
of any matter referred to in this Section 10.02 as it shall deem reasonable.
The record of any debentureholders' meeting shall be proved in the
manner provided in Section 11.06.
SECTION 10.03. Who May be Deemed Owners of Debentures. The Company,
the Trustee, any paying or conversion agent and any Debenture registrar may
deem and treat the person in whose name any Debenture shall be registered
upon the books of the Company as the absolute owner of such Debenture
(whether or not such Debenture shall be overdue and notwithstanding any
notation of ownership or other writing thereon) for the purpose of receiving
payment of or on account of the principal of (premium, if any) and interest
on such Debenture and for all other purposes; and neither the Company nor the
Trustee nor any paying or conversion agent nor any Debenture registrar shall
be affected by any notice to the contrary. All such payments so made to, or
upon the order of, any such holder shall be valid, and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for
moneys payable upon any such Debenture.
SECTION 10.04. Debentures Owned by Company or Controlled or Controlling
Persons Disregarded for Certain Purposes. In determining whether the holders
of the requisite aggregate principal amount of Debentures have concurred in
any demand, direction, request, notice, consent, waiver or other action under
this Indenture, Debentures which are owned by the Company or any other
obligor on the Debentures or by any person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Company
or any other obligor on the Debentures shall be disregarded and deemed not to
be outstanding for the purpose of any such determination, provided that for
the purposes of determining whether the Trustee shall be protected in relying
on any such demand, direction, request, notice, consent or waiver, only
Debentures which the Trustee knows are so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section 10.04, if the pledgee shall
establish to the satisfaction of the Trustee the pledgee's right to vote such
Debentures and that the pledgee is not a person directly or indirectly
controlling or controlled by or under direct or common control with the
Company or any such obligor. In case of a dispute as to such right, any
decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.
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SECTION 10.05. Record Date for Action by Debentureholders, Whenever in
this Indenture it is provided that holders of a specified percentage in
aggregate principal amount of the Debentures may take any action (including
the making of any demand or request, the giving of any direction, notice,
consent or waiver or the taking of any other action), other than any action
taken at a meeting of debentureholders called pursuant to Article Eleven, the
Company, pursuant to a resolution of its Board of Directors, or the holders
of at least ten per cent in aggregate principal amount of the Debentures then
outstanding, may request the Trustee to fix a record date for determining
debentureholders entitled to notice of and to take any such action. In case
the Company or the holders of Debentures in the amount above specified shall
desire to request debentureholders to take any such action and shall request
the Trustee to fix a record date with respect thereto by written notice
setting forth in reasonable detail the debentureholder action to be
requested, the Trustee shall promptly (but in any event within five days of
receipt of such request) fix a record date which shall be a business day not
less than fifteen nor more than twenty days after the date on which the
Trustee receives such request. If the Trustee shall fail to fix a record
date as hereinabove provided, then the Company or the holders of Debentures
in the amount above specified may fix the same by mailing written notice
thereof (the record date so fixed to be a business day not less than fifteen
nor more than twenty days after the date on which such written notice shall
be given) to the Trustee. If a record date is fixed according to this
Section 10.05, only persons shown as debentureholders on the registration
books for the Company at the close of business on the record date so fixed
shall be entitled to take the requested action and the taking of any such
action by the holders on the record date of the required percentage of the
aggregate principal amount of the Debentures shall be binding on all
debenturebolders, provided that the taking of the requested action by the
holders on the record date of the percentage in aggregate principal amount of
the Debentures specified in this Indenture in connection with such action
shall have been evidenced to the Trustee, as provided in Section 10.01, not
later than 180 days after such record date.
SECTION 10.06. Instruments Executed by Debentureholders Bind Future
Holders. At any time prior to (but not after) the evidencing to the Trustee,
as provided in Section 10.01, of the taking of any action by the holders of
the percentage in aggregate principal amount of the Debentures specified in
this Indenture in connection with such action, any holder of a Debenture the
serial number of which is shown by the evidence to be included in the
Debentures the holders of which have consented to such action may, by filing
written notice
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with the Trustee at its principal office and upon proof of holdings as
provided in Section 10.02, revoke such action so far as concerns such
Debenture. Except as aforesaid any such action taken by the holder of any
Debenture and any direction, demand, request, waiver, consent, vote or other
action of the holder of any Debenture which by any provisions of this
Indenture is required or permitted to be given shall be conclusive and
binding upon such holder and upon all future holders and owners of such
Debenture, and of any Debenture issued in lieu thereof, irrespective of
whether or not any notation in regard thereto is made upon such Debenture.
Any action taken by the holders of the percentage in aggregate principal
amount of the Debentures specified in this Indenture in connection with such
action shall be conclusively binding upon the Company, the Trustee and the
holders of the Debentures.
ARTICLE ELEVEN
DEBENTUREHOLDERS' MEETINGS
SECTION 11.01. Purposes for Which Meetings May be Called A meeting of
debentureholders may be called at any time and from time to time pursuant to
the provisions of this Article Eleven for any of the following purposes:
(1) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
or Event of Default hereunder and its consequences, or to take any other
action authorized to be taken by debentureholders pursuant to any of the
provisions of Article Eight;
(2) to remove the Trustee and appoint a successor trustee pursuant
to the provisions of Article Nine;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 12.02; or
(4) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of the
Debentures under any other provisions of this Indenture or under applicable
law.
SECTION 11.02. Manner of Calling Meetings, Record Date. The Trustee may
at any time call a meeting of debentureholders to take any action specified in
Section 11.01, to be held at such time and at such place in the Borough of
Manhattan, The City of New York, State of New York, as the Trustee shall
determine. Notice of every meeting of the debentureholders, setting forth the
time and the place of such meeting and in general terms the
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action proposed to be taken at such meeting, shall be mailed not less than
twenty nor more than sixty days prior to the date fixed for the meeting to
such debentureholders at their registered addresses and to the Company as
provided in Section 16.03. For the purpose of determining debentureholders
entitled to notice of any meeting of debentureholders, the Trustee shall fix
in advance a date as the record date for such determination, such date to be
a business day not more than ten days prior to the date of the mailing of
such notice as hereinabove provided. Only persons in whose name any
Debenture shall be registered upon the books of the Company on a record date
fixed by the Trustee as aforesaid, or by the Company or the debentureholders
as in Section 11.03 provided, shall be entitled to notice of the meeting of
debentureholders with respect to which such record date was so fixed.
SECTION 11.03. Call of Meeting by Company or Debentureholders. In case
at any time the Company, pursuant to a resolution of its Board of Directors,
or the holders of at least ten per cent in aggregate principal amount of the
Debentures then outstanding, shall have requested the Trustee to call a
meeting of debentureholders to take any action authorized in Section 11.01 by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed notice of such
meeting within twenty days after receipt of such request, then the Company or
the holders of Debentures in the amount above specified, as the case may be,
may fix the record date with respect to, and determine the time and the place
in said Borough of Manhattan for, such meeting and may call such meeting to
take any action authorized in Section 11.01, by mailing notice thereof as
provided in Section 11.02. The record date fixed as provided in the preceding
sentence shall be set forth in a written notice to the Trustee and shall be a
business day not less than fifteen nor more than twenty days after the date
on which such notice is sent to the Trustee.
SECTION 11.04. Who May Attend and Vote at Meetings. Only persons
entitled to receive notice of a meeting of debentureholders and their
respective proxies duly appointed by an instrument in writing shall be
entitled to vote at such meeting. The only persons who shall be entitled to
be present or to speak at any meeting of debentureholders shall be the
persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel. When a determination of debentureholders entitled
to vote at any meeting of debentureholders has been made as provided in this
Section, such determination shall apply to any adjournment thereof.
SECTION 11.05. Regulations. Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations as it may
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deem advisable for any meeting of debentureholders, in regard to proof of the
holding of Debentures and the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination
of proxies, certificates and other evidence of the right to vote, and such
other matters concerning the conduct of the meeting as it shall think fit.
Except as otherwise permitted or required by any such regulations, the
holding of Debentures shall be proved in the manner specified in Section
10.02.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by debentureholders as provided in Section 11.03, in which case
the Company or the debentureholders calling the meeting, as the case may be,
shall in like manner appoint a temporary chairman. A permanent chairman and
a permanent secretary of the meeting shall be elected by a vote of the
holders of a majority in principal amount of the Debentures represented at
the meeting and entitled to vote.
Subject to the provisions of Section 10.04, at any meeting each
debentureholder or proxy entitled to vote thereat shall be entitled to one
vote for each $1,000 principal amount of Debentures held or represented by
him; provided, however, that no vote shall be cast or counted at any meeting
in respect of any Debenture challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman of the meeting
shall have no right to vote other than by virtue of Debentures held by him or
instruments in writing as aforesaid duly designating him as the person to
vote on behalf of other debentureholders. Any meeting of debentureholders
duly called pursuant to the provisions of Section 11.02 or 11.03 may be
adjourned from time to time, and the meeting may be held as so adjourned
without further notice.
At any meeting of debentureholders, the presence of persons who held, or
who are acting as proxy for persons who held, an aggregate principal amount
of Debentures on the record date for such meeting sufficient to take action
on the business for the transaction of which such meeting was called shall
constitute a quorum, but, if less than a quorum is present, the persons
holding or representing a majority in aggregate principal amount of the
Debentures represented at the meeting may adjourn such meeting with the same
effect, for all intents and purposes, as though a quorum had been present.
SECTION 11.06. Manner of Voting at Meetings and Record to be Kept. The
vote upon any resolution submitted to any meeting of debentureholders shall
be by written ballots on each of which shall be subscribed the signature of
the debentureholder or proxy casting such ballot and the identifying number
or numbers of the Debentures held or represented in respect of which
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such ballot is cast. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or
against any resolution and who shall make and file with the secretary of the
meeting their verified written reports in duplicate of all votes cast at the
meeting. A record in duplicate of the proceedings of each meeting of
debentureholders shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more
persons having knowledge of the facts setting forth a copy of the notice of
the meeting and showing that said notice was mailed as provided in Section
11.02. The record shall show the identifying numbers of the Debentures voting
in favor of or against any resolution. Each counterpart of such record shall
be signed and verified by the affidavits of the permanent chairman and
secretary of the meeting and one of the counterparts shall be delivered to
the Company and the other to the Trustee to be preserved by the Trustee.
Any counterpart record so signed and verified shall be conclusive
evidence of the matters therein stated and shall be the record referred to in
clause (b) of Section 10.01.
SECTION 11.07. Exercise of Rights of Trustee and Debentureholders Not
to be Hindered or Delayed. Nothing in this Article Eleven contained shall be
deemed or construed to authorize or permit, by reason of any call of a
meeting of debentureholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any
right or rights conferred upon or reserved to the Trustee or to the
debentureholders under any of the provisions of this Indenture or of the
Debentures.
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES
SECTION 12.01. Purposes for Which Supplemental Indentures May Be
Entered into Without Consent of Debentureholders. The Company, when
authorized by a resolution of its Board of Directors, and the Trustee may
from time to time and at any time enter into an indenture or indentures
supplemental hereto (which shall comply with the provisions of the Trust
Indenture Act of 1939 as then in effect) for one or more of the following
purposes:
(a) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article Thirteen;
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(b) to add to the covenants of the Company such further covenants,
restrictions or conditions as its Board of Directors and the Trustee shall
consider to be for the protection of the holders of Debentures, and to make
the occurrence, or the occurrence and continuance, of a default in any of
such additional covenants, restrictions or conditions a default or an Event
of Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;
(c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture or any supplemental
indenture as shall not adversely affect the interests of the holders of the
Debentures;
(d) to provide for the issuance under this Indenture of Debentures,
whether or not then outstanding, in coupon form (including Debentures
registrable as to principal only) and to provide for exchangeability of
such Debentures with Debentures issued hereunder in fully registered form
and to make all appropriate changes for such purpose; and
(e) to comply with Section 4.06.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer, mortgage, pledge or assignment of any property
thereunder, provided that if any such supplemental indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise,
the Trustee may in its discretion, but shall not be obligated to, enter into
such supplemental indenture.
Any supplemental indenture authorized by the provisions of this Section
12.01 may be executed by the Company and the Trustee without the consent of
the holders of any of the Debentures at the time outstanding, notwithstanding
any of the provisions of Section 12.02.
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SECTION 12.02. Modification of Indenture with Consent of Holders of
66 2/3% in Principal Amount of Debentures. With the consent (evidenced as
provided in Section 10.01) of the holders of not less than 66 2/3% in
aggregate principal amount of the Debentures at the time outstanding
(determined as provided in Sections 10.04 and 10.05), or, if a record date is
set with respect to such consent in accordance with Section 10.05, as of such
record date, the Company, when authorized by a resolution of its Board of
Directors, and the Trustee may from time to time and at any time enter into
an indenture or indentures supplemental hereto (which shall comply with the
provisions of the Trust Indenture Act of 1939 as then in effect) for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture (including, but without limitation,
those relating to the Company's Sinking Fund obligations) or of any
supplemental indenture or of modifying in any manner the rights of the
holders of the Debentures; provided, however, that no such supplemental
indenture shall (i) extend the stated maturity of any Debenture, or reduce
the rate or extend the time of payment of interest thereon, or reduce the
principal amount thereof, or reduce any premium payable upon the redemption
thereof, or alter the provisions of this Indenture so as to affect adversely
the terms of conversion of the Debentures into Common Stock, without the
consent of the holder of each Debenture so affected, or (ii) reduce the
aforesaid percentage of Debentures, the consent of the holders of which is
required for any such supplemental indenture, without the consent of the
holders of all Debentures then outstanding; and provided further that no
change or modification shall directly or indirectly modify or eliminate the
provisions of Article Three in any manner which might terminate or impair the
subordination of the Debentures to Senior Indebtedness without the prior
written consent of the holders of the Senior Indebtedness.
Upon the request of the Company, accompanied by a copy of a resolution of
its Board of Directors certified by the Secretary or an Assistant Secretary of
the Company authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of debentureholders
as aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture, provided that if such supplemental indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise,
the Trustee may in its discretion, but shall not be obligated to, enter into
such supplemental indenture.
<PAGE>
81
It shall not be necessary for the consent of the debentureholders under
this Section 12.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Prompt, after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 12.02, the
Company shall mail a notice to the debentureholders, setting forth in general
terms the substance of such supplemental indenture. Any failure of the Company
to mail such notice, or any defect therein, shall not, however in any way impair
or affect the validity of any such supplemental indenture.
SECTION 12.03. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture pursuant to the provisions of this Article Twelve,
this Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitation of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company and the holders
of Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
SECTION 12.04. Debentures May Bear Notation of Changes by Supplemental
Indentures. Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article Twelve, or
after any action taken at a debentureholders' meeting pursuant to Article
Eleven, may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture or as to any action taken at any
such meeting. If the Company or the Trustee shall so determine, new Debentures
so modified as to conform, in the opinion of the Trustee and the Board of
Directors of the Company, to any modification of this Indenture contained in any
such supplemental indenture may be prepared by the Company, authenticated by the
Trustee and delivered in exchange for the Debentures then outstanding.
SECTION 12.05. Opinion of Counsel The Trustee, subject to the provisions
of Sections 9.01 and 9.02, may rely upon, and shall be entitled to receive, an
Opinion of Counsel as conclusive evidence that any such supplemental indenture
complies with the provisions of this Article Twelve.
<PAGE>
82
ARTICLE THIRTEEN
CONSOLIDATION, MERGER AND SALE
SECTION 13.01. Company May Consolidate, etc., on Certain Terms. Nothing
contained in this Indenture or in any of the Debentures shall prevent any
consolidation or merger of the Company with or into any other corporation or
corporations (whether or not affiliated with the Company) or successive
consolidations or mergers in which the Company or its successor or successors
shall be a party or parties, or shall prevent any sale or conveyance of the
property of the Company as an entirety, or substantially as an entirety, to any
other corporation (whether or not affiliated with the Company) authorized to
acquire and operate the same; provided, however, and the Company hereby
covenants and agrees, that any such consolidation, merger, sale or conveyance
shall be upon the condition that (a) immediately after such consolidation,
merger, sale or conveyance the corporation (whether the Company or such other
corporation) formed by or surviving any such consolidation or merger, or to
which such sale or conveyance shall have been made, shall not be in default in
the performance or observance of any of the terms, covenants and conditions of
this Indenture to be kept or performed by the Company; (b) the corporation (if
other than the Company) formed by or surviving any such consolidation or merger,
or to which sale or conveyance shall have been made, shall be a corporation
organized under the laws of the United States of America or any State thereof;
and (c) the due and punctual payment of the principal of, premium, if any, and
interest on all of the Debentures, according to their tenor, and the due and
punctual performance and observance of all the covenants and conditions of this
Indenture to be performed or observed by the Company, shall be expressly
assumed, by supplemental indenture complying with the requirements of Article
Twelve, satisfactory in form to the Trustee, executed and delivered to the
Trustee by the corporation formed by such consolidation, or into which the
Company shall have been merged, or by the corporation which shall have acquired
such property. If at any time there be any consolidation or merger or sale or
conveyance or lease of property to which the covenant of this Section 13.01 is
applicable, then in any such event the successor corporation will promptly
deliver to the Trustee:
(1) an Officer's Certificate stating that as of the time
immediately after the effective date of any such transaction the covenants
of the Company contained in this Section 13.01 have been complied with and
the successor corporation is not in default under the provisions of the
Indenture; and
<PAGE>
83
(2) an Opinion of Counsel stating that in his opinion such
covenants have been complied with and that any instrument or instruments
executed in the performance of such covenants comply with the requirements
thereof
SECTION 13.02. Successor Corporation to be Substituted. In case of any
such consolidation, merger, sale or conveyance and upon the assumption by the
successor corporation, in the manner hereinabove provided, of the due and
punctual payment of the principal of (premium, if any) and interest on all of
the Debentures and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed or observed by the
Company, such successor corporation shall succeed to and be substituted for the
Company, with the same effect as if it had been named herein as the party of the
first part. Such successor corporation thereupon may cause to be signed, and
may issue either in its own name or in the name of Hexcel Corporation, any or
all of the Debentures issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of such
successor corporation (instead of the Company) and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Debentures which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Debenture which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose. All the
Debentures so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Debentures theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Debentures had
been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such changes
in phraseology and form (but not in substance) may be made in the Debentures
thereafter to be issued as may be appropriate.
SECTION 13.03. Opinion of Counsel The Trustee, subject to the provisions
of Sections 9.01 and 9.02, may and shall be entitled to receive and rely on an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale or conveyance, and any such assumption, complies with the provisions of
this Article Thirteen.
<PAGE>
84
ARTICLE FOURTEEN
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 14.01. Satisfaction and Discharge of indenture. If (a) the
Company shall deliver to the Trustee for cancellation all Debentures theretofore
authenticated (other than any Debentures which shall have been destroyed, lost
or stolen and which shall have been replaced or paid as provided in Section
2.07) and not theretofore cancelled, or (b) all the Debentures not theretofore
cancelled or delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and the Company shall
deposit with the Trustee as trust funds cash equal to the entire amount
sufficient to pay at maturity or upon redemption all of such Debentures not
theretofore cancelled or delivered to the Trustee for cancellation, including
principal (and premium, if any) and interest due or to become due to such date
of maturity or redemption date, as the case may be, and if in either case the
Company shall also pay or cause to be paid all other sums payable hereunder by
the Company, then this Indenture shall cease to be of further effect, and the
Trustee, on demand of the Company and at the cost and expense of the Company,
shall execute proper instruments acknowledging satisfaction of and discharging
this Indenture, the Company, however, hereby agreeing to reimburse the Trustee
for any costs or expenses theretofore and thereafter reasonably and properly
incurred by the Trustee in connection with this Indenture or the Debentures
notwithstanding the satisfaction and discharge of this Indenture, the obligation
of the Company to the Trustee under Section
9.06 shall survive.
SECTION 14.02. Application by Trustee of Funds Deposited for Payment of
Debentures. All moneys deposited with the Trustee pursuant to Section 14.01
shall be held in trust and applied by it to the payment, either directly or
through any paying agent (including the Company acting as its own payment
agent), to the holders of the particular Debentures, for the payment or
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest and premium, if
any.
SECTION 14.03. Repayment of Moneys Held by Paying .Agent. In connection
with the satisfaction and discharge of this Indenture all moneys then held by
any paying agent under the provisions of this Indenture shall, upon
<PAGE>
85
demand of the Company, be paid to the Trustee and thereupon such paying agent
shall be released from all further liability with respect to such moneys.
SECTION 14.04. Repayment of Moneys Held by Trustee. Any moneys deposited
with the Trustee or any paying agent for the payment of the principal of,
premium, if any, or interest on any Debentures and not applied but remaining
unclaimed by the holders of Debentures for two years after the date upon which
such payment shall have become due, shall be repaid to the Company by the
Trustee or by such paying agent on demand; and thereupon the Trustee and such
paying agent shall be released from all further liability with respect to such
moneys, and the holder of any of the Debentures entitled to receive such payment
shall thereafter look only to the Company for the payment thereof; provided,
however, that the Trustee or such paying agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in an authorized newspaper in each place of payment, or mail to each such
holder notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication
or mailing, any unclaimed balance of such money then remaining will be paid to
the Company.
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 15.01. Incorporators, Stockholders, Officers and Directors of
Company Exempt from Individual Liability. No recourse under or upon any
obligation, covenant or agreement of this Indenture, or of any Debenture, or for
any claim based thereon or otherwise in respect thereof, shall be had against
any incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that this Indenture and the obligations issued hereunder
are solely corporate obligations, and that no such personal liability whatever
shall attach to, or is or shall be incurred by, the incorporators, stockholders,
officers or directors, as such, of the Company or of any successor corporation,
or any of them, because of the creation of the indebtedness hereby authorized,
or under or by reason of the obligations, covenants or agreements contained in
this Indenture or in any of the Debentures or implied therefrom; and that any
and all such personal liability of every name and nature, either at common law
or in equity or by constitution or statute, of, and any and all such rights
<PAGE>
86
and claims against, every such incorporator, stockholder, officer or director,
as such, because of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations, covenants or agreements contained in this
Indenture or in any of the Debentures or implied therefrom are hereby expressly
waived and released as a condition of, and as consideration for, the execution
of this Indenture and the issue of such Debentures.
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
SECTION 16.01. Successors and Assigns of Company Bound by Indenture All
the covenants, stipulations, promises and agreements in this Indenture contained
by or in behalf of the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 16.02. Acts of Board, Committee or Officer of Successor
Corporation Valid. Any act or proceeding by any provision of this Indenture
- --authorized or required to be done or performed by any board, committee or
officer of the Company shall and may be done and performed with like force
and effect by the like board, committee or officer of any corporation that
shall at the time be the lawful sole successor of the Company.
SECTION 16.03. Required Notices or Demands May be Served by Mail; Waiver.
Any notice or demand which by any provisions of this Indenture is required or
permitted to be given or served by the Trustee or by the holders of Debentures
to or on the Company may be given or served by being deposited by registered
mail (return receipt requested) in a United States Postal Service facility
addressed (until another address is filed by the Company with the Trustee for
such purpose), as follows: Hexcel Corporation, attention Corporate Secretary,
650 California Street, San Francisco, California 94108. Any notice, direction,
request or demand by any debentureholder or the Company to or upon the Trustee
shall be deemed to have been sufficiently given or made, for all purposes, if
given or made at the principal office of the Trustee.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the person entitled to receive such notice, either before
or after the event or action relating thereto, and such waiver shall be the
equivalent of such notice. Waivers of notice by debentureholders shall be filed
with the Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
<PAGE>
87
SECTION 16.04. Indenture and Debentures to be Construed in Accordance with
the Laws of the State of California. This Indenture and each Debenture shall be
deemed to be a contract made under the laws of the State of California, and for
all purposes shall be construed in accordance with the laws of said State,
except as otherwise required by mandatory provisions of law.
SECTION 16.05. Evidence of Compliance with Conditions Precedent Upon any
request or application by the Company to the Trustee to take any action under
any of the provisions as of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with, except that in
the case of any such application or demand as to which the furnishing of such
document is specifically required by any provision of this Indenture relating to
such particular application or demand, no additional certificate or opinion need
be furnished.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters or information which is in the possession of the Company,
upon the certificate, statement or opinion of or representations by an officer
or officers of the Company, unless such counsel knows that the certificate,
statement or opinion or representations with respect to the matters upon which
his certificate,
<PAGE>
88
statement or opinion may be band as aforesaid are erroneous, in the exercise of
reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Company or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants unless such officer or counsel, as the case may be, knows that the
certificate or opinion or representations with respect to the accounting matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous. Any certificate or opinion of any independent firm of public
accountants filed with the Trustee shall contain a statement that such firm is
independent.
SECTION 16.06. Payments Due on Saturdays, Sundays, and Holidays. In any
case where the date of payment of interest on or principal of the Debentures or
the date fixed for redemption of any Debenture or the making of any Sinking Fund
payment shall not be a business day then payment of interest or principal (and
premium, if any) need not be made on such date, but may be made on the next
succeeding business day with the same force and effect as if made on the date of
payment or the date fixed for redemption, and no interest shall accrue for the
period after the date of payment or date fixed for redemption.
SECTION 16.07. Provisions Required by Trust Indenture Act of 1939 to
Control. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture which
is required to be included in this Indenture by any of Sections 310 to 317,
inclusive, of the Trust Indenture Act of 1939, such required provision shall
control.
SECTION 16.08. Provisions of the Indenture and Debenture for the Sole
Benefit of the Parties and the Debentureholders. Nothing in this Indenture or
in the Debentures, expressed or implied, shall give or be construed to give any
person, firm or corporation, other than the parties hereto, the holders of
Senior Indebtedness and the holders of the Debentures, any legal or equitable
right, remedy or claim under or in respect of this Indenture, or under any
covenant, condition or provision herein contained; all its covenants, conditions
and provisions being for the sole benefit of the parties hereto, the holders of
Senior Indebtedness and the holders of the Debentures.
<PAGE>
89
SECTION 16.09. Indenture May Be Executed in Counterparts; Acceptance by
Trustee. This Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument. The Bank of California, N.A., the party of the
second part, hereby accepts the trusts in this Indenture declared and provided,
upon the terms and conditions hereinabove set forth.
SECTION 16.10. Article and Section Headings. The Article and Section
heading references herein and in the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 16.11. Severability. provision hereof shall be held to be invalid,
illegal or unenforceable under applicable law, then the remaining provisions
hereof shall be construed as though such invalid, illegal or unenforceable
provision were not contained herein.
IN WITNESS WHEREOF, HEXCEL CORPORATION, the party of the first part, has
caused this Indenture to be signed and acknowledged by its President or one of
its Vice Presidents, and its corporate sea] to be affixed hereunto, and the same
to be attested by its Secretary or an Assistant Secretary; and The Bank of
California, N.A., the party of the second part, has caused this Indenture to be
signed and acknowledged by one of its Assistant Vice Presidents, has caused its
corporate sea] to be affixed hereunto, and the same to be attested by one of its
Assistant Secretaries, all as of the day and year first written above.
HEXCEL CORPORATION
ATTEST: By
Secretary
THE BANK OF CALIFORNIA, N.A.
By
ATTEST: Assistant Vice President
Assistant Secretary
<PAGE>
90
STATE OF CALIFORNIA
THE CITY AND COUNTY OF SAN FRANCISCO ss.:
On this 7th day of August, 1986, before me appeared D.T. Divird to me
personally known or proved to me on the basis of satisfactory evidence to be the
person who executed the above instrument, who, being by me duly sworn, did
depose and say that he resides at Danville, CA; that he is the Vice President of
Hexcel corporation, one of the corporations described in and which executed the
above instrument; that the seal affixed to said instrument is the corporate seal
of said corporation; that said instrument was signed and sealed on behalf of
said corporation by authority of its Board of Directors; and that said
instrument was the free act and deed of said corporation.
/s/ Barbara Bernardo
Notary Public
STATE OF CALIFORNIA
THE CITY AND COUNTY OF SAN FRANCISCO ss.:
On this 7th day of August, 1986, before me appeared Gary Lew to me
personally known or proved to me on the basis of satisfactory evidence to be the
person who executed the above instrument, who, being by me duly sworn, did
depose and say that he resides at San Francisco, CA; that he is the Asst. Vice
President of The Bank of California, N.A., one of the corporations described in
and which executed the above instrument; that the seal affixed to said
instrument is the corporate seal of said corporation; that said instrument was
signed and sealed on behalf of said corporation by authority of its Board of
Directors; and that said instrument was the free act and deed of said
corporation.
/s/ Barbara Bernardo
Notary Public
<PAGE>
EXHIBIT 10.4(d)
HEXCEL CORPORATION
AND
CERTAIN OF ITS SUBSIDIARIES
_________________________
$345,000,000 SYNDICATED CREDIT FACILITIES
$10,000,000 EUROPEAN OVERDRAFT FACILITY
_________________________
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF MARCH 5, 1998
_________________________
CREDIT FIRST
SUISSE BOSTON
- -----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS . . . . . . . . . . . 26
2.1 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . 26
2.2 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . . . . 26
2.3 Use of Proceeds of Revolving Credit Loans. . . . . . . . . . . . . . . . 27
SECTION 3. AMOUNT AND TERMS OF LETTER OF CREDIT SUB-FACILITY. . . . . . . . . . . 27
3.1 L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2 Procedure for Issuance of Letters of Credit. . . . . . . . . . . . . . . 28
3.3 Fees, Commissions and Other Charges. . . . . . . . . . . . . . . . . . . 29
3.4 L/C Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.5 Reimbursement Obligation of the Borrowers. . . . . . . . . . . . . . . . 30
3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.7 Letter of Credit Payments. . . . . . . . . . . . . . . . . . . . . . . . 32
3.8 Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.9 Issuing Lender Reporting Requirements. . . . . . . . . . . . . . . . . . 32
3.10 Transitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4. AMOUNT AND TERMS OF SWING LINE SUB-FACILITY. . . . . . . . . . . . . . 33
4.1 Swing Line Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2 Procedure for Swing Line Loan Borrowing. . . . . . . . . . . . . . . . . 33
4.3 Refunding of Swing Line Loans. . . . . . . . . . . . . . . . . . . . . . 34
4.4 Unconditional Obligation to Refund Swing Line Loans. . . . . . . . . . . 35
4.5 Use of Proceeds of Swing Line Loans. . . . . . . . . . . . . . . . . . . 35
SECTION 5. AMOUNTS AND TERMS OF EUROPEAN SUB-FACILITY . . . . . . . . . . . . . . 35
5.1 European Revolving Credit Facility . . . . . . . . . . . . . . . . . . . 35
5.2 Procedure for Borrowing Syndicated European Loans. . . . . . . . . . . . 36
5.3 Procedure for Borrowing Local European Loans . . . . . . . . . . . . . . 36
5.4 Matters Relating to Local European Loans . . . . . . . . . . . . . . . . 37
5.5 Use of Proceeds of European Revolving Loans. . . . . . . . . . . . . . . 39
5.6 Termination of Foreign Borrower Status . . . . . . . . . . . . . . . . . 39
5.7 Resignation of Local Lender. . . . . . . . . . . . . . . . . . . . . . . 39
5.8 Reporting by Local Lenders . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 6. AMOUNTS AND TERMS OF EUROPEAN OVERDRAFT
FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.1 European Overdraft Facility. . . . . . . . . . . . . . . . . . . . . . . 40
6.2 Making of European Overdraft Loans . . . . . . . . . . . . . . . . . . . 41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
6.3 Repayment of European Overdraft Loans. . . . . . . . . . . . . . . . . . 41
6.4 Use of Proceeds of European Overdraft Loans. . . . . . . . . . . . . . . 41
6.5 Adjustment of European Overdraft Commitment. . . . . . . . . . . . . . . 41
SECTION 7. PROVISIONS RELATING TO THE EXTENSIONS OF CREDIT;
FEES AND PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.1 Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . . . . 42
7.2 Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.3 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.4 Optional Termination or Reduction of Aggregate Revolving Credit
Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.5 Mandatory Reduction of Commitments and Prepayments . . . . . . . . . . . 44
7.6 Conversion and Continuation Options. . . . . . . . . . . . . . . . . . . 46
7.7 Minimum Amounts and Maximum Number of Tranches . . . . . . . . . . . . . 47
7.8 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . . . . . 47
7.9 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . 48
7.10 Inability to Determine Interest Rate. . . . . . . . . . . . . . . . . . 49
7.11 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . 49
7.12 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.13 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.15 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.16 Certain Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.17 Change of Lending Office. . . . . . . . . . . . . . . . . . . . . . . . 55
7.18 Overall Interest Rate for French Law. . . . . . . . . . . . . . . . . . 56
7.19 Designation of Additional Borrowers . . . . . . . . . . . . . . . . . . 56
7.20 European Monetary Union . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 58
8.1 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.2 No Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . 59
8.4 Corporate Power; Authorization; Enforceable Obligations. . . . . . . . . 59
8.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.8 Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . 60
8.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.11 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.12 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.13 Investment Company Act; Other Regulations . . . . . . . . . . . . . . . 62
8.14 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
8.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.16 Collateral Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.17 Accuracy and Completeness of Information. . . . . . . . . . . . . . . . 64
8.18 Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.20 Government Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.1 Conditions to Initial Loans. . . . . . . . . . . . . . . . . . . . . . . 65
9.2 Conditions to Each Loan. . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 68
10.1 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . 69
10.3 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . 70
10.4 Conduct of Business and Maintenance of Existence. . . . . . . . . . . . 70
10.5 Maintenance of Property; Insurance. . . . . . . . . . . . . . . . . . . 71
10.6 Inspection of Property; Books and Records; Discussions. . . . . . . . . 71
10.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.8 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.9 Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.1 Financial Condition Covenants . . . . . . . . . . . . . . . . . . . . . 73
11.2 Limitation on Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 74
11.3 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.4 Limitation on Guarantee Obligations . . . . . . . . . . . . . . . . . . 77
11.5 Limitation on Fundamental Changes . . . . . . . . . . . . . . . . . . . 78
11.6 Limitation on Sale of Assets. . . . . . . . . . . . . . . . . . . . . . 78
11.7 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . 79
11.8 Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . 79
11.9 Limitation on Transactions with Affiliates. . . . . . . . . . . . . . . 81
11.10 Limitation on Sales and Leasebacks . . . . . . . . . . . . . . . . . . 81
11.11 Limitation on Changes in Fiscal Year or Accounting Treatment . . . . . 81
11.12 Limitation on Negative Pledge Clauses. . . . . . . . . . . . . . . . . 81
11.13 Limitation on Lines of Business. . . . . . . . . . . . . . . . . . . . 82
11.14 Limitation on Modification of Agreements and Payments on
Account of Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
11.15 No New Restrictions on Subsidiary Dividends. . . . . . . . . . . . . . 82
SECTION 12. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 13. THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT . . . . . . . . . . 86
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
13.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
13.2 Delegation of Duties. . . . . . . . . . . . . . . . . . . . . . . . . . 87
13.3 Exculpatory Provisions. . . . . . . . . . . . . . . . . . . . . . . . . 87
13.4 Reliance by Administrative Agent and Collateral Agent . . . . . . . . . 87
13.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
13.6 Non-Reliance on Administrative Agent, Collateral Agent and Other
Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
13.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
13.8 Agents in their Individual Capacities . . . . . . . . . . . . . . . . . 89
13.9 Successor Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 14. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
14.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 91
14.2 Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 92
14.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
14.4 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . 93
14.5 Survival of Representations and Warranties. . . . . . . . . . . . . . . 93
14.6 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . 94
14.7 Successors and Assigns; Participations and Assignments. . . . . . . . . 95
14.8 Adjustments; Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . 97
14.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
14.10 Certain Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
14.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
14.12 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
14.13 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
14.14 Submission To Jurisdiction; Waivers. . . . . . . . . . . . . . . . . . 99
14.15 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . .100
14.16 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . .101
14.17 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . .101
14.18 Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . .101
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule I Lenders; Commitments
Schedule II Addresses for Notices
Schedule 3.10 Existing Letters of Credit
Schedule 7.5 Permitted Property Sales
Schedule 8.4 Additional Foreign Law Requirements
Schedule 8.6 Existing Litigation
Schedule 8.14 Subsidiaries
Schedule 8.15 Environmental Matters
Schedule 9.1 International Counsel
Schedule 11.2 Indebtedness
Schedule 11.3 Liens
Schedule 11.4 Guarantee Obligations
Schedule 11.9 Permitted Transactions with Affiliates
Schedule 11.14 Permitted Payments of Indebtedness
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Swing Line Note
Exhibit C-1 Form of Company Guaranty
Exhibit C-2 Form of Company Pledge Agreement
Exhibit D-1 Form of Subsidiary Guaranty
Exhibit D-2 Form of Subsidiary Pledge Agreement
Exhibit E Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
Exhibit F-1 Form of Notice of Borrowing (Drawings)
Exhibit F-2 Form of Notice of Borrowing (Conversions)
Exhibit F-3 Form of Notice of Borrowing (Continuations)
Exhibit G Form of Assignment and Acceptance
Exhibit H Form of Compliance Certificate
Exhibit I Form of Additional Borrower Joinder Agreement
Exhibit J Form of Local Lender Joinder Agreement
</TABLE>
<PAGE>
2
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 5, 1998,
among:
(a) HEXCEL CORPORATION, a Delaware corporation (with its successors and
permitted assigns, the "COMPANY");
(b) the FOREIGN BORROWERS from time to time parties hereto (together with
the Company, the "BORROWERS");
(c) the LENDERS from time to time parties hereto;
(d) CITIBANK, N.A., a national banking association, as collateral agent (the
"COLLATERAL AGENT");
(e) CITICORP SECURITIES, INC., a Delaware corporation, as syndication agent
(the "SYNDICATION AGENT") for the Lenders
(e) CREDIT SUISSE FIRST BOSTON, a Swiss banking association ("CSFB"), as
documentation agent (in such capacity, the "DOCUMENTATION AGENT") and as
administrative agent (in such capacity, the "ADMINISTRATIVE AGENT") for
the Lenders.
W I T N E S S E T H:
WHEREAS, the Company is a party to the Credit Agreement, dated as
of June 27, 1996 (as amended, supplemented or otherwise modified from time to
time, the "EXISTING AGREEMENT"), with the Foreign Borrowers from time to time
parties thereto, the banks and other financial institutions from time to time
parties thereto, Citibank, N.A., as collateral agent, and CSFB, as
administrative agent;
WHEREAS, the Company has requested that the Existing Agreement be
amended as more fully described herein;
WHEREAS, each of the parties to the Existing Agreement is agreeable
to the requested amendments, but only upon the terms and subject to the
conditions set forth herein, and each of the parties to the Existing
Agreement, for convenience of reference, has agreed to restate the Existing
Agreement as so amended;
WHEREAS, each of the Banks and the other parties hereto are
agreeable to the terms and provisions of the Existing Agreement as amended
and restated hereby;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties to the Existing Agreement agree that
the Existing Agreement shall be and hereby is amended and restated in its
entirety and the parties hereto hereby agree as follows:
<PAGE>
3
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate PER ANNUM equal to the greater of (i)
the Prime Rate in effect on such day and (ii) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
ABR due to a change in the Prime Rate or the Federal Funds Effective
Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.
"ABR LOANS": Loans (including, without limitation, Swing Line
Loans) the rate of interest applicable to which is based upon the ABR.
"ADDITIONAL BORROWER": as defined in subsection 7.19(a).
"ADDITIONAL BORROWER JOINDER AGREEMENT": an Additional Borrower
Joinder Agreement, substantially in the form of Exhibit I, delivered
pursuant to subsection 7.19(b).
"ADMINISTRATIVE AGENT": as defined in the preamble hereto.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For
purposes of this definition, "control" of a Person means the power,
directly or indirectly, either to (a) vote 5% or more of the securities
having ordinary voting power for the election of directors of such
Person or (b) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise; PROVIDED that
Hexcel Foundation shall be deemed not to be an "Affiliate" of the
Company or any of its Subsidiaries during such time as Hexcel Foundation
maintains its status as a not-for-profit corporation for purposes of
California law.
"AGGREGATE OUTSTANDING EXTENSIONS OF CREDIT": as to any Revolving
Credit Lender at any time, an amount equal to the sum of (a) the
aggregate outstanding principal amount of all Revolving Credit Loans
made by such Revolving Credit Lender and (b) such Revolving Credit
Lender's Revolving Credit Commitment Percentage of the L/C Obligations
and Swing Line Loans then outstanding.
"AGGREGATE REVOLVING CREDIT COMMITMENT": $345,000,000, as such
amount may be reduced from time to time pursuant to this Agreement.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"APPLICABLE FACILITY FEE RATE": (a) for each day when a Pricing
Adjustment
<PAGE>
4
Event is not continuing, the rate equal to 0.250% PER ANNUM and (b) for
each day when a Pricing Adjustment Event is continuing, the rate per
annum set forth below opposite the Leverage Ratio then in effect:
<TABLE>
<CAPTION>
-----------------------------------------
Leverage Ratio Facility
Fee
-----------------------------------------
<S> <C>
Greater than or equal to 4.5 .375%
to 1.0
Greater than or equal to 4.0 .325%
to 1.0, but less than 4.5 to
1.0
Greater than or equal to 3.5 .300%
to 1.0, but less than 4.0 to
1.0
Greater than or equal to 3.0 .250%
to 1.0, but less than 3.5 to
1.0
Greater than or equal to 2.5 .225%
to 1.0, but less than 3.0 to
1.0
Less than 2.5 to 1.0 .1875%
-----------------------------------------
</TABLE>
"APPLICABLE MARGIN": (a) for each day when a Pricing Adjustment
Event is not continuing, the rate per annum set forth under the relevant
column heading below opposite the Leverage Ratio then in effect:
<TABLE>
<CAPTION>
----------------------------------------------
Margin
Leverage Ratio
------------------------
Eurodollar ABR Loans
Loans
----------------------------------------------
<S> <C> <C>
Greater than or equal 0.625% 0%
to 4.0
Greater than or equal 0.500% 0%
to 3.5 to 1.0, but less
than 4.0 to 1.0
Less than 3.5 to 1.0 0.375% 0%
----------------------------------------------
</TABLE>
<PAGE>
5
(b) for each day when a Pricing Adjustment Event is continuing,
the rate per annum set forth under the relevant column heading below
opposite the Leverage Ratio then in effect:
<TABLE>
<CAPTION>
----------------------------------------------
Margin
Leverage Ratio
------------------------
Eurodollar ABR Loans
Loans
----------------------------------------------
<S> <C> <C>
Greater than or equal 1.125% 0.125%
to 4.5 to 1.0
Greater than or equal 0.925% 0%
to 4.0 to 1.0, but less
than 4.5 to 1.0
Greater than or equal 0.700% 0%
to 3.5 to 1.0, but less
than 4.0 to 1.0
Greater than or equal 0.625% 0%
to 3.0 to 1.0, but less
than 3.5 to 1.0
Greater than or equal 0.400% 0%
to 2.5 to 1.0, but less
than 3.0 to 1.0
Less than 2.5 to 1.0 0.3125% 0%
----------------------------------------------
</TABLE>
(c) Notwithstanding the foregoing and regardless of whether a
Pricing Adjustment Event shall then be continuing, (i) the "Applicable
Margin" from time to time for Swing Line Loans shall be the same as the
"Applicable Margin" then in effect for ABR Loans and (ii) the
"Applicable Margin" from time to time for Eurocurrency Loans denominated
in Optional Currencies shall be increased by any additional "associated
reserve costs" (or analogous costs) not otherwise included in the
Eurocurrency Rate.
"APPLICATION": an application, in such form as the relevant
Issuing Lender may specify from time to time, requesting such Issuing
Lender to open a Letter of Credit.
"ASSIGNEE": as defined in subsection 14.7(c).
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Revolving
Credit Lender, at any time, an amount equal to the excess, if any, of
(a) such Revolving Credit Lender's Revolving Credit Commitment over (b)
the sum of (i) such Revolving Credit Lender's Aggregate Outstanding
Extensions of Credit and (ii) such Revolving Credit Lender's Revolving
Credit Commitment Percentage of the Reserved Proceeds then outstanding.
"BANKRUPTCY EVENT": any event described in Section 12(f)(i) or
(ii).
<PAGE>
6
"BORROWERS": as defined in the preamble hereto.
"BORROWING DATE": any Business Day specified in a Notice of
Borrowing pursuant to subsection 2.2, 4.2, 5.2, 5.3 or 6.2 as a date on
which the relevant Borrower requests the Lenders to make Loans hereunder.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required by law to close (a)
in New York, New York and (b) in the case of Eurocurrency Loans, (i) in
London, England and either (A) in the case of Loans denominated in (1)
Austrian shillings, in Vienna, Austria, (2) Belgian francs, in Brussels,
Belgium, (3) Dutch guilders, in Amsterdam, The Netherlands, (4) French
francs, in Lyon, France, (5) German marks, in Frankfurt-am-Main,
Germany, (6) Italian lire, in Milan, Italy, (7) Spanish pesetas, in
Madrid, Spain, and (8) any other currency, the principal financial
center of the jurisdiction in which such Loan is being made and (B) in
the case of Letter of Credit transactions for a particular Issuing
Lender, in the place where its office for issuance or administration of
the pertinent Letter of Credit is located.
"CAPITAL EXPENDITURE": an expenditure in respect of the purchase
or other acquisition of fixed or capital assets (excluding any such
asset acquired in connection with normal replacement and maintenance
programs properly charged to current operations); PROVIDED, that (i)
Capital Expenditures shall include (A) that portion of Financing Leases
which is incurred and capitalized on the balance sheet of the Company
and its Subsidiaries and (B) expenditures for equipment that is
purchased simultaneously with the trade-in or disposal of existing
equipment owned by the Company or any of its Subsidiaries, to the extent
the gross purchase price of the purchased equipment exceeds the actual
value attributed to such equipment at the time of such trade-in or
disposal; and (ii) Capital Expenditures shall exclude expenditures made
in connection with the replacement or restoration of Property, to the
extent reimbursed or financed from insurance or condemnation proceeds.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"CASH EQUIVALENTS": (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates
of deposit and eurodollar time deposits with maturities of one year or
less from the date of acquisition and overnight bank deposits of any
Lender or of any commercial bank having capital and surplus in excess of
$250,000,000, (c) repurchase obligations of any Lender or of any
commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 30 days with respect to
securities issued or fully guaranteed or insured by the United States
Government, (d) commercial paper of a domestic issuer rated at least A-2
by Standard and Poor's Rating Group ("S&P") or P-2 by Moody's Investors
Service, Inc.
<PAGE>
7
("MOODY'S"), (e) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A
by Moody's, (f) securities with maturities of one year or less from the
date of acquisition backed by standby letters of credit issued by any
Lender or any commercial bank satisfying the requirements of clause (b)
of this definition or (g) shares of money market mutual or similar funds
which invest exclusively in assets satisfying the requirements of
clauses (a) through (f) of this definition.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. '' 9601 ET SEQ., as
amended, any successor statutes, and any regulations or legally
enforceable guidelines promulgated thereunder.
"CERCLIS" is defined in subsection 8.15(f).
"CHANGE OF CONTROL" means the occurrence of any of the following
events:
(i) (A) any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act, but other than Specialty Chemicals and its
Affiliates) beneficially owns, directly or indirectly, more than 25% of
the total voting power of the voting stock of the Company and (B) the
total voting power of the voting stock of the Company beneficially owned
by such "person" exceeds that which is beneficially owned by the
Specialty Chemicals and its Affiliates; or
(ii) at any time, individuals who constitute the Board of
Directors of the Company on the date hereof (together with any new
directors whose election by such Board of Directors or whose nomination
for election by the shareholders of the Company was approved pursuant to
the Governance Agreement or by a vote of 66-2/3% of the directors of the
Company then still in office who were either directors at the beginning
of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board of Directors then in office.
"CHEMICAL HOLDINGS" means Ciba Specialty Chemical Holdings Inc., a
Swiss corporation, and its successors.
"CLOSING DATE": the date on which the conditions precedent set
forth in subsection 9.1 shall be satisfied.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": all assets of the Credit Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by
any Security Document (it being understood that, on the Closing Date,
the only such assets constituting "Collateral" shall be capital stock).
<PAGE>
8
"COLLATERAL AGENT": as defined in the preamble hereto.
"COMMERCIAL LETTER OF CREDIT": as defined in subsection 3.1(b).
"COMMITMENT PERIOD": the period from and including the date hereof
to but not including the Termination Date or such earlier date on which
the Aggregate Revolving Credit Commitment shall terminate as provided
herein.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes
the Company and which is treated as a single employer under Section 414
of the Code.
"COMPANY": as defined in the preamble.
"COMPANY GUARANTY": the Guaranty, substantially in the form of
Exhibit C-1, made by the Company in favor of the Collateral Agent, as
the same may be amended, supplemented or otherwise modified from time to
time.
"COMPANY PLEDGE AGREEMENT": the Pledge Agreement, substantially in
the form of Exhibit C-2, made by the Company in favor of the Collateral
Agent, as the same may be amended, supplemented or otherwise modified
from time to time.
"CONTAMINANT" means any pollutant, hazardous substance, radioactive
substance, toxic substance, hazardous waste, radioactive waste, special
waste, petroleum or petroleum-derived substance or waste, asbestos in
any form or condition, polychlorinated biphenyls (PCBs), or any
hazardous or toxic constituent thereof and includes, but is not limited
to, these terms as defined under Environmental, Health or Safety
Requirements of Law.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CREDIT DOCUMENTS": this Agreement, the Notes, the Applications,
the Guarantees and the Security Documents.
"CREDIT PARTIES": the Company and each of its Subsidiaries
(including, without limitation, each Foreign Borrower) which is a party
to a Credit Document.
"CSFB": as defined in the preamble.
"DEFAULT": any of the events specified in Section 12, whether or
not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has
<PAGE>
9
been satisfied.
"DIC": the joint venture entered into between the Company and
Dainippon Ink & Chemicals, Inc., pursuant to that certain Parent Company
Agreement dated as of April 17, 1990 (as amended) under which the
Company and Dainippon caused Hexcel Technologies, Inc. and DIC
Technologies, Inc. (Wholly-owned Subsidiaries of the Company and
Dainippon Ink & Chemicals, Inc., respectively) to enter into that
certain Participants Agreement dated as of September 14, 1990 (as
amended) pursuant to which Hexcel Technologies, Inc. and DIC
Technologies, Inc. formed Hexcel-DIC Partnership ("HDP") and pursuant to
which Hexcel Technologies, Inc. and DIC Technologies Inc., caused HDP to
form DIC-Hexcel, Ltd. as a Wholly-owned Subsidiary of HDP.
"DOLLAR EQUIVALENT" means, with respect to any Optional Currency at
the time of determination thereof, the equivalent of such currency in
Dollars determined at the rate of exchange quoted by the Administrative
Agent in New York, New York at 12:00 noon (New York time) on the last
Business Day of the most recently completed calendar quarter (or, if the
Administrative Agent so elects or any Lender so requests, on the date of
determination), to prime banks in New York City for the spot purchase in
the New York foreign exchange market of such amount of Dollars with such
Optional Currency.
"DOLLARS" and "$": dollars in lawful currency of the United States
of America.
"DOMESTIC SUBSIDIARY": any Subsidiary of the Company organized
under the laws of any jurisdiction within the United States.
"EBITDA": for any period on a combined basis for any Person, (i)
the sum of the amounts for such period for such Person of (A) Net
Income, (B) depreciation and amortization expense, (C) total Interest
Expense, (D) charges for federal, state, local and foreign income taxes
and (E) extraordinary losses (including restructuring charges and
business acquisition and consolidation expenses) and other nonoperating
expenses that have been deducted in the determination of such Net
Income, MINUS (ii) the sum of (A) extraordinary gains not already
excluded from the determination of such Net Income (including, without
limitation, gains in connection with the sale of Property and gains
based upon market valuation, GAAP valuation or sale of securities) and
(B) interest and other nonoperating income.
"ELIGIBLE ASSIGNEE" means (i) a Lender or any Affiliate thereof;
(ii) a commercial bank organized under the laws of the United States, or
any State thereof, and having total assets in excess of $5,000,000,000;
(iii) a finance company, insurance company, other financial institution
or fund, reasonably acceptable to the Administrative Agent, that is
regularly engaged in making, purchasing or investing in loans and having
total assets in excess of $5,000,000,000; (iv) a savings and loan
association or savings bank organized under the laws of the United
States or any State thereof that has a net worth, determined in
accordance with GAAP, in excess of $500,000,000; (v) a commercial bank
organized under the laws of any other country that is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such
<PAGE>
10
country, and having total assets in excess of $5,000,000,000, as long as
such bank is acting through a branch or agency located in the country in
which it is organized or another country that is also a member of the
OECD; (vi) the central bank of any country that is a member of the OECD;
or (vii) a finance company, insurance company, bank, other financial
institution or fund acceptable to the Administrative Agent, which
acceptance shall not be unreasonably withheld; and, in each case, is
capable of making Loans in accordance with the terms hereof both in the
United States and in each country in which an Optional Currency is the
national currency.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law derived from or relating to foreign, European Union,
United States federal, state and local laws or regulations relating to
or addressing the environment, health or safety, including but not
limited to any law, regulation, or order relating to the use, handling,
or disposal of any Contaminant, any law, regulation, or order relating
to Remedial Action and any law, regulation, or order relating to
workplace or worker safety and health, and such Requirements of Law as
are promulgated by the specifically authorized Governmental Authority
responsible for administering such Requirements of Law, each as from
time to time hereafter in effect.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental, Health or
Safety Requirements of Law, or (ii) damages arising from, or costs
incurred by such Governmental Authority in response to, a Release or
threatened Release of a Contaminant into the environment.
"ENVIRONMENTAL PROPERTY TRANSFER ACTS" means any applicable
Requirement of Law that, for environmental reasons, conditions,
restricts, prohibits or requires any notification, Remedial Action or
disclosure triggered by the closure of any Property, the transfer, sale
or lease of any Property or deed or title for any Property or any change
in the direct or indirect ownership or control of any Property,
including, but not limited to, any so-called "Industrial Site Recovery
Acts" or "Responsible Transfer Acts".
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY BASE RATE": the rate per annum determined by the
Administrative Agent at approximately 11:00 a.m. (London time) on the
date which is two Business Days prior to the beginning of the relevant
Interest Period (as specified in the applicable Notice of Borrowing) by
reference to the "British Bankers' Association Interest Settlement
Rates" for deposits in Dollars or the relevant Optional Currency (as set
forth by any service selected by the Administrative Agent which has been
nominated by the British Bankers' Association as an authorized
information vendor for the purpose of displaying such rates) for a
period equal to such Interest Period (rounded, if necessary, upward to
the nearest whole multiple of 1/16th of 1%); PROVIDED that (x) with
respect to any European Overdraft Loans or any other Eurocurrency Loan
having an Interest Period of seven (7) days or (y) to the extent that an
interest rate is not ascertainable pursuant to the foregoing provisions
of this definition, the "Eurocurrency Base Rate" shall be the
<PAGE>
11
interest rate per annum determined by the Administrative Agent (or, in
the case of the European Overdraft Loans, by the European Overdraft
Lender) to be the average (rounded upward to the nearest whole multiple of
one-sixteenth of one percent (0.0625%) per annum, if such average is not
such a multiple) of the rates per annum at which deposits in Dollars or
the relevant Optional Currency are offered to major banks in the London
interbank market in London, England by CSFB at approximately 11:00 a.m.
(London time) on the date which is two Business Days prior to the
beginning of such Interest Period.
"EUROCURRENCY LOANS": Loans the rate of interest applicable to
which is based upon the Eurocurrency Rate.
"EUROCURRENCY RATE": with respect to each day during each Interest
Period pertaining to a Eurocurrency Loan, a rate per annum determined
for such day in accordance with the following formula (rounded upward to
the nearest 1/100th of 1%, if the Eurocurrency Reserve Requirements are
greater than zero):
Eurocurrency Base Rate
________________________________________
1.00 - Eurocurrency Reserve Requirements
"EUROCURRENCY RESERVE REQUIREMENTS" means, for any day, that
percentage which is in effect on such day, as prescribed by the Federal
Reserve Board for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the Federal Reserve
System in New York, New York with deposits exceeding five billion
Dollars in respect of Eurocurrency Liabilities (or in respect of any
other category of liabilities which includes deposits by reference to
which the interest rate on Eurocurrency Rate Loans is determined or any
category of extensions of credit or other assets which includes loans by
a non-United States office of any bank to United States residents).
"EUROPEAN OVERDRAFT LENDER": Citibank, N.A. (and its successors
and permitted assigns), in its capacity as the lender of the European
Overdraft Loans.
"EUROPEAN OVERDRAFT COMMITMENT": $10,000,000 (or the Local
Equivalent thereof), as such amount may be adjusted from time to time in
accordance with the provisions of subsection 6.5
"EUROPEAN OVERDRAFT LOANS": as defined in subsection 6.1.
"EUROPEAN REVOLVING LOANS": as defined in subsection 5.1(a).
"EVENT OF DEFAULT": any of the events specified in Section 12,
PROVIDED that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"EXCHANGE ACT": the Securities Exchange Act of 1934 (as amended
from time to
<PAGE>
12
time) and any successor statute.
"EXISTING AGREEMENT": as defined in the recitals.
"EXISTING TRANSACTION DOCUMENTS" means, collectively:
(a) the Strategic Alliance Agreement, the Subordinated Ciba Notes,
the Subordinated Ciba Notes Indenture, the Governance Agreement and all
other agreements contemplated by, or entered into by the Company and its
Subsidiaries pursuant to or in connection with, the Strategic Alliance
Agreement;
(b) the Asset Purchase Agreement relating to the acquisition by the
Company of the assets constituting the composite products division of
Hercules Incorporated and any other documents or agreements delivered
thereunder or in connection therewith; and
(c) the Asset Purchase Agreement relating to the acquisition by the
Company of the satellite division and certain other assets of Fiberite
Holdings Inc. and any other documents or agreements delivered thereunder or
in connection therewith.
"FEDERAL FUNDS EFFECTIVE RATE": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by
the Administrative Agent from three federal funds brokers of recognized
standing selected by it.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"FIXED CHARGES" means, for any period for any Person, the sum, without
duplication, of the amounts for such period of (i) Interest Expense of such
Person, (ii) the payments of principal on Indebtedness for borrowed money
required to be paid during such period by such Person, including, without
limitation, the principal component of Financing Lease obligations and
(iii) cash dividends paid in respect of Capital Stock by such Person.
"FIXED CHARGE COVERAGE RATIO" means, for any period of four
consecutive fiscal quarters, the ratio of (i) EBITDA of the Company and its
Subsidiaries for such period, MINUS Capital Expenditures paid by the
Company and its Subsidiaries during such period, PLUS Net Proceeds of asset
sales received during such period to the extent not included in the
calculation of EBITDA for such period to (ii) Fixed Charges of the Company
and its Subsidiaries for such period.
"FOREIGN BORROWERS": subject to the provisions of subsection 5.6, the
collective
<PAGE>
13
reference to each of:
(i) Hexcel (U.K.) Limited, a corporation organized and existing
under the laws of England and Wales ("HEXCEL-U.K.");
(ii) Hexcel Composites Limited, a corporation organized and existing
under the laws of the United Kingdom ("COMPOSITES-UK");
(iii) Hexcel S.A., a French societe anonyme ("HEXCEL-FRANCE");
(iv) Hexcel Fabrics S.A., a French societe anonyme
("FABRICS-FRANCE");
(v) Hexcel Composites S.A., a French societe anonyme
("COMPOSITES-FRANCE");
(vi) Hexcel Composites S.A., a company organized and existing under
the laws of Belgium ("HEXCEL-BELGIUM");
(vii) Salver S.r.l., a limited liability company organized and
existing under the laws of Italy ("SALVER");
(viii) Hexcel Composites GmbH, a company organized and existing under
the laws of Austria ("COMPOSITES-AUSTRIA");
(ix) Hexcel Composites S.A., a corporation organized and existing
under the laws of Spain ("HEXCEL-SPAIN");
(x) Hexcel Composites GmbH, a corporation organized and existing
under the laws of Germany ("HEXCEL-GERMANY"); and
(xi) each other Foreign Borrower from time to time designated in
accordance with the provisions of subsection 7.19.
"FOREIGN BORROWER SUBLIMIT" means, with respect to (a) Composites-
Austria, $2,000,000, (b) Salver, $4,000,000 and (c) each other Foreign
Borrower, $35,000,000 (or, in each case, the Local Equivalent thereof), as
any such amount may be modified from time to time for the relevant Foreign
Borrower by the Company with the prior consent of the Administrative Agent
and any affected Local Lender.
"FOREIGN EMPLOYEE BENEFIT PLAN" means any employee benefit plan as
defined in Section 3(3) of ERISA that is maintained or contributed to for
the benefit of the employees of the Company or any Commonly Controlled
Entity or any of the Company's Subsidiaries, but which is not covered by
ERISA pursuant to ERISA Section 4(b)(4).
"FOREIGN PENSION PLAN" means any Foreign Employee Benefit Plan that,
under applicable local law, is required to be funded through a trust or
other funding vehicle other than a trust or funding vehicle maintained by a
Governmental Authority.
<PAGE>
14
"FOREIGN PLEDGE AGREEMENT": each pledge agreement (or analogous
agreement) by and between the Company or a Domestic Subsidiary, as
applicable, and the Collateral Agent pledging 65% of the ownership interest
(other than shares required by applicable law to be owned by another Person
for the qualification of directors or to satisfy minimum shareholder
requirements) held directly by the Company or such Domestic Subsidiary (as
the case may be) in each Material Subsidiary thereof (other than Hexcel
Chemical Products (U.K.) Limited, Hexcel Foreign Sales Corp. and Hexcel do
Brasil Servicos S/C Ltda.), as each such pledge agreement may be amended,
supplemented or otherwise modified from time to time.
"FOREIGN SUBSIDIARY": any Subsidiary of the Company organized under
the laws of any jurisdiction outside the United States of America.
"GAAP": generally accepted accounting principles in the United States
of America as in effect from time to time; PROVIDED that, for purposes of
determining compliance with the provisions of subsection 11.1, "GAAP" shall
mean generally accepted account principles in the United States of America
as in effect on December 31, 1996.
"GOVERNANCE AGREEMENT" means the Governance Agreement dated as of
February 29, 1996 by and between Chemical Holdings (as successor to Ciba-
Geigy Limited) and the Company, as the same may be amended, supplemented
or otherwise modified from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other similar obligations (the "PRIMARY OBLIGATIONS") of any other third
Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment
of any such primary obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the
owner of any such primary obligation against loss in respect thereof;
PROVIDED, HOWEVER, that the term Guarantee Obligation shall not include
endorsements of instruments for
<PAGE>
15
deposit or collection in the ordinary course of business. The amount of
any Guarantee Obligation of any guaranteeing person shall be deemed to
be the lower of (a) an amount equal to the stated or determinable amount
of the primary obligation in respect of which such Guarantee Obligation
is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such
Guarantee Obligation, unless such primary obligation and the maximum
amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by the Company in good faith.
"GUARANTOR": any Person delivering a Guaranty pursuant to this
Agreement.
"GUARANTEES": the collective reference to (a) the Company Guaranty,
(b) the Subsidiary Guaranty and (c) each other guaranty hereafter delivered
to the Collateral Agent to support the obligations and liabilities of any
Borrower hereunder and under any of the other Credit Documents.
"INDEBTEDNESS": of any Person at any date (and without duplication),
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (b) any other indebtedness of such
Person which is evidenced by a note, bond, debenture or similar instrument,
(c) all obligations of such Person under Financing Leases, (d) all
obligations of such Person in respect of acceptances issued or created for
the account of such Person and (e) all liabilities secured by any Lien on
any property owned by such Person even though such Person has not assumed
or otherwise become liable for the payment thereof; PROVIDED, HOWEVER, that
(i) for purposes of calculating compliance with the financial covenants
contained in subsection 11.1 only, the term "Indebtedness" shall include
only such obligations which would be reflected in a consolidated balance
sheet of the Company and its Subsidiaries prepared in accordance with GAAP
and (ii) for purposes of Section 12(e) only, the term "Indebtedness" shall
also include obligations under Interest Rate Agreements and obligations on
account of currency hedging arrangements.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST COVERAGE RATIO": for any period of four consecutive fiscal
quarters, the ratio of (a) EBITDA of the Company and its Subsidiaries for
such period to (b) total Interest Expense of the Company and its
Subsidiaries for such period.
"INTEREST EXPENSE": for any period on a combined basis for any
Person, all of the following as determined in conformity with GAAP: (i)
total interest expense, whether paid or accrued (without duplication)
(including the interest component of Financing
<PAGE>
16
Lease obligations for such period), including, without limitation, all
commissions, discounts and other fees and charges owed with respect to
letters of credit and net costs under Interest Rate Agreements, but
excluding, however, (w) amortization of discount, (x) capitalized debt
issuance costs, (y) interest paid in property other than cash and (z)
any other interest expense not payable in cash, MINUS (ii) any net
payments received during such period under Interest Rate Agreements.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the third Business
Day of each January, April, July and October for the period ending on (and
including) the last day of the immediately preceding December, March, June
or September, respectively, (b) as to any Eurocurrency Loan (including, in
any event, any European Overdraft Loan) having an Interest Period of three
months or less, the last day of such Interest Period and (c) as to any
Eurocurrency Loan (including, in any event, any European Overdraft Loan)
having an Interest Period longer than three months, each day which is three
months, or a whole multiple thereof, after the first day of such Interest
Period (or, if such day is not a Business Day, the next succeeding Business
Day) and the last day of such Interest Period; PROVIDED that interest
payable on account of European Overdraft Loans shall be paid quarterly, on
the last Business Day of each March, June, September and December.
"INTEREST PERIOD": with respect to any Eurocurrency Loan:
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurocurrency Loan and
ending one, two, three or six months thereafter (or, unless any
Lender shall object thereto, nine months or seven days thereafter),
as selected by the relevant Borrower in its Notice of Borrowing given
with respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurocurrency Loan and
ending one, two, three or six months thereafter (or, unless any
Lender shall object thereto, nine months or seven days thereafter),
as selected by the relevant Borrower by irrevocable notice to the
Administrative Agent delivered by 11:00 a.m. (New York City time or,
with respect to continuations of Loans denominated in Optional
Currencies, London, England time) not less than three Business Days
prior to the last day of the then current Interest Period with
respect thereto;
PROVIDED that, all of the foregoing provisions relating to Interest Periods
are subject to the following:
(1) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month
in which event such Interest Period shall end on the immediately
preceding Business Day;
(2) any Interest Period that would otherwise extend beyond the
<PAGE>
17
Termination Date shall end on the Termination Date;
(3) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(4) the relevant Borrower shall select Interest Periods so as not
to require a payment or prepayment of any Eurocurrency Loan during an
Interest Period for such Loan;
PROVIDED, FURTHER, that European Overdraft Loans shall have an Interest
Period of one day.
"INTEREST RATE AGREEMENT": any interest rate swap, option, cap,
collar or insurance or any other agreement or arrangement with any Lender
(or any Affiliate thereof) which is designed to provide protection against
fluctuations in interest rates, and any renewals thereof or substitutions
therefor;
"INVESTMENT": any (a) advance, loan, extension of credit or capital
contribution to, (b) purchase of any stock, bonds, notes, debentures or
other securities of or any assets constituting a business unit of, or
similar investment in, or (c) for purposes of subsection 11.8(j) only,
incurrence of any Guarantee Obligation with respect to obligations of, any
Person.
"ISSUING LENDER": with respect to any Letter of Credit, CSFB or any
other Revolving Credit Lender appointed by the Company (PROVIDED that such
other Revolving Credit Lender is reasonably acceptable to the
Administrative Agent and agrees to serve in the capacity of Issuing
Lender), in its capacity as issuer thereof.
"L/C COMMITMENT": $30,000,000 (or the Local Equivalent thereof).
"L/C FEE PAYMENT DATE": the last Business Day of each March, June,
September, and December.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed pursuant to subsection 3.5.
"L/C PARTICIPANTS": with respect to any Letter of Credit, the
collective reference to all the Revolving Credit Lenders other than the
Issuing Lender with respect thereto.
"LENDERS": the collective reference to the Revolving Credit Lenders,
the Swing Line Lender, the European Overdraft Lender and each Issuing
Lender.
"LETTERS OF CREDIT": as defined in paragraph 3.1.
<PAGE>
18
"LEVERAGE RATIO": for any period of four consecutive fiscal quarters,
the ratio of Indebtedness of the Company and its Subsidiaries on a
consolidated basis as of the last day of such period to EBITDA of the
Company and its Subsidiaries for such period.
"LIABILITIES AND COSTS" means all liabilities, obligations,
responsibilities, losses and damages with respect to or arising out of any
of the following: personal injury, death, punitive damages, economic
damages, consequential damages, treble damages, intentional, willful or
wanton injury, damage or threat to the environment or public health or
welfare, costs and expenses (including, without limitation, attorney,
expert and consulting fees and costs of investigation, feasibility or
Remedial Action studies), fines, penalties and monetary sanctions,
voluntary disclosures made to, or settlements with, the United States
Government, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future, including interest, if any, thereon.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
and any Financing Lease having substantially the same economic effect as
any of the foregoing).
"LOAN": any Revolving Credit Loan, Swing Line Loan or European
Overdraft Loan, as the context shall require.
"LOCAL EQUIVALENT" means, with respect to any amount of Dollars at the
time of determination thereof, the equivalent of such currency in the
relevant Optional Currency determined at the rate of exchange quoted by the
Administrative Agent in New York, New York at 11:00 a.m. (local time) on
the date of determination, to prime banks in the jurisdiction of the
principal market for the trading of the relevant Optional Currency for the
spot purchase in such foreign exchange market of such amount of such
Optional Currency with such amount of Dollars.
"LOCAL EUROPEAN LOAN": as defined in subsection 5.1(a)(ii).
"LOCAL LENDER" means, with respect to Local European Loans borrowed by
(a) Hexcel-Belgium, Credit Suisse First Boston, (b) Salver, Istituto
Bancario San Paolo di Torino S.p.A., (c) Composites-Austria, Credit Suisse
First Boston and (d) Hexcel-Spain, Credit Suisse First Boston
Aktiengesellschaft and (e) any Additional Borrower, the Lender (or
affiliate thereof) which has delivered a Local Lender Joinder Agreement
with respect to such Additional Lender, in each case in such Local Lender's
capacity as the lender of such Local European Loans.
"LOCAL LENDER JOINDER AGREEMENT": a Local Lender Joinder Agreement,
substantially in the form of Exhibit J, delivered pursuant to subsection
7.19(b).
<PAGE>
19
"LOCAL LOAN BORROWER": Hexcel-Belgium, Salver, Composites-Austria,
Hexcel-Spain and each other Foreign Borrower as to which a Local Lender has
agreed to make Local European Loans.
"MAJORITY LENDERS": at any time, Lenders having Revolving Credit
Commitment Percentages which aggregate more than 50% of the Aggregate
Revolving Credit Commitment then in effect or if the Aggregate Revolving
Credit Commitment has been terminated, then 50% of the Aggregate
Outstanding Extensions of Credit.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (i) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company and its Subsidiaries, taken as a
whole, (ii) the ability of the Borrowers or of the Subsidiary Guarantors,
taken as a whole, to perform their obligations under the Credit Documents
or (iii) the ability of the Lenders, the Collateral Agent or the
Administrative Agent to enforce the Credit Documents.
"MATERIAL SUBSIDIARY": each Foreign Borrower and each other
Subsidiary of the Company that has assets or annual revenues in excess of
$2,500,000.
"MULTICURRENCY SUBLIMIT" means, at any date, the amount equal to (a)
$200,000,000 MINUS (b) the aggregate principal amount of Indebtedness then
outstanding which was incurred pursuant to subsection 11.2(g).
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NET INCOME" means, for any period for any Person, the net income (or
loss) after taxes for such period taken as a single accounting period,
determined in conformity with GAAP.
"NET PROCEEDS": with respect to any Net Proceeds Event or series of
related Net Proceeds Events in which the aggregate proceeds is in excess of
$1,000,000 (or the Local Equivalent thereof), (a) the gross cash
consideration, and all cash proceeds (as and when received) of non-cash
consideration (including, without limitation, any such cash proceeds in the
nature of principal and interest payments on account of promissory notes or
similar obligations), received by the Company and its Subsidiaries in
connection with such Net Proceeds Event, MINUS (b) the sum, without
duplication, of (i) any taxes which are paid or actually payable to any
federal, state, local or foreign taxing authority by the Company and its
Subsidiaries and are directly attributable to the receipt of such Net
Proceeds, (ii) the amount of fees and commissions (including reasonable
investment banking fees payable to Persons other than Affiliates of the
Company) legal, accounting, consulting, survey, title and recording tax
expenses and other costs and expenses directly incident to such Net
Proceeds Event which are paid or payable by the Company and its
Subsidiaries, (iii) the amount of such net cash proceeds which are
attributable to (and payable to) minority interests, (iv) the amount of any
reserve reasonably maintained by the Company and its Subsidiaries with
respect to indemnification obligations owing
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20
pursuant to the definitive documentation pursuant to which the Net
Proceeds Event is consummated (with any unused portion of such reserve
to constitute Net Proceeds on the date upon which the indemnification
obligations terminate) and (v) the amount of Indebtedness (other than
intercompany Indebtedness), if any, which is required to be repaid at
the time or as a result of such Net Proceeds Event out of the proceeds
thereof;
"NET PROCEEDS EVENT": (a) the sale, transfer or other disposition by
the Company or any of its Subsidiaries of any real or personal, tangible or
intangible, property (including, without limitation, any Capital Stock, but
other than inventory and obsolete or worn-out property which is sold,
transferred or otherwise disposed of in the ordinary course of business) of
the Company or such Subsidiary to any Person (other than to the Company or
any of its Subsidiaries) and (b) the recovery by the Company and its
Subsidiaries of amounts owing to them under property insurance policies.
"NON-EXCLUDED TAXES": as defined in subsection 7.14(a).
"NOTE": a Revolving Credit Note or a Swing Line Note, as the context
shall require; collectively, the "NOTES."
"NOTICE OF BORROWING": with respect to (a) any borrowing of Loans, a
Notice of Borrowing (Drawings), substantially in the form of Exhibit F-1,
(b) any conversion of Loans, a Notice of Borrowing (Conversions),
substantially in the form of Exhibit F-2 and (c) any continuation of
Eurocurrency Loans, a Notice of Borrowing (Continuations), substantially in
the form of Exhibit F-3 hereto.
"NPL": as defined in subsection 8.15(f).
"OBLIGATIONS" means, to the extent arising hereunder, under the Notes
or under any other Credit Document, all Loans, advances, debts, liabilities
and obligations owing by (as applicable) the Borrowers or any Domestic
Subsidiary that has executed a Domestic Guaranty to the Administrative
Agent, any Lender, any Affiliate of the Administrative Agent or any Lender
or any Person entitled to indemnification pursuant to subsection 13.7, of
any kind or nature, present or future, whether or not evidenced by any
note, guaranty or other instrument, whether or not for the payment of
money, whether arising (i) under or in connection with any cash management
services provided by the Administrative Agent or any Affiliate of the
Administrative Agent, or (ii) by reason of (A) an extension of credit, (B)
opening or amendment of a Letter of Credit or payment of any draft drawn
thereunder, (C) loan, (D) guaranty or (E) indemnification or (iii) in any
other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees, reasonable attorneys'
fees and disbursements and any other sum chargeable to the Borrowers
hereunder or under any other Credit Document.
"OPTIONAL CURRENCY": the lawful currency of Austria (Austrian
shillings), Belgium (Belgian francs), France (French francs), Germany
(Deutschemarks), The
<PAGE>
21
Netherlands (Dutch guilders), the United Kingdom (British pounds
sterling ("Euro sterling")), Italy (Italian lire), Spain (Spanish
pesetas) or any other jurisdiction which the Company has requested in
writing to have designated as an "Optional Currency" and as to which
each Revolving Credit Lender (or the European Overdraft Lender, in the
case of European Overdraft Loans to be made in such currency) has agreed
in writing to such designation.
"PARTICIPANT": as defined in subsection 14.7(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERMITTED BELGIAN CAPITAL": Investments made by the Company and its
Subsidiaries in Hexcel-Belgium and acquisitions by the Company and its
Subsidiaries of assets of Hexcel-Belgium in order to provide capital to
Hexcel-Belgium; PROVIDED that (a) the aggregate principal amount of such
Investments (other than Investments taking the form of intercompany loans)
and acquisitions shall not exceed $20,000,000 (or the Local Equivalent
thereof) and (b) the aggregate principal amount of such Investments which
take the form of intercompany loans shall not at any one time exceed the
amount equal to $20,000,000 (or the Local Equivalent thereof).
"PERMITTED SUBORDINATED INDEBTEDNESS": the collective reference to
(a) the Subordinated Debentures, (b) the Subordinated Convertible Notes and
(c) the Subordinated Ciba Notes.
"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGE AGREEMENTS": the collective reference to (a) the Company
Pledge Agreement, (b) the Foreign Pledge Agreements and (c) the Subsidiary
Pledge Agreements.
"PRICING ADJUSTMENT EVENT": the failure of Specialty Chemicals to
beneficially own (directly or indirectly) at least 30% of the issued and
outstanding voting stock of the Company.
"PRIME RATE": the rate of interest per annum publicly announced from
time to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City.
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22
"PROPERTY" means any real or personal property, including plant,
building, facility, structure, underground storage tank or unit, equipment,
inventory, general intangible, receivable, or other asset owned, leased or
operated by the Company or any of its Subsidiaries, as applicable
(including any surface water thereon or adjacent thereto, and soil and
groundwater thereunder).
"REFUNDED SWING LINE LOANS": as defined in subsection 4.3(a).
"REGISTER": as defined in subsection 14.7(d).
"REGULATION U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"REIMBURSEMENT OBLIGATION": the obligation of the Company to
reimburse the Issuing Lender pursuant to subsection 3.5 for amounts drawn
under Letters of Credit issued by it.
"RELEASE" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
indoor or outdoor environment or into or out of any Property, including the
movement of Contaminants through or in the air, soil, surface water,
groundwater or Property.
"REMEDIAL ACTION" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
' 2615.
"REQUIRED LENDERS": at any time, Lenders having Revolving Credit
Commitment Percentages which aggregate more than 66-2/3% of the sum of the
Aggregate Revolving Credit Commitment then in effect or if the Aggregate
Revolving Credit Commitment has been terminated, then 66-2/3% of the
Aggregate Outstanding Extensions of Credit.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
<PAGE>
23
"RESERVED PROCEEDS": at any date, the aggregate amount of Net
Proceeds received by the Company and its Subsidiaries on account of any Net
Proceeds Event described in clause (a) of the definition of such term which
was consummated within the immediately preceding 180 days, other than any
such Net Proceeds which (x) have been reinvested in assets similar to those
from which such Net Proceeds were derived during such 180-day period or (y)
have been applied in accordance with the terms of subsection 7.5(f) (it
being understood that amounts not so applied pursuant to the provisions of
clause (x) or (y) of the proviso to subsection 7.5(f) shall be deemed not
to constitute "Reserved Proceeds").
"RESPONSIBLE OFFICER": with respect to:
(a) any Borrower, the chief executive officer, chief operating
officer, senior vice president for finance and administration or chief
financial officer of the Company or, with respect to financial matters, the
senior vice president for finance and administration, chief financial
officer, treasurer or controller of such Borrower; and
(b) any Borrower (other than the Company) which does not have any of
the relevant officers described in clause (a) above, the senior manager,
financial manager or equivalent position (as applicable) of such Borrower.
"REVOLVING CREDIT COMMITMENT": as to any Revolving Credit Lender, its
obligation to make Revolving Credit Loans to and/or issue or participate in
Swing Line Loans and/or Letters of Credit issued on behalf of the Borrowers
hereunder in an aggregate principal and/or face amount at any one time
outstanding not to exceed the amount set forth opposite such Revolving
Credit Lender's name on Schedule I under the heading "Revolving Credit
Commitment".
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Revolving Credit
Lender at any time, the percentage which such Revolving Credit Lender's
Revolving Credit Commitment then constitutes of the Aggregate Revolving
Credit Commitment (or, at any time after the Aggregate Revolving Credit
Commitment shall have expired or terminated, the Revolving Credit
Commitment Percentage of such Lender immediately prior to such expiry or
termination).
"REVOLVING CREDIT LENDERS": each bank or other financial institution
holding a Revolving Credit Commitment hereunder (or, after the last day of
the Commitment Period, having any Aggregate Outstanding Extensions of
Credit hereunder); collectively, the "REVOLVING CREDIT LENDERS".
"REVOLVING CREDIT LOANS": as defined in subsection 2.1.
"REVOLVING CREDIT NOTE": as defined in subsection 7.1(e).
"SECURITY DOCUMENTS": the collective reference to the Company Pledge
Agreement, the Subsidiary Pledge Agreement, the Foreign Pledge Agreements
and all
<PAGE>
24
other security documents hereafter delivered to the Administrative Agent
or the Collateral Agent granting a Lien on any asset or assets of any
Person to secure the Loans and other obligations and liabilities of any
Borrower hereunder and under any of the other Credit Documents or to
secure any guarantee thereof.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SOLVENT", when used with respect to any Person, means that at the
time of determination, (A) (i) the fair market value of its assets is in
excess of the total amount of its liabilities (including, without
limitation, contingent liabilities), and (ii) the present fair saleable
value of its assets is greater than its probable liability on its existing
debts as such debts become absolute and matured, and (iii) it is then able
and expects to be able to pay its debts (including, without limitation,
contingent debts and other commitments) as they mature, and (iv) it has
capital sufficient to carry on its business as conducted and as proposed to
be conducted; and (B) with respect to Hexcel-U.K. and Composites-UK only,
such Person is not unable to pay its debts within the meaning of Section
123 of the Insolvency Act of 1986, and will not become unable to pay its
debts within the meaning of that Section in consequence of its entry into
the Credit Agreement and Transaction Documents.
"SPECIALTY CHEMICALS": the collective reference to Chemical Holdings
and Ciba Specialty Chemicals Corporation, a Delaware corporation, and their
successors.
"STANDBY LETTER OF CREDIT": as defined in subsection 3.1(b).
"STRATEGIC ALLIANCE AGREEMENT" means the Strategic Alliance Agreement
dated as of September 29, 1995 and amended as of December 12, 1995 and as
of February 28, 1996, among the Company and Specialty Chemicals (as
successor to Ciba-Geigy Limited and Ciba-Geigy Corporation), as such
agreement may be amended, supplemented or otherwise modified from time to
time in accordance with subsection 11.14.
"SUBORDINATED CIBA NOTES": the Increasing Rate Senior Subordinated
Notes, due 2003, issued or to be issued by the Company in an aggregate
principal amount not to exceed $43,000,000 (as such amount may be adjusted
in accordance with the Strategic Alliance Agreement) and governed by the
terms of the Subordinated Ciba Notes Indenture.
"SUBORDINATED CIBA NOTES INDENTURE": the Indenture, dated as of
February 29, 1996, between the Company and First Trust of California, N.A.,
as trustee, as such agreement has been amended pursuant to the First
Supplemental Indenture, dated as of June 27, 1996, thereto and as such
agreement may be further amended, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
"SUBORDINATED CONVERTIBLE NOTES": the 7% Convertible Subordinated
Notes, due 2003, issued by the Company in the aggregate original principal
amount of up to
<PAGE>
25
$115,000,000 and governed by the terms of the Subordinated Convertible
Notes Indenture.
"SUBORDINATED CONVERTIBLE NOTES INDENTURE": the Indenture, dated as
of July 24, 1996, between the Company and First Trust of California,
National Association, as trustee, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms of this Agreement.
"SUBORDINATED DEBENTURES": the 7% Convertible Subordinated Debentures,
due 2011, issued by the Company in the aggregate original principal amount
of up to $35,000,000 and governed by the terms of the Subordinated
Debenture Indenture.
"SUBORDINATED DEBENTURE INDENTURE": the Indenture, dated as of August
1, 1986, between the Company and The Bank of California, N.A., as trustee,
as such agreement may be amended, supplemented or otherwise modified from
time to time in accordance with the terms of this Agreement.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person; PROVIDED, that Hexcel
Foundation shall not be deemed a Subsidiary of the Company for as long as
it maintains its status as a not-for-profit corporation for purposes of
California law. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Company.
"SUBSIDIARY GUARANTOR": each Subsidiary of the Company which is party
to a Subsidiary Guaranty.
"SUBSIDIARY GUARANTY": the Guaranty, substantially in the form of
Exhibit D-1, made by each Domestic Subsidiary of the Company in favor of
the Collateral Agent, as the same may be amended, supplemented or otherwise
modified from time to time.
"SUBSIDIARY PLEDGE AGREEMENT": the Pledge Agreement, substantially in
the form of Exhibit D-2, made by certain Domestic Subsidiaries of the
Company in favor of the Collateral Agent, as the same may be amended,
supplemented or otherwise modified from time to time.
"SWING LINE COMMITMENT": at any date, the obligation of the Swing
Line Lender to make Swing Line Loans pursuant to subsection 6.1 in the
amount referred to therein.
"SWING LINE LENDER": CSFB.
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26
"SWING LINE LOANS": as defined in subsection 4.1.
"SWING LINE NOTE": as defined in subsection 7.1(e).
"SYNDICATED EUROPEAN LOAN": as defined in subsection 5.1(a)(i).
"SYNDICATION AGENT": as defined in the preamble.
"TERMINATION DATE": March 4, 2003.
"TRANCHE": the collective reference to Eurocurrency Loans having
then current Interest Periods which begin on the same date and end on
the same later date (whether or not such Loans shall originally have
been made on the same day); Tranches may be identified as "EUROCURRENCY
TRANCHES".
"TRANSACTION DOCUMENTS" means the Credit Documents and all other
agreements or instruments executed and delivered or to be executed and
delivered pursuant hereto or thereto or in connection herewith or
therewith or any of the transactions contemplated hereby or thereby.
"TRANSFEREE": as defined in subsection 14.7(h).
"TYPE": as to any Loan, its nature as an ABR Loan or a Eurocurrency
Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
"WHOLLY-OWNED SUBSIDIARY": with respect to any Person, a
corporation, company having limited liability or societe anonyme, 100%
(or in the case of any entity which is organized under the laws of a
jurisdiction outside of the United States of America, 98%) of the
Capital Stock of which is owned, directly or indirectly, by such Person
(other than shares required by applicable law to be owned by another
Person for the qualification of directors or to satisfy minimum
shareholder requirements).
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Company and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular
<PAGE>
27
provision of this Agreement, and Section, subsection, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
2.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans ("REVOLVING CREDIT LOANS") to the Company from time to
time during the Commitment Period; PROVIDED that, after giving effect to the
making of such Revolving Credit Loan and the use of proceeds thereof, (i) the
Aggregate Outstanding Extensions of Credit of all Revolving Credit Lenders
shall not exceed the Aggregate Revolving Credit Commitment then in effect and
(ii) the Available Revolving Credit Commitment of such Lender shall not be
less than zero. During the Commitment Period the Company may use the
Aggregate Revolving Credit Commitment by borrowing, prepaying the Revolving
Credit Loans in whole or in part, and reborrowing, all in accordance with the
terms and conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i)
Eurocurrency Loans, (ii) ABR Loans or (iii) a combination thereof, as
determined by the Company and notified to the Administrative Agent in
accordance with subsections 2.2 and 7.6, PROVIDED that (x) no Revolving
Credit Loan shall be made as a Eurocurrency Loan after the day that is one
month prior to the Termination Date and (y) any Revolving Credit Loans to be
made on the Closing Date initially shall be made as ABR Loans.
2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Company may
borrow Revolving Credit Loans under the Aggregate Revolving Credit Commitment
during the Commitment Period on any Business Day, PROVIDED that the Company
shall give the Administrative Agent irrevocable notice (which notice must be
received by the Administrative Agent prior to 11:00 A.M., New York City time,
(a) three Business Days prior to the requested Borrowing Date, if all or any
part of the requested Revolving Credit Loans are to be initially Eurocurrency
Loans or (b) on the requested Borrowing Date, otherwise), specifying (i) the
amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the
borrowing is to be of Eurocurrency Loans, ABR Loans or a combination thereof
and (iv) if the borrowing is to be entirely or partly of Eurocurrency Loans,
the amount of such Type of Loan and the length of the initial Interest Period
therefor. Each borrowing under the Aggregate Revolving Credit Commitment
(other than any borrowing of Swing Line Loans or of Revolving Credit Loans
the proceeds of which are used to refund Swing Line Loans) shall be in an
amount equal to (x) in the case of ABR Loans, $2,000,000 or a whole multiple
of $1,000,000 in excess thereof (or, if the then Available Revolving Credit
Commitments are less than $2,000,000, such lesser amount) and (y) in the case
of Eurocurrency Loans, $2,000,000 or a whole multiple of $1,000,000 in excess
thereof. Upon receipt of any such notice from the Company, the
Administrative Agent shall promptly notify each Revolving Credit Lender
thereof. Each Revolving Credit Lender will make the amount of its Revolving
Credit Commitment Percentage of each borrowing available to the
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28
Administrative Agent for the account of the Company at the office of the
Administrative Agent specified in subsection 14.3 prior to 1:00 P.M., New
York City time, on the Borrowing Date requested by the Company in funds
immediately available to the Administrative Agent. Such borrowing will then
be made available to the Company by the Administrative Agent crediting the
account of the Company on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Revolving Credit
Leners and in like funds as received by the Administrative Agent.
2.3 USE OF PROCEEDS OF REVOLVING CREDIT LOANS. (a) The proceeds
of the Revolving Credit Loans shall be utilized by the Company for general
corporate purposes of the Company and its Subsidiaries.
SECTION 3. AMOUNT AND TERMS OF LETTER OF CREDIT SUB-FACILITY
3.1 L/C COMMITMENT. (a) Subject to the terms and conditions
hereof, each Issuing Lender, in reliance on the agreements of the other
Revolving Credit Lenders set forth in subsection 3.4(a), agrees to issue
letters of credit ("LETTERS OF CREDIT") for the account of any Borrower on
any Business Day during the Commitment Period in such form as may be approved
from time to time by such Issuing Lender; PROVIDED that such Issuing Lender
shall have no obligation to issue any Letter of Credit if, after giving
effect to such issuance, (i) the L/C Obligations would exceed the L/C
Commitment, (ii) the Available Revolving Credit Commitment of any Revolving
Credit Lender would be less than zero or (iii) the Aggregate Outstanding
Extensions of Credit of all Revolving Credit Lenders would exceed the
Aggregate Revolving Credit Commitment then in effect.
(b) Each Letter of Credit shall (i) be denominated in Dollars or
an Optional Currency, (ii) be (x) a standby letter of credit (a "STANDBY
LETTER OF CREDIT") issued to support obligations of the Company or any of its
Subsidiaries, contingent or otherwise, or to finance the working capital and
business needs of the Company or any of its Subsidiaries in the ordinary
course of business (including, without limitation, to secure or support lines
of credit obtained by Foreign Subsidiaries in accordance with the terms
hereof) or (y) a commercial letter of credit (a "COMMERCIAL LETTER OF
CREDIT") issued in respect of the purchase of goods or services by the
Company and its Subsidiaries in the ordinary course of business and (iii)
expire no later than the earlier of (x) the date that is 12 months after the
date of its issuance and (y) five Business Days prior to the Termination
Date; PROVIDED that any Letter of Credit with an expiration date occurring up
to twelve months after such Letter of Credit's date of issuance may be
automatically renewable for subsequent 12-month periods (but in no event to a
date which is later than five Business Days prior to the Termination Date)
unless the Issuing Lender with respect to such Letter of Credit shall have
given 60 days' prior written notice to the relevant Borrower and the
beneficiary of such Letter of Credit that it will not be renewed.
Notwithstanding the foregoing, at the request of any Borrower and with the
consent of the Administrative Agent, any Letter of Credit issued for the
account of such Borrower may have an expiration date which is later than the
date set forth in clause (iii)(x) and (y) above, PROVIDED that such Borrower
agrees that, from and after the Termination Date, it shall provide to the
Administrative Agent, as collateral security for the L/C Obligations on
account of such Letter of Credit, an amount of cash which is equal to at
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29
least 105% of the face amount thereof.
(c) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(d) No Issuing Lender shall at any time be obligated to issue any
Letter of Credit hereunder if (i) such issuance would conflict with, or cause
such Issuing Lender or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law or (ii) in the case of any requested Letter
of Credit to be denominated in an Optional Currency, such Issuing Lender is
not reasonably satisfied that deposits in the relevant Optional Currency will
be freely available to it for the relevant period of time.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. Any Borrower may
request that an Issuing Lender issue a Letter of Credit at any time during
the Commitment Period by delivering to such Issuing Lender (with a copy to
the Administrative Agent) at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Lender,
and such other certificates, documents and other papers and information as
the Issuing Lender may reasonably request. Upon receipt of any Application,
the Issuing Lender will process such Application and the certificates,
documents and other papers and information delivered to it in connection
therewith in accordance with its customary procedures and shall promptly
issue the Letter of Credit requested thereby (but in no event shall the
Issuing Lender be required to issue any Letter of Credit earlier than three
Business Days (or, in the case of Letters of Credit denominated in Optional
Currencies, four Business Days) after its receipt of the Application therefor
and all such other certificates, documents and other papers and information
relating thereto) by issuing the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed by such Issuing Lender and
the relevant Borrower. Each Issuing Lender shall furnish to the Company and
the Administrative Agent a copy of each Letter of Credit issued by such
Issuing Lender, promptly following the issuance thereof.
3.3 FEES, COMMISSIONS AND OTHER CHARGES. (a) The Borrowers shall
pay to the Administrative Agent, for the account of the relevant Issuing
Lender and the L/C Participants, a letter of credit fee with respect to each
Standby Letter of Credit, computed for the period from and including the date
of issuance of such Letter of Credit to the expiration date of such Standby
Letter of Credit, at a rate per annum equal to the Applicable Margin then in
effect for Revolving Credit Loans which are Eurocurrency Loans (calculated on
the basis of the actual number of days elapsed over a 360-day year) of the
aggregate face amount of Standby Letters of Credit outstanding (of which 1/4
of 1% of such aggregate face amount shall be for the account of the Issuing
Lender with respect thereto and the remainder of such amount shall be for the
ratable account of such Issuing Lender and the L/C Participations). Such fee
shall be payable to the Administrative Agent, for the ratable account of the
Revolving Credit Lenders, in arrears on each L/C Fee Payment Date (commencing
on June 30, 1998, for the period ending on, and including, the last day of
the immediately preceding December, March, June or September, respectively)
and on the Termination Date.
(b) The Borrowers shall pay to the Administrative Agent, for the
account of the relevant Issuing Lender and the L/C Participants, a letter of
credit fee with respect to each
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30
Commercial Letter of Credit at a flat rate equal to 50% of the Applicable
Margin then in effect for Revolving Credit Loans which are Eurocurrency Loans
(calculated on the basis of the actual number of days elapsed over a 360-day
year) of the aggregate face amount of such Commercial Letter of Credit
outstanding (of which 1/4 of 1% of such aggregate face amount shall be for
the account of the Issuing Lender with respect thereto and the remainder of
such amount shall be for the ratable account of such Issuing Lender and the
L/C Participations). Such fee shall be payable to the Administrative Agent,
for the ratable account of the Revolving Credit Lenders, on the first L/C Fee
Payment Date (commencing on June 30, 1998, for the period ending on, and
including, the last day of the immediately preceding December, March, June or
September, respectively) to occur following the issuance of such Commercial
Letter of Credit.
(c) In addition to the foregoing fees and commissions, the
Borrowers shall pay or reimburse the Issuing Lender for such normal and
customary costs and expenses as are incurred or charged by such Issuing
Lender in issuing, effecting payment under, amending or otherwise
administering any Letter of Credit issued by it.
(d) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the relevant Issuing Lender and the L/C Participants
all fees and commissions received by the Administrative Agent for their
respective accounts pursuant to this subsection.
3.4 L/C PARTICIPATIONS. (a) Each Issuing Lender irrevocably
agrees to grant and hereby grants to each L/C Participant, and, to induce
such Issuing Lender to issue Letters of Credit hereunder, each L/C
Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from such Issuing Lender, on the terms and conditions hereinafter
stated, for such L/C Participant's own account and risk an undivided interest
equal to such L/C Participant's Revolving Credit Commitment Percentage from
time to time in effect in such Issuing Lender's obligations and rights under
each Letter of Credit issued by such Issuing Lender hereunder and the amount
of each draft paid by such Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with such Issuing Lender that, if a
draft is paid under any Letter of Credit issued by such Issuing Lender for
which such Issuing Lender is not reimbursed in full by the relevant Borrower
in accordance with the terms of this Agreement, such L/C Participant shall
pay to such Issuing Lender upon demand at such Issuing Lender's address for
notices specified herein an amount equal to such L/C Participant's then
Revolving Credit Commitment Percentage of the amount of such draft, or any
part thereof, which is not so reimbursed; PROVIDED that, if such demand is
made prior to 12:00 Noon, New York City time, on a Business Day, such L/C
Participant shall make such payment to such Issuing Lender prior to the end
of such Business Day and otherwise such L/C Participant shall make such
payment on the next succeeding Business Day.
(b) If any amount required to be paid by any L/C Participant to an
Issuing Lender pursuant to paragraph 3.4(a) in respect of any unreimbursed
portion of any payment made by such Issuing Lender under any Letter of Credit
is paid to such Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to such Issuing Lender on
demand an amount equal to the product of (i) such amount, times (ii) the
daily average Federal funds rate, as quoted by such Issuing Lender, during
the period from and including the date such payment is required to the date
on which such payment is immediately available to
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such Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of which is
360. If any such amount required to be paid by any L/C Participant pursuant
to paragraph 3.4(a) is not in fact made available to such Issuing Lender by
such L/C Participant within three Business Days after the date such payment
is due, such Issuing Lender shall be entitled to recover from such L/C
Participant, on demand, such amount with interest thereon calculated from
such due date at the rate per annum applicable to ABR Loans hereunder. A
certificate of an Issuing Lender submitted to any L/C Participant with
respect to any amounts owing to such Issuing Lender under this subsection
shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after an Issuing Lender has made payment
under any Letter of Credit issued by it and has received from any L/C
Participant its Revolving Credit Commitment Percentage of such payment in
accordance with subsection 3.4(a), such Issuing Lender receives any payment
related to such Letter of Credit (whether directly from the relevant Borrower
or otherwise, including proceeds of collateral applied thereto by such
Issuing Lender), or any payment of interest on account thereof, such Issuing
Lender will promptly distribute to such L/C Participant its Revolving Credit
Commitment Percentage thereof; PROVIDED, HOWEVER, that in the event that any
such payment received by such Issuing Lender and distributed to the L/C
Participants shall be required to be returned by such Issuing Lender, each
such L/C Participant shall return to such Issuing Lender the portion thereof
previously distributed by such Issuing Lender to it.
3.5 REIMBURSEMENT OBLIGATION OF THE BORROWERS. (a) Each Borrower
agrees to reimburse the relevant Issuing Lender on the same Business Day on
which a draft is presented under any Letter of Credit issued by such Issuing
Lender for the account of such Borrower and paid by such Issuing Lender,
PROVIDED that such Issuing Lender provides notice to such Borrower prior to
12:00 Noon, New York City time, on such Business Day and otherwise such
Borrower will reimburse the Issuing Lender on the next succeeding Business
Day; PROVIDED, FURTHER, that the failure to provide such notice shall not
affect the absolute and unconditional obligation of such Borrower to
reimburse the relevant Issuing Lender for any draft paid under any Letter of
Credit issued by it. Each Issuing Lender shall provide notice to the
relevant Borrower on such Business Day as a draft is presented and paid by
such Issuing Lender indicating the amount of (i) such draft so paid and (ii)
any taxes, fees, charges or other costs or expenses incurred by such Issuing
Lender in connection with such payment. Each such payment shall be made to
such Issuing Lender at its address for notices specified herein in lawful
money of the currency in which such Letter of Credit was denominated and in
immediately available funds.
(b) Interest shall be payable on any and all amounts remaining
unpaid by the Borrowers under this subsection from the date such amounts
become payable until payment in full at (i) in the case of amounts owing in
Dollars, the rate which would be payable on any outstanding Loans that are
ABR Loans which were then overdue and (ii) in the case of amounts owing in
Optional Currencies, the rate reasonably determined by the Issuing Lender as
reflecting its cost of funds for the maintenance of such extension of credit
on an overnight basis PLUS 2% above the Applicable Margin then in effect for
ABR Loans.
(c) Each drawing under any Letter of Credit shall constitute a
request by
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the relevant Borrower to the Administrative Agent for a borrowing of ABR
Loans (in the case of Letters of Credit denominated in Dollars) or Local
European Loans (in the case of Letters of Credit denominated in Optional
Currencies) in the amount and currency of such drawing. The Borrowing Date
with respect to such borrowing shall be the date of such drawing.
3.6 OBLIGATIONS ABSOLUTE. (a) The obligations of each Borrower
under subsection 3.5(a) shall be absolute and unconditional under any and all
circumstances and irrespective of any set-off, counterclaim or defense to
payment which any Borrower may have or have had against the relevant Issuing
Lender, any L/C Participant or any beneficiary of a Letter of Credit.
(b) Each Borrower also agrees with each Issuing Lender that such
Issuing Lender shall not be responsible for, and such Borrower's
Reimbursement Obligations under subsection 3.5(a) shall not be affected by,
among other things, (i) the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or (ii) any dispute between or among such
Borrower and any beneficiary of any Letter of Credit or any other party to
which such Letter of Credit may be transferred or (iii) any claims whatsoever
of such Borrower against any beneficiary of such Letter of Credit or any such
transferee.
(c) Neither the Issuing Lender with respect to any Letter of
Credit nor any L/C Participant with respect thereto shall be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with such Letter
of Credit, except for errors or omissions caused by such Issuing Lender's
gross negligence or willful misconduct.
(d) Each Borrower agrees that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of Credit issued by it
or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards of care
specified in the Uniform Commercial Code of the State of New York, shall be
binding on such Borrower and shall not result in any liability of such
Issuing Lender or any L/C Participant to such Borrower.
3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented
for payment under any Letter of Credit, the responsibility of the Issuing
Lender thereof to the relevant Borrower in connection with such draft shall,
in addition to any payment obligation expressly provided for in such Letter
of Credit, be limited to determining that the documents (including each
draft) delivered under such Letter of Credit in connection with such
presentment are in conformity with such Letter of Credit.
3.8 APPLICATION. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the
provisions of this Section 3, the provisions of this Section 3 shall apply.
3.9 ISSUING LENDER REPORTING REQUIREMENTS. Each Issuing Lender
shall, no later than the fifth Business Day following the last day of each
calendar month and on the last
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33
Business Day of each calendar quarter (or, to the extent that the
Administrative Agent so agrees, not more than two Business Days thereafter),
provide to the Administrative Agent and the Company separate schedules for
Commercial Letters of Credit and Standby Letters of Credit issued by such
Issuing Lender, in form and substance reasonably satisfactory to the
Administrative Agent, setting forth the aggregate L/C Obligations outstanding
to such Issuing Lender at the end of each month or calendar quarter, as the
case may be, and any information requested by the Administrative Agent or the
Company relating to the date of issue, account party, amount, expiration date
and reference number of each Letter of Credit issued by it. Promptly
following receipt by the Administrative Agent of the quarterly schedule, the
Administrative Agent shall provide to each Revolving Credit Lender a report
containing such information.
3.10 TRANSITIONAL PROVISIONS. Schedule 3.10 lists certain letters
of credit issued prior to the date hereof by the Revolving Credit Lenders for
the account of the Borrowers. On the Closing Date, (i) such letters of
credit, to the extent outstanding, shall be automatically and without further
action by the parties thereto converted to Letters of Credit Issued pursuant
to this Section 3 for the account of the Borrower who presently is the
account party thereunder and subject to the provisions hereof, and for this
purpose the fees specified in Sections 3.3 shall be payable (in substitution
for any fees set forth in the reimbursement agreement relating to such
letters of credit) as if such letters of credit had been issued on the
Closing Date and (ii) the face amount of such letters of credit shall be
included in the calculation of the aggregate amount of outstanding L/C
Obligations. No letter of credit converted in accordance with this
subsection 3.10 shall be amended, extended or renewed without the prior
written consent of the Administrative Agent. To the extent that any fees
with respect to the letters of credit listed on Schedule 3.10 were paid in
advance to the issuing bank under such letter of credit, the Administrative
Agent shall use reasonable efforts (but shall otherwise not be obligated) to
obtain a PRO RATA refund for the relevant Borrower of such fees to the extent
such fees were paid in respect of any time period during which such letter of
credit shall be a letter of credit on account of the provisions of this
subsection. Notwithstanding anything set forth in Section 3.2(c)(A), to the
extent that any letter of credit listed on Schedule 3.10 has an expiration
date in excess of one year, such letter of credit shall continue in full
force and effect pursuant to the terms hereof after the Closing Date through
its stated expiration date (but shall be cash collateralized upon terms
reasonably satisfactory to the relevant Issuing Lender during the period from
the Termination Date through such stated expiration date).
SECTION 4. AMOUNT AND TERMS OF SWING LINE SUB-FACILITY
4.1 SWING LINE COMMITMENTS. (a) Subject to the terms and
conditions hereof, the Swing Line Lender agrees to make swing line loans (the
"SWING LINE LOANS") to the Company on any Business Day from time to time
during the Commitment Period in an aggregate principal amount not to exceed
$15,000,000 at any one time outstanding; PROVIDED that, after giving effect
to the making of such Swing Line Loan, the Aggregate Outstanding Extensions
of Credit of all Revolving Credit Lenders shall not exceed the Aggregate
Revolving Credit Commitment then in effect. Amounts borrowed under this
subsection 4.1 may be repaid and, to but excluding the Termination Date,
reborrowed.
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(b) All Swing Line Loans shall be made and maintained as ABR Loans
and, notwithstanding the provisions of subsection 7.6, shall not be entitled
to be converted into Eurocurrency Loans; PROVIDED that nothing contained in
this subsection 4.1 shall prohibit the conversion into Eurocurrency Loans of
any Revolving Credit Loans the proceeds of which are utilized to refund Swing
Line Loans.
4.2 PROCEDURE FOR SWING LINE LOAN BORROWING. The Company may
borrow under the Swing Line Commitment during the Commitment Period on any
Business Day; PROVIDED that the Company shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 1:30 P.M., New York City time), on the requested borrowing date
(which shall be a Business Day) specifying the amount of each requested Swing
Line Loan, which shall be in a minimum amount of $1,000,000 or a multiple of
$100,000 in excess thereof. Upon receipt of any such notice from the Company
the Administrative Agent shall promptly notify the Swing Line Lender thereof.
The Swing Line Lender will make the amount of its Swing Line Loan available
to the Administrative Agent for the account of the Company at the office of
the Administrative Agent specified in subsection 14.3 prior to 2:30 P.M., New
York City time, on the Borrowing Date requested by the Company in funds
immediately available to the Administrative Agent. The proceeds of each
Swing Line Loan will then be made immediately available to the Company by the
Administrative Agent crediting the account of the Company on the books of
such office with the amount made available to the Administrative Agent by the
Swing Line Lender and in like funds as received by the Administrative Agent.
4.3 REFUNDING OF SWING LINE LOANS. (a) The Administrative Agent,
at any time in its sole and absolute discretion, may (or, upon the request of
the Swing Line Lender, shall) on behalf of the Company (which hereby
irrevocably directs the Administrative Agent to act on its behalf) request
that each Revolving Credit Lender make a Revolving Credit Loan in an amount
equal to such Lender's Revolving Credit Commitment Percentage of the then
outstanding principal amount of Swing Line Loans (the "REFUNDED SWING LINE
LOANS") on the date such notice is given (regardless of whether the Refunded
Swing Line Loans comply with the minimum borrowing provisions of subsection
4.2). In the event that the Swing Line Lender makes its request for
refunding of the Swing Line Loans, each Revolving Credit Lender shall make
the proceeds of its Revolving Credit Loan available in immediately available
funds to the Administrative Agent, for the benefit of the Swing Line Lender,
at the office of the Administrative Agent specified in subsection 14.3 prior
to 11:00 A.M., New York City time, on the first Business Day following such
request (or, if such request is made prior to 10:00 A.M., New York City time,
on any date, then the proceeds of such Revolving Credit Loans shall instead
be so made available to the Administrative Agent prior to 2:00 P.M., New York
City time, on the date of such request); PROVIDED, HOWEVER, that in the event
that any Bankruptcy Event shall have occurred and be continuing, the
Revolving Credit Lenders shall not make such Revolving Credit Loans and the
provisions of subsection 6.3(b) shall apply.
(b) If, prior to the making of a Revolving Credit Loan pursuant to
subsection 4.3(a), a Bankruptcy Event shall have occurred and be continuing,
each Revolving Credit Lender will, on the date such Revolving Credit Loan was to
have been made, purchase from the Swing
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35
Line Lender an undivided participating interest in the Swing Line Loan to be
refunded in an amount equal to its Revolving Credit Commitment Percentage of
such Swing Line Loan to be refunded. Each Revolving Credit Lender will
immediately transfer to the Administrative Agent, in immediately available
funds, the amount of its participation.
(c) Whenever, at any time after the Swing Line Lender has received
from any Revolving Credit Lender such Revolving Credit Lender's participating
interest in a Swing Line Loan to be refunded pursuant to subsection 4.3(b),
the Swing Line Lender receives any payment on account thereof, the Swing Line
Lender will distribute to such Revolving Credit Lender its participating
interest in such amount (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Revolving Credit
Lender's participating interest was outstanding and funded) in like funds as
received; PROVIDED, HOWEVER, that in the event that such payment received by
the Swing Line Lender is required to be returned, such Revolving Credit
Lender will return to the Swing Line Lender any portion thereof previously
distributed by the Swing Line Lender to it in like funds as such payment is
required to be returned by the Swing Line Lender (together with such
Revolving Credit Lender's ratable share of any interest required to be paid
by the Swing Line Lender upon such return).
4.4 UNCONDITIONAL OBLIGATION TO REFUND SWING LINE LOANS. Each
Revolving Credit Lender's obligation to make Revolving Credit Loans and to
purchase participating interests in accordance with subsections 4.3(b) and
(c) above shall be absolute and unconditional and shall not be affected by
any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Revolving Credit
Lender may have against the Swing Line Lender, the Company or any other
Person for any reason whatsoever; (ii) the occurrence or continuance of any
Default or Event of Default; (iii) any adverse change in the condition
(financial or otherwise) of the Company or any other Person; (iv) any breach
of this Agreement by the Company or any other Person; (v) any inability of
the Company to satisfy the conditions precedent to borrowing set forth in
this Agreement on the date upon which such Revolving Credit Loan is to be
made or participating interest is to be purchased or (vi) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing. If any Revolving Credit Lender does not make available to the
Administrative Agent the amount required pursuant to subsections 4.3(b) and
(c) above, as the case may be, the Administrative Agent shall be entitled to
recover such amount on demand from such Revolving Credit Lender, together
with interest thereon for each day from the date of non-payment until such
amount is paid in full at the Federal Funds Effective Rate for the first two
Business Days and at ABR thereafter.
4.5 USE OF PROCEEDS OF SWING LINE LOANS. The proceeds of Swing
Line Loans hereunder shall be used by the Company for any purpose for which
the proceeds of Revolving Credit Loans may be used.
SECTION 5. AMOUNTS AND TERMS OF EUROPEAN SUB-FACILITY
5.1 EUROPEAN REVOLVING CREDIT FACILITY. (a) Subject to the terms
and conditions set forth herein:
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(i) each Revolving Credit Lender hereby severally and not jointly
agrees to make revolving credit loans (each individually, a "SYNDICATED
EUROPEAN LOAN" and, collectively, the "SYNDICATED EUROPEAN LOANS") to the
Foreign Borrowers (including, without limitation, the Local Loan Borrowers)
in Dollars and Optional Currencies from time to time during the period from
the Closing Date to the Termination Date in accordance with the provisions
of subsection 5.2; and
(ii) each Local Lender hereby severally and not jointly agrees to
make revolving credit loans (each individually, a "LOCAL EUROPEAN LOAN"
and, collectively, the "LOCAL EUROPEAN LOANS"; together with the Syndicated
European Loans, the "EUROPEAN REVOLVING LOANS") to its respective Local
Loan Borrower in Dollars and Optional Currencies from time to time during
the period from the Closing Date to the Termination Date in accordance with
the provisions of subsection 5.3;
PROVIDED that, after giving effect to the making of such European Revolving
Loans and the simultaneous use of proceeds thereof, (w) each Revolving Credit
Lender's Aggregate Outstanding Extensions of Credit shall not exceed its
Revolving Credit Commitment then in effect, (x) the Aggregate Outstanding
Extensions of Credit of all Revolving Credit Lenders shall not exceed the
Aggregate Revolving Credit Commitment then in effect, (y) the aggregate
principal amount of European Revolving Loans denominated in Optional
Currencies and L/C Obligations denominated in Optional Currencies made to the
Foreign Borrowers shall not exceed at any time the Multicurrency Sublimit in
effect at such time and (z) the aggregate outstanding amount of European
Revolving Loans made to such Foreign Borrower shall not exceed at any time
its Foreign Borrower Sublimit then in effect.
(b) Amounts borrowed pursuant to this subsection 5.1 may be repaid
and, to but excluding the Termination Date, reborrowed.
5.2 PROCEDURE FOR BORROWING SYNDICATED EUROPEAN LOANS. The
Foreign Borrowers may borrow under the Aggregate Revolving Credit Commitment
pursuant to subsection 5.1 during the Commitment Period on any Business Day,
PROVIDED that the relevant Foreign Borrower shall give the Administrative
Agent irrevocable notice (which notice must be received by the Administrative
Agent prior to 11:00 A.M., London, England time, three Business Days prior to
the requested Borrowing Date), specifying (i) the amount to be borrowed, (ii)
the requested Borrowing Date, (iii) whether the borrowing is to be made in
Dollars or in an Optional Currency (and, if applicable, specifying the
relevant Optional Currency) and (iv) the length of the initial Interest
Period therefor. Each borrowing of Syndicated European Loans that is
denominated in Dollars shall be in an aggregate minimum amount of $2,000,000
or a whole multiple of $1,000,000 in excess of that amount and each such
borrowing that is denominated in an Optional Currency shall be in an integral
multiple of 100,000 units in such Optional Currency and equal to or greater
than the Local Equivalent of $2,000,000. Upon receipt of any such notice
from the relevant Foreign Borrower, the Administrative Agent shall promptly
notify each Revolving Credit Lender thereof. Each Revolving Credit Lender
will make the amount of its Revolving Credit Commitment Percentage of each
borrowing available to the Administrative Agent for the account of such
Foreign Borrower prior to 11:00 A.M. (London, England time) on
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the Borrowing Date requested by such Foreign Borrower in funds immediately
available to the Administrative Agent in the relevant currency. Such
borrowing will then be made available to the relevant Foreign Borrower by the
Administrative Agent crediting the account of such Foreign Borrower with the
Administrative Agent with the aggregate of the amounts made available to the
Administrative Agent by the Revolving Credit Lenders and in like funds as
received by the Administrative Agent.
5.3 PROCEDURE FOR BORROWING LOCAL EUROPEAN LOANS. The Local Loan
Borrowers may borrow under the Aggregate Revolving Credit Commitment pursuant
to subsection 5.1 during the Commitment Period on any Business Day, PROVIDED
that the relevant Local Loan Borrower shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 11:00 A.M. (local time in the jurisdiction in which the relevant
Local European Loan is to be made) three Business Days prior to the requested
Borrowing Date), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be made in Dollars or in an
Optional Currency (and, if applicable, specifying the relevant Optional
Currency) and (iv) the length of the initial Interest Period therefor. Each
borrowing of Local European Loans that is denominated in Dollars shall be in
an aggregate minimum amount of $100,000 or a whole multiple thereof and each
such borrowing that is denominated in an Optional Currency shall be in an
aggregate minimum amount equal to at least 50,000 units in such Optional
Currency or a whole multiple of 10,000 units in excess thereof (and equal to
or greater than the Local Equivalent of $100,000). Upon receipt of any such
notice from the relevant Local Loan Borrower, the Administrative Agent shall
promptly notify the relevant Local Lender thereof. The Local Lender will
make the amount of such borrowing available to the relevant Local Loan
Borrower at its local office in the jurisdiction of the Local Loan Borrower
prior to 11:00 A.M. (local time) on the Borrowing Date requested by such
Local Loan Borrower in funds immediately available to such Local Loan
Borrower in the relevant currency.
5.4 MATTERS RELATING TO LOCAL EUROPEAN LOANS. (a) Each Revolving
Credit Lender hereby unconditionally and irrevocably agrees to purchase (in
the currency in which the relevant Local European Loan is outstanding) from
time to time an undivided participating interest in its Revolving Credit
Commitment Percentage of such portion of the Local European Loans then
outstanding as the Administrative Agent may at any time request; PROVIDED
that:
(i) the Administrative Agent hereby agrees that, unless an Event of
Default has occurred and is continuing, it will not request any such
purchase of participating interests unless the Administrative Agent has
given to the relevant Borrower and the affected Lenders at least three
Business Days' prior notice thereof;
(ii) the Administrative Agent hereby agrees that it will request that
the Revolving Credit Lenders purchase such participating interest in the
Local European Loans made by any Local Lender promptly following receipt by
the Administrative Agent of a written certification from such Local Lender
that an Event of Default described in Section 12(a) has occurred and is
continuing with respect to the Local European Loans made by such Local
Lender and requesting that such request be made by the Administrative
Agent; and
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(iii) in the event that any of the events specified in Section 12(f)
shall have occurred with respect to any Borrower who has Local European
Loans then outstanding, each Revolving Credit Lender shall be deemed to
have purchased, automatically and without request, such participating
interest in the Local European Loans made to such Borrower.
Any such request by the Administrative Agent shall be made in writing to each
Revolving Credit Lender and shall specify the relevant currency and the
amount thereof required from such Revolving Credit Lender in order to effect
the purchase by such Revolving Credit Lender of a participating interest in
the amount equal to its Revolving Credit Commitment Percentage TIMES the
aggregate then outstanding principal amount of the relevant Local European
Loans (together with accrued interest thereon and other amounts owing in
connection therewith). Promptly upon receipt of such request, each Revolving
Credit Lender shall deliver to the Administrative Agent (in immediately
available funds and in the requested currency) the amount so specified by the
Administrative Agent. The Administrative Agent shall promptly deliver to the
relevant Local Lender all amounts actually received by the Administrative
Agent in like funds as received. Promptly following receipt thereof, such
Local Lender will deliver to each Revolving Credit Lender (through the
Administrative Agent) a certificate evidencing the participating interest in
the Local European Loans purchased by such Revolving Credit Lender. From and
after such purchase, all amounts from time to time accruing, and all amounts
from time to time payable, on account of such Local European Loans
(including, without limitation, any interest and other amounts which were
accrued but unpaid on the date of such purchase) shall (other than with
respect to the portion of the Applicable Margin which, pursuant to subsection
7.8(d), is expressly stated to be paid for the account of the Local Lender)
be distributed by such Local Lender to the Administrative Agent, for the
accounts of the Revolving Credit Lenders, on account of such participating
interests. The failure of any Revolving Credit Lender to deposit the amount
described above with the Administrative Agent on the date when due shall not
relieve any other Revolving Credit Lender of its obligations hereunder to
purchase its participating interest or prejudice any rights that the relevant
Local Lender may have against such Revolving Credit Lender as a result of any
such default by such Revolving Credit Lender. No Revolving Credit Lender
shall be responsible for any failure by any other Revolving Credit Lender to
perform its obligation to purchase such participating interest hereunder nor
shall the evolving Credit Commitment of any Revolving Credit Lender be
increased or decreased as a result of any such failure.
(b) Whenever, at any time after a Local Lender has received from
any Revolving Credit Lender such Revolving Credit Lender's participating
interest in a Local European Loan pursuant to subsection 5.4(a), such Local
Lender receives any payment on account thereof, such Local Lender will
distribute to the Administrative Agent, for the account of such Revolving
Credit Lender, such Revolving Credit Lender's participating interest in such
amount (appropriately adjusted, in the case of interest payments, to reflect
the period of time during which such Revolving Credit Lender's participating
interest was outstanding) in like funds as received; PROVIDED, HOWEVER, that
in the event that such payment received by such Local Lender is required to
be returned, such Revolving Credit Lender will return to such Local Lender
any portion thereof previously distributed by such Local Lender for the
account of such Revolving Credit Lender in like funds as such payment is
required to be returned by such Local Lender.
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(c) Each Revolving Credit Lender's obligation to purchase
participating interests pursuant to clause (a) above shall be irrevocable,
shall not be subject to any qualification or exception whatsoever except
willful misconduct or gross negligence of the Local Lender as determined in a
final, non-appealable judgment by a court of competent jurisdiction, and
shall be honored in accordance with this Section 5 (irrespective of the
satisfaction of the applicable conditions described in Section 9) under all
circumstances, including, without limitation, (A) any lack of validity or
enforceability hereof or of any of the other Credit Documents, (B) the
existence of any claim, setoff, defense or other right that any Borrower may
have at any time against the Local Lender, the Administrative Agent, any
Lender or any other Person, whether in connection herewith, or with any Local
European Loan, the transactions contemplated herein or any unrelated
transactions, (C) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit Documents;
(D) the occurrence of any Event of Default or Default or (E) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
(d) Notwithstanding anything to the contrary contained herein, (i)
each Local European Loan borrowed by Salver shall be due and payable (but any
such payment need not be accompanied by a reduction of Revolving Credit
Commitments) on the date that is 17 months from the date of its borrowing
hereunder (or, if feasible, the last day of the Commitment Period) and (ii)
the Local Lender with respect to Salver shall be entitled to terminate its
commitment to serve as such Local Lender on the date which is 17 months after
the Closing Date and on each date which is 17 months thereafter by giving
written notice to the Company, Salver and the Administrative Agent not less
than 30 days prior to the effective date of such termination. In the event
that the Administrative Agent receives notice from such Local Lender of its
election to terminate its commitment to serve as such, then either (x) the
Administrative Agent may, prior to the effective date of such termination,
designate an alternate Local Lender to serve in such capacity (which
alternate Local Lender must be willing, in its sole discretion, to serve in
such capacity in accordance with the terms of this Agreement and must provide
to the Administrative Agent such alternate Local Lender's written agreement
to perform the obligations of the Local Lender with respect to Salver
hereunder and to be bound hereby) or (y) the right of Salver to receive Local
European Loans shall be terminated (subject to reinstatement in the event
that an alternate Local Lender is at any time thereafter appointed) and all
Local European Loans then outstanding to Salver shall be due and payable on
such date of termination. From and after the date upon which an alternate
Local Lender is appointed in accordance with the terms hereof, such alternate
Local Lender shall be deemed to be the Local Lender to Salver for all
purposes under this Agreement and the other Credit Documents.
5.5 USE OF PROCEEDS OF EUROPEAN REVOLVING LOANS. Proceeds of the
European Revolving Loans shall be used for any purpose for which Revolving
Credit Loans would be available to the Company; PROVIDED, that European
Revolving Loans made to Composites-UK and Hexcel-Spain shall not be used to
repay any loans (or refinancings thereof) used to acquire Composites-UK and
Hexcel-Spain, respectively.
5.6 TERMINATION OF FOREIGN BORROWER STATUS. The Company may
terminate its designation of a Foreign Borrower as a Borrower, by written notice
to the Administrative Agent,
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which notice shall be executed by the Company and the relevant Foreign
Borrower. Once notice of such termination is received by the Administrative
Agent (and all amounts owing by such Foreign Borrower have been paid in
full), such Foreign Borrower shall immediately cease to be subject to the
terms of this Agreement (other than any indemnities and similar obligations
of such Foreign Borrower which expressly survive the termination of this
Agreement).
5.7 RESIGNATION OF LOCAL LENDER. (a) In the event that the
Revolving Credit Commitment of a Local Lender shall at any time terminate
(otherwise than on termination of the Aggregate Revolving Credit Commitment)
or a Local Lender shall assign all of its Revolving Credit Commitment in
accordance with the provisions of subsection 14.7(c) or a Local Lender shall
otherwise so elect, such Local Lender shall resign as "Local Lender" by
giving written notice of its resignation to the Company, the relevant Foreign
Borrower and the Administrative Agent, with such resignation becoming
effective on the date which is the earlier of (i) the date upon which a
Revolving Credit Lender reasonably acceptable to the Administrative Agent and
the Company is designated as a substitute Local Lender in accordance with the
provisions of subsection 5.7(b) and (ii) such other date upon which such
Local Lender, the Company and the relevant Foreign Borrower otherwise agree;
PROVIDED that such effective date shall in no event be later than the date
which is 60 days following the date upon which such written notice is
delivered to the Company. Any Local European Loans made by such Local Lender
which are outstanding on such termination date shall be due and payable on
such termination date.
(b) In the event that any Local Lender shall cease to serve as
such pursuant to subsection 5.7(a), the Company may designate another
Revolving Credit Lender reasonably acceptable to the Administrative Agent to
serve as "Local Lender" with respect to the relevant Foreign Borrower;
PROVIDED that no Revolving Credit Lender shall be so designated without its
agreement (in its sole discretion) to serve as the "Local Lender" with
respect to such Foreign Borrower hereunder. Upon any such designation and
the receipt by the Administrative Agent of a Local Lender Joinder Agreement,
duly executed and delivered by such designated Local Lender, such Revolving
Credit Lender shall be deemed to be the "Local Lender" with respect to such
Foreign Borrower for all purposes under this Agreement and the other Credit
Documents.
(c) During any period when no substitute Local Lender has been
duly appointed in accordance with the terms of subsection 5.7(b), the right
of the relevant Foreign Borrower to borrow Local European Loans shall be
suspended.
5.8 REPORTING BY LOCAL LENDERS. Within five Business Days
following the last day of each March, June, September and December, each
Local Lender shall deliver to the Administrative Agent a statement showing
the average daily principal amount of Local European Loans in each currency
during the calendar quarter most recently ended and the principal amount of
Local European Loans in each currency which was outstanding on the last day
of such quarter. Promptly following receipt thereof, the Administrative
Agent shall provide to each Revolving Credit Lender a report containing such
information.
SECTION 6. AMOUNTS AND TERMS OF EUROPEAN OVERDRAFT
FACILITY
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41
6.1 EUROPEAN OVERDRAFT FACILITY. Subject to the terms and
conditions set forth herein, the European Overdraft Lender shall make loans
(the "EUROPEAN OVERDRAFT LOANS") to the Foreign Borrowers from time to time
during the period from the day immediately following the Closing Date to the
Termination Date, up to an aggregate principal amount at any time outstanding
which shall not exceed the European Overdraft Commitment then in effect;
PROVIDED that (x) except to the extent that the European Overdraft Lender
shall otherwise agree, Composites-Austria shall not, in the aggregate, have
the right to borrow more than $250,000 (or the Local Equivalent thereof) at
any one time under the European Overdraft Commitment and (y) except to the
extent that the European Overdraft Lender otherwise shall so agree, Salver
shall not have the right to borrow any amounts under the European Overdraft
Commitment. All European Overdraft Loans shall be payable on the Termination
Date with accrued interest thereon and shall be secured by the Collateral and
shall, except as expressly provided in this Section 6, otherwise be subject
to all the terms and conditions applicable to Syndicated European Loans,
except that each European Overdraft Loan shall be denominated in a single
Optional Currency and shall not be subject to a minimum borrowing requirement.
6.2 MAKING OF EUROPEAN OVERDRAFT LOANS. All European Overdraft
Loans shall be made available to the Foreign Borrowers at the office of the
European Overdraft Lender in London in immediately available funds on the
date of the proposed Borrowing applicable thereto. The European Overdraft
Lender shall not make any European Overdraft Loan in the period commencing on
the first Business Day after it has notice that one or more of the conditions
precedent contained in subsection 9.2 shall not on such date be satisfied,
and ending when such conditions are satisfied, and the European Overdraft
Lender shall not otherwise be required to determine that, or take notice
whether, the conditions precedent set forth in subsection 9.2 hereof have
been satisfied in connection with the making of any European Overdraft Loan.
6.3 REPAYMENT OF EUROPEAN OVERDRAFT LOANS. Each Foreign Borrower
shall repay the outstanding European Overdraft Loans owing by it to the
European Overdraft Lender at any time, but in no event later than the earlier
of (A) demand by the European Overdraft Lender and (B) the Termination Date.
6.4 USE OF PROCEEDS OF EUROPEAN OVERDRAFT LOANS. The proceeds of
the European Overdraft Loans may be used to provide for ongoing working
capital needs in the ordinary course of the business of the Foreign Borrowers
and their respective Subsidiaries and for any other lawful corporate purposes
not prohibited hereunder.
6.5 ADJUSTMENT OF EUROPEAN OVERDRAFT COMMITMENT. (a) Upon the
written request of the Company from time to time and with the consent of each
of the Administrative Agent and the European Overdraft Lender (in their
respective sole discretion) the European Overdraft Commitment of the European
Overdraft Lender may be increased to an amount not in excess of $25,000,000.
Any such increase in the European Overdraft Commitment shall be accompanied
by a reduction in the Revolving Credit Commitment of Citibank, N.A. to the
extent required by subsection 7.5(e); PROVIDED that, after giving effect to
such decrease in the Revolving Credit Commitment of Citibank, N.A., the sum
of the Revolving Credit Commitment of Citibank, N.A. and the European
Overdraft Commitment shall be unchanged (it being understood
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42
that such reduction in the Revolving Credit Commitment of Citibank, N.A.
shall alter the Revolving Credit Commitment Percentage of each Revolving
Credit Lender).
(b) Upon the written request of the Company from time to time and
with the consent of each of the Administrative Agent and the European
Overdraft Lender (such consents not to be unreasonably withheld), the
European Overdraft Commitment of the European Overdraft Lender may be reduced
and the Revolving Credit Commitment of Citibank, N.A. may be increased by an
amount not to exceed the amount of such reduction; PROVIDED that, after
giving effect to such increase in the Revolving Credit Commitment of
Citibank, N.A., the sum of the Revolving Credit Commitment of Citibank, N.A.
and the European Overdraft Commitment shall be unchanged (it being understood
that such increase in the Revolving Credit Commitment of Citibank, N.A. shall
alter the Revolving Credit Commitment Percentage of each Revolving Credit
Lender).
SECTION 7. PROVISIONS RELATING TO THE EXTENSIONS OF CREDIT;
FEES AND PAYMENTS
7.1 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) Each Borrower
hereby unconditionally promises to pay to (i) with respect to Swing Line
Loans, the Swing Line Lender, (ii) with respect to Local European Loans in
which the purchase of participating interests have not been funded pursuant
to subsection 5.4(a), the relevant Local Lender, (iii) with respect to
European Overdraft Loans, the European Overdraft Lender and (iv) otherwise,
the Administrative Agent, the then unpaid principal amount of each Loan on
the Termination Date (or such earlier date on which such Loans become due and
payable hereunder). Each Borrower hereby further agrees to pay interest on
the unpaid principal amount of the Loans from time to time owing by it from
the date hereof until payment in full thereof at the rates PER ANNUM, and on
the dates, set forth in subsection 7.8.
(b) Each Lender (including, without limitation, the European
Overdraft Lender) shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of each Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time
to time under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant
to subsection 14.7(d), and a subaccount therein for each Lender, in which
shall be recorded (i) the amount of each Loan made hereunder, the Type
thereof, each Interest Period applicable thereto and the Borrower with
respect thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from each Borrower to each Lender hereunder and
(iii) both the amount of any sum received by the Administrative Agent
hereunder from any Borrower and each applicable Lender's share thereof;
PROVIDED that the Administrative Agent shall have no obligation to record in
the Register any matters with respect to European Overdraft Loans.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 7.1(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE
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43
evidence of the existence and amounts of the obligations of the Borrowers
therein recorded; PROVIDED, HOWEVER, that the failure of any Lender or the
Administrative Agent to maintain the Register or any such account, or any
error therein, shall not in any manner affect the obligation of each Borrower
to repay (with applicable interest) the Loans made to such Borrower by such
Lender in accordance with the terms of this Agreement.
(e) Each relevant Borrower agrees that, upon request of any Lender
through the Administrative Agent, such Borrower will execute and deliver to
such Lender (i) in the case of a Revolving Credit Lender, a promissory note
of such Borrower evidencing the Revolving Credit Loans of such Revolving
Credit Lender, substantially in the form of Exhibit A with appropriate
insertions as to date and principal amount (a "REVOLVING CREDIT NOTE") and
(ii) in the case of the Swing Line Lender, a promissory note of such Borrower
evidencing the Swing Line Loans, substantially in the form of Exhibit B with
appropriate insertions as to date and principal amount (a "SWING LINE NOTE").
No promissory notes shall be provided with respect to any European Revolving
Loans or the European Overdraft Facility.
7.2 FACILITY FEE. (a) The Borrowers shall pay to the
Administrative Agent, for the account of each Revolving Credit Lender, a
facility fee for each day during the period from and including the first day
of the Commitment Period to and including the Termination Date, computed at
the rate PER ANNUM equal to the Applicable Facility Fee Rate then in effect
on the average daily amount of the Revolving Credit Commitment of such
Revolving Credit Lender during the period for which payment is made. Such
facility fee shall be payable (A) quarterly in arrears on the last Business
Day of each March, June, September and December, commencing on June 30, 1998,
for the period ending on (and including) the last day of the immediately
preceding December, March, June or September, respectively, and (B) on the
Termination Date.
(b) The Borrowers shall pay to the European Overdraft Lender a
facility fee for each day during the period from and including the first day
of the Commitment Period to and including the Termination Date, computed at
the rate PER ANNUM equal to the Applicable Facility Fee Rate then in effect
on the average daily amount of the European Overdraft Commitment during the
period for which payment is made. Such facility fee shall be payable (A)
quarterly in arrears on the last Business Day of each March, June, September
and December, commencing on June 30, 1998, for the period ending on (and
including) the last day of the immediately preceding December, March, June or
September, respectively, and (B) on the Termination Date.
7.3 OPTIONAL PREPAYMENTS. (a) Each Borrower may at any time and
from time to time prepay the Loans made to it (other than (x) the Swing Line
Loans, as to which the provisions of subsection 7.3(b) shall apply and (y)
the European Overdraft Loans, as to which the provisions of subsection 6.3
shall apply), in whole or in part, without premium or penalty, upon at least
three Business Days' (or, in the case of prepayments of ABR Loans, same
day's) irrevocable notice to the Administrative Agent (which notice must be
received by the Administrative Agent prior to (x) in the case of Loans
denominated in Dollars, 11:00 A.M., New York City time, and (y) in the case
of Loans denominated in Optional Currencies, 11:00 A.M., London time, on the
date upon which such notice is due), specifying whether such prepayment is to
be applied to the Revolving Credit Loans or the other Loans hereunder and, in
any event, the date and amount of prepayment and whether the prepayment is of
Eurocurrency Loans, ABR
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44
Loans or a combination thereof, and, if of a combination thereof, the amount
allocable to each. Upon receipt of any such notice, the Administrative Agent
shall promptly notify each affected Lender thereof. If any such notice is
given, the amount specified in such notice shall be due and payable on the
date specified therein, together with any amounts payable pursuant to
subsection 7.15 and, except in the case of prepayments of Revolving Credit
Loans which are ABR Loans, accrued interest to such date on the amount
prepaid. Partial prepayments shall be (i) in the case of Loans denominated
in Dollars, in an aggregate principal amount of $1,000,000 or a whole
multiple of $1,000,000 in excess thereof, (ii) in the case of Syndicated
European Loans denominated in any Optional Currency, in an aggregate
principal amount equal to an integral multiple of 100,000 units of such
Optional Currency and equal to or greater than the Local Equivalent of
$2,000,000 and (iii) in the case of Local European Loans denominated in any
Optional Currency, in an aggregate principalamount equal to an integral
multiple of 50,000 units of such Optional Currency and equal to or greater
than the Local Equivalent of $100,000.
(b) The Company may at any time and from time to time prepay, in
whole or in part and without premium or penalty, any Swing Line Loans then
owing by it on any Business Day; PROVIDED that the Company has given
irrevocable notice to the Administrative Agent not later than 1:00 P.M., New
York City time, on the date of such prepayment.
7.4 OPTIONAL TERMINATION OR REDUCTION OF AGGREGATE REVOLVING
CREDIT COMMITMENT. The Company shall have the right, upon not less than
three Business Days' notice to the Administrative Agent, to terminate the
Aggregate Revolving Credit Commitment or, from time to time, to reduce the
amount thereof; PROVIDED that no such termination or reduction shall be
permitted if, after giving effect thereto and to any prepayments of the
Revolving Credit Loans, European Revolving Loans and Swing Line Loans made on
the effective date thereof, the aggregate principal amount of the Revolving
Credit Loans, European Revolving Loans and Swing Line Loans then outstanding,
when added to the then outstanding L/C Obligations, would exceed the
Aggregate Revolving Credit Commitment then in effect. Any such reduction
shall be in an amount equal to the Local Equivalent of $1,000,000 or a whole
multiple thereof and shall reduce permanently the Aggregate Revolving Credit
Commitment then in effect.
7.5 MANDATORY REDUCTION OF COMMITMENTS AND PREPAYMENTS. (a) The
Aggregate Revolving Credit Commitment shall terminate on the Termination Date.
(b) If the Aggregate Outstanding Extensions of Credit of all
Lenders shall at any time exceed the Aggregate Revolving Credit Commitment
then in effect (including, without limitation, as a result of any reduction
or termination of the Aggregate Revolving Credit Commitment pursuant to
subsection 7.4 or this subsection 7.5), the Borrowers shall immediately repay
the Aggregate Outstanding Extensions of Credit by the amount of such excess,
with such prepayment being applied, FIRST, to the then outstanding Swing Line
Loans, SECOND, to the then outstanding Revolving Credit Loans, THIRD, to the
then outstanding European Revolving Loans (in such order as the Company shall
elect) and, FOURTH, to cash collateralize the then outstanding L/C
Obligations.
(c) If the aggregate outstanding principal amount of European
Overdraft Loans shall at any time exceed the European Overdraft Commitments
then in effect, the Foreign
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45
Borrowers shall, within five Business Days, repay the European Overdraft
Loans by the amount of such excess.
(d) If any Foreign Borrower shall at any time cease to be a
"Foreign Borrower" hereunder, all European Revolving Loans owing by such
Foreign Borrower shall be immediately due and payable (together with accrued
interest and any other amounts owing in respect thereof).
(e) If the European Overdraft Commitment shall at any time be
increased pursuant to subsection 6.5(a), the Revolving Credit Commitment of
Citibank, N.A. immediately shall be temporarily reduced (subject to
reinstatement in accordance with the provisions of subsection 6.5(b)) by 100%
of the amount of such increase and the Aggregate Outstanding Extensions of
Credit owing to Citibank, N.A. immediately shall be prepaid by the amount
necessary to cause such Aggregate Outstanding Extensions of Credit to equal
Citibank, N.A.'s Revolving Credit Commitment Percentage of (after giving
effect to such reduction of its Revolving Credit Commitment) of the Aggregate
Outstanding Extensions of Credit of all Revolving Credit Lenders.
(f) The Aggregate Revolving Credit Commitment shall be reduced by
the amount equal to 100% of any Net Proceeds (other than Reserved Proceeds)
derived by the Company and its Subsidiaries from any Net Proceeds Event;
PROVIDED, HOWEVER, that no such reduction shall be required:
(x) with respect to the first $20,000,000 of Net Proceeds derived
from any Net Proceeds Event received by the Company and its Subsidiaries
during any period of 365 consecutive days (other than any Net Proceeds
Event on account of the sale, transfer or other disposition of assets
described in clause (y) below); or
(y) with respect to any Net Proceeds received on account of the sale,
transfer or other disposition of any property listed on Schedule 7.5.
Unless the Company otherwise elects, the application of prepayments made
pursuant to this subsection 7.5(f) shall be made, FIRST, to ABR Loans and,
SECOND, to Eurocurrency Loans. Notwithstanding anything to the contrary
contained in this clause (f), any Reserved Proceeds which are not reinvested
in accordance with the definition of such term within 180 days following the
occurrence of the relevant Net Proceeds Event shall cease to be Reserved
Proceeds, and shall be applied to reduce the Aggregate Revolving Credit
Commitment in accordance with the terms of this clause (f), on the earlier to
occur of (x) the 181st day following such occurrence and (y) to the extent
that an Event of Default is then continuing, the date upon which the
Administrative Agent or the Majority Lenders shall request such application.
(g) Notwithstanding anything to the contrary contained herein, in
the event that a Borrower would incur costs pursuant to subsection 7.15 as a
result of any payment due as a result of any commitment reduction required to
be made pursuant to this subsection 7.5, such Borrower may deposit the amount
of such payment with the Administrative Agent, for the benefit of the Lenders
who would have received such payment, in a cash collateral account, until the
end of the applicable Interest Period at which time such payment shall be
made. Each Borrower hereby
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46
grants to the Administrative Agent, for the benefit of such Lenders, a
security interest in all amounts in which such Borrower has any right, title
or interest which are from time to time on deposit in such cash collateral
account and expressly waives all rights (which rights such Borrower hereby
acknowledges and agrees are vested exclusively in the Administrative Agent)
to exercise dominion or control over any such amounts.
7.6 CONVERSION AND CONTINUATION OPTIONS. (a) Each Borrower may
elect from time to time to convert Eurocurrency Loans to ABR Loans by
delivering to the Administrative Agent an irrevocable Notice of Borrowing by
11:00 A.M., New York City time, at least one Business Day prior to the
requested date of conversion; PROVIDED that any such conversion of
Eurocurrency Loans may only be made on the last day of an Interest Period
with respect thereto. Each Borrower may elect from time to time to convert
ABR Loans to Eurocurrency Loans by delivering to the Administrative Agent an
irrevocable Notice of Borrowing by 11:00 A.M., New York City time, at least
three Business Days' prior to the requested conversion date. Any such Notice
of Borrowing with respect to a conversion to Eurocurrency Loans shall specify
the length of the initial Interest Period or Interest Periods therefor. Upon
receipt of any such Notice of Borrowing, the Administrative Agent shall
promptly notify each Lender thereof. All or any part of outstanding
Eurocurrency Loans and ABR Loans may be converted as provided herein,
PROVIDED that (i) no Loan may be converted into a Eurocurrency Loan when any
Event of Default has occurred and is continuing and the Administrative Agent
has or the Required Lenders have determined that such a conversion is not
appropriate and (ii) no Revolving Credit Loan may be converted into a
Eurocurrency Loan after the date that is one month prior to the Termination
Date. Notwithstanding anything to the contrary contained herein, Swing Line
Loans shall at all times be maintained as ABR Loans and shall not be
converted to Eurocurrency Loans hereunder.
(b) Any Eurocurrency Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
relevant Borrower delivering to the Administrative Agent an irrevocable
Notice of Borrowing, in accordance with the applicable provisions of the term
"Interest Period" set forth in subsection 1.1, setting forth (among other
things) the length of the next Interest Period to be applicable to such
Loans, PROVIDED that (i) no Loan may be continued as a Eurocurrency Loan when
any Event of Default has occurred and is continuing and the Administrative
Agent has or the Required Lenders have determined that such a continuation is
not appropriate and (ii) no Revolving Credit Loan may be continued as a
Eurocurrency Loan after the date that is one month prior to the Termination
Date and PROVIDED, FURTHER, that if a Borrower shall fail to give such notice
or if such continuation is not permitted, such Loans shall (x) in the case of
any Loan to the Company, be automatically converted to ABR Loans on the last
day of such then expiring Interest Period and (y) in each other case, bear
interest at a rate equal to the rate determined by the Administrative Agent
(in its reasonable discretion and notified to the relevant Borrower) as
reflecting a reasonable cost of funds for the maintenance by the Lenders of
such Loan on an overnight basis PLUS (in the case of this clause (y)) the
Applicable Margin then in effect with respect to Eurocurrency Loans. Upon
receipt of any such Notice of Borrowing, the Administrative Agent shall
promptly notify each Lender thereof.
7.7 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods
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47
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the
Loans comprising each Eurocurrency Tranche shall be equal to (a) in the case
of Loans denominated in Optional Currencies, 100,000 units in such Optional
Currency and at least the Local Equivalent of $2,000,000 and (b) in the case
of all other Loans, $2,000,000 or a whole multiple of $1,000,000 in excess
thereof. In no event shall there be more than 10 Eurocurrency Tranches
outstanding to the Company at any time or more than 15 Eurocurrency Tranches
outstanding to the Foreign Borrowers (in the aggregate) at any time.
Notwithstanding the foregoing, the provisions of this Section 7.7 shall not
apply to European Overdraft Loans.
7.8 INTEREST RATES AND PAYMENT DATES. (a) Each Eurocurrency Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurocurrency Rate determined for
such day plus the Applicable Margin with respect thereto. Interest on each
Eurocurrency Loan shall be payable in the currency in which such Eurocurrency
Loan is denominated.
(b) Each ABR Loan (including, without limitation, each Swing Line
Loan) shall bear interest at a rate per annum equal to the ABR plus the
Applicable Margin with respect thereto.
(c) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any facility fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated maturity,
by acceleration or otherwise), the principal of the Loans and any such
overdue interest, facility fee or other amount shall bear interest at a rate
per annum which is (x) in the case of principal, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
subsection plus 2% or (y) in the case of any such overdue interest, facility
fee or other amount (including, without limitation, fees and commissions on
Letters of Credit), the rate which would have been applicable thereto if such
amount were principal of a Loan denominated in the relevant currency (with
any such amount which is denominated in Dollars being treated as if it were
an ABR Loan) plus 2%, in each case from the date of such non-payment until
such overdue principal, interest, facility fee or other amount is paid in
full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date (PROVIDED that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand) and shall be payable
(w) in the case of interest on account of Swing Line Loans, to the Swing Line
Lender (for its own account), (x) in the case of interest on Local European
Loans, to the relevant Local Lender (for its own account), (y) in the case of
interest on European Overdraft Loans, to the European Overdraft Lender (for
its own account) and (z) otherwise, to the Administrative Agent (for the
ratable account of the Lenders holding the obligations on account of which
such interest was paid).
(e) Each Local Lender hereby agrees that, in consideration of the
agreement of the Revolving Credit Lenders to purchase participating interests
in the Local European Loans made by it, such Local Lender shall pay to the
Administrative Agent (for the ratable account of the Lenders) promptly upon
receipt by such Local Lender of any interest payment hereunder a
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risk participation fee in the amount equal to (x) the Applicable Margin for
Eurocurrency Loans on the average daily principal amount of its Local
European Loans during the period for which payment is due MINUS (y) the
amount equal to 1/8 of 1% on such average daily principal amount (which
amount shall be retained by such Local Lender, for its own account);
PROVIDED, HOWEVER, that, in the event that the Revolving Credit Lenders have
funded the purchase of participating interests in such Local European Loans
pursuant to subsection 5.4(a), such Local Lender instead shall pay to the
Administrative Agent, for the account of each Revolving Credit Lender which
has so funded such purchase, the amount equal to such Revolving Credit
Lender's Revolving Credit Commitment Percentage of the full amount (other
than the amount equal to 1/8 of 1% PER ANNUM on the average daily principal
amount on which such interest is being paid, which amount shall be retained
by the relevant Local Lender as an administrative fee) of the interest paid
to such Local Lender by the relevant Borrower. In addition to the foregoing
amounts, the relevant Borrower also shall pay to each Lender any amounts due
pursuant to subsection 7.15.
7.9 COMPUTATION OF INTEREST AND FEES. (a) Facility fees and,
whenever it is calculated on the basis of the Prime Rate, interest shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for
the actual days elapsed; and, otherwise, interest shall be calculated on the
basis of a 360-day year for the actual days elapsed; PROVIDED that interest
on all Eurocurrency Loans denominated in Belgian francs or British pounds
sterling ("Euro sterling") shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the relevant
Borrower and the affected Lenders of each determination of a Eurocurrency
Rate. Any change in the interest rate on a Loan resulting from a change in
(i) the ABR or the Eurocurrency Reserve Requirements shall become effective
as of the opening of business on the day on which such change becomes
effective and (ii) the Leverage Ratio of the Company and its Subsidiaries
shall become effective as of the opening of business on the date upon which
the Administrative Agent receives the financial statements required to be
delivered pursuant to subsection 10.1 which evidence such change in the
Leverage Ratio. The Administrative Agent shall as soon as practicable notify
the relevant Borrower and the affected Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrowers and the Lenders in the absence of manifest error.
The Administrative Agent shall, at the request of any Borrower, deliver to
such Borrower a statement showing the quotations used by the Administrative
Agent in determining any interest rate pursuant to subsection 7.9(a) which is
applicable to the Loans of such Borrower and, with respect to Loans made to
French Borrowers or in French Francs, the overall interest rate ("taux
effectif global") applicable to such Loans.
7.10 INABILITY TO DETERMINE INTEREST RATE. If prior to the
determination of the Eurocurrency Rate with respect to any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrowers) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurocurrency Rate for
such Interest Period;
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49
(b) the Administrative Agent shall have received notice from any
Lender that deposits in Dollars or the applicable Optional Currency, as
applicable, in the principal amounts of the Eurocurrency Rate Loans to
which such Interest Period is to be applicable are not generally available
in the London interbank market for a period equal to such Interest Period;
or
(c) the Administrative Agent shall have received notice from the
Required Lenders that the Eurocurrency Rate to be determined for such
Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or
maintaining their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to
the Company and the affected Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurocurrency Loans requested to be made on the
first day of such Interest Period shall be made as ABR Loans, (y) any Loans
that were to have been converted on the first day of such Interest Period to
Eurocurrency Loans shall be converted to or continued as ABR Loans and (z)
any outstanding Eurocurrency Loans shall be converted, on the first day of
such Interest Period, to ABR Loans. Until such notice has been withdrawn by
the Administrative Agent, no further Eurocurrency Loans under the Aggregate
Revolving Credit Commitment shall be made or continued as such, nor shall the
relevant Borrower have the right to convert Loans to Eurocurrency Loans.
7.11 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing (other
than a borrowing of Swing Line Loans, Local European Loans or European
Overdraft Loans) by a Borrower from the Lenders hereunder, each payment by a
Borrower on account of any facility fee hereunder and any reduction of the
Revolving Credit Commitments of the Lenders shall be made PRO RATA according
to the respective relevant Revolving Credit Commitment Percentages of the
Lenders holding obligations in respect of which such amounts were paid. Each
payment (including each prepayment) by a Borrower on account of principal of
and (subject to the provisions of subsection 7.12) interest on the Loans
(other than the Swing Line Loans, the European Overdraft Loans or any Local
European Loans in which the purchase of participating interests has not been
funded pursuant to subsection 5.4(a)) shall be made PRO RATA according to the
respective outstanding principal amounts of such Loans then held by the
Lenders. Except as otherwise set forth herein, all payments (including
prepayments) to be made by any Borrower hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 1:00 P.M., New York City time (with
respect to amounts denominated in Dollars) or London time (with respect to
other amounts), on the due date thereof to the Administrative Agent, for the
account of the applicable Lenders, at the Administrative Agent's office
specified in subsection 14.3 (or at such other office as the Administrative
Agent may from time to time specify), in immediately available funds and in
the currency in which the underlying obligation is denominated (PROVIDED that
facility fees payable pursuant to subsection 7.2 shall be payable in
Dollars). The Administrative Agent shall distribute such payments to the
Lenders holding obligations on account of which such amounts were paid
promptly upon receipt in like funds as received. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day, and, with respect to
payments of principal, interest thereon shall be
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50
payable at the then applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its relevant Revolving Credit Commitment
Percentage of such borrowing available to the Administrative Agent, the
Administrative Agent may assume that such Lender is making such amount
available to the Administrative Agent, and the Administrative Agent may, in
reliance upon such assumption, make available to the relevant Borrower a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount
with interest thereon at a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Administrative Agent. A certificate of the Administrative
Agent submitted to any Lender with respect to any amounts owing under this
subsection 7.11 shall be conclusive in the absence of manifest error. If such
Lender's relevant Revolving Credit Commitment Percentage of such borrowing is
not made available to the Administrative Agent by such Lender within three
Business Days of such Borrowing Date, the Administrative Agent shall also be
entitled to recover such amount with interest thereon at the rate PER ANNUM
applicable to ABR Loans hereunder, on demand, from the relevant Borrower.
(c) Notwithstanding anything to the contrary contained herein, in
the event that the Administrative Agent shall make any payment to a Lender on
account of amounts owing to such Lender by a Borrower hereunder and the
Administrative Agent either (i) shall not receive the corresponding amount
from such Borrower or (ii) shall be required to be return such amount to such
Borrower, such Lender shall (upon the request of the Administrative Agent)
promptly return to the Administrative Agent the amount of such payment.
(d) For the purposes of this Agreement, the Dollar Equivalent of a
European Revolving Loan which is denominated in an Optional Currency or any
L/C Obligations denominated in an Optional Currency shall be determined by
the Administrative Agent upon receipt from any Borrower of the Notice of
Borrowing requesting a Loan or any application for a Letter of Credit, and
such Dollar Equivalent shall be recalculated on each date that it shall be
necessary to determine the unused portion of each Lender's Revolving Credit
Commitment or any or all of the Aggregate Outstanding Extensions of Credit
outstanding on such date (it being understood that such calculation or
recalculation may, under the circumstances described in the definition of the
term "Dollar Equivalent" in Section 1.1, be made based upon an exchange rate
in effect on the last Business Day of the most recently ended calendar
quarter).
7.12 ILLEGALITY. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender
to make or maintain Eurocurrency Loans as contemplated by this Agreement, (a)
the commitment of such Lender hereunder to make Eurocurrency Loans, continue
Eurocurrency Loans as such and convert ABR Loans to Eurocurrency Loans shall
forthwith be cancelled and (b) such Lender's Loans then outstanding as
Eurocurrency Loans, if any, shall be converted automatically to:
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51
(i) in the case of Loans denominated in Dollars, ABR Loans; and
(ii) otherwise, a rate equal to the rate determined by the
Administrative Agent (or, in the case of Local European Loans, the relevant
Lender) in its reasonable discretion and notified to the relevant Borrower
as reflecting a reasonable cost of funds for the maintenance by the
relevant Lenders of such Loan on an overnight basis PLUS (in the case of
this clause (ii)) the Applicable Margin then in effect with respect to
Eurocurrency Loans;
in each case on the respective last days of the then current Interest Periods
with respect to such Loans or within such earlier period as required by law. If
any such conversion of a Eurocurrency Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, the relevant
Borrower shall pay to the relevant Lenders such amounts, if any, as may be
required pursuant to subsection 7.15.
7.13 REQUIREMENTS OF LAW. (a) If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Letter of
Credit, any Application or any Eurocurrency Loan made by it, or change
the basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by subsection 7.14 and changes in
the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurocurrency Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurocurrency Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Company shall promptly pay (or cause to be
paid) to such Lender such additional amount or amounts as will compensate such
Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the
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52
rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved
but for such adoption, change or compliance (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy) by
an amount deemed by such Lender to be material, then from time to time, the
Company shall promptly pay (or cause to be paid) to such Lender such
additional amount or amounts as will compensate such Lender for such
reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Company (with a copy
to the Administrative Agent) of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
subsection (accompanied by a statement as to the amount of such compensation and
a summary of the basis for such demand with detailed calculations) submitted by
such Lender to the Company (with a copy to the Administrative Agent) shall be
conclusive in the absence of manifest error. The agreements in this subsection
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
(d) The Company shall be permitted to replace any Lender which (a)
requests reimbursement for amounts owing pursuant to this Section 7.13 with a
replacement financial institution; PROVIDED that (i) such replacement does not
conflict with any Requirement of Law, (ii) no Event of Default shall have
occurred and be continuing at the time of such replacement, (iii) prior to any
such replacement, such Lender shall not have taken action under Section 7.17 so
as to eliminate the continued need for payment of amounts owing pursuant to this
Section 7.13, (iv) the replacement financial institution shall purchase, at par,
all Loans and other amounts owing to such replaced Lender on or prior to the
date of replacement, (v) the Company shall be liable to such replaced Lender
under Section 7.15 if any Eurodollar Loan owing to such replaced Lender shall be
purchased other than on the last day of the Interest Period relating thereto,
(vi) the replacement financial institution, if not already a Lender, shall be
reasonably satisfactory to the Administrative Agent, (vii) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions of
Section 14.7 (provided that the Company shall be obligated to pay the
registration and processing fee referred to therein), (viii) the Company shall
pay to the replaced Lender all additional amounts (if any) owing pursuant to
this Section 7.13.
7.14 TAXES. (a) All payments made by the Borrowers under this
Agreement and any Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent or any Lender
as a result of a present or former connection between the Administrative Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Administrative Agent or
such Lender having executed, delivered or performed its obligations or
received a payment under, or enforced, this Agreement or any Note). If
any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("NON-EXCLUDED TAXES")
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53
are required to be withheld from any amounts payable to the Administrative
Agent or any Lender hereunder or under any Note, the amounts so payable to
the Administrative Agent or such Lender shall be increased to the extent
necessary to yield to the Administrative Agent or such Lender (after payment
of all Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement,
PROVIDED, HOWEVER, that no Borrower shall be required to increase any such
amounts payable to any Lender that is not organized under the laws of the
United States of America or a state thereof if such Lender fails to comply
with the requirements of paragraph (b) of this subsection. Whenever any
Non-Excluded Taxes are payable by a Borrower, as promptly as possible
thereafter such Borrower shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by such Borrower showing
payment thereof. If such Borrower fails to pay any Non-Excluded Taxes when
due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary
evidence, such Borrower shall indemnify the Administrative Agent and the
Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Company and the Administrative Agent (A)
two duly completed copies of United States Internal Revenue Service
Form 1001 or 4224, or successor applicable form, as the case may be, and
(B) an Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be;
(ii) deliver to the Company and the Administrative Agent two
further copies of any such form or certification on or before the date
that any such form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to the Company; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Company or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Company and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii) in
the case of a Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax. Each Person that shall become a Lender or a
Participant pursuant to subsection 14.7 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to
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54
this subsection, provided that in the case of a Participant such Participant
shall furnish all such required forms and statements to the Lender from which
the related participation shall have been purchased.
(c) Each of the Lenders and the Administrative Agent agrees, within a
reasonable time after receiving a written request from the Company, to provide
the Company and the Administrative Agent with such certificates as are
reasonably required and take such other actions as are reasonably necessary to
claim such exemptions as such Lender, the Administrative Agent or Affiliate may
be entitled to claim in respect of all or a portion of any Non-Excluded Taxes
that are otherwise required to be paid or deducted or withheld pursuant to this
subsection 7.14 in respect of any payments under this Agreement or under the
Notes.
(d) To the extent that the undertaking to indemnify and reimburse the
Administrative Agent and the Lenders set forth in this subsection may be invalid
and/or unenforceable because it is violative of any law or public policy, such
Borrower shall contribute the maximum portion that it is permitted to pay under
applicable law to the payment of the Non-Excluded Taxes imposed on the
Administrative Agent and the Lenders.
(e) If a Lender or the Administrative Agent shall become aware that
it is entitled to receive a refund (including interest and penalties, if any) in
respect of Non-Excluded Taxes as to which it has been indemnified by a Borrower
pursuant to this subsection 7.14, it shall promptly notify in writing such
Borrower of the availability of such refund (including interest and penalties,
if any) and shall, within 30 days after receipt of a request by such Borrower,
apply for such refund at such Borrower's expense; PROVIDED that neither the
Lender nor the Administrative Agent shall have any liability to any Borrower for
any failure to provide such notice if such right to receive such refund could
reasonably be attributed to factors unrelated to the transactions under this
Agreement or if such failure results from a good faith error on the part of such
Lender or the Administrative Agent.
(f) Each Lender confirms to the Administrative Agent (on the date
hereof, or, in the case of a Lender which becomes a party hereto by assignment
or transfer, on the date on which the relevant transfer or assignment become
effective) that either:
(i) it is not resident for tax purposes in the United Kingdom and is
beneficially entitled to its participation in the relevant Loans and
interest thereon; or
(ii) it is a bank as defined for the purposes of Section 349 of the
Income & Corporation Taxes Act 1988 of the United Kingdom and is
beneficially entitled to its participation in the relevant Loans and the
interest thereon,
and each Lender in favor of the Agent agrees to notify the Agent if there is any
change in its position from that set out above.
7.15 INDEMNITY. Each Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by such Borrower in making a borrowing
of, conversion into or
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55
continuation of Eurocurrency Loans after such Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by such Borrower in making any prepayment after such Borrower has
given a notice thereof in accordance with the provisions of this Agreement or
(c) the making of a prepayment of Eurocurrency Loans on a day which is not
the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day
of such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans
provided for herein (excluding, however, the Applicable Margin included
therein, if any) over (ii) the amount of interest (as reasonably determined
by such Lender) which would have accrued to such Lender on such amount by
placing such amount on deposit for a comparable period with leading banks in
the interbank eurocurrency market. Any Lender requesting indemnification
pursuant to this subsection 7.15 shall deliver to the applicable Borrower,
concurrently with such demand, a written statement in reasonable detail as to
such losses and expenses, and such statement shall be conclusive in the
absence of manifest error. This covenant shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
7.16 CERTAIN FEES. The Company agrees to pay to the Administrative
Agent and to the Collateral Agent, for their own accounts, the non-refundable
fees previously agreed to with the Administrative Agent and the Collateral Agent
in the manner and on the dates so previously agreed.
7.17 CHANGE OF LENDING OFFICE. (a) Each Lender agrees that if it
makes any demand for payment under subsection 7.12 or 7.14(a), or if any
adoption or change of the type described in subsection 7.13 shall occur with
respect to it, it will use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts would
not be disadvantageous to it, as determined in its sole discretion) to designate
a different lending office if the making of such a designation would reduce or
obviate the need for a Borrower to make payments under subsection 7.12 or
7.14(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 7.13.
(b) Notwithstanding anything to the contrary contained herein, no
Lender shall be entitled to receive any amount under subsections 7.12, 7.13 or
7.14(a) as a result of the transfer of any Eurocurrency Loan to a lending office
which is greater than such Lender would have been entitled to receive
immediately prior thereto, unless (i) the transfer occurred at a time when
circumstances giving rise to the claim for such greater amount did not exist and
(ii) such claim would have arisen even if such transfer had not occurred.
7.18 OVERALL INTEREST RATE FOR FRENCH LAW. Given the variable rates
of interest applicable to the Loans, the overall interest rate ("taux effectif
global"), as governed by the French Usury Law of December 28, 1966 and the
Decree of September 4, 1985, cannot be calculated at the time of execution of
this Agreement.
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56
7.19 DESIGNATION OF ADDITIONAL BORROWERS. (a) The Company may from
time to time request that any one or more Wholly-owned Subsidiaries of the
Company be designated as a "Foreign Borrower" hereunder (each such additional
Foreign Borrower, an "ADDITIONAL BORROWER") by providing written notice to the
Administrative Agent specifying (i) the identity of such Foreign Subsidiary,
(ii) the jurisdiction of its incorporation, (iii) the Optional Currency (if any)
in which Loans to such Foreign Subsidiary shall be denominated and (iv) whether
such Foreign Subsidiary is to be a Local Loan Borrower and, if so, the Revolving
Credit Lender (or affiliate thereof) which is to serve as the Local Lender with
respect thereto (which Local Lender shall have agreed, in its sole discretion,
to serve in such capacity). The Administrative Agent shall promptly notify each
Revolving Credit Lender of such request. Within five Business Days following
the receipt of such notice, each Revolving Credit Lender shall notify the
Administrative Agent in writing whether such designation is acceptable to such
Revolving Credit Lender (in its sole discretion) and the Administrative Agent
promptly shall notify the Company thereof.
(b) In the event that such designation is acceptable to the Revolving
Credit Lenders holding the majority of the Aggregate Revolving Credit
Commitment, the Company shall cause the requested Additional Borrower to deliver
to the Administrative Agent (i) an Additional Borrower Joinder Agreement, (ii) a
Local Lender Joinder Agreement, (iii) a first-priority, perfected security
interest in all of the issued and outstanding capital stock of each direct
Subsidiary of such requested Additional Borrower pursuant to a pledge agreement
which is in form and substance reasonably satisfactory to the Administrative
Agent (PROVIDED that such security interest shall secure the obligations only of
such requested Additional Borrower and not of the Company or any other Borrower)
and (iv) such other documents, instruments, agreements and legal opinions as the
Administrative Agent reasonably may request (including, in any event, an opinion
of local counsel in the relevant jurisdiction as to the applicable matters
covered by the opinions delivered on the Closing Date with respect to the
Foreign Borrowers).
(c) From and after the date upon which the Administrative Agent has
received the documents (all of which shall be in form and substance reasonably
satisfactory to the Administrative Agent) described in subsection 7.19(b), the
requested Additional Borrower shall be a Foreign Borrower for all purposes
hereunder and (if applicable) the Revolving Credit Lender designated to serve as
Local Lender in the relevant jurisdiction with respect to such Additional
Borrower shall be a Local Lender for all purposes hereunder.
7.20 EUROPEAN MONETARY UNION. (a) If, as a result of the
implementation of European monetary union, (i) any currency ceases to be lawful
currency of the nation issuing the same and is replaced by a European single
currency or (ii) any currency and a European single currency are at the same
time recognized by the central bank or comparable authority of the nation
issuing such currency as lawful currency of such nation and the Administrative
Agent or the Required Lenders (or, in the case of European Overdraft Loans, the
European Overdraft Lender) shall so request in a notice delivered to the
Company, then any amount payable hereunder by the Revolving Credit Lenders (or
the European Overdraft Lender, as the case may be) to any Borrower, or by any
Borrower to the Revolving Credit Lenders (or the European Overdraft Lender, as
the case may be), in such currency shall instead by payable in the European
single currency and the amount so payable shall be determined by translating the
amount payable
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57
in such currency to such European single currency at the exchange rate
recognized by the European Central Bank for the purpose of implementing
European monetary union.
(b) The Company agrees, at the request of any Lender, to compensate
such Lender for any reasonable loss, cost, expense or reduction in return that
shall be incurred or sustained by such Lender (other than through such Lender's
gross negligence or willful misconduct) as a result of the implementation of
European monetary union, that would not have been incurred or sustained but for
the transactions provided for herein and that, to the extent that such loss,
cost, expense or reduction is of a type generally applicable to extensions of
credit similar to the extensions of credit hereunder, is generally being
requested from borrowers subject to similar provisions. A certificate of a
Lender setting forth (x) the amount or amounts necessary to compensate such
Lender (y) describing the nature of the loss or expense sustained or incurred by
such Lender as a consequence thereof and (z) setting forth a reasonably detailed
explanation of the calculation thereof shall be delivered to the Company and
shall be conclusive absent manifest error. The Company shall pay such Lender
the amount shown as due on any such certificate within 10 days after receipt
thereof.
(c) The Company agrees, at the request of the Required Lenders (or,
with respect to matters relating to the European Overdraft Loans, the European
Overdraft Lender), at the time of or at any time following the implementation of
European monetary union, to enter into an agreement amending this Agreement in
such manner as the Required Lenders (or the European Overdraft Lender, as the
case may be) reasonably shall request in order to reflect the implementation of
such monetary union to place the parties hereto in the position they would have
been in had such monetary union not been implemented.
SECTION 8. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make its Loans and other extensions of credit hereunder, the
Company hereby represents and warrants (and, to the extent that any such
representation and warranty concerns matters relating to any other Borrower or
any of its Subsidiaries, such Borrower hereby represents and warrants) to each
Lender and the Administrative Agent as follows:
8.1 FINANCIAL CONDITION. (a) The condensed, consolidated balance
sheet of the Company and its consolidated Subsidiaries as at December 31, 1996
and the related consolidated statements of income and of cash flows for the
fiscal year ended on such date, reported on by Deloitte & Touche LLP, copies of
which have heretofore been furnished to each Lender, are complete and correct
and present fairly the consolidated financial condition of the Company and its
consolidated Subsidiaries as at such date, and the consolidated results of their
operations and their consolidated cash flows for the fiscal year then ended.
The unaudited condensed, consolidated balance sheet of the Company and its
consolidated Subsidiaries as at September 30, 1997 and the related unaudited
consolidated statements of income and of cash flows for the nine-month period
ended on such date, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of the Company and its consolidated
Subsidiaries as at such
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58
date, and the consolidated results of their operations and their consolidated
cash flows for the nine-month period then ended (subject to normal year-end
audit adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by
such accountants or Responsible Officer, as the case may be, and as disclosed
therein).
(b) Neither the Company nor any of its consolidated Subsidiaries had,
at the date of the most recent balance sheet referred to above, any material
Guarantee Obligation, contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitment, including, without
limitation, any interest rate or foreign currency swap or exchange transaction,
which is not reflected in the foregoing statements or in the notes thereto.
(c) During the period from December 31, 1996 to and including the
date hereof, there has been no sale, transfer or other disposition by the
Company or any of its consolidated Subsidiaries of any material part of its
business or property and no purchase or other acquisition of any business or
property (including any capital stock of any other Person) material in relation
to the consolidated financial condition of the Company and its consolidated
Subsidiaries at December 31, 1996.
8.2 NO CHANGE. Since December 31, 1996, there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.
8.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Company
and its Subsidiaries (a) is duly organized, validly existing and (to the extent
applicable) in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified as
a foreign corporation and in good standing (or, with respect to Foreign
Subsidiaries, maintains the analogous status) under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification, except to the extent that the
failure to maintain such status could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
8.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company and each other Credit Party has the corporate power and authority, and
the legal right, to make, deliver and perform the Credit Documents to which it
is a party and, in the case of each Borrower, to borrow hereunder and has taken
all necessary corporate action to authorize the borrowings on the terms and
conditions of this Agreement and any Notes or Applications and to authorize the
execution, delivery and performance of the Credit Documents to which it is a
party. Except to the extent described on Schedule 8.4, no consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of the Credit Documents to which the Company and each other
Credit Party is a party. Subject to the requirements listed on Schedule 8.4,
this Agreement
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has been, and each other Credit Document to which it is a party will be, duly
executed and delivered on behalf of the Company and each other Credit Party.
This Agreement constitutes, and each other Credit Document to which it is a
party when executed and delivered will constitute, a legal, valid and binding
obligation of the Company and each other Credit Party enforceable against the
Company and each other Credit Party, as the case may be, in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
good faith and fair dealing.
8.5 NO LEGAL BAR. The execution, delivery and performance of each
Credit Document, the incurrence or issuance of and use of the proceeds of the
Loans and of drawings under the Letters of Credit and the transactions
contemplated by the Credit Documents (a) will not violate any material
Requirement of Law or any material Contractual Obligation applicable to or
binding upon the Company or any of its Subsidiaries or any of their respective
properties or assets, in any manner and (b) will not result in the creation or
imposition of any Lien on any properties or assets of the Company or any of its
Subsidiaries pursuant to any Requirement of Law applicable to it, as the case
may be, or any of its Contractual Obligations, except for the Liens arising
under the Security Documents.
8.6 NO MATERIAL LITIGATION. Except to the extent described in
Schedule 8.6, no litigation by, investigation by, or proceeding of or before any
arbitrator or any Governmental Authority is pending or, to the knowledge of the
Company, threatened by or against the Company or any of its Subsidiaries, or
against any of its or their respective properties or revenues, with respect to
any Credit Document, the Loans made hereunder, the use of proceeds thereof, or
any drawings under a Letter of Credit and the other transactions contemplated
hereby or which could reasonably be expected to have a Material Adverse Effect
and all applicable waiting periods have expired without any action being taken
or threatened by any Governmental Authority which would restrain, prevent or
otherwise impose material adverse conditions on the transactions contemplated
hereby or thereby or which would be reasonably likely to have a Material Adverse
Effect.
8.7 NO DEFAULT. None of the Company or any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect.
No Default or Event of Default has occurred and is continuing.
8.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Company and its
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, and none of such property is
subject to any Lien except as permitted by subsection 11.3.
8.9 INTELLECTUAL PROPERTY. The Company and each of its Subsidiaries
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which could not
reasonably be expected to have a Material Adverse Effect (the
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"INTELLECTUAL PROPERTY"). No material claim has been asserted and is pending
by any Person challenging or questioning the use of any such Intellectual
Property or the validity or effectiveness of any such Intellectual Property,
nor does the Company know of any valid basis for any such claim. The use of
such Intellectual Property by the Company and its Subsidiaries does not
infringe on the rights of any Person, except for such claims and
infringements that, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
8.10 TAXES. Each of the Company and its Subsidiaries has filed or
caused to be filed all material tax returns which, to the knowledge of the
Company, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Company or its Subsidiaries, as the case may be); no tax Lien has
been filed; to the knowledge of the Company, no claim is being asserted, with
respect to any such tax, fee or other charge which would reasonably be likely to
have a Material Adverse Effect.
8.11 FEDERAL REGULATIONS. No part of the proceeds of any Loans will
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. If requested by any Lender or the Administrative Agent,
the Company will furnish to the Administrative Agent and each Lender a statement
to the foregoing effect in conformity with the requirements of FR Form G-1 or FR
Form U-1 referred to in said Regulation G or Regulation U, as the case may be.
8.12 EMPLOYEE BENEFITS. (a) Neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan, and each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. No termination of a Single Employer Plan has
occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such
five-year period. The present value of all accrued benefits under each Single
Employer Plan (based on those assumptions used to fund such Plans) did not, as
of the last annual valuation date prior to the date on which this representation
is made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits by more than $1,000,000. Neither the Company nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither the Company nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Company or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent.
(b) Each Foreign Employee Benefit Plan is in compliance in all
material respects with all Requirements of Law applicable thereto and the
respective requirements of the governing documents for such Foreign Employee
Benefit Plan. The aggregate of the liabilities to
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provide all of the accrued benefits under any Foreign Pension Plan does not
exceed the current fair market value of the assets held in the trust or other
funding vehicle for such Foreign Employee Benefit Plan by an amount in excess
of $5,000,000. With respect to any Foreign Employee Benefit Plan maintained
by a Borrower, any of its Subsidiaries or any Commonly Controlled Entity
(other than a Foreign Pension Plan), reasonable reserves have been
established in accordance with prudent business practice or where required by
ordinary accounting practices in the jurisdiction in which such Foreign
Employee Benefit Plan is maintained. The aggregate unfunded liabilities,
after giving effect to any reserves for such liabilities, with respect to
such Foreign Employee Benefit Plans are not material. There are no actions,
suits or claims (other than routine claims for benefits) pending or, to the
knowledge of such Borrower, threatened against such Borrower, any of its
Subsidiaries or any Commonly Controlled Entity with respect to any Foreign
Employee Benefit Plan that would subject such Borrower, any of its
Subsidiaries or an Commonly Controlled Entity to a liability in excess of
$5,000,000.
8.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS. No Borrower is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No
Borrower is subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
8.14 SUBSIDIARIES. On the Closing Date, the Subsidiaries of the
Company, their jurisdiction of incorporation and the percentage of the Capital
Stock thereof which is owned (directly or indirectly) by the Company shall be as
set forth on Schedule 8.14.
8.15 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 8.15:
(a) none of the Company, any of its Subsidiaries or any of their
respective operations or present or past Property are subject to any
investigation by, or any judicial or administrative proceeding, order,
judgment, settlement, decree or other agreement alleging or addressing (i)
a material violation of any Environmental, Health or Safety Requirement of
Law; (ii) any Remedial Action; or (iii) any material claims or Liabilities
and Costs arising from the Release or threatened Release of a Contaminant
into the environment, nor has the Company or any of its Subsidiaries
received any notice of the foregoing, except, in each case, for any matter
that, individually or in the aggregate is not reasonably likely to have a
Material Adverse Effect;
(b) none of the Company or any of its Subsidiaries is or has been the
owner or operator of any Property that has any of the following that would
reasonably be likely to have a Material Adverse Effect:
(i) any past or present on-site generation,
treatment, recycling, storage or disposal of any hazardous
waste, as that term is defined under 40 C.F.R. Part 261 or any
state or local equivalent;
(ii) any past or present landfill, waste-pile,
underground storage tank or surface impoundment;
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(iii) any asbestos-containing material or any Contaminant;
(iv) any polychlorinated biphenyls (PCBs) used in
hydraulic oils, electrical transformers or other equipment;
(c) no Environmental Lien has attached to any Property of the
Company or any of its Subsidiaries that would reasonably be likely to
have a Material Adverse Effect;
(d) there have been no Releases of any Contaminants into the
environment in reportable quantities by the Company or any of its
Subsidiaries or any other Person that would reasonably be likely to have a
Material Adverse Effect;
(e) neither the Company nor any of its Subsidiaries has any
contingent liability in connection with any Release or threatened Release
of any Contaminants into the environment that would reasonably be likely to
have a Material Adverse Effect;
(f) neither the Company nor any of its Subsidiaries has disposed of
or sent or directly arranged for the transport of any waste or Contaminant
at or to any site listed or proposed for listing on the National Priorities
List ("NPL") pursuant to CERCLA or on the Comprehensive Environmental
Response Compensation Liability Information System List ("CERCLIS"), or any
similar state list, or any other location the effect of which would
reasonably be likely to have a Material Adverse Effect;
(g) no present or past Property of the Company or any of its
Subsidiaries is listed or proposed for listing on the NPL pursuant to
CERCLA or on the CERCLIS or any similar state list of sites requiring
Remedial Action, and the Company and its Subsidiaries are unaware of any
conditions on such Property that would qualify such Property for inclusion
on any such list, except, in either case, where such listing would not
reasonably be likely to have a Material Adverse Effect;
(h) neither the Company nor any of its Subsidiaries is subject to any
Environmental Property Transfer Act as a result of the transactions
contemplated by the Credit Documents or, to the extent such acts are
applicable to any such property, the Company or the relevant Subsidiary has
fully complied with the requirements of such acts, except where the failure
to comply would not reasonably be likely to have a Material Adverse Effect;
(i) neither the Company nor any of its Subsidiaries has assumed,
either contractually or by operation of law, any liabilities or potential
liabilities under any Environmental, Health or Safety Requirements of Law
except where (i) such assumption would not reasonably be likely to have a
Material Adverse Effect or (ii) the Company has received a written
indemnity with respect to such liabilities or potential liabilities (as the
case may be) from a Person (other than the Company or any of its
Subsidiaries) who would reasonably be expected to pay in full all
reasonable claims in respect of such indemnity; and
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(j) The Company and each of its Subsidiaries has obtained, and is in
compliance with, all permits, approvals, registrations, authorization
licenses, variances, facility security clearances and personnel security
clearances, and all permissions required from a Governmental Authority
required under any Environmental, Health or Safety Requirements of Law,
except where the failure to obtain or comply therewith would not, in the
aggregate, reasonably be likely to have a Material Adverse Effect.
8.16 COLLATERAL DOCUMENTS. (a) Upon execution and delivery thereof
by the parties thereto, each Security Document (other than the Foreign Pledge
Agreements) will be effective to create in favor of the Collateral Agent, for
the ratable benefit of the Lenders, a legal, valid and enforceable security
interest in the Collateral described therein and, when the Collateral Agent has
received the stock certificates evidencing the Capital Stock pledged thereunder
(together with the related stock power), the security interests granted pursuant
thereto shall constitute a perfected first lien on, and security interest in,
all right, title and interest of the pledgor party thereto in the Collateral
described therein.
(b) Upon execution and delivery thereof by the parties thereto, each
Foreign Pledge Agreement will be effective to create in favor of the Collateral
Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable
security interest in not less than 65% of the Capital Stock of each Foreign
Subsidiary which is directly owned by the Company or a Domestic Subsidiary and,
when the actions (if any) specified in the legal opinion delivered in connection
with such Foreign Pledge Agreement have been duly taken, the security interests
granted pursuant thereto shall constitute a perfected first lien on, and
security interest in, all right, title and interest of the pledgor party thereto
in such Capital Stock.
8.17 ACCURACY AND COMPLETENESS OF INFORMATION. The factual
statements contained in the financial statements referred to in subsection
8.1(a) and (b), the Credit Documents (including the schedules thereto) and any
other certificates or documents furnished or to be furnished to the
Administrative Agent, the Collateral Agent or the Lenders from time to time in
connection with this Agreement, taken as a whole, do not and will not, to the
best knowledge of the Company and its Subsidiaries, as of the date when made,
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading in
light of the circumstances in which the same were made, all except as otherwise
qualified herein or therein, such knowledge qualification being given only with
respect to factual statements made by Persons other than the Company or any of
its Subsidiaries.
8.18 PROJECTIONS. Each of the Company's business plans and all other
financial projections and related materials and documents delivered to the
Lenders pursuant hereto were prepared in good faith on the basis of the
assumptions accompanying them, and such projections and assumptions as of the
date of preparation thereof were, and as of the Closing Date are, reasonable in
light of the then current and foreseeable business conditions and prospects of
the Company and its Subsidiaries and represented management's opinion of the
Company's and its Subsidiaries' projected financial performance based on the
information available to the Company at the time so furnished, it being
understood that nothing contained in this subsection 8.18 shall
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constitute a representation or warranty that such future financial performance
or results of operations will in fact be achieved.
8.19 SOLVENCY. Each Borrower is, and after giving effect to the
incurrence of all Indebtedness and obligations being incurred in connection
herewith will be, Solvent.
8.20 GOVERNMENT CONTRACTS. (a) None of the Company or any of its
Subsidiaries or any of their respective Affiliates is party to any Contractual
Obligation or subject to any Requirement of Law as a result of any conflict of
interest by, between or among the Company, such Subsidiaries or such Affiliates
or otherwise that would result in the termination of any contract with any
Governmental Authority or that would impose any limitation on the ability of the
Company or such Subsidiary to perform any such contract, except where such
termination or limitation is not reasonably likely to have a Material Adverse
Effect, or to continue its business substantially as presently conducted and
proposed to be conducted.
(b) (i) None of the Company, any of its Subsidiaries or any of their
respective directors or executive officers is (or during the last three years
has been) under administrative, civil or criminal investigation or indictment by
any Governmental Authority, with respect to any alleged irregularity,
misstatement or omission arising under or relating to any contract with a
Governmental Authority; and (ii) during the last three years, none of the
Company or any of its Subsidiaries has conducted or initiated any internal
investigation or made a voluntary disclosure to the United States Government
with respect to any alleged irregularity, misstatement or omission arising under
or relating to a contract with any Governmental Authority, in each case except
(with respect to such matters occurring after the Closing Date) as disclosed in
writing to the Lenders.
(c) Except (with respect to such matters occurring after the Closing
Date) as disclosed in writing to the Lenders, none of the Company or any of its
Subsidiaries or any of their respective directors or executive officers is (or
during the last three years has been) suspended or debarred from doing business
with the United States Government or is (or during such period was) the subject
of a finding of nonresponsibility or ineligibility for United States Government
contracting.
SECTION 9. CONDITIONS PRECEDENT
9.1 CONDITIONS TO INITIAL LOANS. The agreement of each Lender to
make the initial Loans and other extensions of credit requested to be made by it
is subject to the satisfaction, immediately prior to or concurrently with the
making of such Loan or other extension of credit (and, in any event, on or prior
to March 31, 1998), of the following conditions precedent:
(a) CREDIT DOCUMENTS. The Administrative Agent shall have received
(i) this Agreement, executed and delivered by a duly authorized officer of
each Borrower, (ii) the Company Pledge Agreement, executed and delivered by
a duly authorized officer of the Company, (iii) the Subsidiary Pledge
Agreement, executed and delivered by a duly authorized officer of each
Domestic Subsidiary party thereto, (iv) the Foreign Pledge
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Agreements, each executed and delivered by a duly authorized officer of
each party thereto, (v) the Company Guaranty, executed and delivered by
a duly authorized officer of the Company, (vi) the Subsidiary Guaranty,
executed and delivered by a duly authorized officer of each Domestic
Subsidiary party thereto.
(b) RELATED AGREEMENTS. The Administrative Agent shall have received
true and correct copies, certified as to authenticity by the Company, of
such other documents or instruments as may be reasonably requested by the
Administrative Agent.
(c) CORPORATE PROCEEDINGS OF THE COMPANY. The Administrative Agent
shall have received a copy of the resolutions, in form and substance
satisfactory to the Administrative Agent, of the Board of Directors of the
Company authorizing (i) the execution, delivery and performance of this
Agreement and the other Credit Documents to which it is a party, (ii) the
borrowings contemplated hereunder and (iii) the granting by it of the Liens
created pursuant to the Security Documents to which it is a party,
certified by the Secretary or an Assistant Secretary of the Company as of
the Closing Date, which certificate shall be in form and substance
satisfactory to the Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.
(d) COMPANY INCUMBENCY CERTIFICATE. The Administrative Agent shall
have received a Certificate of the Company, dated the Closing Date, as to
the incumbency and signature of the officers of the Company executing any
Credit Document satisfactory in form and substance to the Administrative
Agent.
(e) CORPORATE PROCEEDINGS OF CREDIT PARTIES. The Administrative
Agent shall have received a copy of the resolutions, in form and substance
satisfactory to the Administrative Agent, of the Board of Directors of each
Credit Party (other than the Company) which is a party to a Credit Document
authorizing (i) the execution, delivery and performance of the Credit
Documents to which it is a party and (ii) the granting by it of the Liens
created pursuant to the Security Documents (if any) to which it is a party,
certified by the Secretary or an Assistant Secretary (or another competent
officer or a director) of each such Subsidiary as of the Closing Date,
which certificate shall be in form and substance satisfactory to the
Administrative Agent and shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded.
(f) CREDIT PARTY INCUMBENCY CERTIFICATES. The Administrative Agent
shall have received a certificate of each Credit Party (other than the
Company), dated the Closing Date, as to the incumbency and signature of the
officers of such Credit Party executing any Credit Document, satisfactory
in form and substance to the Administrative Agent.
(g) CORPORATE DOCUMENTS. The Administrative Agent shall
have received true and complete copies of the certificate of incorporation
and by-laws of the Company, certified as of the Closing Date as complete
and correct copies thereof by the Secretary or an Assistant Secretary of
the Company.
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(h) FEES. Each of the Administrative Agent and the Collateral Agent
shall have received the fees to be received on the Closing Date referred to
in subsection 7.16.
(i) LEGAL OPINIONS. The Administrative Agent shall have received the
following executed legal opinions:
(i) the executed legal opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to the Company and the other Credit
Parties, substantially in the form of Exhibit E;
(ii) the executed legal opinions of counsel described on
Schedule 9.1, which opinions shall be in form and substance reasonably
acceptable to the Administrative Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require. The Company hereby directs each of its special
counsel, Skadden, Arps, Slate, Meagher & Flom LLP, and each of the foreign
counsel to the Borrowers to prepare and deliver to the Administrative
Agent, the Collateral Agent and the Lenders, its opinions.
(j) PLEDGED STOCK; STOCK POWERS. The Administrative Agent shall have
received the certificates representing the shares pledged pursuant to each
of the Pledge Agreements (it being understood that the Capital Stock of
each of Composites-Austria, Hexcel-France and Salver is represented by
uncertificated securities and that the Capital Stock of Hexcel-Belgium
exists in registered form), together with (if legally possible) an undated
stock power for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof.
(k) ACTIONS TO PERFECT LIENS. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all
filings, recordings, registrations and other actions necessary or, in the
opinion of the Administrative Agent, desirable to perfect the Liens created
by the Security Documents shall have been completed.
(l) NO CONSENTS. The Company and its Subsidiaries shall have
obtained all consents and approvals of Governmental Authorities and third
parties necessary or reasonably advisable in connection with the Loans and
other extensions of credit hereunder and the continuing operations of the
Company and its Subsidiaries; all such consents and approvals shall be in
full force and effect and all applicable appeal and waiting periods shall
have expired without any governmental or judicial action being taken or
threatened that has had or would be reasonably likely to have a Material
Adverse Effect.
(m) FEES. The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the Closing Date, including,
to the extent invoiced a reasonable time prior to the Closing Date,
reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Company and its
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Subsidiaries hereunder or under any other Credit Document.
9.2 CONDITIONS TO EACH LOAN. The agreement of each Lender to make
any Loan or other extension of credit requested to be made by it on any
date (including, without limitation, any Loan or other extension of credit
to be made on the Closing Date) is subject to the satisfaction of the
following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Borrowers requesting such Loan or other extension of
credit in or pursuant to the Credit Documents shall be true and correct in
all material respects on and as of such date as if made on and as of such
date.
(b) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans and
other extensions of credit requested to be made on such date.
(c) NO MATERIAL ADVERSE CHANGE. No event shall have occurred since
December 31, 1996, which has or is reasonably likely, in the opinion of the
Majority Lenders, to have a material adverse effect on the business,
condition (financial or otherwise), performance, properties or prospects of
the Borrower requesting such Loan or other extension of credit or the
Subsidiary Guarantors, taken as a whole, or of the Company and its
Subsidiaries, taken as a whole.
(d) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Credit Documents
shall be satisfactory in form and substance to the Administrative Agent,
and the Administrative Agent shall have received such other documents and
legal opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
Each borrowing by a Borrower hereunder shall constitute a representation and
warranty by such Borrower as of the date thereof that the conditions contained
in this subsection have been satisfied.
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SECTION 10. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Aggregate Revolving
Credit Commitment or the European Overdraft Commitment remains in effect or any
amount is owing to any Lender, the Collateral Agent or the Administrative Agent
hereunder or under any other Credit Document, it shall and (except in the case
of delivery of financial information, reports and notices) shall cause each of
its Subsidiaries to:
10.1 FINANCIAL STATEMENTS. Furnish to the Administrative Agent (who
shall promptly forward such documents to the Lenders):
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Company after the Closing Date, a copy of
the consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of such year and the related consolidated
statements of income and cash flows for such year, setting forth in each
case in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Price Waterhouse or
other independent certified public accountants of nationally recognized
standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Company, the unaudited consolidated balance sheets of the
Company and its consolidated Subsidiaries as at the end of such quarter and
the related unaudited consolidated statements of income and cash flows of
the Company and its consolidated Subsidiaries for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth
in each case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments); and
(c) not later than 30 days (or, in the case of the first fiscal month
following the Closing Date, 45 days) after the end of each fiscal month of
the Company (not already provided for in 10.1(a) or (b)), a copy of the
unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of such month and the related unaudited
consolidated statements of income and cash flows of the Company and its
consolidated Subsidiaries for such month, certified by a Responsible
Officer as being fairly stated in all material respects (subject to normal
year-end audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
10.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Administrative
Agent (who shall promptly forward such documents to the Lenders):
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(a) concurrently with the delivery of the financial statements
referred to in subsection 10.1(a), a letter from the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such letter;
(b) concurrently with the delivery of the financial statements
referred to in subsections 10.1(a) and (b), a certificate of a Responsible
Officer, substantially in the form of Exhibit H;
(c) not later than thirty days after the end of each fiscal year of
the Company, a combined annual budget (in the format customarily utilized
by the Company for making financial projections) of (i) the Company and its
Domestic Subsidiaries, (ii) each Foreign Borrower and (iii) the Company and
its Subsidiaries for the succeeding fiscal year of the Company, displaying
on a quarterly basis the anticipated balance sheets as at the end of such
period and the related statements of income and cash flow of each of the
Persons described in clauses (i) through (iii) above;
(d) during the month of March in each calendar year, the Company
shall submit to the Administrative Agent and the Lenders a report prepared
by the appropriate officers of the Company summarizing the status of any
material environmental, health or safety non-compliance, hazard or
liability issues, and identifying the cash expenditures for Liabilities and
Costs arising out of or relating to such environmental health or safety
matters made by the Company and its Subsidiaries during the previous
calendar year; and
(e) within five days after the same are sent, copies of all financial
statements and reports which the Company sends to its stockholders or
debtholders generally, and within five days after the same are filed,
copies of all financial statements and reports which the Company may make
to, or file with, the Securities and Exchange Commission or any successor
or analogous Governmental Authority; and
(f) promptly, such additional financial and other information as any
Lender (acting through the Administrative Agent) may from time to time
reasonably request.
10.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Company or its Subsidiaries, as the case may be.
10.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. (a) Continue
to engage in business of the same general type as now conducted by it and
preserve, renew and keep in full force and effect its corporate existence and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business, except (i) as
otherwise permitted pursuant to subsection 11.5 and (ii) to the extent that the
failure to maintain or preserve such rights, privileges and franchises would not
reasonable be expected to
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have a Material Adverse Effect.
(b) Comply with all Contractual Obligations and Requirements of Law
except to the extent that failure to comply therewith could not, in the
aggregate, be reasonably expected to have a Material Adverse Effect.
10.5 MAINTENANCE OF PROPERTY; INSURANCE. (a) Keep all property
useful and necessary in its business in good working order and condition;
PROVIDED that nothing contained in this subsection 10.5 shall be deemed to
prohibit the Company or any of its Subsidiaries from discontinuing the operation
or maintenance of any such property if such discontinuance (i) is, in the
reasonable judgment of the Company or such Subsidiary, necessary or appropriate
in the conduct of its business, (ii) is otherwise permitted by this Agreement
and (iii) would not be reasonably likely to have a Material Adverse Effect.
(b) Maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and against at least such
risks as are usually insured against in the same general area by companies
engaged in the same or a similar business; and furnish to each Lender, upon
written request, full information as to the insurance carried.
10.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and (subject to
applicable Requirements of Law concerning classified information and to the
rights of any tenants or licensees of such properties) permit representatives of
the Administrative Agent (or, after the occurrence and during the continuance of
any Event of Default under Section 12(a), any Lender) to visit and inspect any
of its properties and examine and make abstracts from any of its books and
records at any reasonable time and as often as may reasonably be desired (upon
reasonable written notice) and to discuss the business, operations, properties
and financial and other condition of the Company and its Subsidiaries with
officers and employees of the Company and its Subsidiaries and with its
independent certified public accountants. All reasonable costs and expenses
incurred by the Administrative Agent as a result of any inspections, audits and
examinations conducted pursuant to this subsection 10.6 shall be paid by the
Company.
10.7 NOTICES. Promptly give notice to the Administrative Agent and
each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the Company
or any of its Subsidiaries and any Governmental Authority, which in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Company or any of its
Subsidiaries
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which (after giving effect to any applicable insurance coverage) would
be reasonably likely to have (in the Company's reasonable judgment) a
Material Adverse Effect;
(d) the following events, as soon as possible and in any event within
30 days after the Company knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer Plan
or (ii) the institution of proceedings or the taking of any other action by
the PBGC or the Company or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan;
(e) any loss or threatened loss of the security clearances necessary
for the operation of the Company's "government contracts business" unless
disclosure thereof is prohibited by any Requirement of Law; and
(f) any development or event which has had or could reasonably be
expected to have (i) a Material Adverse Effect or (ii) a material adverse
effect on the value of, or the Collateral Agent's interest in, the
Collateral.
Each notice pursuant to this subsection 10.7 shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Company proposes to take with respect
thereto.
10.8 FURTHER ASSURANCES. Upon the request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and execute or
cause to be executed any and all documents (including, without limitation,
financing statements and continuation statements) for filing under the
provisions of the Uniform Commercial Code or any other Requirement of Law which
are necessary or advisable to maintain in favor of the Collateral Agent, for the
benefit of the Lenders, Liens on the Collateral that are duly perfected in
accordance with all applicable Requirements of Law.
10.9 ADDITIONAL COLLATERAL. (a) With respect to any Person (other
than a Domestic Subsidiary formed for the sole purpose of holding the capital
stock of one or more of the Company's Foreign Subsidiaries) that, subsequent to
the Closing Date, becomes a Domestic Subsidiary which is a Material Subsidiary,
promptly upon the request of the Administrative Agent: (i) execute and deliver
to the Collateral Agent, for the benefit of the Lenders, a new pledge agreement
or such amendments to the existing Pledge Agreements as the Administrative Agent
shall deem necessary or advisable to grant to the Collateral Agent, for the
benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is
owned by the Company or any of its Subsidiaries, (ii) deliver to the Collateral
Agent the certificates representing such Capital Stock, together with undated
stock powers executed and delivered in blank by a duly authorized officer of the
Company or such Subsidiary, as the case may be, (iii) cause such new Subsidiary
(A) to become a party to the Subsidiary Guaranty, in each case pursuant to
documentation which is in form and substance satisfactory to the Administrative
Agent, and (B) to take all actions
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necessary or advisable to cause the Lien created by the relevant Security
Documents to be duly perfected in accordance with all applicable Requirements
of Law and (iv) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described in
clauses (i), (ii) and (iii) immediately preceding, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a Foreign Subsidiary and which has Capital Stock which is owned directly
by the Company or a Domestic Subsidiary which is a Material Subsidiary, promptly
upon the request of the Administrative Agent: (i) execute and deliver to the
Collateral Agent a new Foreign Pledge Agreement or such amendments to the
relevant Foreign Pledge Agreement as the Administrative Agent shall deem
necessary or advisable to grant to the Collateral Agent, for the benefit of the
Lenders, a Lien on the Capital Stock of such Subsidiary which is owned directly
by the Company or any of its Domestic Subsidiaries (PROVIDED that in no event
shall more than 65% of the Capital Stock of any such Subsidiary be required to
be so pledged if the pledge of more than such amount would be reasonably likely
to cause adverse tax consequences), (ii) to the extent reasonably deemed
advisable by the Administrative Agent, deliver to the Administrative Agent any
certificates representing such Capital Stock, together with undated stock powers
executed and delivered in blank by a duly authorized officer of the Company or
such Subsidiary, as the case may be, (iii) take or cause to be taken all such
other actions under the law of the jurisdiction of organization of such Foreign
Subsidiary as may be necessary or advisable to perfect such Lien on such Capital
Stock and (iv) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described in clauses
(i) through (iii) immediately preceding, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
Each Foreign Borrower hereby covenants and agrees that it shall not take any
action or fail to take any action which would constitute a Default or Event of
Default hereunder.
SECTION 11. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Aggregate Revolving
Credit Commitment or the European Overdraft Commitment remains in effect or any
amount is owing to any Lender, the Collateral Agent or the Administrative Agent
hereunder or under any other Credit Document, it shall not and (except in the
case of subsection 11.1) shall not permit any of its Subsidiaries to, directly
or indirectly:
11.1 FINANCIAL CONDITION COVENANTS.
(a) MINIMUM INTEREST COVERAGE RATIO. Permit the Interest Coverage
Ratio of the Company and its Subsidiaries on the last day of any fiscal quarter
of the Company to be less than 3.0 to 1.0.
(b) MAXIMUM LEVERAGE RATIO. Permit the Leverage Ratio of the Company
and its Subsidiaries on the last day of any fiscal quarter of the Company to be
greater than 4.75 to
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1.0.
(c) MINIMUM FIXED CHARGE COVERAGE RATIO. Permit the Fixed Charge
Coverage Ratio of the Company and its Subsidiaries on the last day of any fiscal
quarter of the Company to be less than 2.0 to 1.0.
11.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness (including, in any event, any preferred stock), except:
(a) Indebtedness of the Borrowers and their Subsidiaries under
this Agreement and the other Credit Documents, and other Indebtedness
of the Borrowers arising pursuant to Interest Rate Agreements,
currency hedging agreements and foreign exchange contracts to which
any Lender or Affiliate thereof is a party;
(b) Indebtedness listed on Schedule 11.2 and any refinancings,
refundings, renewals or extensions thereof; PROVIDED that (x) the aggregate
principal amount of replacement Indebtedness is not greater than the
principal amount of the Indebtedness being so replaced and (y) the terms of
such replacement Indebtedness are, in the aggregate, no less favorable to
the Company or such Subsidiary than the terms of the Indebtedness being so
replaced;
(c) Financing Leases and purchase money Indebtedness incurred by
the Company or any of its Subsidiaries to finance the acquisition of
tangible or intangible assets, and Indebtedness incurred by the
Company or any of its Subsidiaries to refinance such Financing Leases
and purchase money Indebtedness, in an aggregate principal amount not
to exceed $20,000,000 (or the Local Equivalent thereof) at any one
time outstanding;
(d) Indebtedness of the Company to any Subsidiary and of any
Subsidiary to the Company or any other Subsidiary;
(e) Indebtedness of a Person which becomes a Subsidiary after the
Closing Date; PROVIDED that (i) such Indebtedness existed at the time such
Person became a Subsidiary and was not created in anticipation thereof and
(ii) immediately after giving effect to the acquisition of such Person by
the Borrower no Default or Event of Default shall have occurred and be
continuing, and any refinancings, refundings, of renewals or extensions
thereof; PROVIDED that the amount of such Indebtedness is not increased at
the time of such refinancing, refunding, renewal or extension;
(f) Permitted Subordinated Indebtedness of the Company;
(g) Indebtedness incurred for the working capital purposes of the
Foreign Borrowers in an aggregate principal amount not to exceed
$125,000,000 (or the Local Equivalent thereof) at any one time outstanding;
PROVIDED that (x) the Aggregate Revolving Credit Commitment shall be
temporarily reduced by the amount of any
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Indebtedness incurred pursuant to this subsection 11.2(g) and (y) during
such time as a Foreign Borrower has any Indebtedness under this
subsection 11.2(g), it shall have no outstanding European Revolving
Loans hereunder;
(h) foreign currency cap agreements, foreign currency rate swap
agreements and other similar agreements and arrangements entered into by
the Company or any Subsidiary to provide protection against fluctuations in
foreign currency rates; PROVIDED that such agreements are entered into by
the Company or any Subsidiary in the ordinary course of business;
(i) Indebtedness of the Company in respect of unsecured standby and
commercial letters of credit issued by a Lender in an aggregate face amount
(including, without limitation, any reimbursement obligations owing in
respect thereof) not to exceed $10,000,000 (or the Local Equivalent
thereof) at any one time outstanding;
(j) Indebtedness of the Company owing to employees of the Company and
its Subsidiaries on account of employee contributions to a non-qualified
benefit plan;
(k) Preferred stock of Subsidiaries of the Company and subordinated
Indebtedness of the Company or any of its Domestic Subsidiaries which is
upon terms reasonably satisfactory to the Majority Lenders; PROVIDED that
the PRO FORMA Leverage Ratio of the Company and its Subsidiaries (based
upon the EBITDA of the Company and its Subsidiaries for the period of four
consecutive fiscal quarters most recently ended and the Indebtedness of the
Company and its Subsidiaries on the date of, and after giving effect to,
the incurrence of such Indebtedness) is not more than 4.5 to 1.0; and
(l) additional Indebtedness in an aggregate principal amount not to
exceed $20,000,000 (or the Local Equivalent thereof) at any time
outstanding.
11.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes, assessments and governmental charges not yet due
or which are being contested in good faith by appropriate proceedings,
PROVIDED that adequate reserves with respect thereto are maintained on the
books of the Company or its Subsidiaries, as the case may be, in conformity
with GAAP (or, in the case of Foreign Subsidiaries, generally accepted
accounting principles in effect from time to time in their respective
jurisdictions of incorporation);
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
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(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Company or any Subsidiary;
(f) Liens arising from precautionary UCC financing statement filings
regarding operating leases entered into by the Company and its Subsidiaries
in the ordinary course of business;
(g) Liens in favor of banking institutions arising as a matter of law
and encumbering the deposits (including the right of setoff) held by such
banking institutions in the ordinary course of business and which are
within the general parameters customary in the banking industry;
(h) Liens in favor of customs and revenue authorities arising as a
matter of law to secure the payment of customs duties in connection with
the importation of goods; and
(i) Liens created pursuant to the Security Documents;
(j) Liens listed on Schedule 11.3, securing Indebtedness permitted by
subsection 11.2(b), PROVIDED that no such Lien is spread to cover any
additional property after the Closing Date and that the amount of
Indebtedness secured thereby is not increased;
(k) purchase money Liens (including the interest of a lessor
under a Financing Lease) and Liens to which any Property is subject at
the time of the acquisition thereof securing Indebtedness permitted by
subsection 11.2(c) and limited in each case to the property purchased
or subject to such lease;
(l) any attachment or judgment Lien the existence of which does not
constitute an Event of Default under Section 12(h);
(m) Liens securing Indebtedness permitted by subsection 11.2(g);
PROVIDED that such Lien shall encumber only assets of the Foreign Borrower
who is the primary obligor in respect of such Indebtedness and shall
encumber only assets which are located outside of the United States of
America;
(n) Liens on the property or assets of a Person which becomes a
Subsidiary after the Closing Date securing Indebtedness permitted by
Section 11.2(e); PROVIDED that (i) such Liens existed at the time such
Person became a Subsidiary and were not created in anticipation thereof,
(ii) any such Lien is not spread to cover any property or assets of
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such Person after the time such corporation becomes a Subsidiary, and
(iii) the amount of Indebtedness secured thereby is not increased; and
(o) additional Liens securing Indebtedness which, in the aggregate
with the amount guaranteed pursuant to any Guarantee Obligation created in
reliance upon the provisions of subsection 11.4(i), does not exceed 5% of
the consolidated net assets of the Company and its Subsidiaries; PROVIDED
that no Default or Event of Default has occurred and is continuing at the
time that such Indebtedness is incurred.
11.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations listed on Schedule 11.4;
(b) Guarantee Obligations arising under the Credit Documents;
(c) Guarantee Obligations arising on account of obligations,
warranties and indemnities which (i) are not with respect to Indebtedness
of any Person, (ii) have been or are undertaken or made in the ordinary
course of business or in connection with the sale of assets permitted by
subsection 11.6(f) and (iii) are not for the benefit of or in favor of an
Affiliate of the Company or any of its Subsidiaries;
(d) Guarantee Obligations of (i) the Company in respect of
obligations of any of its Wholly-owned Subsidiaries and (ii) any Subsidiary
of the Company in respect of obligations of the Company or any wholly-owned
Subsidiary of the Company;
(e) Guarantee Obligations with respect to obligations, warranties and
indemnities (other than with respect to Indebtedness) arising (i) in the
ordinary course of business, (ii) under the Existing Transaction Documents
or the Transaction Documents or (iii) with respect to customary
representations, warranties and indemnities entered into in connection with
the sale or other disposition of assets;
(f) Guarantee Obligations in respect of payments made by the Company
to Dainippon Ink & Chemical, Inc. in an aggregate amount not to exceed at
any time $10,500,000;
(g) Guarantee Obligations in respect of Indebtedness of Subsidiaries
of the Company which was incurred in reliance upon the provisions of
subsection 11.2(g);
(h) Guarantee Obligations constituting Investments pursuant to
subsection 11.8(j); and
(i) additional Guarantee Obligations of the Company and its
Subsidiaries in respect of obligations which, in the aggregate with the
aggregate amount of Indebtedness secured by Liens incurred in reliance upon
the provisions of subsection 11.3(n), does not exceed 5% of the
consolidated net assets of the Company and its Subsidiaries; PROVIDED
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that no Default or Event of Default has occurred and is continuing at
the time that such Guarantee Obligation is incurred.
11.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the Company (other than a Borrower) may be
merged or consolidated with or into the Company (PROVIDED that the Company
shall be the continuing or surviving corporation) or with or into any one
or more wholly owned Subsidiaries of the Company (PROVIDED that the wholly
owned Subsidiary or Subsidiaries shall be the continuing or surviving
corporation); and
(b) any wholly owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation
or otherwise) to the Company or any other Wholly-owned Subsidiary of the
Company.
11.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person other than the
Company or any wholly owned Subsidiary, except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale or other disposition of obsolete or worn out property in
the ordinary course of business;
(c) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the
compromise or collection thereof;
(d) assignments and licenses of intellectual property of the Company
and its Subsidiaries (i) to joint ventures, (ii) in the ordinary course of
business or (iii) pursuant to the Strategic Alliance Agreement;
(e) leases of owned real property and subleases of leased real
property, to the extent such leases and subleases have anticipated annual
rentals of less than $1,000,000 each; PROVIDED, HOWEVER, leases and
subleases of real property among the Company and its subsidiaries or among
such subsidiaries shall be permitted without regard to anticipated annual
rentals;
(f) the sale by the Company and its Subsidiaries of all or any part
of the property referred to on Schedule 7.5; PROVIDED, that (i) the
Administrative Agent shall have received the documentation evidencing such
sales, (ii) such sales shall not be made for
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less than the fair market value of such Property and for consideration
other than at least 85% cash and (iii) the Net Proceeds arising from
such sales shall not be substantially less than the amount specified
with respect to such Property listed on Schedule 9.5;
(g) sales permitted by subsection 11.5 or 11.9; and
(h) additional sales of assets not in excess of $20,000,000 (or the
Local Equivalent thereof) in any fiscal year.
Any Collateral which is sold, transferred or otherwise conveyed pursuant to this
subsection 11.6 to a Person other than the Company and its Subsidiaries shall,
upon the consummation of such sale in accordance with the terms of this
Agreement and the other Credit Documents, be released from the Liens granted
pursuant to the Security Documents and each Lender hereby authorizes and
instructs each of the Administrative Agent and the Collateral Agent to take such
action as the Company reasonably may request to evidence such release.
11.7 LIMITATION ON RESTRICTED PAYMENTS. Declare or pay any dividend
(other than dividends payable solely in common stock of the Borrower) on, or
make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any shares of any class of Capital Stock of the Company or any
warrants or options to purchase any such Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Company or
any Subsidiary (such declarations, payments, setting apart, purchases,
redemptions, defeasances, retirements, acquisitions and distributions being
herein called "RESTRICTED PAYMENTS"), except that, during such time as no
Default or Event of Default has occurred and is continuing or would result
therefrom, the Company may make Restricted Payments with respect to (a) employee
or director stock options, stock incentive plans or restricted stock plans of
the Company, (b) the purchase from time to time by the Company of its common
stock (for not more than market price) with the proceeds of the exercise by
grantees under any equity-based incentive plan (c) other purchases from time to
time by the Company of its common stock not to exceed $10,000,000 in the
aggregate since the date hereof and (d) transactions otherwise permitted
pursuant to subsection 11.14.
11.8 LIMITATION ON INVESTMENTS. Make any Investment in any Person
after the Closing Date, except:
(a) Investments in cash and Cash Equivalents;
(b) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(c) Investments on account of (i) intercompany loans which are
permitted by subsection 11.2(d), (ii) the purchase of equity interests of,
and the making of capital
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contributions to, Wholly-owned Subsidiaries and (iii) Permitted Belgian
Capital;
(d) cash contributions to Hexcel Foundation not to exceed $500,000 in
the aggregate in any fiscal year; PROVIDED, that the unused portion of such
amount may be used in the next succeeding year;
(e) Investments specifically contemplated by any Existing Transaction
Document;
(f) promissory notes and other Investments received as consideration
pursuant to transactions permitted by subsection 11.6(f);
(g) extensions of trade credit in the ordinary course of business;
(h) loans and advances to employees of the Company and its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(i) Investments on account of the acquisition by the Company and its
Subsidiaries of all or substantially all of the capital stock or assets of
any Person (or business units thereof); PROVIDED that, after giving effect
to the consummation of such Investment, the Leverage Ratio of the Company
and its Subsidiaries (determined on a PRO FORMA basis, based upon the
EBITDA of the Company, its Subsidiaries and the acquired entity for the
period of four consecutive fiscal quarters most recently ended and the
Indebtedness of the Company, its Subsidiaries and the acquired entity after
giving effect to the consummation of such Investment) is not more than 4.5
to 1.0; and
(j) additional Investments by the Company and its Subsidiaries;
PROVIDED that, after giving effect to the consummation of such Investment,
(i) the aggregate amount of all Investments (with the amount of any
Guarantee Obligations being deemed to be the amount so guaranteed) made by
the Company and its Subsidiaries in reliance upon the provisions of this
subsection 11.8(j) does not exceed the greater of (A) $75,000,000 and (B)
the amount then equal to 15% of the consolidated tangible net assets of the
Company and its Subsidiaries and (ii) the Leverage Ratio of the Company and
its Subsidiaries (based upon the EBITDA of the Company and its Subsidiaries
for the period of four consecutive fiscal quarters most recently ended and
the Indebtedness of the Company and its Subsidiaries after giving effect to
the consummation of such Investment) is not more than 4.5 to 1.0.
11.9 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement, (b) in the
ordinary course of the Borrower's or such Subsidiary's business and (c) upon
fair and reasonable terms no less favorable to the Company or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate; PROVIDED, HOWEVER, that
nothing contained herein shall be deemed to prohibit (i) employment or
compensation agreements or other arrangements with officers or directors of
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the Company or any of its Subsidiaries which have been approved by the Board
of Directors of the Company or any committee of the disinterested directors
of the Company, (ii) existing management agreements, (iii) stock options and
awards granted to employees and directors of the Company or any of its
Subsidiaries under existing Plans or other employee benefit Plans, and (iv)
any contract or transaction providing for indemnification of officers or
directors of the Company or any of its Subsidiaries from liability, or
providing or maintaining insurance or other arrangements on behalf of any
such officer or director against any liability asserted against such person
and incurred in or arising out of such capacity, (v) the transactions set
forth on Schedule 11.9 or permitted by subsection 11.5 and (vi) transactions
which are expressly contemplated by the Existing Transaction Documents.
11.10 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Company or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Company or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Company or such Subsidiary, other than any such
transactions relating to the sale and lease of equipment upon terms and subject
to conditions satisfactory to the Administrative Agent to the extent that the
aggregate fair market value of all equipment sold does not exceed $20,000,000
(or the Local Equivalent thereof).
11.11 LIMITATION ON CHANGES IN FISCAL YEAR OR ACCOUNTING TREATMENT.
(a) Permit the fiscal year of the Company to end on a day other than
December 31.
(b) Make any material change in accounting treatment and reporting
practices or tax reporting treatment, except as required by GAAP and disclosed
to the Lenders and the Administrative Agent.
11.12 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any
Person any agreement, other than (a) the Credit Documents and (b) any industrial
revenue bonds, purchase money mortgages or Financing Leases permitted by this
Agreement (in which cases, any prohibition or limitation shall only be effective
against the assets financed thereby), which prohibits or limits the ability of
the Company or any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired.
11.13 LIMITATION ON LINES OF BUSINESS. Enter into any business,
either directly or through any Subsidiary, which would not reasonably be
considered to be related to (or an extension of) the businesses in which the
Company and its Subsidiaries are engaged on the date hereof.
11.14 LIMITATION ON MODIFICATION OF AGREEMENTS AND PAYMENTS ON
ACCOUNT OF DEBT. (a) Prepay, redeem, purchase, repurchase, defease or retire
any long-term Indebtedness, other than (i) the Indebtedness hereunder, (ii) any
intercompany Indebtedness permitted by subsection 11.1 if an Event of Default is
not existing and would not result from giving effect to such prepayment, (iii)
other scheduled payments in respect of Indebtedness, (iv) regularly scheduled
payments on the Permitted Subordinated Indebtedness, (v) payments of equity or
cash
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made upon the conversion of any Permitted Subordinated Indebtedness into
equity in accordance with the relevant indenture governing such Indebtedness,
PROVIDED that (A) such payments are permitted to be made under the terms of
the Permitted Subordinated Indebtedness, (B) no Default or Event of Default
has occurred and is continuing and (C) payments of cash do not exceed
$10,000,0000 in the aggregate, and (vi) payments of Indebtedness made in
connection with (A) the Existing Transaction Documents or (B) as set forth on
Schedule 11.14; PROVIDED that nothing contained herein shall be deemed to
prohibit (x) the Company from converting into equity any intercompany
Indebtedness which is owing to it from any of its Subsidiaries, (y) any
Subsidiary of the Company from converting into equity any Indebtedness which
is owing to it from any other Subsidiary or (z) the conversion of the
Permitted Subordinated Indebtedness into common stock of the Company in a
manner not inconsistent with the terms thereof (and the payment of (i) cash
adjustments by the Company in lieu of issuing fractional shares of common
stock upon the conversion of the Subordinated Ciba Notes or the Subordinated
Debentures and (ii) accrued interest thereon).
(b) Amend, supplement or otherwise modify the terms of any Existing
Transaction Document, the Subordinated Debentures, the Subordinated Debenture
Indenture, the Subordinated Convertible Notes or the Subordinated Convertible
Notes Indenture in any material respect, other than amendments to any
non-material Existing Transaction Document in a manner which could not
reasonably be expected to be adverse to the Lenders.
(c) Amend, supplement or otherwise modify the terms of (i) its
articles/certificate of incorporation (or the equivalent organizational
documents), (ii) its by-laws (or the equivalent governing documents, if any), or
(iii) any document setting forth the designation, amount and/or relative rights,
limitations and preferences of any class or series of its Capital Stock, except
for any such amendments, supplements and other modifications which could not
reasonably be expected to adversely affect the rights or interests of the
Administrative Agent or the Lenders.
11.15 NO NEW RESTRICTIONS ON SUBSIDIARY DIVIDENDS. Agree to create
or otherwise permit to become effective any consensual encumbrance or
restriction of any kind on the ability of any Subsidiary to:
(a) pay, directly or indirectly, dividends or make any other
distributions in respect of its Capital Stock;
(b) make any other distribution or transfer of funds or assets to the
Company; or
(c) make loans or advances to or other Investments in, or pay any
Indebtedness or other obligation owing to, the Company;
except to the extent required by (x) any applicable Requirements of Law, (y) the
Credit Documents or the Subordinated Ciba Notes Indenture or (z) to the extent
permitted (including, without limitation, by waiver of applicable restrictions
contained therein) by the Subordinated Ciba Notes Indenture, any document or
agreement governing Indebtedness which is incurred in reliance upon the
provisions of subsection 11.2(g).
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Each Foreign Borrower hereby covenants and agrees that it shall not take any
action or fail to take any action which would constitute a Default or Event of
Default hereunder.
SECTION 12. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) Any Borrower shall fail to pay any principal of any Loan when
due in accordance with the terms thereof or hereof; or any Borrower
shall fail to pay any interest on any Loan, or any other amount payable
hereunder, within five days after any such interest or other amount
becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the
Company or any other Credit Party herein or in any other Credit Document
or which is contained in any certificate, document or financial or other
statement furnished by it at any time under or in connection with this
Agreement or any such other Credit Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed
made; or
(c) The Company or any other Credit Party shall default in the
observance or performance of any agreement contained in Section 11 or
any negative covenant contained in any of the other Credit Documents; or
(d) The Company or any other Credit Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Credit Document (other than as provided in
paragraphs (a) through (c) of this Section), and such default (to the
extent that it is susceptible to remedy) shall continue unremedied for a
period of 30 days; or
(e) The Company or any of its Subsidiaries shall (i) default in
any payment of principal of or interest of any Indebtedness (other than
the Loans) or in the payment of any Guarantee Obligation, beyond the
period of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or performance
of any other agreement or condition relating to any such Indebtedness or
Guarantee Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur
or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity
or such Guarantee Obligation to become payable; PROVIDED, HOWEVER, that
no Default or Event of Default shall exist under this paragraph unless
the aggregate amount of Indebtedness and/or Guarantee Obligations in
respect of which any default or other event or condition referred to in
this paragraph shall have occurred shall be equal to at least
$10,000,000 (or the Local Equivalent thereof); or
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(f) (i) The Company or any of its Material Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Material Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall
be commenced against the Company or any of its Material Subsidiaries any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against the Company or any of its Material Subsidiaries any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial
part of its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Company or any of its Material Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Company or any of its Material Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of the Company or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Company or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required
Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with
respect to a Plan; and in each case in clauses (i) through (vi) above,
such event or condition, together with all other such events or
conditions, if any, involve an aggregate amount in excess of $3,000,000;
or
(h) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a net
liability (after reduction for the amount of any applicable insurance
coverage) of $10,000,000 (or the Local Equivalent
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thereof) or more, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 60 days from
the entry thereof; or
(i) (i) Any of the Security Documents (or any material provision
of any thereof) shall cease, for any reason, to be in full force and
effect, or the Company or any other Credit Party which is a party to any
of the Security Documents shall so assert or (ii) the Lien created by
any of the Security Documents shall cease to be enforceable and of the
same effect and priority purported to be created thereby, except, in
each case, to the extent such cessation is (A) in accordance with the
terms of the Credit Documents or (B) a result of (x) the failure of the
Collateral Agent to maintain possession of the securities representing
the Collateral or (y) the gross negligence or willful misconduct of any
of the Administrative Agent, the Collateral Agent or the Lenders; or
(j) Any of the Guarantees (or any material provision of any
thereof) shall cease, for any reason, to be in full force and effect, or
the Company or any other Credit Party which is a party to any of the
Guarantees shall so assert; or
(k) Any Change of Control shall occur; or
(l) Any Foreign Borrower shall cease to be (or shall not be) a
Wholly-owned Subsidiary of the Company;
then, and in any such event, (A) if such event is a Bankruptcy Event with
respect to any Borrower, automatically each of the Aggregate Revolving Credit
Commitment and the European Overdraft Commitment shall immediately terminate
and the Loans hereunder (with accrued interest thereon) and all other amounts
owing under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters
of Credit shall have presented the documents required thereunder) shall
immediately become due and payable, and (B) if such event is any other Event
of Default, either or both of the following actions may be taken: (i) with
the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by
notice to the Company declare the Aggregate Revolving Credit Commitment
and/or the European Overdraft Commitment to be terminated forthwith,
whereupon such Commitment(s) shall immediately terminate; and (ii) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Company, declare the Loans hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement (including, without limitation,
all amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the relevant Borrower shall at such time
deposit in one or more cash collateral accounts opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of
such Letters of Credit. Each Borrower hereby grants to the Administrative
Agent, for the
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85
benefit of the Issuing Lender and the L/C Participants, a security interest
in such cash collateral to secure all obligations of such Borrower under this
Agreement and the other Credit Documents. Any amounts held in such cash
collateral account shall be applied by the Administrative Agent to the
payment of drafts drawn under such Letters of Credit issued for the account
of such Borrower, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied
to repay other obligations of the Borrowers hereunder and under the Notes.
After all such Letters of Credit shall have expired or been fully drawn upon,
all Reimbursement Obligations shall have been satisfied and all other
obligations of the Borrowers hereunder and under the Notes shall have been
paid in full, the balance, if any, in such cash collateral account shall be
returned to the relevant Borrower. Each Borrower shall execute and deliver to
the Administrative Agent, for the account of the relevant Issuing Lender and
the L/C Participants, such further documents and instruments as the
Administrative Agent may request to evidence the creation and perfection of
the within security interest in such cash collateral account.
Except as expressly provided above in this Section 12, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 13. THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
13.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints (a) the Administrative Agent as the administrative agent of such
Lender under this Agreement and the other Credit Documents, (b) the
Documentation Agent as the documentation agent hereunder and under the other
Credit Documents, (c) the Collateral Agent as the collateral agent hereunder
and under the other Credit Documents and (d) the Syndication Agent as the
syndication agent hereunder and under the other Credit Documents. Each such
Lender hereby further irrevocably authorizes the Administrative Agent and the
Collateral Agent, in its respective capacity as such, to take such action on
its behalf under the provisions of this Agreement and the other Credit
Documents and to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent or the Collateral Agent (as
the case may be) by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental
thereto (including, without limitation, acting on behalf of and for the
account of each Lender in the creation, execution, perfection, delivery and
enforcement of the Foreign Pledge Agreements). Notwithstanding any
provision to the contrary elsewhere in this Agreement, neither the
Administrative Agent not the Collateral Agent shall have any duties or
responsibilities, except those expressly set forth with respect to it herein,
or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Credit Document or otherwise exist against
the Administrative Agent or the Collateral Agent. Each Lender hereby
acknowledges and agrees that Citibank, N.A., shall have no obligations or
liability hereunder in its capacity as syndication agent and that Credit
Suisse First Boston shall have no obligations or liability hereunder in its
capacity as documentation agent.
13.2 DELEGATION OF DUTIES. Each of the Administrative Agent and the
Collateral Agent may execute any of its duties under this Agreement and the
other Credit Documents by or
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through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. Neither the
Administrative Agent nor the Collateral Agent shall be responsible for the
negligence or misconduct of any agent or attorneys in-fact selected by it
with reasonable care.
13.3 EXCULPATORY PROVISIONS. None of the Administrative Agent,
the Collateral Agent nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for
any action lawfully taken or omitted to be taken by it or such Person under
or in connection with this Agreement or any other Credit Document (except for
its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Borrower or any officer thereof
contained in this Agreement or any other Credit Document or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent or the Collateral Agent under or
in connection with, this Agreement or any other Credit Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Credit Document or for any failure of any
Borrower to perform its obligations hereunder or thereunder. Neither the
Administrative Agent nor the Collateral Agent shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of, this Agreement or
any other Credit Document, or to inspect the properties, books or records of
any Borrower.
13.4 RELIANCE BY ADMINISTRATIVE AGENT AND COLLATERAL AGENT. Each
of the Administrative Agent and the Collateral Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex
or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons and upon advice and statements of legal
counsel (including, without limitation, counsel to the Company), independent
accountants and other experts selected by the Administrative Agent or the
Collateral Agent (as the case may be). Each of the Administrative Agent and
the Collateral Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation
or transfer thereof shall have been filed with the Administrative Agent or
the Collateral Agent (as the case may be). Each of the Administrative Agent
and the Collateral Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Credit Document unless it
shall first receive such advice or concurrence of the Majority Lenders as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. Each of the
Administrative Agent and the Collateral Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and
the other Credit Documents in accordance with a request of the Majority
Lenders (or such larger number of Lenders as may be explicitly required
hereunder), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Loans.
13.5 NOTICE OF DEFAULT. Neither the Administrative Agent nor the
Collateral Agent shall be deemed to have knowledge or notice of the
occurrence of any Default or Event of
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87
Default hereunder unless it has received notice from the Collateral Agent, a
Lender or a Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In
the event that the Collateral Agent receives such a notice, it shall promptly
give notice thereof to the Administrative Agent. In the event that the
Administrative Agent receives such a notice from the Collateral Agent, any
Lender or a Borrower, the Administrative Agent shall give notice thereof to
the Lenders. Each of the Administrative Agent and the Collateral Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders or (in the case of the Collateral
Agent) as shall be reasonably directed by the Administrative Agent; PROVIDED
that unless and until the Administrative Agent or the Collateral Agent (as
the case may be) shall have received such directions, it may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
13.6 NON-RELIANCE ON ADMINISTRATIVE AGENT, COLLATERAL AGENT AND
OTHER LENDERS. Each Lender expressly acknowledges that none of the
Administrative Agent, the Collateral Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent or the Collateral Agent hereinafter taken, including any
review of the affairs of any Borrower, shall be deemed to constitute any
representation or warranty by the Administrative Agent or the Collateral
Agent (as the case may be) to any Lender. Each Lender represents to the
Administrative Agent and the Collateral Agent that such Lender has,
independently and without reliance upon the Administrative Agent, the
Collateral Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of each Borrower and made its own decision to
make its Loans and other extensions of credit hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent, the Collateral Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the
other Credit Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and
other condition and creditworthiness of the Borrowers. Except for notices,
reports and other documents expressly required to be furnished to the Lenders
by the Administrative Agent or the Collateral Agent hereunder, neither the
Administrative Agent nor the Collateral Agent (as the case may be) shall have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, conditio
(financial or otherwise), prospects or creditworthiness of any Borrower which
may come into the possession of the Administrative Agent or the Collateral
Agent (as the case may be) or any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
13.7 INDEMNIFICATION. The Lenders agree to indemnify each of the
Administrative Agent, the Collateral Agent, the Documentation Agent and the
Syndication Agent in its capacity as such (to the extent not reimbursed by
the Borrowers and without limiting the obligation of the Borrowers to do so),
ratably (according to the percentage which the Revolving Credit Commitment of
such Lender constitutes of the Aggregate Revolving Credit Commitment
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on the date on which indemnification is sought), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Loans) be imposed on, incurred by or asserted against the Administrative
Agent, the Collateral Agent, the Documentation Agent or the Syndication Agent
in any way relating to or arising out of, the Aggregate Revolving Credit
Commitment and/or the European Overdraft Commitment, this Agreement, any of
the other Credit Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Administrative Agent, the Collateral Agent,
the Documentation Agent or the Syndication Agent under or in connection with
any of the foregoing; PROVIDED that no Lender shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
the gross negligence or willful misconduct of the Administrative Agent, the
Collateral Agent, the Documentation Agent or the Syndication Agent (as the
case may be). The agreements in this subsection 13.7 shall survive the
payment of the Loans and all other amounts payable hereunder.
13.8 AGENTS IN THEIR INDIVIDUAL CAPACITIES. Each of the
Administrative Agent, the Collateral Agent, the Documentation Agent, the
Syndication Agent and their respective Affiliates and Subsidiaries may make
loans to, accept deposits from and generally engage in any kind of business
with any Borrower as though the Administrative Agent, the Collateral Agent,
the Documentation Agent or the Syndication Agent (as the case may be) were
not the Administrative Agent, the Collateral Agent, the Documentation Agent
or the Syndication Agent hereunder and under the other Credit Documents.
With respect to the Loans and other extensions of credit made by it, each of
the Administrative Agent, the Collateral Agent, the Documentation Agent and
the Syndication Agent shall have the same rights and powers under this
Agreement and the other Credit Documents as any Lender and may exercise the
same as though it were not the Administrative Agent, the Collateral Agent,
the Documentation Agent or the Syndication Agent (as the case may be), and
the terms "Lender" and "Lenders" shall include each of the Administrative
Agent, the Collateral Agent, the Documentation Agent and the Syndication
Agent in its respective individual capacity.
13.9 SUCCESSOR AGENTS. Each of the Administrative Agent, the
Collateral Agent, the Documentation Agent and the Syndication Agent may
resign as such upon 30 days' notice to the Lenders. If the Administrative
Agent shall resign as "Administrative Agent" or the Collateral Agent shall
resign as "Collateral Agent" under this Agreement and the other Credit
Documents, then the Required Lenders shall appoint from among the Lenders a
successor Administrative Agent or Collateral Agent (as the case may be) for
the Lenders, which successor Administrative Agent or Collateral Agent
(PROVIDED that, to the extent that no Default or Event of Default is
continuing at the time of such appointment, such Administrative Agent or
Collateral Agent, as the case may be, shall have been approved by the
Company), shall succeed to the rights, powers and duties of the
Administrative Agent or the Collateral Agent (as the case may be) hereunder.
Effective upon such appointment and approval, the term "Administrative Agent"
or "Collateral Agent" (as the case may be) shall mean such successor
Administrative Agent or Collateral Agent, and the rights, powers and duties
of the former Administrative Agent as Administrative Agent or of the former
Collateral Agent as Collateral Agent (as the case may be) shall be
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terminated, without any other or further act or deed on the part of such
former Administrative Agent or Collateral Agent (as the case may be) or any
of the parties to this Agreement or any holders of the Loans. After any
resignation of the retiring Administrative Agent as Administrative Agent or
of the retiring Collateral Agent as Collateral Agent, the provisions of this
Section 13 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent or Collateral Agent (as the
case may be) under this Agreement and the other Credit Documents.
Notwithstanding anything to the contrary contained herein, during such time
as shares of capital stock of Hexcel Pottsville Corporation are pledged to
the Collateral Agent pursuant to the terms hereof, any successor Collateral
Agent shall be a Person who is acceptable to the Defense Investigative
Service. If the Syndication Agent shall resign as "Syndication Agent" under
this Agreement and the other Credit Documents, then no successor Syndication
Agent shall be appointed. If the Documentation Agent shall resign as
"Documentation Agent" under this Agreement and the other Credit Documents,
then no successor Documentation Agent shall be appointed.
SECTION 14. MISCELLANEOUS
14.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other
Credit Document, nor any terms hereof or thereof may be amended, supplemented
or modified except in accordance with the provisions of this subsection. The
Majority Lenders may, or, with the written consent of the Majority Lenders,
the Administrative Agent (and/or, to the extent applicable, the Collateral
Agent) may, from time to time, (a) enter into with each Borrower directly
affected thereby written amendments, supplements or modifications hereto and
to the other Credit Documents for the purpose of adding any provisions to
this Agreement or the other Credit Documents or changing in any manner the
rights of the Lenders or of such Borrowers hereunder or thereunder or (b)
waive, on such terms and conditions as the Majority Lenders or the
Administrative Agent (and/or, to the extent applicable, the Collateral
Agent), as the case may be, may specify in such instrument, any of the
requirements of this Agreement or the other Credit Documents or any Default
or Event of Default and its consequences; PROVIDED, HOWEVER, that no such
waiver and no such amendment, supplement or modification shall:
(i) without the consent of each Lender directly
affected thereby, (A) reduce the amount or extend the scheduled
date of maturity of any Loan or of any installment thereof, (B)
reduce the stated rate of any interest or fee payable hereunder or
extend the scheduled date of any payment thereof or (C) increase
the amount or extend the expiration date of any Lender's Revolving
Credit Commitment;
(ii) without the written consent of all the Lenders, (A)
amend, modify or waive any provision of this subsection, (B) reduce
the percentage specified in the definition of Required Lenders or
Majority Lenders, (C) consent to the assignment or transfer by any
Borrower of any of its rights and obligations under this Agreement
and the other Credit Documents or (D) release all or substantially
all of the Collateral;
(iii) without the prior written consent of the Issuing
Lender with respect thereto, amend, supplement or otherwise modify
any provisions of or directly applicable to any
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Letter of Credit;
(iv) amend, modify or waive any provision of Section 4
or any other provision of this Agreement governing the rights or
obligations of the Swing Line Lender without the written consent of
the Swing Line Lender;
(v) amend, modify or waive any provision of Section 5
or any other provision of this Agreement directly governing the
rights or obligations of any Local European Lender without the
written consent of such Local European Lender;
(vi) amend, modify or waive any provision of Section 6
or any other provision of this Agreement governing the rights or
obligations of the European Overdraft Lender without the written
consent of the European Overdraft Lender; or
(vii) amend, modify or waive any provision of Section 13
without the written consent of the then Administrative Agent and,
to the extent affected thereby, the Collateral Agent.
Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon the Borrowers,
the Lenders, the Collateral Agent, the Administrative Agent and all future
holders of the Loans. In the case of any waiver, the Borrowers, the Lenders,
the Collateral Agent and the Administrative Agent shall be restored to their
former positions and rights hereunder and under the other Credit Documents,
and any Default or Event of Default waived shall be deemed to be cured and
not continuing; no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.
14.2 RELEASE OF COLLATERAL. (a) Notwithstanding anything to the
contrary contained herein (other than the provisions of subsection 14.2(b))
or in any Security Document, the Collateral Agent shall (upon request of the
Company, but without any notice to or vote or consent of any Lender) take
action having the effect of releasing:
(i) any collateral and/or guarantee obligations provided for in
any Credit Document to the extent necessary to permit the consummation
of any Net Proceeds Event or any asset dispositions permitted by
subsection 11.6 by the Company or any of its Subsidiaries in accordance
with the provisions of this Agreement and the Credit Documents; PROVIDED
that the Net Proceeds of any Net Proceeds Events are applied in the
manner contemplated by subsections 7.5 (if so required); and
(ii) all collateral and guarantee obligations provided for in the
Credit Documents upon the termination of each of the Aggregate Revolving
Credit Commitment and the European Overdraft Commitment, payment in full
of all Loans and Reimbursement Obligations owing hereunder and
termination of all L/C Obligations.
In furtherance of the foregoing, each Lender hereby authorizes and instructs the
Collateral Agent to execute and deliver or file such termination and partial
release statements and do such other
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things as the Company reasonably may request to evidence and effect any
release contemplated hereby.
(b) Notwithstanding the provisions of subsection 14.2(a), the
Collateral Agent shall not be required to execute any release document
which, in the Collateral Agent's opinion, would expose the Collateral
Agent to liability or impose additional obligations upon the Collateral
Agent.
14.3 NOTICES. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing
(including by facsimile transmission) and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made (a) in
the case of delivery by hand, when delivered, (b) in the case of
delivery by mail, three days after being deposited in the mails, postage
prepaid, or (c) in the case of delivery by facsimile transmission, when
sent and receipt has been confirmed, addressed as follows in the case of
the Borrowers, the Collateral Agent and the Administrative Agent, and as
set forth in Schedule II in the case of the other parties hereto, or to
such other address as may be hereafter notified by the respective
parties hereto:
The Company: Hexcel Corporation
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
Attention: Treasurer
Fax: 203/358-3993
Foreign Borrowers: c/o Hexcel Corporation
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
Attention: Treasurer
Fax: 203/358-3993
The Collateral Agent: Citibank, N.A.
399 Park Avenue
New York, New York 10022
Attention: ________________________
Fax: ______________________________
The Administrative Agent: Credit Suisse First Boston
11 Madison Avenue
New York, New York 10010
Attention: ________________________
Fax: ______________________________
PROVIDED that any notice, request or demand to or upon the
Administrative Agent or the Lenders pursuant to subsection 2.2, 3.2,
4.2, 5.2, 5.3, 5.7, 6.2, 7.3, 7.4, 7.6 or 7.11(b)
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92
shall not be effective until received.
14.4 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and
no delay in exercising, on the part of the Administrative Agent, the
Collateral Agent or any Lender, any right, remedy, power or privilege
hereunder or under the other Credit Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
14.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other Credit Documents
and in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this
Agreement and the making of the Loans hereunder.
14.6 PAYMENT OF EXPENSES AND TAXES. The Borrowers agree (a) to
pay or reimburse the Administrative Agent and the Collateral Agent for all
its respective out-of-pocket costs and expenses incurred in connection with
the development, preparation and execution of, and any amendment, supplement
or modification to, this Agreement and the other Credit Documents and any
other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable fees and disbursements
of the several counsel to the Administrative Agent and the Collateral Agent,
(b) to pay or reimburse each Lender, the Collateral Agent and the
Administrative Agent for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights under this Agreement, the
other Credit Documents and any such other documents, including, without
limitation, the fees and disbursements of the several counsel to the Lenders,
the Collateral Agent and the Administrative Agent, (c) to pay, indemnify, and
hold each Lender, the Collateral Agent, the Administrative Agent, the
Documentation Agent and the Syndication Agent harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the
other Credit Documents and any such other documents and (d) to pay,
indemnify, and hold each Lender, the Collateral Agent, the Administrative
Agent, the Documentation Agent and the Syndication Agent harmless from and
against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whasoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other
Credit Documents and the other transactions contemplated hereby, or the use
of the proceeds of the Loans and other extensions of credit hereunder and any
such other documents, including, without limitation, any of the foregoing
relating to the violation of, noncompliance with or liability under, any
Environmental, Health or Safety Requirements of Law applicable to the
operations of the Company, any of its Subsidiaries or any Property (all the
foregoing in this clause (d), collectively, the "INDEMNIFIED LIABILITIES"),
PROVIDED that (x) no Borrower shall be obligated hereunder to the
Administrative Agent, the Collateral Agent, the Documentation
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93
Agent, the Syndication Agent or any Lender with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of the
Administrative Agent, the Collateral Agent, the Documentation Agent, the
Syndication Agent or any such Lender (as the case may be), (y) (ii) neither
of Composites-UK or Hexcel-Spain shall be liable for any indemnified
liabilities to the extent such indemnified liabilities relate to or are
associated with its own acquisition by the Company or any of its Subsidiaries
and (z) none of the Foreign Borrowers shall have any obligation to the
Administrative Agent, the Collateral Agent, the Documentation Agent, the
Syndication Agent or any Lender hereunder with respect to indemnified
liabilities relating to the Revolving Credit Loans made to the Company, Swing
Loans or Letters of Credit issued for the account of a Borrower other than
such Foreign Borrower. The agreements in this subsection 14.6 shall survive
repayment of the Loans and all other amounts payable hereunder.
14.7 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a)
This Agreement shall be binding upon and inure to the benefit of the
Borrowers, the Lenders, the Collateral Agent, the Administrative Agent and
their respective successors and assigns, except that no Borrower may assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to
one or more banks or other entities ("PARTICIPANTS") participating interests
in any Revolving Credit Loan owing to such Lender, the Revolving Credit
Commitment of such Lender or any other interest of such Lender hereunder and
under the other Credit Documents. In the event of any such sale by a Lender
of a participating interest to a Participant, such Lender's obligations under
this Agreement to the other parties to this Agreement shall remain unchanged,
such Lender shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of any such Loan or other extension of credit
for all purposes under this Agreement and the other Credit Documents, and the
relevant Borrowers, the Collateral Agent and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Credit
Documents. No Lender shall be entitled to create in favor of any
Participant, in the participation agreement pursuant to which such
Participant's participating interest shall be created or otherwise, any right
to vote on, consent to or approve any matter relating to this Agreement or
any other Credit Document except for those specified in clause (ii) of the
proviso to subsection 14.1 or, to the extent that such Lender would have the
right to vote on any matter specified therein, clause (i) of such proviso.
The Borrowers agree that if amounts outstanding under this Agreement are due
or unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall, to the
maximum extent permitted by applicable law, be deemed to have the right of
setoff in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement, PROVIDED that, in
purchasing such participating interest, such Participant shall be deemed to
have agreed to share with the Lenders the proceeds thereof as provided in
subsection 14.8(a) as fully as if it were a Lender hereunder. The Borrowers
also agree that each Participant shall be entitled to the benefits of
subsections 7.13, 7.14 and 7.15 with respect to its participation in the
Revolving Credit Commitments, Revolving Credit Loans and other extensions of
credit outstanding from time to time as if it was a Lender; PROVIDED that, in
the case of subsection 7.14,
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94
such Participant shall have complied with the requirements of said subsection
and PROVIDED, FURTHER, that no Participant shall be entitled to receive any
greater amount pursuant to any such subsection than the transferor Lender
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had
no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time and from
time to time assign to (i) any Lender or any affiliate thereof, (ii) with the
consent of the Administrative Agent (which shall not be unreasonably
withheld), to any Eligible Assignee or (iii) with the consent of the
Administrative Agent and the Company (which, in each case, shall not be
unreasonably withheld), to any additional bank or financial institution (any
assignee described in clause (i), (ii) or (ii), an "ASSIGNEE") all or any
part of its rights and obligations under this Agreement and the other Credit
Documents pursuant to an Assignment and Acceptance, substantially in the form
of Exhibit G, executed by such Assignee, such assigning Lender (and, in the
case of an Assignee that is not then a Lender or an affiliate thereof, by the
Administrative Agent and, to the extent required pursuant to clause (iii)
above, by the Company) and delivered to the Administrative Agent for its
acceptance and recording in the Register, PROVIDED that, in the case of any
such assignment to an additional bank or financial institution, the sum of
the aggregate principal amount of the Loans, the aggregate amount of the L/C
Obligations and the aggregate amount of the Available Revolving Credit
Commitment being assigned is not less than $5,000,000 (or such lesser amount
as may be agreed to by the Company and the Administrative Agent). Upon such
execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Revolving Credit Commitment as set forth therein, and (y)
the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such assigning Lender shall cease to be a party hereto).
Notwithstanding any provision of this paragraph (c) and paragraph (e) of this
subsection 14.7, the consent of the Company shall not be required, and,
unless requested by the Assignee and/or the assigning Lender, new Notes shall
not be required to be executed and delivered by the relevant Borrower, for
any assignment which occurs at any time when any of the events described in
Section 12(f) shall have occurred and be continuing.
(d) The Administrative Agent, on behalf of each Borrower, shall
maintain at the address of the Administrative Agent referred to in subsection
14.3 a copy of each Assignment and Acceptance delivered to it and a register
(the "REGISTER") for the recordation of the names and addresses of the
Lenders and the Revolving Credit Commitments of, and principal amounts of the
Loans owing to, each Lender from time to time. The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrowers, the
Administrative Agent, the Collateral Agent and the Lenders may (and, in the
case of any Loan or other obligation hereunder not evidenced by a Note,
shall) treat each Person whose name is recorded in the Register as the owner
of a Loan or other obligation hereunder as the owner thereof for all purposes
of this Agreement and the other Credit Documents, notwithstanding any notice
to the contrary. Any
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95
assignment of any Loan or other obligation hereunder not evidenced by a Note
shall be effective only upon appropriate entries with respect thereto being
made in the Register.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Company and the
Administrative Agent), together with payment to the Administrative Agent of a
registration and processing fee of $3,500, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders,
the Company and (if not the Company) the relevant Borrower.
(f) Each Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "TRANSFEREE") and any prospective Transferee
any and all financial information in such Lender's possession concerning such
Borrower and its Affiliates which has been delivered to such Lender by or on
behalf of such Borrower pursuant to this Agreement or which has been
delivered to such Lender by or on behalf of such Borrower in connection with
such Lender's credit evaluation of such Borrower and its Affiliates prior to
becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection 14.7 concerning
assignments of Loans and Notes relate only to absolute assignments and that
such provisions do not prohibit assignments creating security interests,
including, without limitation, any pledge or assignment by a Lender of any
Loan or Note to any Federal Reserve Bank in accordance with applicable law.
14.8 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED
LENDER") shall at any time receive any payment of all or part of any of its
Loans or Reimbursement Obligations owing to it under the Revolving Credit
Commitment, or interest thereon, pursuant to a guarantee or otherwise, or
receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off or otherwise), in a greater proportion than any
such payment to and collateral received by any other Lender, if any, in
respect of such other Lender's Revolving Credit Loans or Reimbursement
Obligations owing to it under the Revolving Credit Commitment or interest
thereon, such benefitted Lender shall purchase for cash from the other Lender
such portion of each such other Lender's similar Loans or Reimbursement
Obligations, or shall provide such other Lender with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral
or proceeds ratably with each of the Lenders which hold the Revolving Credit
Commitment; PROVIDED, HOWEVER, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. Each Borrower agrees that
each Lender so purchasing a portion of another Lender's Loans or
Reimbursement Obligations may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as fully
as if such purchasing Lender were the direct holder of such portion.
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96
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to the
relevant Borrower, any such notice being expressly waived by such Borrower to
the extent permitted by applicable law, upon any amount becoming due and
payable by a Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional
or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of such
Borrower. Each Lender agrees promptly to notify the relevant Borrower and
the Administrative Agent after any such set-off and application made by such
Lender, PROVIDED that the failure to give such notice shall not affect the
validity of such set-off and application.
14.9 COUNTERPARTS. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of
the copies of this Agreement signed by all the parties shall be lodged with
the Company and the Administrative Agent.
14.10 CERTAIN WAIVERS. (a) Each Lender hereby acknowledges that
certain of the Foreign Pledge Agreements and related documentation may not be
executed and delivered prior to or on the Closing Date. Each Lender hereby
waives compliance with the provision of Section 9 of this Agreement to the
extent and only to the extent necessary to permit the Borrowers to borrow
under the this Agreement without the delivery of such Pledge Agreements and
other documentation. The Company hereby covenants that it shall, and shall
cause its Subsidiaries to, deliver to the Administrative Agent all such
Foreign Pledge Agreements and related documentation within 30 days following
the Closing Date and that the failure to deliver any such Foreign Pledge
Agreement or related documentation within such 30-day period shall constitute
an Event of Default hereunder; PROVIDED that the Administrative Agent may (in
its sole discretion) elect to extent such 30-day period by not more than an
additional 30 days.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Borrowers shall not be entitled to borrow European Revolving
Loans under this Agreement until March 11, 1998; PROVIDED that such
restriction shall not affect the commitment fees payable pursuant to this
Agreement if such European Revolving Loans were available (but undrawn)
during such period.
(c) The Company hereby agrees, and each Lender which is both a
party to this Agreement and the Existing Agreement hereby agrees (in its
capacity as a "Lender" under the Existing Agreement), that:
(i) the Existing Agreement hereby is superseded by this Agreement,
except that (A) the Company and its Subsidiaries shall remain obligated to
pay any amounts owing thereunder, (B) any provision of the Existing
Agreement which is expressly stated therein to survive the termination
thereof shall be deemed to be incorporated in this Agreement for the
benefit of the Lenders under (and as defined in) the Existing Agreement and
(C)
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the Revolving Credit Commitments of each Lender under (and as defined
in) the Existing Agreement (and any related provisions of the Existing
Agreement) shall remain in effect through March 11, 1998 to the extent
necessary to permit the Borrowers under the Existing Agreement to borrow
European Revolving Loans through such date in accordance with the terms of
the Existing Agreement (with the Company acknowledging and agreeing, on
its own behalf and on behalf of each of its Subsidiaries, that any credit
support and collateral security granted pursuant to the Existing Agreement
shall continue to secure and support such European Revolving Loans until
they are superseded by European Revolving Loans under this Agreement or
repaid); and
(ii) on March 11, 1998, the Revolving Credit Obligations under (and
as defined in) the Existing Agreement shall be due and payable (it being
understood that such Revolving Credit Obligations may be paid through
borrowings or other extensions of credit under this Agreement).
14.11 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
14.12 INTEGRATION. This Agreement and the other Credit Documents
represent the agreement of the Borrowers, the Administrative Agent, the
Collateral Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Administrative Agent, the Collateral Agent or any Lender relative to subject
matter hereof not expressly set forth or referred to herein or in the other
Credit Documents.
14.13 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
14.14 SUBMISSION TO JURISDICTION; WAIVERS. Each Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and for its property to the non-exclusive
jurisdiction of any New York State or Federal court sitting in The City of
New York and any competent court of the jurisdiction of organization of
such Borrower (a "LOCAL COURT"), and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement
or the Notes;
(b) agrees that all claims in respect of such action or proceeding
may be heard and determined in such New York State or local court or, to
the extent permitted by law, in such Federal court and waives, to the
fullest extent it may effectively do so, any defense of an inconvenient
forum to the maintenance of such action or proceeding in any
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such court and any right of jurisdiction on account of the place of
residence or domicile of such Borrower;
(c) appoints United States Corporation Services Company (the "NEW
YORK PROCESS AGENT"), with an office on the date hereof at 80 State
Street, Albany, New York 12207, as its agent to receive on behalf of
such Borrower and its respective property service of copies of the
summons and complaint and any other process which may be served in any
such action or proceeding in any such New York State or Federal court
and agrees promptly to appoint a successor New York Process Agent in The
City of New York (which successor Process Agent shall accept such
appointment in a writing prior to the termination for any reason of the
appointment of the initial New York Process Agent);
(d) agrees that, in any such action or proceeding in such New York
State or Federal court sitting in The City of New York, such service may
be made on such Borrower by delivering a copy of such process to such
Borrower in care of the appropriate Process Agent at such Process
Agent's above address and by depositing a copy of such process in the
mails by certified or registered air mail, addressed to such Borrower
(such service to be effective upon such receipt by the appropriate
Process Agent and the depositing of such process in the mails as
aforesaid);
(e) authorizes and directs such Process Agent to accept such
service on its behalf.
(f) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law (including,
without limitation, by the mailing of copies of such process to such
Borrower by certified or registered air mail at its address referred to
in subsection 14.3 or shall limit the right to sue in any other
jurisdiction;
(g) agrees that, to the fullest extent permitted by applicable
law, a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law; and
(h) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding
referred to in this subsection 14.14 any special, exemplary, punitive or
consequential damages.
14.15 ACKNOWLEDGEMENTS. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Credit Documents;
(b) none of the Administrative Agent, the Collateral Agent or any
Lender has any fiduciary relationship with or duty to such Borrower
arising out of or in connection with this Agreement or any of the other
Credit Documents, and the relationship between Administrative Agent, the
Collateral Agent and the Lenders, on one hand, and such Borrower, on the
other hand, in connection herewith or therewith is solely that of debtor
and creditor; and
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(c) no joint venture is created hereby or by the other Credit
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among such Borrower and the Lenders.
14.16 WAIVERS OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE
AGENT, THE COLLATERAL AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
14.17 CONFIDENTIALITY. Subject to subsection 14.7(f), the
Administrative Agent, the Collateral Agent and the Lenders shall hold all
nonpublic information obtained pursuant to the requirements hereof and
identified as such by any Borrower in accordance with such Person's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a bona fide offeree, assignee or
participant in connection with the contemplated transfer or participation, or
as required or requested by any Governmental Authority or representative
thereof, or pursuant to legal process or any applicable Requirement of Law,
or to its accountants, lawyers and other advisors, and shall require any such
offeree, assignee or participant to agree (and require any of its offerees,
assignees or participants to agree) to comply with this subsection 14.17. In
no event shall the Administrative Agent, the Collateral Agent or any Lender
be obligated or required to return any materials furnished by the Borrowers;
PROVIDED, that each offeree shall be required to agree that if it does not
become an assignee or participant it shall return all materials furnished to
it by the Borrowers in connection herewith.
14.18 JUDGMENT CURRENCY. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder or under
the Notes in any currency (the "ORIGINAL CURRENCY") into another currency
(the "OTHER CURRENCY") the parties hereto agree, to the fullest extent that
they may effectively do so, that the rate of exchange used shall be that at
which in accordance with normal banking procedures the Administrative Agent
could purchase the Original Currency with the Other Currency at 11:00 a.m. in
New York, New York on the second Business Day preceding that on which final
judgment is given.
(b) The obligation of any Borrower in respect of any sum due in
the Original Currency from it to any Lender, the Collateral Agent or the
Administrative Agent hereunder or under the Note held by such Lender shall,
notwithstanding any judgment in any Other Currency, be discharged only to the
extent that on the Business Day following receipt by such Lender, the
Collateral Agent or the Administrative Agent (as the case may be) of any sum
adjudged to be so due in such Other Currency such Lender, the Collateral
Agent or the Administrative Agent (as the case may be) may in accordance with
normal banking procedures purchase Dollars with such Other Currency; if the
amount of the Original Currency so purchased is less than the sum originally
due to such Lender, the Collateral Agent or the Administrative Agent (as the
case may be) in the Original Currency, such Borrower agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify such Lender,
the Collateral Agent or the Administrative Agent (as the case may be) against
such loss, and if the amount of the Original Currency so purchased
<PAGE>
100
exceeds the sum originally due to any Lender or the Administrative Agent (as
the case may be) in the Original Currency, such Lender, the Collateral Agent
or the Administrative Agent (as the case may be) agrees to remit to such
Borrower such excess.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
HEXCEL CORPORATION
HEXCEL (U.K.) LIMITED
HEXCEL COMPOSITES LIMITED
HEXCEL S.A. (France)
HEXCEL FABRICS S.A.
HEXCEL COMPOSITES S.A.
HEXCEL COMPOSITES S.A. (Belgium)
SALVER S.r.L.
HEXCEL COMPOSITES GMBH (Austria)
HEXCEL COMPOSITES S.A. (Spain)
HEXCEL COMPOSITES GMBH (Germany)
By:____________________________________
Title:
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent and as Documentation
Agent
By:____________________________________
Title:
By:____________________________________
Title:
CITIBANK, N.A., as Collateral Agent and
as a Lender
By:____________________________________
Title:
By:____________________________________
Title:
<PAGE>
2
CITICORP SECURITIES, INC. as Syndication Agent
By:____________________________________
Title:
CREDIT SUISSE FIRST BOSTON, as a Lender
By:____________________________________
Title:
By:____________________________________
Title:
CREDIT SUISSE FIRST BOSTON,
as a Local Lender
By:____________________________________
Title:
By:____________________________________
Title:
CREDIT SUISSE FIRST BOSTON
AKTIENGESELLSCHAFT, as a Local Lender
By:____________________________________
Title:
By:____________________________________
Title:
<PAGE>
3
THE BANK OF NEW YORK, as Lender
By:____________________________________
Title:
<PAGE>
4
BANQUE NATIONAL DE PARIS,
San Fransciso Branch, as Lender
By:____________________________________
Title:
<PAGE>
5
THE CHASE MANHATTAN BANK, as Lender
By:____________________________________
Title:
<PAGE>
6
CREDIT LYONNAIS, as Lender
By:____________________________________
Title:
<PAGE>
7
ISTITUTO BANCARIO SAN PAOLO
DI TORINO, S.p.A., as Lender
By:____________________________________
Title:
ISTITUTO BANCARIO SAN PAOLO
DI TORINO, S.p.A., as a Local Lender
By:____________________________________
Title:
<PAGE>
8
SOCIETE GENERALE, as Lender
By:____________________________________
Title:
<PAGE>
9
SWISS BANK CORPORATION, Stamford and
Cayman Island Branches, as Lender
By:____________________________________
Title:
<PAGE>
10
UNION BANK OF CALIFORNIA, as Lender
By:____________________________________
Title:
<PAGE>
11
UNION BANK OF SWITZERLAND, as Lender
By:____________________________________
Title:
<PAGE>
SCHEDULE I
LENDER; COMMITMENTS
<TABLE>
<CAPTION>
COMMITMENTS IN U.S. DOLLARS
NAME OF LENDER SYNDICATED FACILITY EUROPEAN OVERDRAFT FACILITY
- ------------------------------------------------------------------------------------
<S> <C> <C>
Credit Suisse First Boston U.S.$50,000,000.00 U.S.$0.00
Citibank, N.A. 40,000,000.00 10,000,000.00
The Bank of New York 40,000,000.00 0.00
The Chase Manhattan Bank 40,000,000.00 0.00
Credit Lyonnais 40,000,000.00 0.00
Banque Nationale de Paris 25,000,000.00 0.00
Istituto Bancario San Paolo 10,000,000.00 0.00
Societe Generale 25,000,000.00 0.00
Swiss Bank Corporation 25,000,000.00 0.00
Union Bank of California, N.A. 25,000,000.00 0.00
Union Bank of Switzerland 25,000,000.00 0.00
- -------------------------------------------------------------------------------------
TOTAL: 345,000,000.00 10,000,000.00
</TABLE>
<PAGE>
SCHEDULE II
ADDRESSED FOR NOTICES
THE BANK OF NEW YORK
10990 Wilshire Blvd.
Suite 1126
Los Angeles, CA 90024
Attention: Liz Ying
Telephone: 310-996-8661
Facsimile: 310-996-8667
BANQUE NATIONAL DE PARIS
180 Montgomery Street
San Francisco, CA 94104
Attention: Katherine Wolfe
Telephone: 415-956-0707 x230
Facsimile: 415-296-8954
THE CHASE MANHATTAN BANK
270 Park Avenue
New York, NY 10017
Attention: Robert Sacks
Telephone: 212-270-4118
Facsimile: 212-270-7939
CITIBANK, N.A.
399 Park Avenue
New York, NY 10043
Attention: William Clark
Telephone: 212-559-5944
Facsimile: 212-826-2371
CREDIT LYONNAIS
1301 Avenue of the Americas
20th Floor
New York, NY 10019
Attention: Rolf Seibert
Telephone: 212-261-7176
Facsimile: 212-459-3174
<PAGE>
ISTITUTO BANCARIO SAN PAOLO DI TORINO
444 South Flower St.
45th Floor
Los Angeles, CA 90071
Attention: Donald Brown
Telephone: 213-489-3105
Facsimile: 213-622-2514
SOCIETE GENERALE
1221 Avenue of the Americas
New York, NY 10020
Attention: George Peters
Telephone: 212-278-7091
Facsimile: 212-278-7462
SWISS BANK CORPORATION
277 Park Avenue
New York, NY 10172
Attention: Hanno Huber
Telephone: 212-574-3177
Facsimile: 212-574-3551
UNION BANK OF CALIFORNIA
350 California Street
San Francisco, CA 94104
Attention: David Taylor
Telephone: 415-705-5098
Facsimile: 415-705-5093
UNION BANK OF SWITZERLAND
299 Park Avenue
New York, NY 10171
Attention: Chris Glockler
Telephone: 212-821-3853
Facsimile: 212-821-3878
<PAGE>
SCHEDULE 3.10
EXISTING LETTERS OF CREDIT
<TABLE>
<CAPTION>
ISSUING BANK* BENEFICIARY STATED AMOUNT L/C NUMBER
<S> <C> <C> <C>
BNP Safeco Insurance Co. USD 576,000 # 0086850
BNP Northrop Grumman Corp USD 1,563,819 0189019
BNP Zurich Insurance Co. USD 100,000 0189020
BNP Home Insurance Co. USD 75,000 0189021
BNP Safeco Insurance Co. USD 288,375 # 0189022
BNP Self Insurance Plans - CA USD 645,218 # 0189023
BNP Zurich Insurance Co. USD 100,000 0189067
BNP H.M. Customs & Excise GBP 200,000 0189072
</TABLE>
* Note BNP stands for Banque Nationale de Paris
# Subject to change due to self-insurance annual security calculation
requirements.
<PAGE>
SCHEDULE 7.5
PERMITTED PROPERTY SALES
<TABLE>
<CAPTION>
DESCRIPTION MINIMUM NET
CASH PROCEEDS
<S> <C>
1. The manufacturing plant located in Lancaster, Ohio USD 200,000
2. The manufacturing plant located in Welkenraedt, Belgium USD 600,000
3. The manufacturing plant located in Graham, Texas USD 0
4. The manufacturing plant located in Brindisi, Italy USD 0
5. The Company will purchase from F&P Properties a certain USD 0
piece of real property adjacent to the Livermore,
California facility in the amount of approximately
4.7 acres and then sell the property. Purchase from F&P
pending required environmental clean-up of site.
6. The real property located in Lodi, New Jersey USD 0
</TABLE>
<PAGE>
SCHEDULE 8.4
ADDITIONAL REQUIREMENTS OF FOREIGN LAW
BELGIUM
Filing stipulated in the first paragraph of Article 17b is of the Belgium Law of
March 2, 1989 on the publication of important holdings in stock exchange
companies and the organization of public takeover bids (in connection with
Hexcel Belgium).
<PAGE>
SCHEDULE 8.6
EXISTING LITIGATION
DESCRIPTION
1. GEC Alsttom vs. Hexcel Composites S.A. (Belgium)
An action for damage brought by a customer based on product liability. The
claim relates to allegedly defective panels, delivered 1989-1992, which
have since delaminated after being installed in railway carriages in
France. The case is proceeding through the French Courts and has yet to be
quantified. A report of judicial experts is expected shortly.
2. ANF vs. Hexcel Composites S.A. (Belgium)
An action for damage brought by a customer based on product liability. The
claim relates to allegedly defective panels, delivered 1989-1992, which
have since delaminated after being installed in railway carriages in
France. The case is proceeding through the French Courts and has yet to be
quantified. A report of judicial experts is expected shortly.
<PAGE>
SCHEDULE 8.14
SUBSIDIARIES
<TABLE>
<CAPTION>
Name Of Company And Its Jurisdiction of Incorporation Outstanding shares and Stockholders
Subsidiaries
<S> <C> <C>
Hexcel Corporation Delaware 2,344 (as of 12/31/97) stockholders
94-1109521 2 March 1983 of common stock 100,000,000 common,
20,000,000 preferred as of 12/31/97
Outstanding shares: 36,856,238
Hexcel Far East California Hexcel Corporation (10,000)
94-2260183 8 July 1974
Hexcel Foundation California (nonprofit public no shares issued
94-2972860 benefit)
27 November 1984
Hexcel International California Hexcel Corporation (100)
94-2880337 7 June 1982
Hexcel Omega Corporation California Hexcel International (1,000)
33-0703595 8 April 1996
Hexcel Pacific Rim California Hexcel Corporation (1,000)
Corporation 1 January 1997
94-3261056
Hexcel Pacific Rim Delaware Hexcel Corporation (3,000)
Corporation (formerly 6 February 1995
Hexcel Alpha Corp.)
94-3226988
Hexcel Beta Corp. Delaware Hexcel Corporation (3,000)
94-3226513 6 February 1995
Hexcel Pottsville Delaware Hexcel Corporation (100)
Corporation 15 November 1995
23-2827480
Hexcel Technologies Inc. Delaware Hexcel Corporation (100)
93-1047646 1 May 1990
Hexcel Composites GmbH Austria Hexcel Far East (250,000)
FN144908a 15 May 1996 250,000 Outstanding
500,000 Authorized
Hexcel Composites S.A. Belgium Hexcel Corporation (254,719)
402.459.235 19 June 1967 Hexcel International (1)
Hexcel do Brasil Servicos Brazil Hexcel Corporation (201,069)
S/C Ltda. 20 March 1986 Hexcel International (1)
43.397.601/0001-18
Confection et Diffusion France Hexcel Fabric S.A.[France] (3,195)
de Stores et Rideaux 14 March 1979 Hexcel S.A.[France] (986)
R.C.S. Lyon B 315 253 021 Christopher Boland (1)
Stephen C. Forsyth (1)
Claude Genin (1)
Rodney P. Jenks, Jr. (1)
Hexcel International (1)
Hexcel S.A. France Hexcel Corporation (92,204)
R.C.S. Lyon B 955 508 007 7 December 1933 Eugene A. Forcione (1)
Stephen Forsyth (1)
Claude Genin (1)
Juergen Habermeier (1)
Rodney P. Jenks, Jr. (1)
Hexcel International (1)
</TABLE>
<PAGE>
SCHEDULE 8.14
SUBSIDIARIES
<TABLE>
<CAPTION>
Name Of Company And Its Jurisdiction of Incorporation Outstanding shares and Stockholders
Subsidiaries
<S> <C> <C>
Hexcel Fabrics S.A France Hexcel S.A. (2,494)
B410287379. 24 December 1996 Hexcel Corporation (1)
Hexcel International (1)
Eugene A. Forcione (1)
Stephen Forsyth (1)
Claude Genin (1)
Ira Krakower (1)
Hexcel Composites S.A. France Hexcel S.A. (499,694)
B410286702 24 December 1996 Hexcel Corporation (1)
Hexcel International (1)
William Hunt (1)
Stephen Forsyth (1)
Peter Young (1)
Ira Krakower (1)
Hexcel Composites GmbH Germany Hexcel (U.K.) Limited (50,000)
HRB 114589 18 August 1996
Salver S.r.l. Italy Hexcel Corporation (1,580,000)
00063690747 20 June 1970 Hexcel International (90,000,000)
Hexcel Composites, S.A. Spain Hexcel (U.K.) Limited (145,250)
A78399672 18 December 1986
Hexcel Chemical Products United Kingdom Hexcel Corporation (596,085)
Ltd 14 September 1972 Hexcel Corporation and
1071897 Stephen C. Forsyth (1)
Hexcel Composites Limited United Kingdom Ciba-Geigy AG (50,000,002 deferred)
3069887 19 June 1995 Hexcel (UK) Limited (200,000 ordinary)
Hexcel (U.K.) Limited United Kingdom Hexcel Corporation (502,000 ordinary)
1088844 29 December 1972 Hexcel Corporation (225,000 redeemable)
</TABLE>
Joint Ventures and Other Equity Interests
<TABLE>
<CAPTION>
Name of Joint Venture or Jurisdiction Summary of Ownership
Other Equity Interest Interest
<S> <C> <C>
Hexcel-DIC Partnership California Joint venture (general partnership)
owned 42% by Hexcel Technologies Inc.
and 58% by DIC Technologies, Inc.
DIC-HEXCEL, Ltd. Japan corporation owned 100% by Hexcel-DIC
Partnership
Pole Asset Management, LLC California Owned 50% by Hexcel Beta
1 September 1996
</TABLE>
<PAGE>
SCHEDULE 8.15
ENVIRONMENTAL MATTERS
DESCRIPTION
1. Hexcel Lodi, New Jersey Facility
This site was sold to Fine Organics Corporation in 1986. The sale
triggered provisions of New Jersey Law essentially requiring the site to be
cleaned up. To that end, Hexcel entered into an Administrative Consent
Order for the clean up of the site, and has satisfied the statutory net
worth and cash flow tests to assure performance. The State of New Jersey
has approved Hexcel's remediation plan. The cost of the remediation is
largely dependent on developing circumstances including the possible
redevelopment of the entire area in which this facility is located. Based
on certain assumptions relating to the developing circumstances, Hexcel
believes the cost of remediation will be approximately $2,000,000.
2. Former Hexcel Facility, City of Industry, California
As a result of spills that occurred at a former Hexcel facility located in
the City of Industry, CA, Hexcel has been named a Potentially Responsible
Party (PRP) in the Puente Valley Subbasin of the San Gabriel Superfund.
Together with other PRP's Hexcel has signed a Consent Decree to participate
in a remedial investigation and feasibility study of the subbasin. Hexcel
agreed to a 2.68% allocation for this work. Hexcel has paid virtually all
of it's obligation under this agreement. Hexcel's future obligations in
the basin-wide superfund proceedings have currently not yet determined and
will be a subject of future discussion with the USEPA and the other PRP's.
In addition, Hexcel has consented to a State of California EPA request to
institute further remedial activities at it's former facility. This work
is expected to cost approximately $450K.
3. Heath Tecna, Kent Washington Facility
An investigation of groundwater contamination at this facility commenced in
or around 1982. The source of the contamination has been identified. The
contaminants of concern are trichloroethylene (TCE) and its degradation
products, primarily vinyl chloride. A groundwater remediation project has
been implemented and is operational. The maintenance of this project is
estimated to cost between $250,000 and $300,000 per year for 20 to 30 years
for an estimated total cost of $5,550,000.
<PAGE>
SCHEDULE 9.1
INTERNATIONAL COUNSEL
BAKER & MCKENZIE (UK)
UK COUNSEL
S.G. ARCHIBALD
FRANCE COUNSEL
BRUCKHAUS WESTRICK HELLER LOBER
AUSTRIA COUNSEL
HOGAN & HARTSON, L.L.P.
BELGIUM COUNSEL
MARENA, AGHINA, BONVICINI & LEDERGNENI
ITALY COUNSEL
GOMEZ ACEBO & POMBO ABOGADOS
SPAIN COUNSEL
DOSER AMERELLER NOACK
GERMAN COUNSEL
<PAGE>
SCHEDULE 11.2
INDEBTEDNESS
1. Indebtedness underlying certain Liens as set forth on Schedules 11.3.
<TABLE>
<CAPTION>
DESCRIPTION OUTSTANDING AT CLOSING
<S> <C>
CAPITAL LEASES (UNITED STATES)
2. Joseph S. Riggio and Marcia G. Riggio, Trustees USD 675,521
under Revocable Trust Agreement dated May 16,
1972, as amended, and Joseph S. Riggio, Trustee
under Trust Agreement dated July 11, 1969, as
amended December 31, 1994: Real property and
improvements At Building #73 in Casa Grande, AZ.
3. Erwin Family Trust doing business as Valley USD 851,446
Warehouse and Storage Company, lessor, under
Lease Agreement dated April 1, 1991, as amended
December 21, 1994 and June 23, 1995: Three
Warehouses and real property in Casa Grande, AZ
(maturity November 20, 2009).
CAPITAL LEASES (EUROPE)
4. Batimap/Slicomi lease for various buildings and FRF 6,649,559
land at Plant B in Lyon, France.
5. Raiffeisen Leasing Gesellschaft m.b.H. for
building ATS 39,061,736 in Pasching, Austria
with repayment by 12/31/2012.
OTHER AGREEMENTS FOR BORROWED MONEY (U.S.)
6. Bankruptcy priority claims USD 680,386
7. City of Chandler, AZ for taxes owed under the USD 78,097
terms of the bankruptcy proceedings of Hexcel Corp.
8. F&P Properties Note Payable for Livermore land USD 240,000
OTHER AGREEMENTS FOR BORROWED MONEY
HEXCEL COMPOSITES S.A. (BELGIUM)
9. Miscellaneous overdraft lines BEF 90,000,000
HEXCEL S.A. (FRANCE), HEXCEL COMPOSITES S.A. (FRANCE),
HEXCEL FABRICS S.A. (FRANCE) AND CDSR
10. Miscellaneous overdraft lines FRF 100,000,000
Salver S.r.l. (Italy)
11. Miscellaneous credit lines ITL 3,500,000,000
HEXCEL (U.K.) LTD. AND HEXCEL COMPOSITES LTD. (U.K.) AND
HEXCEL COMPOSITES GMBH (GERMANY)
12. Miscellaneous credit lines GBP 5,000,000
HEXCEL COMPOSITES G.M.B.H (AUSTRIA)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
13. Capital Lease between Hexcel Composites G.m.b.H. ATS 39,061,736
(Austria) and Raiffeisen Leasing Gesellschaft m.b.H.
maturing on 12/31/2012 for Pasching Austria building.
14. Loan by Osterreichische Investkredit ATS 2,857,100
Aktiengesellschaft for investment expenditures with
half year repayment Continuing until December 31, 1999.
15. Loan to fund Hexcel Composites G.m.b.H. (Austria) ATS 25,000,000
sales abroad. Revolving loan renewed every 6 months
by Creditanstalt Bankverein AG.
16. Miscellaneous overdraft lines ATS 31,500,000
HEXCEL COMPOSITES S.A. (Spain)
17. Miscellaneous overdraft lines ESP 150,000,000
</TABLE>
<PAGE>
SCHEDULE 11.3
LIENS
1. Mortgages and pledges of business set forth in Schedule 11.2 - Indebtedness
2. Liens in connection with the Capital Leases set forth in Schedule 11.2 -
Indebtedness
3. Liens in connection with the Existing Agreement.
4. Those liens listed on the attached Exhibit X related to UCC Financing
Statements, Fixture Filings and Operating Leases
5. Consigned inventory from Hexcel suppliers entered into in the ordinary
course
HEXCEL COMPOSITES GMBH (AUSTRIA)
7. As an assignment for security, Hexcel Composites Gmbh (Austria) pledged
public bonds of ATS 5,230,475 to Osterreichische investitionskredit A.G.
8. Assignment of ATS 30,000,000 of receivables, originally entered into on
July 3, 1995, to Creditanstalt Bankverein AG to support a loan for funding
a broad sales. Collateral based on rolling receivables.
<PAGE>
EXHIBIT X
PERMITTED LIEN SCHEDULE
<TABLE>
<CAPTION>
DEBTOR NAME SECURED PARTY JURISDICTION FILING FILING FILING COLLATERAL DESCRIPTION
TYPE NUMBER DATE
<S> <C> <C> <C> <C> <C> <C>
Hexcel Quinn Enterprises, Inc. Arizona - UCC-1 602574 8/8/89 Specified equipment
Corporation Secretary of
State
Hexcel International Computer Services, Inc. Arizona - UCC-1 632871 8/17/90 Specified equipment
Corporation Assignee: Circle Business Credit, Inc. Secretary of
State
Hexcel Assignee: International Computer Arizona - UCC-3 632871 4/22/94 Assignment to
Corporation Services, Inc. Secretary of Assign- International Computer
State ment Services Inc.
Hexcel International Computer Services, Inc. Arizona - UCC-1 675730 8/19/91 Specified equipment
Corporation Assignee: Tilden Financial Corp. Secretary of
State
Hexcel, Norwest Financial Leasing Arizona - UCC-1 717899 9/14/92 Specified equipment
Inc. Secretary of
State
Hexcel Northrup Grumman Corporation Arizona - UCC-1 815742 1/11/95 Specified equipment
Corporation Secretary of
State
Hexcel Northrup Grumman Corporation Arizona - UCC-1 815743 1/11/95 Specified equipment
Corporation Secretary of
State
Hexcel International Computer Services, Inc. Arizona - UCC-1 820433 2/21/95 Specified equipment
Corporation Secretary of
State
Hexcel Yale Financial Services, Inc. Arizona - UCC-1 828379 4/24/95 Specified equipment
Corporation Secretary of
State
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
DEBTOR NAME SECURED PARTY JURISDICTION FILING FILING FILING COLLATERAL DESCRIPTION
TYPE NUMBER DATE
<S> <C> <C> <C> <C> <C> <C>
Hexcel Briggs-Weaver, Inc. Arizona - UCC-1 840349 7/27/95 Specified equipment
Corporation Assignee: Yale Financial Services, Secretary of
Inc. State
Hexcel Briggs-Weaver, Inc. Arizona - UCC-1 841455 8/3/95 Specified equipment
Corporation Assignee: Yale Financial Services, Secretary of
Inc. State
Hexcel American Business Credit Corporation Arizona - UCC-1 863133 1/19/96 Specified equipment
Corporation Secretary of
State
Hexcel American Business Credit Corp. Arizona - UCC-1 890394 3/25/96 Specified equipment
Corporation Assignee: ABCC Secretary of
State
Hexcel Briggs-Equipment Arizona - UCC-1 957939 3/3/97 Specified equipment
Corporation Assignee: Yale Financial Services, Secretary of
Inc. State
Hexcel International Computer Services, Inc. California - UCC-1 92264153 12/11/92 Specified equipment
Corporation Assignee: Tilden Financial Corp. Secretary of
State
Hexcel International Computer Services, Inc. California - UCC-1 92264154 12/11/92 Specified equipment
Corporation Assignee: Tilden Financial Corp. Secretary of
State
Hexcel International Computer Services, Inc. California - UCC-1 92264157 12/11/92 Specified equipment
Corporation Assignee: Tilden Financial Corp. Secretary of
State
Hexcel Assignee: Matrix Funding California - UCC-3 95320C0127 11/13/95 Assignment to Matrix
Corporation Secretary of Assign- Funding
State ment
Hexcel International Computer Services, Inc. California - UCC-1 92264159 12/11/92 Specified equipment
Corporation Assignee: Tilden Financial Corp. Secretary of
State
Hexcel International Computer Services, Inc. California - UCC-1 92264160 12/11/92 Specified equipment
Corporation Assignee: Tilden Financial Corp. Secretary of
State
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
DEBTOR NAME SECURED PARTY JURISDICTION FILING FILING FILING COLLATERAL DESCRIPTION
TYPE NUMBER DATE
<S> <C> <C> <C> <C> <C> <C>
Hexcel International Computer Services, Inc. California - UCC-1 93038853 2/24/93 Specified equipment
Corporation Secretary of
State
Hexcel Taylor Made Office Systems, Inc. California - UCC-1 93077820 4/19/93 Specified equipment
Corporation Secretary of
State
Hexcel Capital Associates International, Inc. California - UCC-1 93086671 4/29/93 Specified equipment
Corporation Assignee: Capital Preferred Yield Fund II Secretary of
State
Hexcel Capital Associates International Inc. California - UCC-1 93089733 5/3/93 Specified equipment
Corporation Assignee: Leasetec Income Fund V Secretary of
State
Hexcel Capital Associates International Inc. California - UCC-3 94356C0032 12/5/94 Amendment to Equipment
Corporation Assignee: Leasetec Income Fund V Secretary of Amend- Schedule
State ment
Hexcel United States Leasing International, California - UCC-1 93088336 5/5/93 Specified equipment
Corporation Inc. Secretary of
State
Hexcel United States Leasing International, California - UCC-1 93149849 7/28/93 Specified equipment
Corporation Inc. Secretary of
State
Hexcel International Computer Services, Inc. California - UCC-1 93161636 8/9/93 Specified equipment
Corporation Secretary of
State
Hexcel Assignee: Western Computer Leasing California - UCC-3 93161636 11/17/93 Assignment to Western
Corporation Secretary of Assign- Computer Leasing
State ment
Hexcel International Computer Services, Inc. California - UCC-1 93161637 8/9/93 Specified equipment
Corporation Secretary of
State
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
DEBTOR NAME SECURED PARTY JURISDICTION FILING FILING FILING COLLATERAL DESCRIPTION
TYPE NUMBER DATE
<S> <C> <C> <C> <C> <C> <C>
Hexcel Assignee: Western Computer Leasing. California - UCC-3 93161637 11/17/93 Assignment to Western
Corporation Secretary of Assign- Computer Leasing
State ment
Hexcel Ciba-Geigy Corporation. California - UCC-1 93218048 10/28/93 Inventory and all accounts
Corporation Secretary of receivable and other
State proceeds as they relate
to products sold or
consigned under Con-
signment Agreement
Hexcel Ciba-Geigy Corporation. California - UCC-1 93218049 10/28/93 Consigned goods under
Corporation Secretary of consignment Agreement
State
Hexcel Capital Associates International, Inc. California - UCC-1 93234554 11/18/93 Specified equipment
Corporation Secretary of
State
Hexcel Amoco Performance Products, Inc. California - UCC-1 94061175 3/28/94 Specified equipment
Corporation Secretary of
State
Hexcel International Computer Services, Inc. California - UCC-1 94161996 8/8/94 Specified equipment
Corporation Assignee: Matrix Funding Corporation Secretary of
State
Hexcel Assignee: Heller Financial Inc. California - UCC-3 94263C0230 9/5/94 Assignment to Heller
Corporation Secretary of Assign- Financial, Inc.
State ment
Hexcel Assignee: Matrix Funding Corporation California - UCC-3 95320C0133 11/13/95 Assignment back to Matrix
Corporation Secretary of Assign- Funding Corporation
State ment
Hexcel Yale Financial Services, Inc. California - UCC-1 9511660448 4/24/95 Specified equipment
Corporation Secretary of
State
Hexcel Briggs-Weaver, Inc. California - UCC-1 9521260952 7/27/95 Specified equipment
Corporation Assignee: Yale Financial Services, Secretary of
Inc. State
</TABLE>
<PAGE>
5
<TABLE>
<CAPTION>
DEBTOR NAME SECURED PARTY JURISDICTION FILING FILING FILING COLLATERAL DESCRIPTION
TYPE NUMBER DATE
<S> <C> <C> <C> <C> <C> <C>
Hexcel Briggs-Weaver, Inc. California - UCC-1 9522160693 8/7/95 Specified equipment
Corporation Assignee: Yale Financial Services, Secretary of
Inc. State
Hexcel Capital Associates International, Inc. California - UCC-1 9605460295 2/22/96 Specified equipment
Corporation Assignee: Capital Preferred Yield Secretary of
Fund-II, L.P. State
Hexcel Ciba-Geigy Corporation California - UCC-1 9607860538 3/15/96 Raw materials, inventory,
Corporation Secretary of work in process-finished
State products under Manufac-
turing and Supply Agree-
ment
Hexcel Taylor Made Office Systems, Inc. California - UCC-1 9615160063 5/28/96 Specified equipment
Corporation Secretary of
State
Hexcel Caterpillar Financial Services California - UCC-1 9631860942 11/12/96 Specified equipment
Corporation Corporation Secretary of
State
Hexcel Briggs Equipment California - UCC-1 9709160292 3/24/97 Specified equipment
Corporation Secretary of
State
Hexcel East Bay Clarklift, Inc. California - UCC-1 9715460364 5/29/97 Specified equipment
Corporation dba Cromer Equipment Secretary of
State
Hexcel Roger Paul Shumaker California- Judge- 948599-7 5/7/90 Dismissed with prejudice,
Corporation (Plaintiff) Alameda ment no damages awarded
County
Superior
Court
Hexcel As You Sow, a non-profit corporation California- Judge- 748827-2 7/26/95 Dismissed with prejudice,
Corporation Alameda ment maximum of $4,500.00
County awarded
Superior
Court
Hexcel Amoco Performance Products, Inc. Ohio - UCC-1 AK 87540 3/28/94 Specified Amoco inventory
Corporation Secretary of
State
</TABLE>
<PAGE>
6
<TABLE>
<CAPTION>
DEBTOR NAME SECURED PARTY JURISDICTION FILING FILING FILING COLLATERAL DESCRIPTION
TYPE NUMBER DATE
<S> <C> <C> <C> <C> <C> <C>
Hexcel Amoco Performance Products, Inc. Ohio - UCC-1 55420 3/28/94 Specified Amoco inventory
Corporation Fairfield
County
Hexcel Meridian Leasing, Inc. Pennslyvania- UCC-1 22090328 7/7/93 Specified equipment
Corporation Secretary of
the
Commonwealth
Hexcel Meridian Leasing, Inc. Pennslyvania- UCC-1 22090329 7/7/93 Specified equipment
Corporation Secretary of
the
Commonwealth
Hexcel Keystone Financial Leasing Corp. Pennslyvania- UCC-1 25920639 10/4/96 Specified equipment
Corp. Secretary of
the
Commonwealth
Hexcel Northrup Grumman Corporation Pennslyvania- UCC-1 24170774 4/10/95 Specified equipment
Corporation Secretary of
the
Commonwealth
Hexcel Meridian Leasing, Inc. Pennslyvania- UCC-1 19737-39- 7/2/93 Specified equipment
Corporation Schuylkill 378-3
County
Hexcel Meridian Leasing, Inc. Pennslyvania- UCC-1 19738-39- 7/2/93 Specified equipment
Corporation Schuylkill 378-4
County
Hexcel International Computer Services, Inc. Pennslyvania- UCC-1 19941-39- 9/20/93 Specified equipment
Corporation Assignee: Western Computer Leasing Schuylkill 429-3
County
Hexcel Keystone Financial Leasing Corp. Pennslyvania- UCC-1 23268-41- 10/3/96 Specified equipment
Corp. Schuylkill 226-4
County
Hexcel Capital Associates International, Inc. Texas - UCC-1 119766 6/18/93 Specified equipment
Corporation Assignee: Capital Preferred Yield Fund Secretary of
II State
Hexcel United States Leasing International, Texas - UCC-1 144606 7/28/93 Specified equipment
Corporation Inc. Secretary of
State
</TABLE>
<PAGE>
7
<TABLE>
<CAPTION>
DEBTOR NAME SECURED PARTY JURISDICTION FILING FILING FILING COLLATERAL DESCRIPTION
TYPE NUMBER DATE
<S> <C> <C> <C> <C> <C> <C>
Hexcel Capital Associates International, Inc. Texas - UCC-1 220866 11/17/93 Specified equipment
Corporation Secretary of
State
Hexcel Hercules Incorporated Texas - UCC-1 234431 12/10/93 All Hercules Incorporated
Corporation Secretary of consigned carbon fiber
State products
Hexcel Amoco Performance Products, Inc. Texas - UCC-1 057479 3/28/94 All Amoco carbon fiber
Corporation Secretary of products
State
Hexcel Southwest Lift, Inc. Texas - UCC-1 192130 9/30/94 Specified equipment
Corp. Assignee: Toyota Motor Credit Secretary of
Corporation State
Hexcel Southwest Lift, Inc. Texas - UCC-1 192131 9/30/94 Specified equipment
Corp. Assignee: Toyota Motor Credit Secretary of
Corporation State
Hexcel Southwest Lift, Inc. Texas - UCC-1 192132 9/30/94 Specified equipment
Corp. Assignee: Toyota Motor Credit Secretary of
Corporation State
Hexcel Southwest Lift, Inc. Texas - UCC-1 192133 9/30/94 Specified equipment
Corp. Assignee: Toyota Motor Credit Secretary of
Corporation State
Hexcel Southwest Lift, Inc. Texas - UCC-1 231919 12/1/94 Specified equipment
Corp. Assignee: Toyota Motor Credit Secretary of
Corporation State
Hexcel Southwest Lift, Inc. Texas - UCC-1 231920 12/1/94 Specified equipment
Corp. Assignee: Toyota Motor Credit Secretary of
Corporation State
Hexcel Capital Associates International, Inc. Texas - UCC-1 035244 2/26/96 Specified equipment
Corporation Assignee: Capital Preferred Yield Secretary of
Fund-II, L.P. State
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
DEBTOR NAME SECURED PARTY JURISDICTION FILING FILING FILING COLLATERAL DESCRIPTION
TYPE NUMBER DATE
<S> <C> <C> <C> <C> <C> <C>
Hexcel Southwest Lift, Inc. Texas - UCC-1 048826 3/12/96 Specified equipment
Corporation Assignee: Toyota Motor Credit Secretary of
Corporation State
Hexcel Clarklift of Washington/Alaska, Inc. Washington - UCC-1 95-128-0751 5/8/95 Specified equipment
Corporation Assignee: Clarke Credit Corporation Secretary of
State
Hexcel Caterpillar Financial Services Washington - UCC-1 96-317-0092 11/12/96 Specified equipment
Corporation Corporation Secretary of
State
Hexcel Quality Business Systems Washington - UCC-1 97-147-0499 5/27/97 Specified equipment
Corp. Secretary of
State
</TABLE>
<PAGE>
SCHEDULE 11.4
GUARANTY OBLIGATIONS
1. See Schedule 3.10, Existing Letters of Credit
<TABLE>
<CAPTION>
DESCRIPTION OUTSTANDING
- ----------- -----------
HEXCEL CORPORATION
<S> <C>
2. Guaranty of remaining payments under two GBP 197,929
operating leases between Hexcel U.K. Ltd.
and Raychem Ltd. both expiring on
12/31/98.
3. Effective 7/15/97, Hexcel Corporation ITL 3,050,000,000
provided patronage letters to: (1) Banco
di Napoli, LIR 500,000,000, (2) Rola
Banca, LIR 950,000,000, (3) Credito
Italiano, LIR 1,300,000,000, (4) Banca
Commerciale Italiano, LIR 300,000,000 all
to expire 7/15/98.
4. Pursuant to the Parent Company Agreement
made April 17, 1990 (the "Parent Company
Agreement"), Hexcel Corporation ("Hexcel")
and Dainippon Ink & Chemicals, Inc.
("DIC") agreed to form a joint venture in
order to develop, manufacture and sell
certain products. In furtherance of this
end and pursuant to the Parent Company
Agreement, Hexcel's wholly owned
subsidiary, Hexcel Technologies, Inc.
("HEXTI"), and DIC's wholly-owned
subsidiary, DIC Technologies Inc.
("DICTI"), entered into the Participants'
Agreement made September 14, 1990 (the
AParticipants' Agreement") whereby HEXTI
and DICTI formed HDP as a California
partnership under a certain General
Partnership Agreement of HEXCEL-DIC
Partnership entered into as of September
14, 1990 (the "Partnership Agreement").
Pursuant to the Participants' Agreement,
HEXTI and DICTI caused HDP to form DIC-
Hexcel , Ltd., a Japanese corporation
("OPCO") as a wholly owned subsidiary of
HDP under the laws of Japan.
Hexcel and DIC have agreed to each make
$3,250,000 of capital contributions to
DIC-Hexcel Ltd. during 1997-1998. As of
the date hereof, a final payment of
$500,000 each remains to be paid in July
1998.
Hexcel has a contingent liability of $4.5
million that is to be paid by Hexcel
either upon the liquidation of DIC-Hexcel
Ltd. or following DIC making any payment
upon the call of the bank guarantees DIC
has made supporting bank loans that have
been provided to DIC-Hexcel Ltd. In the
latter case, Hexcel shall have to
contribute 50% of any amount paid by DIC
under such guarantees, up to a maximum of
$4.5 million.
</TABLE>
<PAGE>
1
<TABLE>
<CAPTION>
DESCRIPTION OUTSTANDING
- ----------- -----------
<S> <C>
5. Guaranty in favor of Wimpey Pension USD 128,000
Trustees, Ltd. for one year of rental
payments of the sublessee located in
Lightwater, England under an operating
lease dated 7/22/74 and due to expire on
7/21/98.
6. Guaranty by Hexcel of Lease dated August GBP 22,950
15, 1974 between John Mark Temple Gaisford
and David Wallis Shaw, and Joseph Lucas
Industries Limited, covering annual lease
payments
7. Guaranty with respect to Hexcel Lodi USD 4,000,000
facility in New Jersey
SURETY BONDS
8. Bond securing 12 months of lease payments USD 30,000
for the benefit of the Port of Skagit, WA,
Bond#5686352, Expires 3/13/98
9. Bond securing the State of Arizona workers USD 288,375
compensation benefits due to employees in
favor of the State of Arizona, Bond#
5214167, Expires 4/15/98
10. Bond securing duties, taxes and charges USD 200,000
due on imported merchandise in favor of
U.S. Customs, Bond# 5288974, Expires
10/18/98
11. Bond securing duties, taxes and charges on USD250,000*
imports that are exported in favor of U.S.
Customs, Bond#5288976, Expires 10/18/98
12. Bond securing the State of Washington USD576,000**
worker's compensation benefits (due
employees) in favor such state,
Bond#5852114, Expires 2/28/99
13. Bond securing State of California USD 54,200
disability plan benefits due to employees
in favor of the State of California
Employment Development Department, Bond#
5288984, Expires 1/1/99
14. Bond securing a lost cashiers check and USD 653,853
legal fees in favor of First Interstate
Bank, Bond# 5736792, Expires 11/12/99
15. Bond securing utility guarantee in USD 65,000
Decatur, AL, Bond#5864791, Expires 6/25/98
</TABLE>
- -----------------------
* Will be increased from $130,000 to $250,000 in March 1998 for increased
export activity.
** Subject to change depending on self-insurer security requirements.
<PAGE>
3
<TABLE>
<CAPTION>
HEXCEL COMPOSITES S.A. (BELGIUM)
<S> <C>
16. Guarantees issued by Credit Lyonnais various currencies
Belgium S.A. to guarantee obligations of
Hexcel Composites S.A. (Belgium) vis-a-vis
de Dietrich (FRF 114,227), Baudet (FRF
86,263), and GEC Alsthom (BEF 12,540,000).
17. Rental Bank guarantee BEF 135,000
SALVER S.R.L. (ITALY)
18. Declaration of Fidejussor from LA.ME.S. ITL 835,000,000
S.r.l.. signed by Roberto Salvetti, in
favor Fime Leasing S.P.A., in the Interest
of Centro Trattamenti Superficiali S.p.a.,
Naples, as Guaranty for Leasing contract
dated June 28, 1989. As with the
guaranty, the Same 17 guarantors have
guaranteed the lease payments of C.T.S. As
lessee of a warehouse facility. Salver
S.r.l. (Italy) is responsible To guaranty
repayment of up to 7% of the loan then
outstanding.
19. Declaration of Fidujussor from LA. ME.S. ITL 195,000,000
S.r.l. signed by Roberto Salvetti, in
favor of Fime Leasing S.p.a., in the
Interest Of Centro Trattamenti
Superficiali S.p.a., Naples, as guaranty
for leasing contract dated June 28, 1989.
Guaranty arrangement relating to a
warehouse facility.
20. Declaration of Fidejussor from Credito ITL 5,000,000
Italiano Bank, No. 935 in favor of
SNAM S.p.a. dated 2/23/95
HEXCEL FABRICS S.A. (FRANCE)
21. Guarantee in favor of Credit Lyonnais FRF 2,200,000
(expect cancellation 6/98)
HEXCEL COMPOSITES GMBH (AUSTRIA)
22. As an assignment for security, Hexcel ATS 5,230,475
Composites GmbH (Austria) pledged bonds to
Osterreichische Investition
Aktiengesellschaft. Repayment started on
12/31/96 semiannually until 12/31/99.
23. Assignment of receivables, originally ATS 30,000,000
entered into on July 3, 1995 to
Creditanstalt Bankverein
Aktiengesellschaft to support an export
credit program, payments thereon are due
semiannually; collateral based on rolling
6 months receivables.
24. Bill of exchange with various customers. ATS 25,000,000
</TABLE>
<PAGE>
4
<TABLE>
<CAPTION>
HEXCEL COMPOSITES LTD. (U.K.)
<S> <C>
25. Bond issued by Banque Nationale de Paris GBP 200,000
securing import duties in favor of HM
Customs and Excise.
HEXCEL COMPOSITES S.A. (SPAIN)
26. Generale Bank issued guaranties on behalf ESP 311,000,000
of Hexcel Composite S.A. (Spain) for the
payment of duties and VAT before customs
on goods imported by Hexcel Composites
S.A. (Spain)
</TABLE>
<PAGE>
SCHEDULE 11.9
PERMITTED TRANSACTIONS WITH AFFILIATES
See also Schedule 11.2, Indebtedness
DESCRIPTION
NONE
<PAGE>
SCHEDULE 11.14
PERMITTED PAYMENTS OF INDEBTEDNESS
<TABLE>
<CAPTION>
DESCRIPTION
<S> <C>
1. Subordinated Ciba Notes B The Increasing Rate Senior Subordinated Notes,
due 2003, to be issued by the Company in an aggregate principal amount not
to exceed $43,000,000 (as such amount may be adjusted in accordance with
the Strategic Alliance Agreement) and governed by the terms of the
Subordinated Ciba Notes Indenture.
2. All payments of any intercompany debt, as referenced on Indebtedness
Schedule 11.2.
3. All payments required under amortizing debt (capital leases and mortgages),
as referenced on Indebtedness Schedule 11.2.
</TABLE>
<PAGE>
Page 1
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
[NAME OF BORROWER]
U.S. $________________ March 5, 1998
New York, New York
For value received, the undersigned, ________________, a
_____________ [corporation] [company] (the "Borrower"), promises to pay to
the order of ____________________ (the "Lender"), on the Termination Date (as
defined in the Credit Agreement referred to below), the lesser of (i) the
principal amount of ______________________________ DOLLARS ($_____________)
or (ii) the unpaid principal amount of all amounts loaned by the Lender to
the Borrower under this Note as Revolving Credit Loans under the Credit
Agreement. The principal amount which can be borrowed under this Note, when
aggregated with the principal amount which can be borrowed under all other
Notes issued in accordance with the terms of the Credit Agreement, will in no
case exceed the Aggregate Revolving Credit Commitment set forth in the Credit
Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount borrowed hereunder from the date advanced until paid at the rates
(which shall not exceed the maximum rate permitted by applicable law) and at
the times determined in accordance with the provisions of that certain
Amended and Restated Credit Agreement dated as of March 5, 1998 among Hexcel
Corporation, the Foreign Borrowers named therein, the financial institutions
from time to time parties thereto as Lenders, the Collateral Agent and Credit
Suisse First Boston in its capacity as administrative agent for the Lenders
(in such capacity, the "Administrative Agent") (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement").
This Note is issued pursuant to, and is entitled to the benefits
of, the Credit Agreement to which reference is hereby made for a more
complete statement of the terms and conditions under which the Revolving
Credit Loans evidenced hereby are made and are to be repaid. Terms defined
in the Credit Agreement and not otherwise defined herein are used herein with
the meanings so defined.
All payments of principal and interest in respect of this Note shall
be made on the date and at the place due, to the Administrative Agent in
lawful money of the United States of America in same day funds.
This Note shall be governed by, and shall be construed and enforced
in accordance with, the law of the State of New York.
<PAGE>
3
The Lender shall record in accordance with its usual practice the
date and amount of each Revolving Credit Loan made hereunder, and the date
and amount of each payment of principal; PROVIDED, that the failure to record
any such amount shall not limit or otherwise affect the obligation of the
Borrower to repay the Lender the outstanding principal amount evidenced by
this Note together with accrued interest thereon in accordance with the terms
of the Credit Agreement.
Upon the occurrence of an Event of Default set forth in SECTION
12(a) or (f) of the Credit Agreement as applied to any Borrower (as defined
in the Credit Agreement), the unpaid balance of the principal amount of this
Note may become, and upon the occurrence and continuation of any one or more
other Events of Default, such unpaid balance may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in
the Credit Agreement.
The Borrower hereby waives diligence, presentment, protest, demand
and notice of every kind except as required pursuant to the Credit Agreement.
This Note is secured by certain of the Credit Documents, and
reference is made to such Credit Documents for the terms and conditions
governing the collateral security for the Obligations of the Borrower
hereunder.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed and delivered by its duly authorized officer, as of the day and year
and at the place first above written.
HEXCEL CORPORATION
By_____________________
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF SWING LINE LOAN NOTE
HEXCEL CORPORATION
US $__________ March [__], 1998
New York, New York
For value received, the undersigned, HEXCEL CORPORATION, a Delaware
corporation (the "Borrower"), promises to pay to the order of Credit Suisse
First Boston (the "Swing Line Lender"), in accordance with SECTION 7.1 of the
Credit Agreement, upon the earlier of (A) demand by the Swing Line Loan
Lender and (B) the Termination Date (as defined in the Credit Agreement
referred to below), the lesser of (i) the principal amount of ___________
DOLLARS (US $__________) or (ii) the unpaid principal amount of all amounts
loaned by the Swing Line Lender to the Borrower under this Note as Swing Line
Loans under the Credit Agreement. The principal amount which can be borrowed
under this Note, when aggregated with the principal amount which can be
borrowed under all other Notes issued in accordance with the terms of the
Credit Agreement, will in no case exceed the Aggregate Revolving Credit
Commitment set forth in the Credit Agreement.
The Borrower also promises to pay interest on the unpaid principal
amount borrowed hereunder from the date advanced until paid at the rates
(which shall not exceed the maximum rate permitted by applicable law) and at
the times determined in accordance with the provisions of that certain
Amended and Restated Credit Agreement dated as of March 5, 1998 among the
Borrower, the Foreign Borrowers from time to time parties thereto, the
financial institutions from time to time parties thereto as Lenders, the
Collateral Agent and Credit Suisse First Boston, in its capacity as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent") (as amended, restated, supplemented or otherwise modified from time
to time, the "Credit Agreement").
This Note is issued pursuant to, and is entitled to the benefits
of, the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Swing Line
Loans evidenced hereby are made and are to be repaid. Terms defined in the
Credit Agreement and not otherwise defined herein are used herein with the
meanings so defined.
All payments of principal and interest in respect of this Note
shall be made on the date and at the place due, to the Administrative Agent
in lawful money of the United States of America in same day funds in
accordance with the Credit Agreement.
This Note may be prepaid at any time at the option of the Borrower
without premium or penalty, and must be prepaid as provided in SECTION 7.5 of
the Credit Agreement.
This Note shall be governed by, and shall be construed and enforced
in accordance with, the law of the State of New York.
Upon the occurrence of an Event of Default set forth in SECTION
12(a) or (f) of the Credit Agreement as applied to any Borrower (as defined
in the Credit Agreement), the unpaid balance of the principal amount of this
Note may become, and upon the occurrence and continuation of any one or more
of certain other Events of Default, such unpaid balance may be declared to
be, due and payable in the manner, upon the conditions and with the effect
provided in the Credit Agreement.
The Borrower hereby waives diligence, presentment, protest, demand
and notice of every kind except as required pursuant to the Credit Agreement.
This Note is secured by certain of the Credit Documents, and
reference is made to such Loan
<PAGE>
2
Documents for the terms and conditions governing the collateral security for
the Obligations of the Borrower hereunder.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed and delivered by its duly authorized officer, as of the day and year
and at the place first above written.
HEXCEL CORPORATION
By_________________________
Name:
Title:
<PAGE>
EXHIBIT C-1
FORM OF COMPANY GUARANTY
This AMENDED AND RESTATED GUARANTY ("Guaranty") is made as 5th day
March 1998, by HEXCEL CORPORATION, a Delaware corporation (the "Guarantor")
in favor of CITIBANK, N.A., in its capacity as collateral agent (with its
successors and permitted assigns in such capacity, the "Collateral Agent")
for the Lenders from time to time parties, to (and as defined in) the Credit
Agreement described below. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein with the meanings ascribed thereto
in the Credit Agreement.
W I T N E S S E T H
WHEREAS, the Lenders have agreed to make extensions of credit from time
to time to, the Guarantor and the Foreign Borrowers pursuant to the Credit
Agreement, dated as of the date hereof (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Guarantor, the
Foreign Borrowers from time to time parties thereto, the Lenders, the
Collateral Agent, the Syndication Agent and CSFB, as administrative agent (in
such capacity, the "Administrative Agent"; together with the Collateral Agent
and the Syndication Agent, the "Agents");
WHEREAS, each of the Foreign Borrowers, directly or indirectly, is a
Wholly-owned Subsidiary of the Guarantor;
WHEREAS, the Guarantor will directly and indirectly benefit from the
loans and other financial accommodations made to the Foreign Borrowers
pursuant to the Credit Agreement;
WHEREAS, it is a condition precedent to the obligation of the Lenders to
make their extensions of credit under the Credit Agreement that the Guarantor
execute and deliver to the Collateral Agent this Guaranty;
WHEREAS, the Guarantor is a party to the Company Guaranty, dated as of
June 27, 1996 (as amended, supplemented or otherwise modified from time to
time, the "EXISTING GUARANTY AGREEMENT"), with the Collateral Agent; and
Whereas, the Collateral Agent has requested the Existing Guaranty
Agreement to be amended as more fully described herein; and
WHEREAS, each of the parties to the Existing Agreement is agreeable to
the requested amendments, but only upon the terms and subject to the
conditions set forth herein, and each of the parties to the Existing Guaranty
Agreement, for convenience of reference, has agreed to restate the Existing
Guaranty Agreement as so amended; and
WHEREAS, each of the parties hereto are agreeable to the terms and
provisions of the Existing Guaranty Agreement as amended and restated hereby;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties to the Existing Guaranty Agreement agree that
the Existing Guaranty Agreement shall be and hereby is amended and restated
in its entirety and the parties hereto hereby agree as follows:
1. GUARANTY. (i) The Guarantor hereby irrevocably and
unconditionally guarantees to the Collateral Agent, for the benefit of the
Agents and the Lenders, the full and prompt payment when due (whether at
maturity or earlier, by reason of acceleration or otherwise, and at all times
thereafter) of the Obligations of the
<PAGE>
2
Foreign Borrowers (including, without limitation, interest accruing following
the commencement of any insolvency or bankruptcy case or proceeding or other
similar case or proceeding in respect of any Foreign Borrower, at the
applicable rate specified in the Credit Agreement, whether or not such
interest is allowed as a claim in such case or proceeding) (the "Guaranteed
Obligations").
(ii) At any time after the occurrence and during the continuation
of an Event of Default set forth in SECTION 12(a) of the Credit Agreement,
the Guarantor shall pay to the Collateral Agent, for the benefit of the
Agents and the Lenders, on demand and in immediately available funds, the
amount of the Guaranteed Obligations that is due and payable, and upon
acceleration, the full amount thereof. The Guarantor further agrees to pay
and reimburse the Agents and the Lenders for, on demand and in immediately
available funds, all reasonable fees, costs and expenses (including, without
limitation, all court costs and reasonable attorneys' fees, costs and
expenses) paid or incurred by the Agents or the Lenders in: (1) endeavoring
to collect all or any part of the Guaranteed Obligations from, or in
prosecuting any action in respect of the Guaranteed Obligations against, any
Foreign Borrower or the Guarantor; (2) taking any action with respect to any
security or collateral securing the Guaranteed Obligations or the Guarantor's
obligations hereunder; and (3) preserving, protecting or defending the
enforceability of, or enforcing, this Guaranty or the Collateral Agent's
rights hereunder (all such costs and expenses are hereinafter referred to as
the "Expenses"), and interest thereon. The Guarantor hereby agrees that this
Guaranty is an absolute guaranty of payment and is not a guaranty of
collection.
2. OBLIGATIONS UNCONDITIONAL. The Guarantor hereby agrees that
its obligations under this Guaranty shall be unconditional, irrespective of:
(i) the validity, enforceability, avoidance or subordination of any
of the Guaranteed Obligations or any of the Credit Documents;
(ii) the absence of any attempt by, or on behalf of, either Agent
or any of the Lenders to collect, or to take any other action to enforce, all
or any part of the Guaranteed Obligations whether from or against any Foreign
Borrower, the Guarantor or any other guarantor of the Guaranteed Obligations
or any other Person;
(iii) the election of any remedy by, or on behalf of, either Agent
or any of the Lenders with respect to all or any part of the Guaranteed
Obligations;
(iv) the waiver, consent, extension, forbearance or granting of any
indulgence by, or on behalf of, either Agent or any of the Lenders with
respect to any provision of any of the Credit Documents;
(v) the failure of either Agent or any of the Lenders to take any
steps to perfect and maintain its security interest in, or to preserve its
rights to, any security or collateral for the Guaranteed Obligations;
(vi) the election by, or on behalf of, either Agent or any of the
Lenders, in any proceeding instituted under Chapter 11 of Bankruptcy Code, of
the application of Section 1111(b)(2) of the Bankruptcy Code;
(vii) any borrowing or grant of a security interest by any Foreign
Borrower, as debtor-in-possession, under Section 364 of the Bankruptcy Code;
(viii) the disallowance, under Section 502 of the Bankruptcy Code,
of all or any portion of the claims against any Foreign Borrower of any of
the Lenders or either Agent for repayment of all or any part of the
Guaranteed Obligations or any Expenses; or
(ix) any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of the Guarantor, any Foreign
Borrower or any other guarantor of the Obligations.
3. ENFORCEMENT; APPLICATION OF PAYMENTS. Subject to SECTION 1(ii)
hereof and the provisions of the Credit Agreement, upon the occurrence and
during the continuation of an Event of Default, the Collateral Agent may
proceed directly against the Guarantor to collect and recover the full
amount, or any portion, of the Guaranteed Obligations, without first
proceeding against any Foreign Borrower or any other Person, or against any
security or collateral for the Guaranteed Obligations. Subject only to the
terms and provisions of the Credit Agreement, the
<PAGE>
3
Collateral Agent shall have the exclusive right to determine the application
of payments and credits, if any, from the Guarantor, any Foreign Borrower or
from any other Person on account of the Guaranteed Obligations or any other
liability of the Guarantor to either Agent or any of the Lenders.
4. WAIVERS. (i) The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
receivership or bankruptcy of any Foreign Borrower, protest or notice with
respect to the Guaranteed Obligations, all setoffs and counterclaims, demands
for performance, notices of nonperformance, notices of protest, notices of
dishonor and notices of acceptance of this Guaranty, and all other demands
whatsoever (and shall not require that the same be made on any Foreign
Borrower as a condition precedent to the Guarantor's obligations hereunder),
and covenants that this Guaranty will not be discharged, except by complete
payment (in cash) and performance of the Guaranteed Obligations and any other
obligations contained herein. The Guarantor further waives all notices of
the existence, creation or incurring of new or additional Indebtedness,
arising either from additional loans extended to any Foreign Borrower or
otherwise, and also waives all notices that the principal amount, or any
portion thereof, and/or any interest on any instrument or document evidencing
all or any part of the Guaranteed Obligations is due, notices of any and all
proceedings to collect from the maker, any endorser or any other guarantor of
all or any part of the Guaranteed Obligations, or from any other Person, and,
to the extent permitted by law, notices of exchange, sale, surrender or other
handling of any security or collateral given to the Administrative Agent or
any of the Lenders to secure payment of all or any part of the Guaranteed
Obligations.
(ii) The Agents and/or the Lenders are hereby authorized, without
notice or demand and without affecting the liability of the Guarantor
hereunder, from time to time, (a) to renew, extend, accelerate or otherwise
change the time for payment of, or other terms relating to, all or any part
of the Guaranteed Obligations, or to otherwise modify, amend or change the
terms of any of the Credit Documents; (b) to accept partial payments on all
or any part of the Guaranteed Obligations; (c) to take and hold security or
collateral for the payment of all or any part of the Guaranteed Obligations,
this Guaranty, or any other guaranties of all or any part of the Guaranteed
Obligations or other liabilities of the Foreign Borrowers, (d) to exchange,
enforce, waive and release any such security or collateral; (e) to apply such
security or collateral and direct the order or manner of sale thereof as in
its discretion it may determine; (f) to settle, release, exchange, enforce,
waive, compromise or collect or otherwise liquidate all or any part of the
Guaranteed Obligations, this Guaranty, any other guaranty of all or any part
of the Guaranteed Obligations, and any security or collateral for the
Guaranteed Obligations or for any such guaranty. Any of the foregoing may be
done in any manner, without affecting or impairing the obligations of the
Guarantor hereunder.
5. SETOFF. At any time after all or any part of the Guaranteed
Obligations have become due and payable (by acceleration or otherwise), the
Lenders may, without notice to the Guarantor and regardless of the acceptance
of any security or collateral for the payment hereof, appropriate and apply
toward the payment of all or any part of the Guaranteed Obligations (i) any
Indebtedness due or to become due from the Lenders to the Guarantor, and (ii)
any moneys, credits or other property belonging to the Guarantor, at any time
held by or coming into the possession of the Lenders or their respective
affiliates.
6. FINANCIAL INFORMATION. The Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of the
Foreign Borrowers and any and all other guarantors and/or endorsers of all or
any part of the Guaranteed Obligations, and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations, or any
part thereof, that diligent inquiry would reveal, and the Guarantor hereby
agrees that the Agents and the Lenders shall have no duty to advise the
Guarantor of information known to it regarding such condition or any such
circumstances. In the event that the either Agent or any of the Lenders, in
its sole discretion, undertakes at any time or from time to time to provide
any such information to the Guarantor, then such Agent or such Lender shall
be under no obligation (i) to undertake any investigation not a part of its
regular business routine, (ii) to disclose any information which such Agent
or such Lender, pursuant to accepted or reasonable commercial finance or
banking practices, wishes to maintain confidential or (iii) to make any other
or future disclosures of such information or any other information to the
Guarantor.
7. NO MARSHALLING; REINSTATEMENT. The Guarantor consents and
agrees that none of the Agents or any of the Lenders or any Person acting for
or on behalf of the Collateral Agent shall be under any obligation to
marshall any assets in favor of the Guarantor or against or in payment of any
or all of the Guaranteed Obligations.
<PAGE>
4
The Guarantor further agrees that, to the extent that any Foreign Borrower or
any other guarantor of all or any part of the Guaranteed Obligations makes a
payment or payments to the Agents or the Lenders or either Agent or any
Lender receives any proceeds of Collateral, which payment or payments or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to such Foreign
Borrower, such other guarantor or any other Person, or their respective
estates, trustees, receivers or any other party, including, without
limitation, the Guarantor, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, the part of the Guaranteed Obligations which has been paid,
reduced or satisfied by such amount shall be reinstated and continued in full
force and effect as of the time immediately preceding such initial payment,
reduction or satisfaction.
8. SUBROGATION. Until the Guaranteed Obligations shall have been
paid in full, the Guarantor hereby agrees that it (i) shall not exercise any
right of subrogation with respect to such Guaranteed Obligations (under
contract, Section 509 of the Bankruptcy Code or otherwise) or any other right
of indemnity, reimbursement or contribution, (ii) waives any right to enforce
any remedy which either Agent, any of the Lenders now have or may hereafter
have against any Foreign Borrower, any endorser or any other guarantor of all
or any part of the Guaranteed Obligations or any other Person, and (iii)
waives any benefit of, and any right to participate in, any security or
collateral given to the Agents or the Lenders to secure the payment or
performance of all or any part of the Guaranteed Obligations or any other
liability of any Foreign Borrower to the Agents and the Lenders.
9. SUBORDINATION. The Guarantor agrees that any and all claims of
the Guarantor against any Foreign Borrower or any endorser or other guarantor
of all or any part of the Guaranteed Obligations, or against any of their
respective properties with respect to any Indebtedness of such Foreign
Borrower to the Guarantor (the "Borrower Indebtedness"), shall be
subordinated to the payment in full in cash of all Guaranteed Obligations.
Notwithstanding any right of the Guarantor to ask, demand, sue for, take or
receive any payment from any Foreign Borrower, all such rights and Liens of
the Guarantor with respect to the Borrower Indebtedness, whether now or
hereafter arising and howsoever existing shall be and hereby are subordinated
to the rights of the Agents and the Lenders to receive payment in full in
cash of the Guaranteed Obligations. So long as no Event of Default set forth
in SECTION 12(a) or (f) of the Credit Agreement shall have occurred and be
continuing, the Guarantor shall retain all its rights and shall be entitled
to receive and retain any and all payments made in respect of, the Borrower
Indebtedness. After an Event of Default set forth in SECTION 12(a) or (f) of
the Credit Agreement shall have occurred and be continuing, the Guarantor
shall not exercise any rights with respect to the Borrower Indebtedness or to
foreclose upon any asset securing the Borrower Indebtedness, whether by
judicial action or otherwise, unless and until all of the Guaranteed
Obligations shall have been fully paid in cash and all financing arrangements
pursuant to the Credit Agreement between the Foreign Borrowers and the
Lenders have been terminated. If all or any part of the assets of any
Foreign Borrower, or the proceeds thereof, are subject to any distribution,
division or application to the creditors of such Foreign Borrower, whether
partial or complete, voluntary or involuntary, and whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the
benefit of creditors or any other action or proceeding, or if the business of
any Foreign Borrower is dissolved or if substantially all of the assets of
any Foreign Borrower are sold, then, and in any such event, any payment or
distribution of any kind or character, either in cash, securities or other
property, which shall be payable or deliverable upon or with respect to any
Borrower Indebtedness shall be paid or delivered directly to the Lenders for
application to any of the Guaranteed Obligations, due or to become due, until
such Guaranteed Obligations shall have first been fully paid in cash and
satisfied. The Guarantor irrevocably authorizes and empowers each Agent and
each of the Lenders to demand, sue for, collect and receive every such
payment or distribution and give acquittance therefor and to make and present
for and on behalf of the Guarantor such proofs of claim and take such other
action, in the such Agent's or such Lender's own name or in the name of the
Guarantor or otherwise, as either or any Lender may deem necessary or
advisable for the enforcement of this Guaranty. Each Lender may vote such
proofs of claim in any such proceeding, receive and collect any and all
dividends or other payments or disbursements made thereon in whatever form
the same may be paid or issued and apply the same on account of any of the
Guaranteed Obligations. Should any payment, distribution, security or
instrument or proceeds thereof be received by the Guarantor upon or with
respect to the Borrower Indebtedness after an Event of Default set forth in
SECTION 12(a) or (f) of the Credit Agreement shall have occurred and is
continuing, and prior to the payment in full in cash of all Guaranteed
Obligations and the termination of all financing arrangements pursuant to the
Credit Agreement between the Foreign Borrowers and the Lenders, the Guarantor
shall receive and hold the same in trust, as trustee, for the benefit of the
Agents and the Lenders, and shall forthwith deliver the same to the
Collateral Agent, in precisely the form received (except for the endorsement
or assignment of the Guarantor where necessary), for application to any of
the Guaranteed Obligations, due or not due,
<PAGE>
5
and, until so delivered, the same shall be held in trust by the Guarantor as
the property of the Collateral Agent for the benefit of the Agents and the
Lenders; PROVIDED, that if the Guarantor fails to make any such endorsement
or assignment to the Collateral Agent, the Collateral Agent (or any of its
officers or employees) is hereby irrevocably authorized to make the same.
The Guarantor agrees that after an Event of Default set forth in SECTION
12(a) or (f) of the Credit Agreement shall have occurred and is continuing,
and until the Guaranteed Obligations have been paid in full (in cash) and
satisfied and all financing arrangements pursuant to the Credit Agreement
between the Foreign Borrowers and the Lenders have been terminated, the
Guarantor will not assign or transfer to any Person any claim the Guarantor
has or may have against any Foreign Borrower.
10. ENFORCEMENT; AMENDMENTS; WAIVERS. No delay on the part of
either Agent or any of the Lenders in the exercise of any right or remedy
arising under this Guaranty, the Credit Agreement, any of the other Credit
Documents or otherwise with respect to all or any part of the Guaranteed
Obligations, the Collateral or any other guaranty of or security for all or
any part of the Guaranteed Obligations shall operate as a waiver thereof, and
no single or partial exercise by either Agent or any of the Lenders of any
such right or remedy shall preclude any further exercise thereof. No
modification or waiver of any of the provisions of this Guaranty shall be
binding upon either Agent or any of the Lenders, except as expressly set
forth in a writing duly signed and delivered by the Administrative Agent.
Failure by either Agent or any of the Lenders at any time or times hereafter
to require strict performance by any Foreign Borrower, any other guarantor of
all or any part of the Guaranteed Obligations or any other Person of any of
the provisions, warranties, terms and conditions contained in any of the
Credit Documents now or at any time or times hereafter executed by such
Persons and delivered to either Agent or any of the Lenders shall not waive,
affect or diminish any right of either Agent or any of the Lenders at any
time or times hereafter to demand strict performance thereof and such right
shall not be deemed to have been waived by any act or knowledge of either
Agent or any of the Lenders or its agents, officers or employees, unless such
waiver is contained in an instrument in writing, directed and delivered to
the Guarantor, specifying such waiver, and is signed by the Administrative
Agent. No waiver of any Event of Default by the Lenders shall operate as a
waiver of any other Event of Default or the same Event of Default on a future
occasion, and no action by either Agent or any of the Lenders permitted
hereunder shall in any way affect or impair either Agent's or any Lender's
rights and remedies or the obligations of the Guarantor under this Guaranty.
Any determination by a court of competent jurisdiction of the amount of any
principal and/or interest owing by any Foreign Borrower to the Agents and the
Lenders shall be conclusive and binding on the Guarantor irrespective of
whether the Guarantor was a party to the suit or action in which such
determination was made.
11. EFFECTIVENESS; TERMINATION. This Guaranty shall become
effective against the Guarantor upon its execution by the Guarantor and shall
continue in full force and effect and may not be terminated or otherwise
revoked until the Guaranteed Obligations (other than indemnities not yet due)
shall have been fully paid (in cash) and discharged and the Credit Agreement
and the Revolving Credit Commitments shall have been terminated. If,
notwithstanding the foregoing, the Guarantor shall have any right under
applicable law to terminate or revoke its obligations under this Guaranty,
the Guarantor agrees that such termination or revocation shall not be
effective until a written notice of such revocation or termination,
specifically referring hereto, signed by the Guarantor, is actually received
by each Agent and the Lenders. Such notice shall not affect the right and
power of the Agents or any of the Lenders to enforce rights arising prior to
receipt thereof by the Agents and the Lenders. If any of the Lenders grants
Loans or takes other action after the Guarantor terminates or revokes its
obligations under this Guaranty but before such Lender receives such written
notice, the rights of such Lender with respect thereto shall be the same as
if such termination or revocation had not occurred.
12. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon
the parties hereto and their respective successors and permitted assigns, and
shall inure to the benefit of the parties hereto and the successors and
permitted assigns of the Agents and the Lenders. The rights hereunder and
the interest herein of the Guarantor may not be assigned without the written
consent of the Required Lenders. Any attempted assignment without such
written consent shall be void. Nothing set forth herein or in any other
Credit Document is intended or shall be construed to give any other Person
any right, remedy or claim under, to or in respect of this Guaranty. The
Guarantor's successors shall include, without limitation, a receiver, trustee
or debtor-in-possession of or for the Guarantor.
13. GOVERNING LAW. This Guaranty shall be construed, and the
rights and duties of the parties hereto shall be determined, in accordance
with the law of the State of New York.
<PAGE>
6
14. CERTAIN CONSENTS AND WAIVERS.
(a) PERSONAL JURISDICTION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, (i) EACH OF THE COLLATERAL AGENT AND THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW
YORK, NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS
HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT RELATED HERETO,
AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH STATE COURT OR IN SUCH FEDERAL COURT. THE GUARANTOR
IRREVOCABLY DESIGNATES AND APPOINTS UNITED STATES CORPORATION SERVICES
COMPANY AT 80 STATE STREET, ALBANY, NEW YORK 12207, AS ITS RESPECTIVE PROCESS
AGENT (THE "PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING
IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. EACH OF THE COLLATERAL AGENT AND THE
GUARANTOR AGREES THAT A FINAL NONAPPEALABLE JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH OF THE
COLLATERAL AGENT AND THE GUARANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT
IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE IN ANY SUCH
ACTION OR PROCEEDING IN SUCH STATE COURT OR IN SUCH FEDERAL COURT.
(ii) THE GUARANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE
RIGHT TO PROCEED AGAINST THE GUARANTOR OR ITS PROPERTY IN A COURT HAVING
JURISDICTION IN ANY LOCATION TO ENABLE THE AGENTS AND THE LENDERS TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE GUARANTEED OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE
ADMINISTRATIVE AGENT OR ANY LENDER. THE GUARANTOR WAIVES ANY OBJECTION THAT
IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH EITHER AGENT OR ANY LENDER
MAY COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.
(b) SERVICE OF PROCESS. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW: THE GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
PROCESS AGENT OR THE GUARANTOR'S NOTICE ADDRESS SPECIFIED PURSUANT TO SECTION
16 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING.
EACH OF THE COLLATERAL AGENT AND THE GUARANTOR IRREVOCABLY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF THE COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST THE
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
(c) WAIVER OF JURY TRIAL. EACH OF THE COLLATERAL AGENT AND THE
GUARANTOR IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT.
15. WAIVER OF BOND. The Guarantor waives, to the extent permitted
by law, the posting of any bond otherwise required of the Collateral Agent in
connection with any judicial process or proceeding to realize on the
Collateral or any other security for the Guaranteed Obligations, to enforce
any judgment or other court order entered in favor of the Collateral Agent,
or to enforce by specific performance, temporary restraining order, or
<PAGE>
7
preliminary or permanent injunction, this Guaranty or any other agreement or
document between the Collateral Agent and the Guarantor.
16. NOTICES. All notices and other communications required or
desired to be served, given or delivered hereunder shall be in writing or by
a telecommunications device capable of creating a printed record and shall be
addressed to the party to be notified as follows:
if to the Guarantor, at:
Hexcel Corporation
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
Attention: Treasurer
Telecopier No.: (203) 358-3993
Confirmation No.: (203) 969-0666
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Joseph Coco, Esq.
Telecopier No.: (212) 735-2000
Confirmation No.: (212) 735-3000
if to the Collateral Agent, at:
Citibank, N.A.
399 Park Avenue
New York, New York 10022
Attention: William E. Clark
Telecopier No.: (212) 793-7460
Confirmation No.: (212) 559-5944
or, as to each party, at such other address as designated by such party in a
written notice to the other party. All such notices and communications shall
be deemed to be validly served, given or delivered (i) ten (10) days
following deposit in the United States mails, with proper postage prepaid;
(ii) upon delivery thereof if delivered by hand to the party to be notified;
(iii) one Business Day after delivery thereof to a reputable overnight
courier service, with delivery charges prepaid; or (iv) upon confirmation of
receipt thereof if transmitted by a telecommunications device.
17. SEVERABILITY. Wherever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity without invalidating the
remainder of such provision or the remaining provisions of this Guaranty.
18. COLLATERAL. The Guarantor hereby acknowledges and agrees that
its obligations under this Guaranty are secured pursuant to the terms and
provisions of the other Credit Documents to which it is a party.
19. ENTIRE AGREEMENT. This Guaranty, together with the other
Credit Documents, embodies the entire agreement and understanding of the
parties hereto with respect to the matters contained herein and supersedes
all prior agreements and understandings, written and oral, relating to the
subject matter hereof.
21. EXECUTION IN COUNTERPARTS. This Guaranty may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
<PAGE>
8
original and all of which taken together shall constitute one and the same
agreement.
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
Guarantor as of the day and year first set forth above.
HEXCEL CORPORATION
By________________________________
Name:
Title:
Acknowledged and agreed to
as of the __ day of March, 1998
CITIBANK, N.A., as Collateral Agent
By________________________________
Name:
Title:
<PAGE>
EXHIBIT C-2
FORM OF COMPANY PLEDGE AGREEMENT
This AMENDED AND RESTATED PLEDGE AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "Pledge
Agreement"), dated as of March 5, 1998, by and between HEXCEL CORPORATION, a
Delaware corporation (with its successors and permitted assigns, the
"Pledgor"), and CITIBANK, N.A., in its separate capacity as collateral agent
(with its successors and permitted assigns in such capacity, the "Collateral
Agent") for the Lenders (as defined below) parties to the Credit "greement
described below. Terms defined in the Credit Agreement and not otherwise
defined herein are used herein with the meanings ascribed thereto in the
Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Lenders have agreed to make extensions of credit from
time to time to the Pledgor and the Foreign Borrowers pursuant to the Amended
and Restated Credit Agreement, dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Pledgor, the Foreign Borrowers from time to time
parties thereto, the Lenders, the Collateral Agent and the CSFB, as
administrative agent (in such capacity, the "Administrative Agent", together
with the Collateral Agent, the "Agents");
WHEREAS, the Pledgor owns the shares of capital stock described in
EXHIBIT A hereto and issued by the issuers named therein; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their extensions of credit under the Credit Agreement that
the Pledgor execute and deliver to the Collateral Agent this Pledge
Agreement; and
WHEREAS, the Pledgor is a party to the pledge agreement, dated as
of June 27, 1996 (as amended, supplemented or otherwise modified from time to
time, the "EXISTING PLEDGE AGREEMENT"), with the Collateral Agent; and
Whereas, the Collateral Agent has requested the Existing Agreement
to be amended as more fully described herein; and
WHEREAS, each of the parties to the Existing Pledge Agreement is
agreeable to the requested amendments, but only upon the terms and subject to
the conditions set forth herein, and each of the parties to the Existing
Pledge Agreement, for convenience of reference, has agreed to restate the
Existing Pledge Agreement as so amended; and
WHEREAS, each of the parties hereto are agreeable to the terms and
provisions of the Existing Pledge Agreement as amended and restated hereby;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties to the Existing Pledge Agreement
agree that the Existing Pledge Agreement shall be and hereby is amended and
restated in its entirety and the parties hereto hereby agree as follows:
1. DEFINED TERMS.
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Credit Agreement shall have the meaning specified
for such term in the Credit Agreement. Unless otherwise defined herein, all
terms defined in Article 8 and Article 9 of the Uniform Commercial Code in
effect as of the date hereof
<PAGE>
2
in the State of New York are used herein as defined therein.
(b) The words "hereby," "hereof," "herein" and "hereunder" and
words of like import when used in this Pledge Agreement shall refer to this
Pledge Agreement as a whole and not to any particular provision of this
Pledge Agreement, and section references are to this Pledge Agreement unless
otherwise specified.
(c) All terms defined in this Pledge Agreement in the singular
shall have comparable meanings when used in the plural, and VICE VERSA,
unless otherwise specified.
2. PLEDGE. The Pledgor hereby pledges to the Collateral Agent
(for the benefit of the Agents and the Lenders) and grants to the Collateral
Agent (for the benefit of the Agents and the Lenders) a security interest in
the following (collectively, the "Pledged Collateral"):
(a) All of the issued and outstanding capital stock of the issuers
described in EXHIBIT A hereto (including, without limitation, the shares
of such capital stock described in EXHIBIT A hereto), and the
certificates representing the shares of such capital stock, all options
and warrants for the purchase of shares of such capital stock (all of
said capital stock, options and warrants and all capital stock held in
the name of the Pledgor as a result of the exercise of such options or
warrants being hereinafter collectively referred to as the "Pledged
Stock"), and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect
of, or in exchange for, any or all of the Pledged Stock;
(b) All additional shares of stock of any issuer of the Pledged
Stock from time to time acquired by the Pledgor in any manner, and all
of the shares of the capital stock issued to the Pledgor by any other
Subsidiary of the Pledgor after the date hereof that are required to be
pledged pursuant to the Credit Agreement, and the certificates
representing such additional shares (any such additional shares shall
constitute part of the Pledged Stock and the Collateral Agent is
irrevocably authorized, but is not required, to amend EXHIBIT A from
time to time to reflect such additional shares), and all options,
warrants, dividends, cash, instruments and other rights and options from
time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of such shares;
(c) The property and interests in property described in SECTION 4
below; and
(d) All proceeds of the foregoing.
The Pledgor hereby delivers to the Collateral Agent all of such Pledged
Collateral which is in existence on the date hereof, accompanied by
appropriate undated stock powers (the "Stock Powers") duly executed in blank.
3. SECURITY FOR OBLIGATIONS. The Pledged Collateral secures the
prompt payment, performance and observance of the Obligations (including,
without limitation, the Guaranteed Obligations under, and as defined in, the
Company Guaranty) of the Borrowers.
4. PLEDGED COLLATERAL ADJUSTMENTS. If, during the term of this
Pledge Agreement:
(a) any stock dividend, reclassification, readjustment or other
change is declared or made in the capital structure of any issuer of
Pledged Stock, or any option included within the Pledged Collateral is
exercised, or both, or
(b) any subscription warrants or any other rights or options shall
be issued in connection with the Pledged Collateral,
then all new, substituted and additional shares, warrants, rights, options,
notes or other securities, issued by reason of any of the foregoing, shall be
immediately delivered to and held by the Collateral Agent under the terms of
this Pledge Agreement and shall constitute Pledged Collateral hereunder;
PROVIDED, HOWEVER, that nothing contained in this SECTION 4 shall be deemed to
permit any stock dividend, issuance of additional stock, warrants, rights or
options, reclassification, readjustment or other change in the capital structure
of any issuer of Pledged Stock which is prohibited in the Credit Agreement.
<PAGE>
3
5. SUBSEQUENT CHANGES AFFECTING PLEDGED COLLATERAL. The Pledgor
represents and warrants that it has made its own arrangements for keeping
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, rights to convert, rights to subscribe, payment
of dividends, reorganization or other exchanges, tender offers and voting
rights), and the Pledgor agrees that neither the Agents nor any of the Lenders
shall have any obligation to inform the Pledgor of any such changes or potential
changes or to take any action or omit to take any action with respect thereto.
The Collateral Agent may, upon the occurrence and during the continuation of an
Event of Default, without notice and at its option, transfer or register the
Pledged Collateral or any part thereof into its or its nominee's name with or
without any indication that such Pledged Collateral is subject to the security
interest hereunder. In addition, the Collateral Agent may at any time, after
the occurrence and during the continuation of an Event of Default, exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
6. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the sole legal and beneficial owner of all of the
issued and outstanding capital stock of each issuer listed on EXHIBIT A
hereto, free and clear of any Lien except for the security interest created
by this Pledge Agreement, and the Pledged Stock constitutes 100% of the
issued and outstanding shares of capital stock of the respective issuers
thereof set forth in EXHIBIT A hereto;
(b) There are no restrictions upon the voting rights associated with,
or upon the transfer of, any of the Pledged Collateral, other than (i)
pursuant to this Pledge Agreement and (ii) with regard to the shares of
Hexcel Pottsville Corporation, such restrictions as may exist under any
applicable Requirement of Law;
(c) The pledge of the Pledged Collateral pursuant to this Pledge
Agreement creates a valid and perfected first priority security interest in
the Pledged Collateral, in favor of the Collateral Agent, for the benefit
of the Agents and the Lenders, securing the payment and performance of the
Obligations of the Borrowers; and
(e) The Stock Powers are duly executed and give the Collateral Agent
the authority they purport to confer.
7. VOTING RIGHTS. During the term of this Pledge Agreement, and
except as provided in this SECTION 7 below, the Pledgor shall have the right to
vote the Pledged Stock on all corporate questions in a manner not inconsistent
with the terms of this Pledge Agreement, the Credit Agreement or any other
Credit Document. Upon the occurrence and during the continuation of an Event of
Default, the Collateral Agent may, at the Collateral Agent's option and
following written notice from the Collateral Agent to the Pledgor, exercise all
voting powers pertaining to the Pledged Collateral, including the right to take
action by shareholder consent.
8. DIVIDENDS AND OTHER DISTRIBUTIONS. (a) So long as no Event of
Default under SECTION 12(a) of the Credit Agreement shall have occurred and be
continuing:
(i) The Pledgor shall be entitled to receive and retain any and all
dividends and interest paid in respect of the Pledged Collateral, PROVIDED,
HOWEVER, that any and all
(A) dividends and interest paid or payable other than in cash with
respect to, and instruments and other property received, receivable or
otherwise distributed with respect to, or in exchange for, any of the
Pledged Collateral;
(B) dividends and other distributions paid or payable in cash with
respect to any of the Pledged Collateral on account of a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid in surplus; and
(C) cash paid, payable or otherwise distributed with respect to
principal of, or in redemption of, or in exchange for, any of the
Pledged Collateral;
<PAGE>
4
shall be Pledged Collateral, and shall be forthwith delivered to the
Collateral Agent to hold, for the benefit of the Agents and the Lenders, as
Pledged Collateral and shall, if received by the Pledgor, be received in
trust for the Collateral Agent, for the benefit of the Agents and the
Lenders, be segregated from the other property or funds of the Pledgor, and
be delivered immediately to the Collateral Agent as Pledged Collateral in
the same form as so received (with any necessary endorsement); and
(ii) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to receive the dividends or interest payments which
the Pledgor is authorized to receive and retain pursuant to CLAUSE (i)
above or exercise the voting rights in Section 7 above.
(b) Upon the occurrence and during the continuation of an Event of Default
set forth in SECTION 12(a) of the Credit Agreement:
(i) All rights of the Pledgor to receive the dividends and
interest payments which it would otherwise be authorized to receive and
retain pursuant to SECTION 8(a)(i) hereof shall cease, and all such rights
shall thereupon become vested in the Collateral Agent, for the benefit of
the Agents and the Lenders, which shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends and interest
payments;
(ii) All dividends and interest payments which are received by
the Pledgor contrary to the provisions of CLAUSE (i) of this SECTION 8(b)
shall be received in trust for the Collateral Agent, for the benefit of the
Agents and the Lenders, shall be segregated from other funds of the Pledgor
and shall be paid over immediately to the Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsements); and
(iii) The Pledgor shall, upon the request of the Collateral Agent, at
Pledgor's expense, execute and deliver all such instruments and documents,
and do or cause to be done all such other acts and things, as may be
necessary or, in the opinion of the Collateral Agent, the Pledgor or its or
their counsel, advisable to register the applicable Pledged Collateral
under the provisions of the Securities Act, and to exercise its best
efforts to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and supplements
thereto and to the related prospectus which, in the opinion of the
Collateral Agent, the Pledgor or its or their counsel, are necessary or
advisable, all in conformity with the requirements of the Securities Act
and the rules and regulations of the Securities and Exchange Commission
applicable thereto;
(iv) The Pledgor shall, upon the request of the Collateral Agent, at
Pledgor's expense, use its best efforts to qualify the Pledged Collateral
under state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Collateral, as requested
by the Collateral Agent;
(v) The Pledgor shall, upon the request of the Collateral Agent,
at the Pledgor's expense, make available to the holders of its securities,
as soon as practicable, earnings statements which will satisfy the
provisions of Section 11(a) of the Securities Act; and
(vi) The Pledgor shall, upon the reasonable request of the
Collateral Agent, at the Pledgor's expense, do or cause to be done all such
other acts and things as may be necessary to make such sale of the Pledged
Collateral or any part thereof valid and binding and in compliance with
applicable law.
The Pledgor will reimburse the Collateral Agent for all reasonable expenses
incurred by the Collateral Agent, including, without limitation, reasonable
attorneys' and accountants' fees and expenses in connection with the foregoing.
Upon or at any time after the occurrence and during the continuation of an Event
of Default, if the Collateral Agent determines that, prior to any public
offering of any securities constituting part of the Pledged Collateral, such
securities should be registered under the Securities Act and/or registered or
qualified under any other federal or state law and such registration and/or
qualification is not practicable, then the Pledgor agrees that it will be
commercially reasonable if a private sale, upon at least ten (10) Business Days'
notice to the Pledgor, is
<PAGE>
5
arranged so as to avoid a public offering, even though
the sales price established and/or obtained at such private sale may be
substantially less than prices which could have been obtained for such security
on any market or exchange or in any other public sale.
9. TRANSFERS AND OTHER LIENS. The Pledgor agrees that it will not
(i) sell or otherwise dispose of, or grant any option with respect to, any of
the Pledged Collateral without the prior written consent of the Collateral
Agent, other than in accordance with the Credit Agreement, or (ii) create or
permit to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest permitted hereunder and under the Credit
Agreement.
10. REMEDIES; APPLICATION OF PROCEEDS. (a) Subject to the
restrictions set forth in the Collateral Agency Agreement among Hexcel
Corporation and the Agents, the Collateral Agent shall have, in addition to any
other rights given under this Pledge Agreement or by law, all of the rights and
remedies with respect to the Pledged Collateral of a secured party under the
Uniform Commercial Code as in effect in the State of New York. In addition,
upon the occurrence and during the continuation of an Event of Default set forth
in SECTION 12(a) of the Credit Agreement or upon acceleration of the
Obligations, the Administrative Agent shall have such powers of sale and other
powers as may be conferred by applicable law. With respect to the Pledged
Collateral or any part thereof which shall then be in or shall thereafter come
into the possession or custody of the Collateral Agent or which the Collateral
Agent shall otherwise have the ability to transfer under applicable law, the
Collateral Agent may, in its sole discretion, without notice except as specified
below, after the occurrence and during the continuation of an Event of Default
set forth in SECTION 12(a) of the Credit Agreement or upon acceleration of the
Obligations of the Borrowers, sell or cause the same to be sold at any exchange,
broker's board or at public or private sale, in one or more sales or lots, at
such price as the Collateral Agent may deem best, for cash or on credit or for
future delivery, without assumption of any credit risk, and the purchaser of any
or all of the Pledged Collateral so sold shall thereafter own the same,
absolutely free from any claim, encumbrance or right of any kind whatsoever.
The Agents and any Lender may, in its own name, or in the name of a designee or
nominee, buy such Pledged Collateral at any public sale and, if permitted by
applicable law, buy such Pledged Collateral at any private sale. In the event
of a sale of any Collateral, or any part thereof, to a Lender or the Agents upon
the occurrence and during the continuation of an Event of Default set forth in
SECTION 12(a) of the Credit Agreement or upon acceleration of the Obligations,
such Lender or the Agents, as the case may be, shall not deduct or offset from
any part of the purchase price to be paid therefor any indebtedness owing to it
by the Pledgor. The Pledgor will pay to the Agents all reasonable expenses
(including, without limitation, court costs and reasonable attorneys' expenses)
of, or incidental to, the enforcement of any of the provisions hereof. The
Collateral Agent agrees to distribute any proceeds of the sale of the Pledged
Collateral in accordance with the Credit Agreement and the Pledgor shall remain
liable for any deficiency following the sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens to decline speedily in
value or is or becomes of a type sold on a recognized market, the Collateral
Agent will give the Pledgor reasonable notice of the time and place of any
public sale thereof, or of the time after which any private sale or other
intended disposition is to be made. Any sale of the Pledged Collateral
conducted in conformity with reasonable commercial practices of banks,
commercial finance companies, insurance companies or other financial
institutions disposing of property similar to the Pledged Collateral shall be
deemed to be commercially reasonable. Notwithstanding any provision to the
contrary contained herein, the Pledgor agrees that any requirements of
reasonable notice shall be met if such notice is received by the Pledgor as
provided in SECTION 20 below at least ten (10) Business Days before the time of
the sale or disposition; PROVIDED, HOWEVER, that the Collateral Agent may give
any shorter notice that is commercially reasonable under the circumstances. Any
other requirement of notice, demand or advertisement for sale is waived, to the
extent permitted by law.
(c) In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of the Pledged
Collateral may be effected after the occurrence and during the continuation of
an Event of Default set forth in SECTION 12(a) of the Credit Agreement or upon
acceleration of the Obligations of the Borrowers, the Pledgor agrees that upon
the occurrence and during the continuation of an Event of Default, the
Collateral Agent may, from time to time, attempt to sell all or any part of the
Pledged Collateral by means of a private placement restricting the bidders and
prospective purchasers to those who are qualified and will represent and agree
that they are purchasing for investment only and not for distribution. In so
doing, the Collateral Agent may solicit offers to buy the Pledged Collateral, or
any part of it, from a limited number of investors deemed by the
<PAGE>
6
Collateral Agent, in its reasonable judgment, to be financially responsible
parties who might be interested in purchasing the Pledged Collateral. If the
Collateral Agent solicits such offers from not less than four (4) such
investors, then the acceptance by the Collateral Agent of the highest offer
obtained therefrom shall be deemed to be a commercially reasonable method of
disposing of such Pledged Collateral; PROVIDED, HOWEVER, that this Section
does not impose a requirement that the Collateral Agent solicit offers from
four or more investors in order for the sale to be commercially reasonable.
11. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
appoints the Collateral Agent its attorney-in-fact, with full authority, in the
name of the Pledgor or otherwise, upon the occurrence and during the
continuation of an Event of Default, from time to time in the Collateral Agent's
sole discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Pledge Agreement, including, without limitation (subject to SECTION 8
hereof), to receive, endorse and collect all instruments made payable to the
Pledgor representing any dividend, interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same and to arrange for the transfer of all or any part of the Pledged
Collateral on the books of each of the issuers of such Pledged Stock or obligors
of such Pledged Stock to the name of the Administrative Agent or the Collateral
Agent's nominee.
12. WAIVERS. The Pledgor waives presentment and demand for payment
of any of the Obligations, protest and notice of dishonor or Event of Default
with respect to any of the Obligations and all other notices to which the
Pledgor might otherwise be entitled except as otherwise expressly provided
herein or in the Credit Agreement.
13. TERMINATION OF THIS SECURITY AGREEMENT; RELEASE OF COLLATERAL.
(a) The pledge made and the security interest granted by the Pledgor under this
Pledge Agreement shall terminate upon final payment in full in cash of the
Obligations and the termination of the Revolving Credit Commitments under the
Credit Agreement. Upon such termination (other than as a result of the sale of
the Pledged Collateral) and at the written request of the Pledgor or its
successors or assigns, and at the cost and expense of the Pledgor or its
successors or assigns, the Collateral Agent shall execute in a timely manner
such instruments, documents or agreements as are necessary or desirable to
terminate the Collateral Agent's security interest in the Pledged Collateral and
deliver the Pledged Stock and the Stock Powers, subject to any disposition made
by the Collateral Agent pursuant to the Pledge Agreement.
(b) Notwithstanding anything in this Pledge Agreement to the contrary, the
Pledgor may, to the extent permitted by the Credit Agreement, sell, assign,
transfer or otherwise dispose of any Pledged Collateral. In addition, the
Collateral shall be subject to release from time to time (with the Collateral
referred to in the immediately preceding sentence, the "Released Collateral") in
accordance with SECTION 14.2 of the Credit Agreement. The Liens under this
Pledge Agreement shall terminate with respect to the Released Collateral upon
such sale, transfer, assignment, disposition or release, and, upon the request
of the Pledgor, the Collateral Agent shall execute and deliver such instruments
or documents as may be necessary to release the Liens granted hereunder;
PROVIDED, HOWEVER, that (i) the Collateral Agent shall not be required to
execute any such documents on terms which, in the Collateral Agent's opinion,
would expose the Collateral Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens on (or obligations of the Pledgor in respect
of) all interests retained by the Pledgor, including without limitation, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral unless and until applied strictly in accordance with the Credit
Documents.
14. SUCCESSORS AND ASSIGNS. This Pledge Agreement shall be binding
upon the parties hereto and their respective successors and permitted assigns,
and shall inure to the benefit of the parties hereto and the successors and
permitted assigns of the Agents and the Lenders. The rights hereunder and the
interest herein of the Pledgor may not be assigned without the written consent
of the Required Lenders. Any attempted assignment without such written consent
shall be void. Nothing set forth herein or in any other Credit Document is
intended or shall be construed to give any other Person any right, remedy or
claim under, to or in respect of this Pledge Agreement or any Pledged
Collateral. The Pledgor's successors shall include, without limitation, a
receiver, trustee or debtor-in-possession of or for the Pledgor.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND THE RIGHTS
AND DUTIES OF THE
<PAGE>
7
PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK, EXCEPT FOR PERFECTION AND ENFORCEMENT OF SECURITY
INTERESTS AND LIENS IN OTHER JURISDICTIONS WHICH SHALL BE GOVERNED BY THE LAWS
OF THOSE JURISDICTIONS.
16. WAIVER OF BOND. The Pledgor waives, to the extent permitted by
law, the posting of any bond otherwise required of the Collateral Agent in
connection with any judicial process or proceeding to realize on the Pledged
Collateral or any other security for the Obligations, to enforce any judgment or
other court order entered in favor of the Collateral Agent, or to enforce by
specific performance, temporary restraining order, or preliminary or permanent
injunction, this Pledge Agreement or any other agreement or document between the
Collateral Agent and the Pledgor.
17. SEVERABILITY. Whenever possible, each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Pledge Agreement shall be held to
be prohibited or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Pledge Agreement.
18. FURTHER ASSURANCES. The Pledgor agrees that it will cooperate
with the Collateral Agent and will execute and deliver, or cause to be executed
and delivered, all such other stock powers, proxies, instruments and documents,
and will take all such other actions, including, without limitation, the
execution and filing of financing statements, as the Collateral Agent may
reasonably request from time to time in order to carry out the provisions and
purposes of this Pledge Agreement.
19. THE COLLATERAL AGENT'S DUTY OF CARE. The Collateral Agent shall
not be liable for any acts, omissions, errors of judgment or mistakes of fact or
law including, without limitation, acts, omissions, errors or mistakes with
respect to the Pledged Collateral, except for those arising out of or in
connection with the Collateral Agent's (i) gross negligence or willful
misconduct as determined in a final nonappealable judgment by a court of
competent jurisdiction, or (ii) failure to use reasonable care with respect to
the safe custody of the Pledged Collateral in the Collateral Agent's
possession. Without limiting the generality of the foregoing, the Collateral
Agent shall be under no obligation to take any steps necessary to preserve
rights in the Pledged Collateral against any other parties but may do so at
its option. All expenses incurred in connection therewith shall be for the
sole account of the Pledgor, and shall constitute part of the Obligations
secured hereby.
20. NOTICES. All notices and other communications hereunder shall be
given in the manner and to the addresses set forth in SECTION 14.3 of the Credit
Agreement.
21. AMENDMENTS, WAIVERS AND CONSENTS. None of the terms or
provisions of this Pledge Agreement may be waived, altered, modified or amended,
and no consent to any departure by the Pledgor herefrom shall be effective,
except by or pursuant to an instrument in writing which (i) is duly executed by
the Pledgor and the Administrative Agent and (ii) is otherwise made in
accordance with the Credit Agreement. Any such waiver shall be valid only to
the extent set forth therein. A waiver by the Collateral Agent of any right or
remedy under this Pledge Agreement on any one occasion shall not be construed as
a waiver of any right or remedy which the Collateral Agent would otherwise have
on any future occasion. No failure to exercise or delay in exercising any
right, power or privilege under this Pledge Agreement on the part of the
Collateral Agent shall operate as a waiver thereof; and no single or partial
exercise of any right, power or privilege under this Pledge Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
22. SECTION TITLES. The section titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
23. EXECUTION IN COUNTERPARTS. This Pledge Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
<PAGE>
8
24. ENTIRE AGREEMENT. This Agreement, together with the other Credit
Documents, embodies the entire agreement and understanding of the parties hereto
with respect to the matters contained herein and supersedes all prior agreements
and understandings, written and oral, relating to the subject matter hereof.
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have executed
this Pledge Agreement as of the date set forth above.
HEXCEL CORPORATION
By:________________________
Name:
Title:
CITIBANK, N.A., as Collateral Agent
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT A
to
PLEDGE AGREEMENT
PLEDGED STOCK
<TABLE>
<CAPTION>
STOCK ISSUER Percentage of Stock Certificate Shares of Capital
Owned by Pledgor No. Stock Represented
Thereby
<S> <C> <C> <C>
Hexcel Beta Corp. 100% 1 3,000
Hexcel International 100% 2 100
Hexcel Pottsville Corporation 100% 1 100
</TABLE>
<PAGE>
ACKNOWLEDGEMENT
The undersigned hereby acknowledge receipt of a copy of the foregoing
Pledge Agreement, waive any rights or requirement at any time hereafter to
receive a copy of such Pledge Agreement in connection with the registration of
any Pledged Collateral in the name of the Collateral Agent or its nominee or the
exercise of voting rights by the Collateral Agent and agree to comply with any
provision of such Pledge Agreement which is applicable to it.
HEXCEL BETA CORPORATION
HEXCEL INTERNATIONAL
HEXCEL POTTSVILLE CORPORATION
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT D-1
FORM OF SUBSIDIARY GUARANTY
This AMENDED AND RESTATED SUBSIDIARY GUARANTY (" Guaranty") is made as
of this 5th day March 1998, by each of the corporations signatory hereto (each
individually a AGuarantor", and collectively the "Guarantors"), in favor of
CITIBANK, N.A., in its capacity as collateral agent (with its successors and
permitted assigns in such capacity, the "Collateral Agent") for the Lenders from
time to time parties to (and as defined in) the Credit Agreement described
below. Terms defined in the Credit Agreement and not otherwise defined herein
are used herein with the meanings ascribed thereto in the Credit Agreement.
W I T N E S S E T H
WHEREAS, the Lenders have agreed to make extensions of credit from time to
time to the Company and the Foreign Borrowers pursuant to the Credit Agreement,
dated as of the date hereof (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Hexcel Corporation (the "Company"),
the Foreign Borrowers from time to time parties thereto, the Lenders, the
Collateral Agent, the Syndication Agent and CSFB, as administrative agent (in
such capacity, the "Administrative Agent"; together with the Collateral Agent
and the Syndication Agent, the "Agents");
WHEREAS, the Guarantors are direct Wholly-owned Subsidiaries of the
Company and will directly and indirectly benefit from the loans and other
financial accommodations made pursuant to the Credit Agreement to the Company
and the Foreign Borrowers;
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their extensions of credit under the Credit Agreement that each
Guarantor execute and deliver to the Collateral Agent this Guarantee;
WHEREAS, the Guarantors are party to the Subsidiary Guaranty, dated as of
June 27, 1996 (as amended, supplemented or otherwise modified from time to time,
the "EXISTING GUARANTY AGREEMENT"), with the Collateral Agent; and
Whereas, the Collateral Agent has requested the Existing Guaranty Agreement
to be amended as more fully described herein; and
WHEREAS, each of the parties to the Existing Agreement is agreeable to the
requested amendments, but only upon the terms and subject to the conditions set
forth herein, and each of the parties to the Existing Guaranty Agreement, for
convenience of reference, has agreed to restate the Existing Guaranty Agreement
as so amended; and
WHEREAS, each of the parties hereto are agreeable to the terms and
provisions of the Existing Guaranty Agreement as amended and restated hereby;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties to the Existing Guaranty Agreement agree that the
Existing Guaranty Agreement shall be and hereby is amended and restated in its
entirety and the parties hereto hereby agree as follows:
NOW THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. GUARANTY. (i) Each Guarantor jointly and severally hereby
irrevocably and unconditionally guarantees to the Collateral Agent, for the
benefit of the Agents and the Lenders, the full and prompt payment when due
(whether at maturity or earlier, by reason of acceleration or otherwise, and at
all times thereafter) of the Obligations including, without limitation, interest
accruing following the commencement of any insolvency or
<PAGE>
2
bankruptcy case or proceeding or other similar case or proceeding in respect
of any Borrower, at the applicable rate specified in the Credit Agreement,
whether or not such interest is allowed as a claim in such case or proceeding
(the "Guaranteed Obligations").
(ii) At any time after the occurrence and during the continuation of
an Event of Default set forth in SECTION 12(A) of the Credit Agreement, each
Guarantor shall jointly and severally pay to the Collateral Agent, for the
benefit of the Agents and the Lenders, on demand and in immediately available
funds, the amount of the Guaranteed Obligations that is due and payable, and
upon acceleration, the full amount thereof. Each Guarantor further agrees to
jointly and severally pay and reimburse the Agents and the Lenders for, on
demand and in immediately available funds, all reasonable fees, costs and
expenses (including, without limitation, all court costs and reasonable
attorneys' fees, costs and expenses) paid or incurred by the Agents and the
Lenders in: (1) endeavoring to collect all or any part of the Guaranteed
Obligations from, or in prosecuting any action in respect of the Guaranteed
Obligations against, any Borrower or such Guarantor; (2) taking any action with
respect to any security or collateral securing the Guaranteed Obligations or
such Guarantor's obligations hereunder; and (3) preserving, protecting or
defending the enforceability of, or enforcing, this Guaranty or the Collateral
Agent's rights hereunder (all such costs and expenses are hereinafter referred
to as the "Expenses"), and interest thereon. Each Guarantor hereby agrees that
this Guaranty is an absolute guaranty of payment and is not a guaranty of
collection.
(iii) Notwithstanding anything contained in this Guaranty to the
contrary, the amount guaranteed by each Guarantor hereunder shall be limited
to an aggregate amount which is equal to the largest amount that would not be
subject to avoidance under Section 548 of Title 11 of the United States Code
(11 U.S.C. SECTIONS 101 ET SEQ.) (the "Bankruptcy Code") or any applicable
provisions of any comparable state law.
2. OBLIGATIONS UNCONDITIONAL. Each Guarantor hereby agrees that its
obligations under this Guaranty shall be unconditional, irrespective of:
(i) the validity, enforceability, avoidance or subordination of any of
the Guaranteed Obligations or any of the Credit Documents;
(ii) the absence of any attempt by, or on behalf of, either Agent or
any of the Lenders to collect, or to take any other action to enforce, all
or any part of the Guaranteed Obligations whether from or against any
Borrower, any Guarantor or other guarantor of the Guaranteed Obligations or
any other Person;
(iii) the election of any remedy by, or on behalf of, the either Agent
or any of the Lenders with respect to all or any part of the Guaranteed
Obligations;
(iv) the waiver, consent, extension, forbearance or granting of any
indulgence by, or on behalf of, the either Agent or any of the Lenders with
respect to any provision of any of the Credit Documents;
(v) the failure of the either Agent or any of the Lenders to take any
steps to perfect and maintain its security interest in, or to preserve its
rights to, any security or collateral for the Guaranteed Obligations;
(vi) the election by, or on behalf of, the either Agent or any of the
Lenders, in any proceeding instituted under Chapter 11 of Bankruptcy Code,
of the application of Section 1111(b)(2) of the Bankruptcy Code;
(vii) any borrowing or grant of a security interest by any Borrower,
as debtor-in-possession, under Section 364 of the Bankruptcy Code;
(viii) the disallowance, under Section 502 of the Bankruptcy Code, of
all or any portion of the claims against any Borrower of any of the Lenders
or either Agent for repayment of all or any part of the Guaranteed
Obligations or any Expenses; or
(ix) any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of any Borrower or any Guarantor.
<PAGE>
3
3. ENFORCEMENT; APPLICATION OF PAYMENTS. Subject to SECTION 1(ii)
hereof and the provisions of the Credit Agreement, upon the occurrence and
during the continuation of an Event of Default, the Collateral Agent may proceed
directly against any Guarantor to collect and recover the full amount, or any
portion, of the Guaranteed Obligations, without first proceeding against any
Borrower or any other Person, or against any security or collateral for the
Guaranteed Obligations. Subject only to the terms and provisions of the Credit
Agreement, the Collateral Agent shall have the exclusive right to determine the
application of payments and credits, if any, from any Guarantor, any Borrower or
from any other Person on account of the Guaranteed Obligations or any other
liability of the Guarantors to the either Agent or any of the Lenders.
4. WAIVERS. (i) Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
receivership or bankruptcy of any Borrower, protest or notice with respect to
the Guaranteed Obligations, all setoffs and counterclaims, demands for
performance, notices of nonperformance, notices of protest, notices of dishonor
and notices of acceptance of this Guaranty, and all other demands whatsoever
(and shall not require that the same be made on any Borrower as a condition
precedent to such Guarantor's obligations hereunder), and covenants that this
Guaranty will not be discharged, except by complete payment (in cash) and
performance of the Guaranteed Obligations and any other obligations contained
herein. Each Guarantor further waives all notices of the existence, creation or
incurring of new or additional Indebtedness, arising either from additional
loans extended to any Borrower or otherwise, and also waives all notices that
the principal amount, or any portion thereof, and/or any interest on any
instrument or document evidencing all or any part of the Guaranteed Obligations
is due, notices of any and all proceedings to collect from the maker, any
endorser or any other guarantor of all or any part of the Guaranteed
Obligations, or from any other Person, and, to the extent permitted by law,
notices of exchange, sale, surrender or other handling of any security or
collateral given to either Agent or any of the Lenders to secure payment of all
or any part of the Guaranteed Obligations.
(ii) The Agents and/or the Lenders are hereby authorized, without
notice or demand and without affecting the liability of the Guarantors
hereunder, from time to time, (a) to renew, extend, accelerate or otherwise
change the time for payment of, or other terms relating to, all or any part of
the Guaranteed Obligations, or to otherwise modify, amend or change the terms of
any of the Credit Documents; (b) to accept partial payments on all or any part
of the Guaranteed Obligations; (c) to take and hold security or collateral for
the payment of all or any part of the Guaranteed Obligations, this Guaranty, or
any other guaranties of all or any part of the Guaranteed Obligations or other
liabilities of any of the Borrowers, (d) to exchange, enforce, waive and release
any such security or collateral; (e) to apply such security or collateral and
direct the order or manner of sale thereof as in its discretion it may
determine; (f) to settle, release, exchange, enforce, waive, compromise or
collect or otherwise liquidate all or any part of the Guaranteed Obligations,
this Guaranty, any other guaranty of all or any part of the Guaranteed
Obligations, and any security or collateral for the Guaranteed Obligations or
for any such guaranty. Any of the foregoing may be done in any manner, without
affecting or impairing the obligations of the Guarantors hereunder.
5. SETOFF. At any time after all or any part of the Guaranteed
Obligations have become due and payable (by acceleration or otherwise), the
Lenders may, without notice to any Guarantor and regardless of the acceptance of
any security or collateral for the payment hereof, appropriate and apply toward
the payment of all or any part of the Guaranteed Obligations (i) any
Indebtedness due or to become due from the Lenders to such Guarantor, and
(ii) any moneys, credits or other property belonging to such Guarantor, at any
time held by or coming into the possession of the Lenders or their respective
affiliates.
6. FINANCIAL INFORMATION. Each Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of the
Borrowers and any and all other Guarantors and endorsers and/or other guarantors
of all or any part of the Guaranteed Obligations, and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations, or any part
thereof, that diligent inquiry would reveal, and such Guarantor hereby agrees
that the Agents and the Lenders shall have no duty to advise any Guarantor of
information known to it regarding such condition or any such circumstances. In
the event that either Agent or any of the Lenders, in its sole discretion,
undertakes at any time or from time to time to provide any such information to
any Guarantor, then such Agent or such Lender shall be under no obligation
(i) to undertake any investigation not a part of its regular business routine,
(ii) to disclose any information which such Agent or such Lender, pursuant to
accepted or reasonable commercial finance or banking practices, wishes to
maintain confidential or (iii) to make any other or future disclosures of such
information or any other information to such Guarantor.
<PAGE>
4
7. NO MARSHALLING; REINSTATEMENT. Each Guarantor consents and agrees
that none of the Agents any of the Lenders or any Person acting for or on behalf
of the Collateral Agent shall be under any obligation to marshall any assets in
favor of any Guarantor or against or in payment of any or all of the Guaranteed
Obligations. Each Guarantor further agrees that, to the extent that any
Borrower, any Guarantor or any other guarantor of all or any part of the
Guaranteed Obligations makes a payment or payments to the Agents or the Lenders
or either Agent or any Lender receives any proceeds of Collateral, which payment
or payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to any
Borrower, any Guarantor, such other guarantor or any other Person, or their
respective estates, trustees, receivers or any other party, including, without
limitation, such Guarantor, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or repayment,
the part of the Guaranteed Obligations which has been paid, reduced or satisfied
by such amount shall be reinstated and continued in full force and effect as of
the time immediately preceding such initial payment, reduction or satisfaction.
8. SUBROGATION. Until the Guaranteed Obligations shall have been
paid in full, each Guarantor hereby agrees that it (i) shall not exercise any
right of subrogation with respect to such Guaranteed Obligations (under
contract, SECTION 509 of the Bankruptcy Code or otherwise) or any other right of
indemnity, reimbursement or contribution, (ii) waives any right to enforce any
remedy which either Agent or any of the Lenders now have or may hereafter have
against any Borrower, any endorser or any other guarantor of all or any part of
the Guaranteed Obligations or any other Person, and (iii) waives any benefit of,
and any right to participate in, any security or collateral given to the Agents
and the Lenders to secure the payment or performance of all or any part of the
Guaranteed Obligations or any other liability of any Borrower to the Agents and
the Lenders.
9. SUBORDINATION. Each Guarantor agrees that any and all claims of
such Guarantor against any Borrower, any other Guarantor or any endorser or
other guarantor of all or any part of the Guaranteed Obligations, or against any
of their respective properties, with respect to any Indebtedness of such
Borrower to the Guarantor (the "Borrower Indebtedness"), shall be subordinated
to the payment in full in cash of all Guaranteed Obligations. Notwithstanding
any right of the Guarantor to ask, demand, sue for, take or receive any payment
from any Borrower, all such rights and Liens of the Guarantor with respect to
the Borrower Indebtedness, whether now or hereafter arising and howsoever
existing shall be and hereby are subordinated to the rights of the Agents and
the Lenders to receive payment in full in cash of the Guaranteed Obligations.
So long as no Event of Default set forth in SECTION 12(a) or (f) of the Credit
Agreement shall have occurred and is continuing, the Guarantor shall retain all
its rights and shall be entitled to receive and retain any and all payments made
in respect of, the Borrower Indebtedness. After an Event of Default set forth
in SECTION 12(a) or (f) of the Credit Agreement shall have occurred and is
continuing, the Guarantor shall not exercise any rights with respect to the
Borrower Indebtedness or to foreclose upon any asset securing the Borrower
Indebtedness, whether by judicial action or otherwise, unless and until all of
the Guaranteed Obligations shall have been fully paid in cash and all financing
arrangements pursuant to the Credit Agreement between the Borrowers and the
Lenders have been terminated. If all or any part of the assets of any Borrower,
or the proceeds thereof, are subject to any distribution, division or
application to the creditors of such Borrower, whether partial or complete,
voluntary or involuntary, and whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding, or if the business of any Borrower is dissolved or if
substantially all of the assets of any Borrower are sold, then, and in any such
event, any payment or distribution of any kind or character, either in cash,
securities or other property, which shall be payable or deliverable upon or with
respect to any Borrower Indebtedness shall be paid or delivered directly to the
Lenders for application to any of the Guaranteed Obligations, due or to become
due, until such Guaranteed Obligations shall have first been fully paid in cash
and satisfied. The Guarantor irrevocably authorizes and empowers each Agent and
each of the Lenders to demand, sue for, collect and receive every such payment
or distribution and give acquittance therefor and to make and present for and on
behalf of the Guarantor such proofs of claim and take such other action, in such
Agent's or such Lender's own name or in the name of the Guarantor or otherwise,
as either Agent or any Lender may deem necessary or advisable for the
enforcement of this Guaranty. Each Lender may vote such proofs of claim in any
such proceeding, receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
apply the same on account of any of the Guaranteed Obligations. Should any
payment, distribution, security or instrument or proceeds thereof be received by
the Guarantor upon or with respect to the Borrower Indebtedness after an Event
of Default set forth in SECTION 12(a) or (f) of the Credit Agreement shall have
occurred and is continuing, and prior to the payment in full in cash of all
Guaranteed Obligations and the termination of all financing arrangements
pursuant
<PAGE>
5
to the Credit Agreement between the Borrowers and the Lenders, the Guarantor
shall receive and hold the same in trust, as trustee, for the benefit of the
Agents and the Lenders and shall forthwith deliver the same to the Collateral
Agent, in precisely the form received (except for the endorsement or
assignment of the Guarantor where necessary), for application to any of the
Guaranteed Obligations, due or not due, and, until so delivered, the same
shall be held in trust by the Guarantor as the property of the Collateral
Agent, for the benefit of the Agents and the Lenders; PROVIDED, that if the
Guarantor fails to make any such endorsement or assignment to the Collateral
Agent, the Collateral Agent (or any of its officers or employees) is hereby
irrevocably authorized to make the same. The Guarantor agrees that after an
Event of Default set forth in SECTION 12(a) or (f) of the Credit Agreement
shall have occurred and is continuing, and until the Guaranteed Obligations
have been paid in full (in cash) and satisfied and all financing arrangements
pursuant to the Credit Agreement between the Borrowers and the Lenders have
been terminated, the Guarantor will not assign or transfer to any Person any
claim the Guarantor has or may have against any Borrower.
10. ENFORCEMENT; AMENDMENTS; WAIVERS. No delay on the part of either
Agent or any of the Lenders in the exercise of any right or remedy arising under
this Guaranty, the Credit Agreement, any of the other Credit Documents or
otherwise with respect to all or any part of the Guaranteed Obligations, the
Collateral or any other guaranty of or security for all or any part of the
Guaranteed Obligations shall operate as a waiver thereof, and no single or
partial exercise by either Agent or any of the Lenders of any such right or
remedy shall preclude any further exercise thereof. No modification or waiver
of any of the provisions of this Guaranty shall be binding upon either Agent or
any of the Lenders, except as expressly set forth in a writing duly signed and
delivered by the Administrative Agent. Failure by either Agent or any of the
Lenders at any time or times hereafter to require strict performance by any
Borrower, any Guarantor, any other guarantor of all or any part of the
Guaranteed Obligations or any other Person of any of the provisions, warranties,
terms and conditions contained in any of the Credit Documents now or at any time
or times hereafter executed by such Persons and delivered to either Agent or any
of the Lenders shall not waive, affect or diminish any right of either Agent or
any of the Lenders at any time or times hereafter to demand strict performance
thereof and such right shall not be deemed to have been waived by any act or
knowledge of either Agent or any of the Lenders, or its agents, officers or
employees, unless such waiver is contained in an instrument in writing, directed
and delivered to the Borrowers or the Guarantors, as applicable, specifying such
waiver, and is signed by either Agent. No waiver of any Event of Default by the
Lenders shall operate as a waiver of any other Event of Default or the same
Event of Default on a future occasion, and no action by either Agent or any of
the Lenders permitted hereunder shall in any way affect or impair either Agent's
or any Lender's rights and remedies or the obligations of the Guarantors under
this Guaranty. Any determination by a court of competent jurisdiction of the
amount of any principal and/or interest owing by any Borrower to either Agents
and the Lenders shall be conclusive and binding on each Guarantor irrespective
of whether such Guarantor was a party to the suit or action in which such
determination was made.
11. EFFECTIVENESS; TERMINATION. This Guaranty shall become effective
against any Guarantor upon its execution by such Guarantor and shall continue in
full force and effect and may not be terminated or otherwise revoked until the
Guaranteed Obligations (other than indemnities not yet due) shall have been
fully paid (in cash) and discharged and the Credit Agreement and the Revolving
Credit Commitments shall have been terminated. If, notwithstanding the
foregoing, any Guarantor shall have any right under applicable law to terminate
or revoke its obligations under this Guaranty, such Guarantor agrees that such
termination or revocation shall not be effective until a written notice of such
revocation or termination, specifically referring hereto, signed by such
Guarantor, is actually received by each Agent. Such notice shall not affect the
right and power of the Agents or any of the Lenders to enforce rights arising
prior to receipt thereof by the Agents and the Lenders. If any of the Lenders
grants loans or takes other action after such Guarantor terminates or revokes
its obligations under this Guaranty but before such Lender receives such written
notice, the rights of such Lender with respect thereto shall be the same as if
such termination or revocation had not occurred.
12. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
parties hereto and their respective successors and permitted assigns, and shall
inure to the benefit of the parties hereto and the successors and permitted
assigns of the Agents and the Lenders. The rights hereunder and the interest
herein of each Guarantor may not be assigned without the written consent of the
Required Lenders. Any attempted assignment without such written consent shall
be void. Nothing set forth herein or in any other Credit Document is intended
or shall be construed to give any other Person any right, remedy or claim under,
to or in respect of this Guaranty. Each Guarantor's successors shall include,
without limitation, a receiver, trustee or debtor-in-possession of or for such
Guarantor.
<PAGE>
6
13. GOVERNING LAW. THIS GUARANTY SHALL BE CONSTRUED AND THE RIGHTS
AND DUTIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK.
14. CERTAIN CONSENTS AND WAIVERS.
(a) PERSONAL JURISDICTION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, (i) EACH OF THE COLLATERAL AGENT AND THE GUARANTORS IRREVOCABLY
AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH
THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT RELATED HERETO, AND EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT
OR IN SUCH FEDERAL COURT. EACH OF THE GUARANTORS IRREVOCABLY DESIGNATES AND
APPOINTS UNITED STATES CORPORATION SERVICES COMPANY AT 80 STATE STREET, ALBANY,
NEW YORK 12207, AS ITS RESPECTIVE PROCESS AGENT (THE "PROCESS AGENT") FOR
SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE
BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
EACH OF THE COLLATERAL AGENT AND THE GUARANTORS AGREES THAT A FINAL
NONAPPEALABLE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. EACH OF THE COLLATERAL AGENT AND THE GUARANTORS WAIVES
IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
CONSIDERING THE DISPUTE IN ANY SUCH ACTION OR PROCEEDING IN SUCH STATE COURT OR
IN SUCH FEDERAL COURT.
(ii) EACH OF THE GUARANTORS AGREES THAT THE COLLATERAL AGENT
SHALL HAVE THE RIGHT TO PROCEED AGAINST EACH OF THE GUARANTORS OR ITS RESPECTIVE
PROPERTY IN A COURT HAVING JURISDICTION IN ANY LOCATION TO ENABLE THE AGENTS AND
THE LENDERS TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
GUARANTEED OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF THE AGENTS OR ANY LENDER. EACH OF THE GUARANTORS WAIVES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH EITHER AGENT OR ANY
LENDER MAY COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.
(b) SERVICE OF PROCESS. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE GUARANTORS IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE PROCESS AGENT OR THE GUARANTOR'S NOTICE ADDRESS SPECIFIED PURSUANT TO
SECTION 16 HEREOF, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH
MAILING. EACH OF THE COLLATERAL AGENT AND THE GUARANTORS IRREVOCABLY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT IN ANY
JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST EACH OF THE GUARANTORS IN THE
COURTS OF ANY OTHER JURISDICTION.
<PAGE>
7
(c) WAIVER OF JURY TRIAL. EACH OF THE COLLATERAL AGENT AND THE
GUARANTORS IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT TO WHICH SUCH PERSON IS A
PARTY.
15. WAIVER OF BOND. Each Guarantor waives, to the extent permitted
by law, the posting of any bond otherwise required of the Collateral Agent in
connection with any judicial process or proceeding to realize on the Collateral
or any other security for the Guaranteed Obligations, to enforce any judgment or
other court order entered in favor of the Collateral Agent, or to enforce by
specific performance, temporary restraining order, or preliminary or permanent
injunction, this Guaranty or any other agreement or document between the
Collateral Agent and such Guarantor.
16. NOTICES. All notices and other communications required or
desired to be served, given or delivered hereunder shall be in writing or by a
telecommunications device capable of creating a printed record and shall be
addressed to the party to be notified as follows:
if to any Guarantor, at:
Hexcel Corporation
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
Attention: Treasurer
Telecopier No.: (203) 358-3993
Confirmation No.: (203) 969-0666
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Joseph Coco, Esq.
Telecopier No.: (212) 735-2000
Confirmation No.: (212) 735-3000
if to the Collateral Agent, at:
Citibank, N.A.
399 Park Avenue
New York, New York 10022
Attention: William E. Clark
Telecopier No.: (212) 793-7460
Confirmation No.: (212) 559-5944
or, as to each party, at such other address as designated by such party in a
written notice to the other party. All such notices and communications shall be
deemed to be validly served, given or delivered (i) ten (10) days following
deposit in the United States mails, with proper postage prepaid; (ii) upon
delivery thereof if delivered by hand to the party to be notified; (iii) one
Business Day after delivery thereof to a reputable overnight courier service,
with delivery charges prepaid; or (iv) upon confirmation of receipt thereof if
transmitted by a telecommunications device.
17. SEVERABILITY. Wherever possible, each provision of this Guaranty
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
18. ENTIRE AGREEMENT. This Guaranty, together with the other Credit
Documents, embodies the entire agreement and understanding among the parties
hereto with respect to the matters contained herein and supersedes all prior
agreements and understandings, written and oral, relating to the subject matter
hereof.
<PAGE>
8
19. EXECUTION IN COUNTERPARTS. This Guaranty may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
20. ADDITIONAL GUARANTORS. Each of the Guarantors agrees that, if,
pursuant to the Credit Agreement, the Company shall be required to cause any
Domestic Subsidiary that is not a Guarantor to become a Guarantor, and such
Subsidiary shall execute and deliver a Subsidiary Guaranty Supplement in the
form of Exhibit A attached hereto, such Subsidiary shall for all purposes be a
party hereto and have the same rights, benefits and obligations as a Guarantor
party hereto on the Closing Date; PROVIDED that such Subsidiary may become a
guarantor of the Guaranteed Obligations by way of any document, instrument or
agreement which is reasonably satisfactory to the Collateral Agent and nothing
contained herein shall require that such Subsidiary become a guarantor of the
Guaranteed Obligations by way of a Subsidiary Guaranty Supplement
<PAGE>
9
IN WITNESS WHEREOF, this Guaranty has been duly executed by each
Guarantor as of the day and year first set forth above.
HEXCEL BETA CORPORATION, a
Delaware corporation
HEXCEL INTERNATIONAL, a
California corporation
HEXCEL OMEGA CORPORATION, a
California corporation
By____________________________
Name:
Title:
Acknowledged and agreed to
as of the __ day of March 1998.
CITIBANK, N.A., as Collateral Agent
By:_________________________________
Name:
Title:
<PAGE>
10
EXHIBIT A TO SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY SUPPLEMENT
The undersigned hereby agrees to be bound as a Guarantor for purposes
of the Subsidiary Guaranty dated as of March 5, 1998, among certain Subsidiaries
of Hexcel Corporation listed on the signature pages thereof and acknowledged by
Citibank, N.A., as Collateral Agent, and the undersigned hereby acknowledges
receipt of a copy of the Guaranty. Capitalized terms used herein are used with
the meanings given them in the Guaranty.
Agreed to this ___ day of ______________, _________.
[NAME OF GUARANTOR]
By:________________________
Name:
Title:
Notice Address:
<PAGE>
EXHIBIT D-2
FORM OF SUBSIDIARY PLEDGE AGREEMENT
This AMENDED AND RESTATED PLEDGE AGREEMENT (as amended, supplemented
or otherwise modified from time to time, this "Pledge Agreement"), dated as of
March 5, 1998, by and between __________, a _____________ [corporation][company]
(with its successors and permitted assigns, the "Pledgor"), and CITIBANK, N.A.,
in its separate capacity as collateral agent (with its successors and permitted
assigns in such capacity, the "Collateral Agent") for the Lenders (as defined
below) parties to the Credit Agreement described below. Terms defined in the
Credit Agreement and not otherwise defined herein are used herein with the
meanings ascribed thereto in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Lenders have agreed to make extensions of credit from
time to time to Hexcel Corporation (the "Company") and the Foreign Borrowers
pursuant to the Credit Agreement, dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among the Company, the Foreign Borrowers from time to time parties thereto, the
Lenders, the Collateral Agent, the Syndication Agent and CSFB, as administrative
agent (in such capacity, the "Administrative Agent", together with the
Collateral Agent and the Syndication Agent, the "Agents");
WHEREAS, the Pledgor is a Wholly-owned Subsidiary of the Company and
has guaranteed the Obligations of the Company pursuant to the Domestic
Subsidiary Guaranty;
WHEREAS, the Pledgor owns the shares of capital stock described in
EXHIBIT A hereto and issued by the issuers named therein; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their extensions of credit under the Credit Agreement that the Pledgor
execute and deliver to the Collateral Agent this Pledge Agreement;
WHEREAS, the Pledgor is a party to the pledge agreement, dated as of
June 27, 1996 (as amended, supplemented or otherwise modified from time to time,
the "EXISTING PLEDGE AGREEMENT"), with the Collateral Agent; and
Whereas, the Collateral Agent has requested the Existing Pledge
Agreement to be amended as more fully described herein; and
WHEREAS, each of the parties to the Existing Pledge Agreement is
agreeable to the requested amendments, but only upon the terms and subject to
the conditions set forth herein, and each of the parties to the Existing Pledge
Agreement, for convenience of reference, has agreed to restate the Existing
Pledge Agreement as so amended; and
WHEREAS, each of the parties hereto are agreeable to the terms and
provisions of the Existing Pledge Agreement as amended and restated hereby;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties to the Existing Pledge Agreement agree that the
Existing Pledge Agreement shall be and hereby is amended and restated in its
entirety and the parties hereto hereby agree as follows:
1. DEFINED TERMS.
<PAGE>
2
(a) Unless otherwise defined herein, each capitalized term used
herein that is defined in the Credit Agreement shall have the meaning specified
for such term in the Credit Agreement. Unless otherwise defined herein, all
terms defined in Article 8 and Article 9 of the Uniform Commercial Code in
effect as of the date hereof in the State of New York are used herein as defined
therein.
(b) The words "hereby," "hereof," "herein" and "hereunder" and words
of like import when used in this Pledge Agreement shall refer to this Pledge
Agreement as a whole and not to any particular provision of this Pledge
Agreement, and section references are to this Pledge Agreement unless otherwise
specified.
(c) All terms defined in this Pledge Agreement in the singular shall
have comparable meanings when used in the plural, and VICE VERSA, unless
otherwise specified.
2. PLEDGE. The Pledgor hereby pledges to the Collateral Agent (for
the benefit of the Agents and the Lenders) and grants to the Collateral Agent
(for the benefit of the Agents and the Lenders) a security interest in the
following (collectively, the "Pledged Collateral"):
(a) All of the issued and outstanding capital stock of the issuers
described in EXHIBIT A hereto (including, without limitation, the shares of
such capital stock described in EXHIBIT A hereto), and the certificates
representing the shares of such capital stock, all options and warrants for
the purchase of shares of such capital stock (all of said capital stock,
options and warrants and all capital stock held in the name of the Pledgor
as a result of the exercise of such options or warrants being hereinafter
collectively referred to as the "Pledged Stock"), and all dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of, or in exchange for, any or all of the
Pledged Stock;
(b) All additional shares of stock of any issuer of the Pledged Stock
from time to time acquired by the Pledgor in any manner, and all of the
shares of the capital stock issued to the Pledgor by any other Subsidiary
of the Company after the date hereof that are required to be pledged
pursuant to the Credit Agreement, and the certificates representing such
additional shares (any such additional shares shall constitute part of the
Pledged Stock and the Collateral Agent is irrevocably authorized, but is
not required, to amend EXHIBIT A from time to time to reflect such
additional shares), and all options, warrants, dividends, cash, instruments
and other rights and options from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares;
(c) The property and interests in property described in SECTION 4
below; and
(d) All proceeds of the foregoing.
The Pledgor hereby delivers to the Collateral Agent all of such Pledged
Collateral which is in existence on the date hereof, accompanied by appropriate
undated stock powers (the "Stock Powers") duly executed in blank.
3. SECURITY FOR OBLIGATIONS. The Pledged Collateral secures the
prompt payment, performance and observance of the Guaranteed Obligations (as
defined in the Domestic Subsidiary Guaranty) of the Company.
4. PLEDGED COLLATERAL ADJUSTMENTS. If, during the term of this
Pledge Agreement:
(a) any stock dividend, reclassification, readjustment or other
change is declared or made in the capital structure of any issuer of
Pledged Stock, or any option included within the Pledged Collateral is
exercised, or both, or
(b) any subscription warrants or any other rights or options shall be
issued in connection with the Pledged Collateral,
then all new, substituted and additional shares, warrants, rights, options,
notes or other securities, issued by reason of any of the foregoing, shall be
immediately delivered to and held by the Collateral Agent under the terms of
this Pledge Agreement and shall constitute Pledged Collateral hereunder;
PROVIDED, HOWEVER, that nothing contained in this SECTION 4 shall be deemed to
permit any stock dividend, issuance of additional stock, warrants, rights or
options,
<PAGE>
3
reclassification, readjustment or other change in the capital structure
of any issuer of Pledged Stock which is prohibited in the Credit Agreement.
5. SUBSEQUENT CHANGES AFFECTING PLEDGED COLLATERAL. The Pledgor
represents and warrants that it has made its own arrangements for keeping
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, rights to convert, rights to subscribe, payment
of dividends, reorganization or other exchanges, tender offers and voting
rights), and the Pledgor agrees that neither the Agents nor any of the Lenders
shall have any obligation to inform the Pledgor of any such changes or potential
changes or to take any action or omit to take any action with respect thereto.
The Collateral Agent may, upon the occurrence and during the continuation of an
Event of Default, without notice and at its option, transfer or register the
Pledged Collateral or any part thereof into its or its nominee's name with or
without any indication that such Pledged Collateral is subject to the security
interest hereunder. In addition, the Collateral Agent may at any time, after
the occurrence and during the continuation of an Event of Default, exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
6. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the sole legal and beneficial owner of all of the
issued and outstanding capital stock of each issuer listed on EXHIBIT A
hereto, free and clear of any Lien except for the security interest created
by this Pledge Agreement, and the Pledged Stock constitutes 100% of the
issued and outstanding shares of capital stock of the respective issuers
thereof set forth in EXHIBIT A hereto;
(b) There are no restrictions upon the voting rights associated with,
or upon the transfer of, any of the Pledged Collateral, other than pursuant
to this Pledge Agreement;
(c) The pledge of the Pledged Collateral pursuant to this Pledge
Agreement creates a valid and perfected first priority security interest in
the Pledged Collateral, in favor of the Collateral Agent, for the benefit
of the Agents and the Lenders, securing the payment and performance of the
Obligations of the Borrowers; and
(e) The Stock Powers are duly executed and give the Collateral Agent
the authority they purport to confer.
7. VOTING RIGHTS. During the term of this Pledge Agreement, and
except as provided in this SECTION 7 below, the Pledgor shall have the right to
vote the Pledged Stock on all corporate questions in a manner not inconsistent
with the terms of this Pledge Agreement, the Credit Agreement or any other
Credit Document. Upon the occurrence and during the continuation of an Event of
Default, the Collateral Agent may, at the Collateral Agent's option and
following written notice from the Collateral Agent to the Pledgor, exercise all
voting powers pertaining to the Pledged Collateral, including the right to take
action by shareholder consent.
8. DIVIDENDS AND OTHER DISTRIBUTIONS. (a) So long as no Event of
Default under SECTION 12(a) of the Credit Agreement shall have occurred and be
continuing:
(i) The Pledgor shall be entitled to receive and retain any and all
dividends and interest paid in respect of the Pledged Collateral, PROVIDED,
HOWEVER, that any and all
(A) dividends and interest paid or payable other than in cash with
respect to, and instruments and other property received, receivable or
otherwise distributed with respect to, or in exchange for, any of the
Pledged Collateral;
(B) dividends and other distributions paid or payable in cash with
respect to any of the Pledged Collateral on account of a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid in surplus; and
(C) cash paid, payable or otherwise distributed with respect to
principal of, or in redemption of, or in exchange for, any of the
Pledged Collateral;
<PAGE>
3
shall be Pledged Collateral, and shall be forthwith delivered to the
Collateral Agent to hold, for the benefit of the Agents and the Lenders, as
Pledged Collateral and shall, if received by the Pledgor, be received in
trust for the Collateral Agent, for the benefit of the Agents and the
Lenders, be segregated from the other property or funds of the Pledgor, and
be delivered immediately to the Collateral Agent as Pledged Collateral in
the same form as so received (with any necessary endorsement); and
(ii) The Collateral Agent shall execute and deliver (or cause to be
executed and delivered) to the Pledgor all such proxies and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to receive the dividends or interest payments which
the Pledgor is authorized to receive and retain pursuant to CLAUSE (i)
above or exercise the voting rights in SECTION 7 above.
(b) Upon the occurrence and during the continuation of an Event of Default
set forth in SECTION 12(A) of the Credit Agreement:
(i) All rights of the Pledgor to receive the dividends and interest
payments which it would otherwise be authorized to receive and retain
pursuant to SECTION 8(a)(i) hereof shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, for the benefit of the
Agents and the Lenders, which shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends and interest
payments;
(ii) All dividends and interest payments which are received by the
Pledgor contrary to the provisions of CLAUSE (i) of this SECTION 8(b) shall
be received in trust for the Collateral Agent, for the benefit of the
Agents and the Lenders, shall be segregated from other funds of the Pledgor
and shall be paid over immediately to the Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsements); and
(iii) The Pledgor shall, upon the request of the Collateral Agent, at
Pledgor's expense, execute and deliver all such instruments and documents,
and do or cause to be done all such other acts and things, as may be
necessary or, in the opinion of the Collateral Agent, the Pledgor or its or
their counsel, advisable to register the applicable Pledged Collateral
under the provisions of the Securities Act, and to exercise its best
efforts to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and supplements
thereto and to the related prospectus which, in the opinion of the
Collateral Agent, the Pledgor or its or their counsel, are necessary or
advisable, all in conformity with the requirements of the Securities Act
and the rules and regulations of the Securities and Exchange Commission
applicable thereto;
(iv) The Pledgor shall, upon the request of the Collateral Agent, at
Pledgor's expense, use its best efforts to qualify the Pledged Collateral
under state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Collateral, as requested
by the Collateral Agent;
(v) The Pledgor shall, upon the request of the Collateral Agent, at
the Pledgor's expense, make available to the holders of its securities, as
soon as practicable, earnings statements which will satisfy the provisions
of SECTION 11(a) of the Securities Act; and
(vi) The Pledgor shall, upon the reasonable request of the Collateral
Agent, at the Pledgor's expense, do or cause to be done all such other acts
and things as may be necessary to make such sale of the Pledged Collateral
or any part thereof valid and binding and in compliance with applicable
law.
The Pledgor will reimburse the Collateral Agent for all reasonable expenses
incurred by the Collateral Agent, including, without limitation, reasonable
attorneys' and accountants' fees and expenses in connection with the
foregoing. Upon or at any time after the occurrence and during the
continuation of an Event of Default, if the Collateral Agent determines that,
prior to any public offering of any securities constituting part of the
Pledged Collateral, such securities should be registered under the Securities
Act and/or registered or qualified under any
<PAGE>
5
other federal or state law and such registration and/or qualification is not
practicable, then the Pledgor agrees that it will be commercially reasonable
if a private sale, upon at least ten (10) Business Days' notice to the
Pledgor, is arranged so as to avoid a public offering, even though the sales
price established and/or obtained at such private sale may be substantially
less than prices which could have been obtained for such security on any
market or exchange or in any other public sale.
9. TRANSFERS AND OTHER LIENS. The Pledgor agrees that it will not
(i) sell or otherwise dispose of, or grant any option with respect to, any of
the Pledged Collateral without the prior written consent of the Collateral
Agent, other than in accordance with the Credit Agreement, or (ii) create or
permit to exist any Lien upon or with respect to any of the Pledged Collateral,
except for the security interest permitted hereunder and under the Credit
Agreement.
10. REMEDIES; APPLICATION OF PROCEEDS. (a) The Collateral Agent
shall have, in addition to any other rights given under this Pledge Agreement or
by law, all of the rights and remedies with respect to the Pledged Collateral of
a secured party under the Uniform Commercial Code as in effect in the State of
New York. In addition, upon the occurrence and during the continuation of an
Event of Default set forth in SECTION 12(a) of the Credit Agreement or upon
acceleration of the Obligations, the Administrative Agent shall have such powers
of sale and other powers as may be conferred by applicable law. With respect to
the Pledged Collateral or any part thereof which shall then be in or shall
thereafter come into the possession or custody of the Collateral Agent or which
the Collateral Agent shall otherwise have the ability to transfer under
applicable law, the Collateral Agent may, in its sole discretion, without notice
except as specified below, after the occurrence and during the continuation of
an Event of Default set forth in SECTION 12(a) of the Credit Agreement or upon
acceleration of the Obligations of the Borrowers, sell or cause the same to be
sold at any exchange, broker's board or at public or private sale, in one or
more sales or lots, at such price as the Collateral Agent may deem best, for
cash or on credit or for future delivery, without assumption of any credit risk,
and the purchaser of any or all of the Pledged Collateral so sold shall
thereafter own the same, absolutely free from any claim, encumbrance or right of
any kind whatsoever. The Agents and any Lender may, in its own name, or in the
name of a designee or nominee, buy such Pledged Collateral at any public sale
and, if permitted by applicable law, buy such Pledged Collateral at any private
sale. In the event of a sale of any Collateral, or any part thereof, to a
Lender or the Agents upon the occurrence and during the continuation of an Event
of Default set forth in SECTION 12(a) of the Credit Agreement or upon
acceleration of the Obligations, such Lender or the Agents, as the case may be,
shall not deduct or offset from any part of the purchase price to be paid
therefor any indebtedness owing to it by the Pledgor. The Pledgor will pay to
the Agents all reasonable expenses (including, without limitation, court costs
and reasonable attorneys' expenses) of, or incidental to, the enforcement of any
of the provisions hereof. The Collateral Agent agrees to distribute any
proceeds of the sale of the Pledged Collateral in accordance with the Credit
Agreement and the Pledgor shall remain liable for any deficiency following the
sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens to decline speedily in
value or is or becomes of a type sold on a recognized market, the Collateral
Agent will give the Pledgor reasonable notice of the time and place of any
public sale thereof, or of the time after which any private sale or other
intended disposition is to be made. Any sale of the Pledged Collateral
conducted in conformity with reasonable commercial practices of banks,
commercial finance companies, insurance companies or other financial
institutions disposing of property similar to the Pledged Collateral shall be
deemed to be commercially reasonable. Notwithstanding any provision to the
contrary contained herein, the Pledgor agrees that any requirements of
reasonable notice shall be met if such notice is received by the Pledgor as
provided in SECTION 20 below at least ten (10) Business Days before the time of
the sale or disposition; PROVIDED, HOWEVER, that the Collateral Agent may give
any shorter notice that is commercially reasonable under the circumstances. Any
other requirement of notice, demand or advertisement for sale is waived, to the
extent permitted by law.
(c) In view of the fact that federal and state securities laws may
impose certain restrictions on the method by which a sale of the Pledged
Collateral may be effected after the occurrence and during the continuation of
an Event of Default set forth in SECTION 12(a) of the Credit Agreement or upon
acceleration of the Obligations of the Borrowers, the Pledgor agrees that upon
the occurrence and during the continuation of an Event of Default, the
Collateral Agent may, from time to time, attempt to sell all or any part of the
Pledged Collateral by means of a private placement restricting the bidders and
prospective purchasers to those who are qualified and will represent and agree
that they are purchasing for investment only and not for distribution. In so
doing, the Collateral Agent
<PAGE>
6
may solicit offers to buy the Pledged Collateral, or any part of it, from a
limited number of investors deemed by the Collateral Agent, in its reasonable
judgment, to be financially responsible parties who might be interested in
purchasing the Pledged Collateral. If the Collateral Agent solicits such
offers from not less than four (4) such investors, then the acceptance by the
Collateral Agent of the highest offer obtained therefrom shall be deemed to
be a commercially reasonable method of disposing of such Pledged Collateral;
PROVIDED, HOWEVER, that this Section does not impose a requirement that the
Collateral Agent solicit offers from four or more investors in order for the
sale to be commercially reasonable.
11. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
appoints the Collateral Agent its attorney-in-fact, with full authority, in the
name of the Pledgor or otherwise, upon the occurrence and during the
continuation of an Event of Default, from time to time in the Collateral Agent's
sole discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Pledge Agreement, including, without limitation (subject to SECTION 8
hereof), to receive, endorse and collect all instruments made payable to the
Pledgor representing any dividend, interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give full discharge
for the same and to arrange for the transfer of all or any part of the Pledged
Collateral on the books of each of the issuers of such Pledged Stock or obligors
of such Pledged Stock to the name of the Administrative Agent or the Collateral
Agent's nominee.
12. WAIVERS. The Pledgor waives presentment and demand for payment
of any of the Obligations, protest and notice of dishonor or Event of Default
with respect to any of the Obligations and all other notices to which the
Pledgor might otherwise be entitled except as otherwise expressly provided
herein or in the Credit Agreement.
13. TERMINATION OF THIS SECURITY AGREEMENT; RELEASE OF COLLATERAL.
(a) The pledge made and the security interest granted by the Pledgor under this
Pledge Agreement shall terminate upon final payment in full in cash of the
Obligations and the termination of the Revolving Credit Commitments under the
Credit Agreement. Upon such termination (other than as a result of the sale of
the Pledged Collateral) and at the written request of the Pledgor or its
successors or assigns, and at the cost and expense of the Pledgor or its
successors or assigns, the Collateral Agent shall execute in a timely manner
such instruments, documents or agreements as are necessary or desirable to
terminate the Collateral Agent's security interest in the Pledged Collateral and
deliver the Pledged Stock and the Stock Powers, subject to any disposition made
by the Collateral Agent pursuant to the Pledge Agreement.
(b) Notwithstanding anything in this Pledge Agreement to the contrary, the
Pledgor may, to the extent permitted by the Credit Agreement, sell, assign,
transfer or otherwise dispose of any Pledged Collateral. In addition, the
Collateral shall be subject to release from time to time (with the Collateral
referred to in the immediately preceding sentence, the "Released Collateral") in
accordance with SECTION 14.2 of the Credit Agreement. The Liens under this
Pledge Agreement shall terminate with respect to the Released Collateral upon
such sale, transfer, assignment, disposition or release, and, upon the request
of the Pledgor, the Collateral Agent shall execute and deliver such instruments
or documents as may be necessary to release the Liens granted hereunder;
PROVIDED, HOWEVER, that (i) the Collateral Agent shall not be required to
execute any such documents on terms which, in the Collateral Agent's opinion,
would expose the Collateral Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens on (or obligations of the Pledgor in respect
of) all interests retained by the Pledgor, including without limitation, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral unless and until applied strictly in accordance with the Credit
Documents.
14. SUCCESSORS AND ASSIGNS. This Pledge Agreement shall be binding
upon the parties hereto and their respective successors and permitted assigns,
and shall inure to the benefit of the parties hereto and the successors and
permitted assigns of the Agents and the Lenders. The rights hereunder and the
interest herein of the Pledgor may not be assigned without the written consent
of the Required Lenders. Any attempted assignment without such written consent
shall be void. Nothing set forth herein or in any other Credit Document is
intended or shall be construed to give any other Person any right, remedy or
claim under, to or in respect of this Pledge Agreement or any Pledged
Collateral. The Pledgor's successors shall include, without limitation, a
receiver, trustee or debtor-in-possession of or for the Pledgor.
<PAGE>
7
15. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND THE RIGHTS
AND DUTIES OF THE PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK, EXCEPT FOR PERFECTION AND ENFORCEMENT OF SECURITY
INTERESTS AND LIENS IN OTHER JURISDICTIONS WHICH SHALL BE GOVERNED BY THE LAWS
OF THOSE JURISDICTIONS.
16. WAIVER OF BOND. The Pledgor waives, to the extent permitted by
law, the posting of any bond otherwise required of the Collateral Agent in
connection with any judicial process or proceeding to realize on the Pledged
Collateral or any other security for the Obligations, to enforce any judgment or
other court order entered in favor of the Collateral Agent, or to enforce by
specific performance, temporary restraining order, or preliminary or permanent
injunction, this Pledge Agreement or any other agreement or document between the
Collateral Agent and the Pledgor.
17. SEVERABILITY. Whenever possible, each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but, if any provision of this Pledge Agreement shall be held to
be prohibited or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Pledge Agreement.
18. FURTHER ASSURANCES. The Pledgor agrees that it will cooperate
with the Collateral Agent and will execute and deliver, or cause to be executed
and delivered, all such other stock powers, proxies, instruments and documents,
and will take all such other actions, including, without limitation, the
execution and filing of financing statements, as the Collateral Agent may
reasonably request from time to time in order to carry out the provisions and
purposes of this Pledge Agreement.
19. THE COLLATERAL AGENT'S DUTY OF CARE. The Collateral Agent shall
not be liable for any acts, omissions, errors of judgment or mistakes of fact or
law including, without limitation, acts, omissions, errors or mistakes with
respect to the Pledged Collateral, except for those arising out of or in
connection with the Collateral Agent's (i) gross negligence or willful
misconduct as determined in a final nonappealable judgment by a court of
competent jurisdiction, or (ii) failure to use reasonable care with respect to
the safe custody of the Pledged Collateral in the Collateral Agent's possession.
Without limiting the generality of the foregoing, the Collateral Agent shall be
under no obligation to take any steps necessary to preserve rights in the
Pledged Collateral against any other parties but may do so at its option. All
expenses incurred in connection therewith shall be for the sole account of the
Pledgor, and shall constitute part of the Obligations secured hereby.
20. NOTICES. All notices and other communications hereunder shall be
given in the manner and to the addresses set forth in SECTION 14.3 of the Credit
Agreement.
21. AMENDMENTS, WAIVERS AND CONSENTS. None of the terms or
provisions of this Pledge Agreement may be waived, altered, modified or amended,
and no consent to any departure by the Pledgor herefrom shall be effective,
except by or pursuant to an instrument in writing which (i) is duly executed by
the Pledgor and the Administrative Agent and (ii) is otherwise made in
accordance with the Credit Agreement. Any such waiver shall be valid only to
the extent set forth therein. A waiver by the Collateral Agent of any right or
remedy under this Pledge Agreement on any one occasion shall not be construed as
a waiver of any right or remedy which the Collateral Agent would otherwise have
on any future occasion. No failure to exercise or delay in exercising any
right, power or privilege under this Pledge Agreement on the part of the
Collateral Agent shall operate as a waiver thereof; and no single or partial
exercise of any right, power or privilege under this Pledge Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
22. SECTION TITLES. The section titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
23. EXECUTION IN COUNTERPARTS. This Pledge Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
<PAGE>
8
24. ENTIRE AGREEMENT. This Agreement, together with the other Credit
Documents, embodies the entire agreement and understanding of the parties hereto
with respect to the matters contained herein and supersedes all prior agreements
and understandings, written and oral, relating to the subject matter hereof.
<PAGE>
9
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have executed
this Pledge Agreement as of the date set forth above.
[PLEDGOR]
By:________________________
Name:
Title:
CITIBANK, N.A., as Collateral Agent
By:_________________________
Name:
<PAGE>
EXHIBIT A
to
PLEDGE AGREEMENT
PLEDGED STOCK
<TABLE>
<CAPTION>
Stock Issuer Percentage of Stock Certificate Shares of Capital
Owned by Pledgor No. Stock Represented
Thereby
<S> <C> <C> <C>
Hexcel Omega
Corporation 100% 1 1,000
</TABLE>
<PAGE>
ACKNOWLEDGEMENT
The undersigned hereby acknowledges receipt of a copy of the foregoing
Pledge Agreement, waives any rights or requirement at any time hereafter to
receive a copy of such Pledge Agreement in connection with the registration of
any Pledged Collateral in the name of the Administrative Agent or its nominee or
the exercise of voting rights by the Collateral agent and agrees to comply with
any provision of such Pledge Agreement which is applicable to it.
HEXCEL OMEGA CORPORATION
By:_________________________
Name:
Title:
<PAGE>
11
EXHIBIT E - FORM OF OPINION OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
March 5, 1998
Credit Suisse First Boston,
as Administrative Agent
and
The Lenders
(as defined below) listed
on Schedule I hereto
Re: HEXCEL CORPORATION
Ladies and Gentlemen:
We have acted as special counsel to Hexcel Corporation, a Delaware
corporation ("HEXCEL"), and its subsidiaries, Hexcel Composites S.A., a company
organized under the laws of Belgium, Hexcel S.A., a company organized under the
laws of France, Hexcel Fabrics S.A., a company organized under the laws of
France, Hexcel Composites S.A., a company organized under the laws of France,
Hexcel (U.K.) Limited, a company organized under the laws of the United Kingdom,
Salver S.r.l., a limited liability company organized under the laws of Italy,
Hexcel Composites GmbH, a company organized under the laws of Germany, Hexcel
Composites GmbH, a company organized under the laws of Austria, Hexcel
Composites S.A., a corporation organized under the laws of Spain, and Hexcel
Composites Limited, a company organized under the laws of the United Kingdom
(such subsidiaries collectively, the "FOREIGN SUBSIDIARIES") in connection with
the preparation, execution and delivery of the Amended and Restated Credit
Agreement dated as of March 5, 1998 (the "AMENDED AND RESTATED CREDIT
AGREEMENT") among Hexcel, the Foreign Subsidiaries, the Lenders (as defined in
the Amended and Restated Credit Agreement) from time to time parties thereto
(the "LENDERS"), Citibank, N.A., a national banking association, in its capacity
as collateral agent (the "COLLATERAL AGENT"), Citicorp Securities, Inc., in its
capacity as syndication agent (the "SYNDICATION AGENT") and Credit Suisse First
Boston, a Swiss banking association, in its capacity as administrative agent and
documentation agent (the "ADMINISTRATIVE AGENT" and together with the Collateral
Agent, the "AGENTS").
This opinion is being delivered to you pursuant to Section 9.1(i)(i)
of the Amended and Restated Credit Agreement. Capitalized terms used herein and
not otherwise defined herein shall have the same meanings herein as ascribed
thereto in the Amended and Restated Credit Agreement.
Hexcel and the Foreign Subsidiaries are collectively referred to
herein as the "BORROWERS." Hexcel Beta Corp., a Delaware corporation ("BETA"),
Hexcel Far East, a California corporation ("FAR EAST"), Hexcel International, a
California corporation ("INTERNATIONAL"), Hexcel Omega Corporation, a California
corporation ("OMEGA"), Hexcel Pacific Rim Corporation, a Delaware corporation
("PACIFIC DELAWARE"), Hexcel Pacific Rim Corporation, a California corporation
("PACIFIC CALIFORNIA") and Hexcel Technologies Inc., a Delaware corporation
("TECHNOLOGIES") are collectively referred to herein as the "DOMESTIC
SUBSIDIARIES." Hexcel and the Domestic Subsidiaries are collectively referred
to herein as the "UNITED STATES PARTIES." Hexcel, Beta, Pacific Delaware, and
Technologies are collectively referred to herein as the "DELAWARE PARTIES." Far
East, International, Omega and Pacific
<PAGE>
12
California are collectively referred to herein as the "CALIFORNIA PARTIES."
The Borrowers and the Domestic Subsidiaries are collectively referred to
herein as the "TRANSACTION PARTIES."
In rendering the opinions set forth herein, we have examined and
relied on originals or copies of the following:
(a) the Amended and Restated Credit Agreement;
(b) the Revolving Credit Notes made by Hexcel in favor of the
Lenders, dated the date hereof;
(c) the Swing Line Note made by Hexcel in favor of the Swing Line
Lender, dated the date hereof;
(d) the Amended and Restated Company Guaranty made by Hexcel in favor
of the Collateral Agent, for the benefit of the Agents and the Lenders, dated
the date hereof;
(e) the Amended and Restated Subsidiary Guaranty made by the Domestic
Subsidiaries (other than Far East and Technologies) in favor of the Collateral
Agent for the benefit of the Agents and the Lenders, dated the date hereof;
(f) the Amended and Restated Company Pledge Agreement executed by
Hexcel in favor of the Collateral Agent for the benefit of the Agents and the
Lenders, dated the date hereof (the "COMPANY PLEDGE AGREEMENT");
(g) the Amended and Restated Hexcel International Pledge Agreement
executed by International in favor of the Collateral Agent for the benefit of
the Agents and the Lenders, dated the date hereof (the "INTERNATIONAL PLEDGE
AGREEMENT");
(h) a certificate of an Officer of Hexcel, a copy of which is
attached hereto as Exhibit A (the "OFFICER'S CERTIFICATE");
(i) certified copies of the Certificate of Incorporation and By-laws
of each of the United States Parties;
(j) certified copies of certain resolutions of the Board of Directors
of the United States Parties;
(k) our opinion (the "ORIGINAL OPINION") dated June 27, 1996
delivered to you pursuant to Section 9.1(a)(i)(A) of the Credit Agreement dated
as of June 27, 1996 (the "CREDIT AGREEMENT") among Hexcel, certain foreign
subsidiaries party thereto, the Lenders and the Agents; and
(l) such other documents as we have deemed necessary or appropriate
as a basis for the opinions set forth below.
In our examination we have assumed the genuineness of all signatures,
including indorsements, the legal capacity of natural persons, the authenticity
of all documents submitted to us as
<PAGE>
13
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies, and the authenticity of the originals
of such copies. As to any facts material to this opinion which we did not
independently establish or verify, we have relied upon statements and
representations of the Transaction Parties and their officers and other
representatives in the Transaction Documents (as hereinafter defined) and the
Officer's Certificate and of public officials.
The documents referred to in clauses (a) through (g) above are
referred to collectively herein as the "TRANSACTION DOCUMENTS". The documents
referred to in clauses (d) through (g) above are referred to collectively herein
as the "SECURITY DOCUMENTS". References to the "NEW YORK UCC" shall mean the
Uniform Commercial Code as in effect on the date hereof in the State of New
York. References to the "EXISTING CREDIT AGREEMENT" shall mean the Credit
Agreement as amended by Consent Number 1 and First Amendment dated as of July 3,
1996, Consent Number 2 and Second Amendment dated as of November 12, 1996 and
Consent Number 3 and Third Amendment dated as of February 27, 1997.
We express no opinion as to the law of any jurisdiction other than (i)
the laws of the State of New York, (ii) the General Corporation Law of the State
of Delaware, (iii) the General Corporation Law of the State of California, (iv)
the federal laws of the United States of America to the extent specifically
referred to herein, and (v) with respect to the security interest perfection
opinion set forth in paragraph 8 herein, the New York UCC.
The opinions set forth below are subject to the following assumptions
and qualifications:
(i) enforcement of the Transaction Documents may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in equity
or at law);
(ii) we express no opinion as to the applicability or effect of
any fraudulent transfer or similar law on the Transaction Documents or any
transactions contemplated thereby;
(iii) certain of the remedial provisions, including waivers,
with respect to the exercise of remedies against the collateral contained
in the Security Documents, may be unenforceable in whole or in part, but
the inclusion of such provisions does not affect the validity of each such
agreement, taken as a whole, and each such agreement, taken as a whole,
together with applicable law, contains adequate provisions for the
practical realization of the benefits of the security created thereby;
(iv) enforcement of the Security Documents with respect to
collateral consisting of the interest of the
<PAGE>
14
Borrowers in instruments, leases, contracts or other agreements
("CONTRACTS") and accounts or general intangibles arising thereunder, may
be subject to the terms of such Contracts, the rights of such other parties
to such Contracts and any claims or defenses of such other parties against
the Borrowers arising under or outside such Contracts;
(v) we have assumed that the Transaction Documents constitute
the legal, valid and binding obligation of each party to such Transaction
Document (other than the Transaction Parties) enforceable against such
party (other than the Transaction Parties) in accordance with its terms;
(vi) we express no opinion as to the effect on the opinions
expressed herein of (a) the compliance or noncompliance of the Collateral
Agent, the Administrative Agent or any of the Lenders, with any state,
federal or other laws or regulations applicable to it or (b) the legal or
regulatory status or the nature of the business of the Collateral Agent,
the Administrative Agent and the Lenders;
(vii) we express no opinion as to the effect on the
opinions expressed herein of any conflict, contravention,
violation or default under (a) any lease, indenture, instrument
or other agreement to which any Transaction Party or its property
is subject (other than the Applicable Contracts as to which we
express our opinion in paragraph 4 herein), (b) any rule, law or
regulation to which any Transaction Party is subject (other than
Applicable Laws as to which we express our opinion in paragraph 5
herein), or (c) any judicial or administrative order or decree of
any governmental authority (other than Applicable Orders as to
which we express our opinion in paragraph 7 herein);
(viii) we have assumed that no authorization, consent or
other approval of, notice to or filing with any court, governmental
authority or regulatory body (other than Governmental Approvals as to
which we express our opinion in paragraph 6 herein) is required to
authorize or is required in connection with the execution, delivery or
performance by the Transaction Parties of any of the Transaction
Documents or the transactions contemplated thereby;
(ix) we have assumed that (a) each of the Foreign Subsidiaries
is duly organized and validly existing in its jurisdiction of organization,
has the corporate or company power and authority to execute, deliver and
perform all of its obligations under each of the Transaction Documents to
which it is a party, and has the corporate or company power and authority
and the legal right to own and operate its property, to lease the property
it operates as lessee and to conduct the business in which it is currently
engaged, (b) the execution and delivery of each of the Transaction
Documents by each Foreign Subsidiary which is a party thereto and the
consummation by each Foreign Subsidiary
<PAGE>
15
of the transactions contemplated thereby have been duly authorized by all
requisite corporate or company action on the part of each Foreign
Subsidiary, and (c) each of the Transaction Documents has been duly
executed and delivered by each Foreign Subsidiary which is a party thereto;
and
(x) we call to your attention that (i) effective enforcement of
a claim denominated in a foreign currency may be limited by requirements
that the claim (or a judgment in respect of such claim) be converted into
United States dollars at a rate of exchange prevailing on a specified date
and (ii) we express no opinion as to whether a federal or state court would
award a judgment in a currency other than United States dollars.
We have previously delivered to you our Original Opinion with respect
to, among other things, the enforceability of each of the Company Pledge
Agreement and the International Pledge Agreement (as defined therein and herein
referred to as the "EXISTING PLEDGE AGREEMENTS") and the validity and perfection
of the security interests created thereby. Such opinion is subject to certain
assumptions and qualifications and the opinions set forth herein are subject to
such assumptions and qualifications.
We understand that you are separately receiving legal opinions
(collectively, the "OTHER LEGAL OPINIONS"), dated the date hereof, from (i)
Baker & McKenzie (UK), (ii) S.G. Archibald, (iii) Hogan & Hartson, L.L.P., (iv)
Marina, Aghina, Bonvicini & Ludergneni, (v) Heller, Lober, Bahn & Partners, (vi)
Gomez, Acibo & Pambo, and (vii) Doser Amereller Noack, with respect to certain
of the matters set forth above. Our opinions herein stated are based upon the
assumptions and qualifications specified herein and we express no opinion as to
the effect on the opinions herein stated of the assumptions and qualifications
contained in the Other Legal Opinions.
Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, we are of the
opinion that:
1. Each United States Party is a corporation validly existing and in
good standing under the laws of its jurisdiction of incorporation. Based solely
upon the certificates issued by public officials in the jurisdictions set forth
on Schedule II hereto, each United States Party is qualified, licensed,
authorized, or entitled to transact or do business (as set forth in such
certificates) as a foreign corporation under the laws of each such jurisdiction.
2. Each United States Party (a) has the corporate power and authority
to execute, deliver and perform all of its obligations under each of the
Transaction Documents to which it is a party and (b) has the corporate power and
authority to conduct the business as described in the Annual Report on Form 10-K
of Hexcel for the fiscal year ended December 31, 1996. The execution and
delivery of each of the Transaction Documents by each United States Party which
is a party thereto and the consummation by each United States Party of the
transactions contemplated thereby have been duly authorized by all requisite
corporate
<PAGE>
16
action on the part of each United States Party. Each of the Transaction
Documents has been duly executed and delivered by each United States - Party
which is a party thereto.
3. Each of the Transaction Documents constitutes the legal, valid and
binding obligation of each Transaction Party which is a party thereto,
enforceable against each such Transaction Party in accordance with its terms,
subject to the qualification that we express no opinion as to (i) the
enforceability of any rights to contribution or indemnification provided for in
such Transaction Documents to the extent any such rights are violative of the
public policy underlying any law, rule or regulation (including, without
limitation, any federal or state securities law, rule or regulation) and (ii)
any provisions which permit any party to any such Transaction Document or any
purchaser of a participation interest from any such party to set off or apply
any deposit, property or indebtedness with respect to any participation
interest.
4. The execution and delivery by each United States Party of the
Transaction Documents to which it is a party and the performance by each such
United States Party of its obligations under each such Transaction Document,
each in accordance with its terms, do not (a) conflict with the Certificate of
Incorporation or By-laws of each such United States Party, (b) constitute a
violation of or a default under any Applicable Contract (as hereinafter defined)
or (c) cause the creation of any security interest or lien (other than the liens
granted under or created by the Transaction Documents) upon any of the property
of the United States Parties pursuant to any Applicable Contracts. "APPLICABLE
CONTRACTS" means those agreements set forth on Schedule III hereto. We express
no opinion, as to the existence of any violation of, or default under, any
financial ratios or tests which may be contained in any Applicable Contract.
5. Neither the execution, delivery or performance by any United
States Party of the Transaction Documents to which it is a party, nor the
compliance by any United States Party with the terms and provisions thereof will
contravene any provision of any Applicable Law (as hereinafter defined).
"APPLICABLE LAWS" means the General Corporation Law of the States of Delaware
and California and those laws, rules and regulations of the State of New York
and of the United States of America (including, without limitation, Regulations
G, U and X of the Board of Governors of the Federal Reserve Board) which, in our
dexperience, are normally applicable to transactions of the type contemplated by
the Transaction Documents, but without our having made any special investigation
as to the applicability of any specific law, rule or regulation.
6. No Governmental Approval (as hereinafter defined), which has not
been obtained or taken and is not in full force and effect, is required to
authorize or is required in connection with the execution, delivery or
performance of any of the Transaction Documents by any United States Party.
"GOVERNMENTAL APPROVAL" means any consent, approval, license, authorization or
validation of, or filing, recording or registration with, any Governmental
Authority pursuant to Applicable Laws. "GOVERNMENTAL AUTHORITY" means any New
York, Delaware, California or federal, legislative, judicial, administrative or
regulatory body.
<PAGE>
17
7. Neither the execution, delivery or performance by any United
States Party of its obligations under the Transaction Documents to which it is a
party, nor compliance by such United States Party with the terms thereof will
contravene any Applicable Order applicable to such United States Party.
"APPLICABLE ORDERS" means those orders, judgments or decrees of Governmental
Authorities applicable to or binding upon the United States Parties as
identified to us in the Officer's Certificate.
8. The Amendment and Restatement of the Existing Credit Agreement and
the Existing Pledge Agreements do not, of themselves, adversely affect the
validity or perfection of the security interest of the Collateral Agent for the
benefit of the Agents and the Lenders granted in the certificates identified on
Exhibit A to each of the Existing Pledge Agreements (the "PLEDGED SHARES").
After giving effect to the Amendment and Restatement of the Existing Credit
Agreement and the Existing Pledge Agreements, the security interest of the
Collateral Agent in the Pledged Shares will be entitled to the same status as a
valid and perfected security interest to which it would otherwise have been
entitled (as reflected in the Original Opinion) immediately prior to giving
effect to the Amendment and Restatement of the Existing Credit Agreement and the
Existing Pledge Agreements. The Loans are entitled to the benefit of the
security interest created by the Existing Pledge Agreements in favor of the
Collateral Agent.
Our opinion in paragraph 8 above is subject to the following
additional assumptions and qualifications:
(a) our security interest opinions are limited to Articles 8 and 9 of
the UCC, and therefore such opinions do not address (i) laws of jurisdictions
other than New York, and of New York, except for Articles 8 and 9 of the UCC,
(ii) collateral of a type not subject to Article 8 or 9 of the UCC, and (iii)
under Section 9-103, what law governs perfection of the security interests
granted in the collateral covered by this opinion;
(b) except for the amendment and restatement thereof on the date
hereof, based on the Officer's Certificate, we have assumed that each of the
Existing Pledge Agreements has not been amended, modified or supplemented and no
rights pursuant thereto have been released, waived or modified by any of the
parties to the Existing Pledge Agreements subsequent to the date of our Original
Opinion;
(c) based on the Officer's Certificate, we have assumed that all
actions specified, assumed or relied upon in the Original Opinion have been
taken and that all of the facts and conditions specified, assumed or relied upon
in the Original Opinion remain correct;
(d) we have assumed that the Collateral Agent was at all times acting
in good faith and without notice of any adverse claims with respect to the
Pledged Shares and that the certificates evidencing the Pledged Shares are, have
been and will be at all times in the continuous possession of the Collateral
Agent in the State of New York.
<PAGE>
18
(e) we express no opinion with respect to the priority of a lien
creditor (as defined in Section 9-301(3) of the UCC) who acquired a lien on any
of the Pledged Shares by attachment or levy at any time within 45 days prior to
the date hereof pursuant to Section 9-301(4) of the UCC; and
(f) we note that since the date of the Original Opinion, filing was
not a method of perfection for the Pledged Shares, but the law has since changed
to permit filing a financing statement with respect to the Pledged Shares.
9. None of the Transaction Parties is an "investment company" under
the Investment Company Act of 1940, as amended.
10. None of the Transaction Parties is a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
This opinion is being furnished only to you in connection with the
Amended and Restated Credit Agreement and is solely for your benefit and is not
to be used, quoted, relied upon or otherwise referred to by any other Person or
for any other purpose without our prior written consent.
Very truly yours,
<PAGE>
19
SCHEDULE I
TO SASM&F OPINION
ADDRESSEES
1. Credit Suisse First Boston
2. The Bank of New York
3. Banque Nationale de Paris, San Francisco Branch
4. The Chase Manhattan Bank
5. Citibank, N.A.
6. Credit Lyonnais
7. Istituto Bancario San Paolo Di Torino, S.p.A.
8. Societe Generale
9. Union Bank of California, N.A.
10. Swiss Bank Corporation, Stamford and Cayman Island Branches
11. Union Bank of Switzerland
12. Credit Suisse First Boston Aktiengesellschaft
13. Union Bank of California, N.A.
<PAGE>
20
SCHEDULE II
TO SASM&F OPINION
FOREIGN JURISDICTIONS
<TABLE>
<CAPTION>
NAME JURISDICTION
<S> <C>
Hexcel Corporation Alabama, Arizona,
California, Colorado,
Connecticut, Florida,
Georgia, Illinois,
Massachusetts,
Michigan, New Jersey,
Ohio, Pennsylvania,
Texas, Utah, Washington
Hexcel Beta Corp. California
Hexcel Pacific Rim Corporation California
(Delaware)
</TABLE>
<PAGE>
21
SCHEDULE III
TO SASM&F OPINION
APPLICABLE CONTRACTS
1. Indenture dated as of August 1, 1986 between Hexcel Corporation and The
Bank of California, N.A., as trustee.
2. Indenture dated as of February 29, 1996 between Hexcel Corporation and
First Trust of California, National Association, as trustee, as amended.
3. Indenture dated as of July 24, 1996 between Hexcel Corporation and First
Trust of California, National Association, as trustee.
<PAGE>
22
Exhibit A
to SASM&F Opinion
CERTIFICATE OF OFFICER
OF
HEXCEL CORPORATION
I, Ira Krakower, am the Senior Vice President, Secretary and the
General Counsel of Hexcel Corporation, a Delaware corporation ("HEXCEL"), and as
such, am familiar with the business and operations of each of the Transaction
Parties. I understand that pursuant to the Amended and Restated Credit
Agreement, dated as of March 5, 1998 (the "CREDIT AGREEMENT"), among Hexcel,
certain Foreign Subsidiaries thereto, the Lenders from time to time parties
thereto (the "LENDERS"), Citibank, N.A., in its capacity as collateral agent
(the "COLLATERAL AGENT"), and Credit Suisse First Boston, in its capacity as
documentation agent and administrative agent (the "ADMINISTRATIVE AGENT" and
together with the Collateral Agent, the "AGENTS"), Skadden, Arps, Slate, Meagher
& Flom LLP is rendering an opinion dated March 5, 1998 with respect thereto (the
"OPINION"). I further understand that Skadden, Arps, Slate, Meagher & Flom LLP
is relying on this officer's certificate and the statements made herein in
rendering such Opinion. Capitalized terms used herein and not otherwise defined
herein shall have the same meaning herein as ascribed thereto in the Opinion.
With regard to the foregoing, on behalf of each of the Transaction
Parties, I do hereby certify that:
1. Due inquiry has been made of all persons deemed necessary or
appropriate to confirm the statements made herein.
2. Set forth on Schedule II hereto are all the material orders,
judgments or decrees of Governmental Authorities which name any United States
Party or to which the business or assets of any United States Party are subject.
3. Less than 25 percent of the assets of each of the Transaction
Parties on a consolidated basis and on an unconsolidated basis consist of margin
stock (as such term is defined in Regulation G or Regulation U of the Board of
Governors of the Federal Reserve System).
4. Each of the Transaction Parties (a) is primarily engaged, directly
or through a wholly-owned subsidiary or subsidiaries, in a business or
businesses other than that of investing, reinvesting, owning, holding or trading
in securities and (b) is not engaged and does not propose to engage in the
business or investing, reinvesting, owning, holding or trading in securities,
and does not own or propose to acquire "investment securities" (as such term is
defined in the Investment Company Act of 1940, as amended) having a value
exceeding 40 percent of the value of such Transaction Party's total assets
(exclusive of government securities and cash items) on an unconsolidated basis.
<PAGE>
23
5. No Transaction Party is a "gas utility company" within the
meaning of the Public Utility Holding Company of 1935, as amended.
6. No Transaction Party is an "electric utility company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
7. No Transaction Party, owns, controls, or holds with power to vote
(a) ten percent (10%) or more of the outstanding securities, such as notes,
drafts, stock, treasury stock, bonds, debentures, certificates of interest or
participations in any profit sharing agreements or in oil, gas, other mineral
royalties or leases, collateral-trust certificates, preorganization certificates
or subscriptions, transferable shares, investment contracts, voting-trust
certificates, certificates of deposit for a security, receiver's or trustee's
certificates, or any other instrument commonly known as a "security" (including
certificates of interest or participation in, temporary or interim certificates
for, receipt for, guaranty of, assumption of liability on, or warrants or rights
to subscribe to or purchase any of the foregoing) presently entitling it to vote
in the direction of management of, or any such instrument issued under or
pursuant to any trust, agreement, or arrangement whereby a trustee or trustees
or agent or agents for the owner of holder of such instrument is presently
entitled to vote in the direction or management of, any corporation,
partnership, association, joint-stock company, joint venture or trust that owns
or operates any "public utility company" (as such term is defined in the Public
Utility Holding Company Act of 1935, as amended), or (b) any other interest,
directly or indirectly, or through one or more intermediary entities, in any
corporation partnership, association, joint-venture company, joint venture or
trust that owns or operates any public utility company.
8. No Transaction Party has received notice that the Securities and
Exchange Commission has determined, or may determine, that such Transaction
Party exercises a controlling influence over the management or direction of the
policies of a gas utility company or an electric utility company as to make it
subject to the obligations, duties and liabilities imposed on holding companies
by the Public Utility Holding Company Act of 1935, as amended.
9. Since June 27, 1996 each of the Existing Pledge Agreements has
not been amended, modified or supplemented and no rights pursuant thereto have
been released waived or modified.
10. In respect of the validity or perfection of the security interest
of the Collateral Agent on behalf of the Agents and the Lenders in the
Transaction Parties' Pledged Shares, all actions to be taken by the Borrowers or
any other Transaction Party specified, assumed or relied upon in the Original
Opinion have been taken and all the facts and conditions specified, assumed or
relied upon in the Original Opinion remain correct.
<PAGE>
24
IN WITNESS WHEREOF, I, in my capacity as an officer of Hexcel
Corporation, have executed this certificate this __ day of March, 1998.
HEXCEL CORPORATION
By:______________________________
Name: Ira Krakower
Title: Senior Vice President, Secretary
and General Counsel
<PAGE>
Schedule I to
Exhibit A
APPLICABLE ORDERS
United States Bankruptcy Court Northern District of California Order N.
93-48535T dated January 10, 1995 In re Hexcel Corporation.
<PAGE>
EXHIBIT F-1
FORM OF NOTICE OF BORROWING (DRAWINGS)
To: Credit Suisse First Boston, in its capacity as administrative agent (with
its successors in such capacities, the "Administrative Agent") for the
Lenders (as defined below) under the Amended and Restated Credit Agreement
dated as of March 5, 1998 (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") among Hexcel
Corporation, the Foreign Borrowers from time to time parties thereto, the
financial institutions from time to time parties thereto as Lenders (the
"Lenders"), the Collateral Agent and Credit Suisse First Boston, in its
capacity as administrative agent for the Lenders.
Pursuant to [SECTION 2.2](1)/[SECTION 4.2](2)/[SECTION 5.2](3)/[SECTION
5.3](4)/ of the Credit Agreement, this Notice of Borrowing ("Notice") represents
the request of the undersigned Borrower (the "Borrower") to borrow on [the date
hereof] [_______________, _____ ](the "Funding Date") from the Lenders
[the principal amount of $ _______________][the principal amount of
_______________ in the lawful currency of
[Austria][Belgium][France][Germany] [Italy][the
Netherlands][Spain][the United Kingdom]] in Revolving Credit Loans as
[ABR Loans][Eurocurrency Rate Loans]. In the event that such
Revolving Credit Loans are Eurocurrency Rate Loans, the Interest
Period for such Eurocurrency Rate Loans is requested to be a
[one][two][three][six] month period.]
[the principal amount of $ ________________ in Swing Line Loans as ABR
Loans]
Proceeds of such Loans are to be deposited on the Funding Date into the
Borrower's disbursement account number __________ maintained at the office of
__________.
The Borrower certifies that as of the Funding Date all of the conditions
precedent contained in [SECTION 9.1 of the Credit Agreement](5)/[SECTION 9.2 of
the Credit Agreement](6)/ have been satisfied (or waived pursuant to SECTION
14.1 of the Credit Agreement).
Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings in this Notice.
Dated this ___ day of ___________, ____.
[Name of Borrower]
- ----------------------------
(1)/ To be used for a requested Borrowing of Domestic Revolving Loans.
(2)/ To be used for a requested Borrowing of Swing Loans.
(3)/ To be used for a requested Borrowing of Syndicated European Loans.
(4)/ To be used for a requested Borrowing of Local European Loans.
(5)/ To be used for Revolving Credit Loans to be made on the Closing Date. All
Revolving Credit Loans made on the Closing Date shall be ABR Loans.
(6)/ To be used for Revolving Credit Loans and Swing Line Loans to be made after
the Closing Date.
By:
Name:
Title:
<PAGE>
EXHIBIT F-2
FORM OF NOTICE OF BORROWING (CONVERSION)
To: Credit Suisse First Boston, in its capacity as administrative agent (with
its successors in such capacities, the "Administrative Agent") for the
Lenders (as defined below) under the Amended and Restated Credit Agreement
dated as of March 5, 1998 (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") among Hexcel
Corporation, the Foreign Borrowers from time to time parties thereto, the
financial institutions from time to time parties thereto as Lenders (the
"Lenders"), the Collateral Agent and the Administrative Agent for the
Lenders.
Pursuant to SECTION 7.6(a) of the Credit Agreement, this Notice of
Borrowing (Conversion) ("Notice") represents the election of the undersigned
Borrower (the "Borrower") to
[Convert $____________ in aggregate principal amount of Revolving Credit
Loans consisting of ABR Loans from ABR Loans to Eurocurrency Rate Loans
denominated in the same currency on ________________, ____. The initial
Interest Period for such Eurocurrency Rate Loans is requested to be a
[one][two][three][six] month period.]
[Convert $_____________ in aggregate principal amount of outstanding
Eurocurrency Rate Loans to ABR Loans denominated in the same currency on
____________, _____.]
The Borrower hereby certifies that (i) the proposed conversion would
not violate any provisions of SECTION 7.7 of the Credit Agreement and, as a
result thereof, (ii) no Default or Event of Default would occur or has occurred
and is continuing under the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings in this Notice.
Dated this ___ day of ________, ____.
[Name of Borrower]
By:________________________
Name:
Title:
<PAGE>
EXHIBIT F-3
FORM OF NOTICE OF BORROWING (CONTINUATION)
To: Credit Suisse First Boston, in its capacity as administrative agent (with
its successors in such capacities, the "Administrative Agent") for the
Lenders (as defined below) under the Amended and Restated Credit Agreement
dated as of March 5, 1998 (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") among Hexcel
Corporation, the Foreign Borrowers from time to time parties thereto, the
financial institutions from time to time parties thereto as Lenders (the
"Lenders"), the Collateral Agent and the Administrative Agent for the
Lenders.
Pursuant to SECTION 7.6(b) of the Credit Agreement, this Notice of
Borrowing (Continuation) ("Notice") represents the election of the undersigned
Borrower (the "Borrower") to continue as Eurocurrency Rate Loans
$_______________ in aggregate principal amount of Revolving Credit Loans
consisting of Eurocurrency Rate Loans denominated in the same currency with a
current Interest Period ending _______________, ____. The succeeding Interest
Period for such Eurocurrency Rate Loans is requested to be a
[one][two][three][six] month period.
The Borrower hereby certifies that (i) the proposed continuation would not
violate any provisions of SECTION 7.7 of the Credit Agreement and, as a result
thereof, (ii) no Default or Event of Default would occur or has occurred and is
continuing under the Credit Agreement.
Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings in this Notice.
Dated this ___ day of ________, ____.
[Name of Borrower]
By:________________________
Name:
Title:
<PAGE>
EXHIBIT G
FORM OF ASSIGNMENT AND ACCEPTANCE
ASSIGNMENT AND ACCEPTANCE dated ____________ __, ____, between
_______________________ (the "ASSIGNOR") and __________________________ (the
"ASSIGNEE").
PRELIMINARY STATEMENTS
A. Reference is made to the Amended and Restated Credit Agreement
dated as of March 5, 1998 (as amended, supplemented or otherwise modified from
time to time, the "CREDIT AGREEMENT") among Hexcel Corporation, a Delaware
corporation (with its successors and permitted assigns, the "COMPANY"), the
Foreign Borrowers (as defined therein) from time to time parties thereto, the
institutions from time to time parties thereto as Lenders, whether by execution
of the Credit Agreement or an Assignment and Acceptance, Citibank, N.A., in its
separate capacity as collateral agent for the Lenders and Credit Suisse First
Boston, a Swiss banking association acting through its New York branch ("CSFB"),
in its separate capacity as administrative agent for the Lenders (with its
successors in such capacity, the "ADMINISTRATIVE AGENT"). Terms defined in the
Credit Agreement and not otherwise defined herein are used herein with the
meanings ascribed thereto in the Credit Agreement.
B. The Assignor is a Lender under the Credit Agreement and desires
to sell and assign to the Assignee, and the Assignee desires to purchase and
assume from the Assignor, on the terms and conditions set forth below, a ___
percent (____%) interest in the Aggregate Revolving Credit Commitment (the
"ASSIGNED PERCENTAGE"), together with the Assignor's rights and obligations
under the Credit Agreement with respect to the Assigned Percentage.
NOW, THEREFORE, the Assignor and the Assignee hereby agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, the Assigned
Percentage, together with the Assignor's rights and obligations under the Credit
Agreement with respect to such Assigned Percentage, including, without
limitation, the obligation to make Revolving Credit Loans and to participate in
Letters of Credit.
2. The Assignor (i) represents and warrants that as of the date
hereof its Revolving Credit Commitment Percentage (without giving effect to
assignments thereof which have not yet become effective) is ____% and that such
Revolving Credit Commitment Percentage multiplied by the Aggregate Revolving
Credit Commitments is equal to $_____________; (ii) represents and warrants that
it has legal and beneficial title to the interests being assigned by it
hereunder free and clear of any claim adverse to such title; (iii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any of the other
Credit Documents, or any other instrument or document furnished pursuant thereto
or executed and delivered in connection therewith; (iv) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of any Borrower or any of such Borrower's Subsidiaries or the
performance or observance by any Borrower or any of such Borrower's Subsidiaries
of any of such Persons' respective obligations under the Credit Agreement, any
other Credit Document or any instrument or document furnished pursuant thereto;
and (v) attaches the Revolving Credit Note (if any) delivered to it under the
Credit Agreement.
<PAGE>
2
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit Agreement, together with copies of such other
Credit Documents, information, exhibits, reports, projections and forecasts that
the Assignee has deemed appropriate to make its own credit analysis and decision
to enter into this Assignment and Acceptance; (iii) agrees that it shall have no
recourse against the Assignor with respect to any matters relating to the Credit
Agreement, any other Credit Document or this Assignment and Acceptance (except
with respect to the representations and warranties made by the Assignor in
CLAUSES (i) and (ii) of PARAGRAPH 2 above); (iv) agrees that it will,
independently and without reliance upon the Administrative Agent, the Collateral
Agent, the Assignor or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement and
the other Credit Documents; (v) appoints and authorizes each of the
Administrative Agent and the Collateral Agent to take such action as
administrative agent on its behalf and to exercise such powers under the Credit
Agreement and the other Credit Documents as are delegated to the Administrative
Agent or the Collateral Agent, as the case may be, by the terms thereof,
together with such powers as are reasonably incidental thereto; (vi) agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Credit Agreement and other Credit Documents are required to be
performed by it as a Lender; (vii) confirms that it is an Eligible Assignee; and
(viii) specifies as its address for notices the address set forth beneath its
name on the signature page hereof, together with the name and address of its
U.S. lending office and its European lending office.
4. The effective date for this Assignment and Acceptance shall be
___________ __, ____ (the "EFFECTIVE DATE"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Administrative Agent for
acceptance by the Administrative Agent and for recording in the Register by the
Administrative Agent, together with a processing and recordation fee of $3,500
to be paid to the Administrative Agent by the [Assignor][Assignee].
5. As of the Effective Date, provided that each of the
Administrative Agent accepts this Assignment and Acceptance and the Company
accepts the Assignee pursuant to the terms of SECTION 14.7(c) of the Credit
Agreement, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall relinquish its
rights and be released from its obligations under the Credit Agreement with
respect to the Assigned Percentage.
6. From and after the Effective Date, provided that the
Administrative Agent accepts this Assignment and Acceptance, the Administrative
Agent shall make all payments under the Credit Agreement in respect of the
Assigned Percentage (including, without limitation, all payments of principal,
interest and fees with respect thereto) to the Assignee. The Assignor and
Assignee shall make all appropriate adjustments in payments under the Credit
Agreement for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the
undersigned has caused this Assignment and Acceptance to be executed on its
behalf by its officer thereunto duly authorized, as of _________ __, ____.
[NAME OF ASSIGNOR]
By______________________________
Name:_________________________
Title:________________________
New Revolving Credit Commitment
Percentage _______%
New Revolving
Credit Commitment $_______
[NAME OF ASSIGNEE]
By______________________________
Name:_________________________
Title:________________________
Notice Address and
U.S. Lending Office:
European Lending Office:
Revolving Credit Commitment
Percentage _______%
Revolving Credit
Commitment $_______
<PAGE>
Agreed to and accepted this __
day of __________, ____
CREDIT SUISSE FIRST BOSTON, as Administrative Agent
By____________________________
Title:
By____________________________
Title:
HEXCEL CORPORATION
By____________________________
Title:
<PAGE>
EXHIBIT H
FORM OF COMPLIANCE CERTIFICATE
To: Credit Suisse First Boston, in its capacity as administrative agent (with
its successors in such capacities, the "Administrative Agent") for the
Lenders (as defined below) under the Amended and Restated Credit Agreement
dated as of March 5, 1998 (as amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement") among Hexcel
Corporation, the Foreign Borrowers from time to time parties thereto, the
financial institutions from time to time parties thereto as Lenders (the
"Lenders"), the Collateral Agent (as defined therein) and Credit Suisse
First Boston, in its capacity as administrative agent for the Lenders.
Pursuant to SECTION 10.2(b) of the Credit Agreement, the [Chief
Financial Officer][Treasurer][Comptroller] of the undersigned, hereby certifies
that:
1. I am the duly elected, qualified and acting [Chief Financial
Officer][Treasurer][Controller] of the Borrower.
2. Unless otherwise defined herein, terms defined in the Credit
Agreement shall have the same meanings in this Certificate.
3. There has been a review of the terms of the Credit Documents and
a review in reasonable detail of the transactions and consolidated
financial condition of the Borrower and its Subsidiaries during the
accounting period(s) covered by the financial statements identified below.
Such review [has] [has not] disclosed the existence during or at the end of
such accounting period, and as at the date hereof the undersigned [does]
[does not] have knowledge, of any condition or event which constitutes a
Default or an Event of Default. [If such condition or event exists or
existed, specify (i) nature and period of such condition or event and (ii)
action being taken and/or proposed to be taken with respect thereto.]
4. The financial statements, reports and copies of certain
instruments and documents attached hereto, namely,
A. _______________, dated _______________
B. _______________, dated _______________
C. _______________, dated _______________
D. _______________, dated _______________
are true, accurate and complete copies of the aforesaid instruments and
documents which constitute part of the customary books and records of the
Borrower.
<PAGE>
2
5. The certificate attached as Annex I hereto demonstrates (a)
calculations relating to the terms of SECTION 7.5 of the Credit Agreement
(including, without limitation, calculations of Net Cash Proceeds and
mandatory prepayments), and (b) compliance by the Borrowers with the
negative covenants of SECTION 11 of the Credit Agreement.
Dated this ___ day of ________, ____.
HEXCEL CORPORATION
By__________________________
Name:_____________________
Title:____________________
<PAGE>
EXHIBIT I
FORM OF ADDITIONAL BORROWER JOINDER AGREEMENT
WHEREAS, [_________________] is a Wholly-owned Subsidiary of Hexcel
Corporation (the ACompany"); and
WHEREAS, the Company is a party to that certain Amended and Restated
Credit Agreement dated as of March 5, 1998 (as amended, restated, supplemented
or otherwise modified from time to time, the "Credit Agreement") among the
Company, the Foreign Borrowers from time to time parties thereto, the
institutions from time to time parties thereto as lenders (the "Lenders"), the
Collateral Agent and Credit Suisse First Boston, in its capacity as
administrative agent (in such capacity, the "Administrative Agent") (terms
defined in the Credit Agreement and not otherwise defined herein are used herein
with the meanings ascribed thereto in the Credit Agreement); and
WHEREAS, the Lenders and the Administrative Agent have required as a
condition, among other conditions set forth in SECTION 7.19 of the Credit
Agreement, to [the undersigned] becoming an Additional Borrower under the Credit
Agreement that [the undersigned] execute this Additional Borrower Joinder
Agreement;
NOW THEREFORE, [the undersigned] agrees as follows:
1. [the undersigned] hereby acknowledges receipt of the Credit
Agreement and the other Credit Documents.
2. [the undersigned] hereby agrees to be a Foreign Borrower under and
as defined in the Credit Agreement and to be bound by all the terms and
conditions of the Credit Agreement and the other Credit Documents applicable to
a Foreign Borrower.
Agreed to this ___ day of _______, ____.
[___________________]
By: _______________________
Name:
Title:
<PAGE>
EXHIBIT J
FORM OF
LOCAL LENDER JOINDER AGREEMENT
LOCAL LENDER JOINDER AGREEMENT, dated as of the date set forth on
Schedule I hereto, made by the Local Lender designated on Schedule I hereto (the
"LOCAL LENDER") pursuant to the Amended and Restated Credit Agreement, dated as
of March 5, 1998 (as amended, restated, supplemented or otherwise modified from
time to time, the "CREDIT AGREEMENT") among the Company, the Foreign Borrowers
from time to time parties thereto, the institutions from time to time parties
thereto as lenders (the "LENDERS"), the Collateral Agent and Credit Suisse First
Boston, in its capacity as administrative agent (in such capacity, the
"ADMINISTRATIVE AGENT") (terms defined in the Credit Agreement and not otherwise
defined herein are used herein with the meanings ascribed thereto in the Credit
Agreement).
For good and valid consideration, the sufficiency of which hereby is
acknowledged, the undersigned hereby agrees that it shall serve as a "Local
Lender" under the Credit Agreement upon the terms and subject to the conditions
set forth therein.
The undersigned hereby:
(a) represents and warrants that it is legally authorized to enter into this
Local Lender Joinder Agreement;
(b) confirms that it has received a copy of the Credit Agreement and the other
Credit Documents relevant to it; and
(c) agrees that it will (i) be bound by the provisions of the Credit Agreement
and each other Credit Document, in each case, applicable to it as a Local
Lender and (ii) perform all obligations which are required to be performed
by it as a Local Lender pursuant to the Credit Agreement and each other
Credit Document.
From and after the Effective Date set forth on Schedule I hereto, the
undersigned shall (a) be a "Local Lender" with respect to the Optional Currency
set forth on Schedule I hereto for all purposes under the Credit Documents and
(b) have the rights and obligations of a Local Lender thereunder and under the
other Credit Documents and (c) be bound by the provisions of the Credit
Documents.
THIS LOCAL LENDER JOINDER AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Local Lender has caused this Local Lender
Joinder Agreement to be executed on Schedule I hereto by its duly authorized
officer as of the date set forth on Schedule I hereto.
<PAGE>
SCHEDULE I
TO
LOCAL LENDER JOINDER AGREEMENT
RELATING TO
THE AMENDED AND RESTATED CREDIT AGREEMENT, DATED AS OF MARCH [__], 1998 (AS
AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME) AMONG
THE COMPANY, THE FOREIGN BORROWERS FROM TIME TO TIME PARTIES THERETO, THE
INSTITUTIONS FROM TIME TO TIME PARTIES THERETO AS LENDERS, THE COLLATERAL AGENT
AND CREDIT SUISSE FIRST BOSTON, IN ITS CAPACITY AS ADMINISTRATIVE AGENT
===============================================================================
DATE OF LOCAL LENDER JOINDER AGREEMENT:
NAME OF DESIGNATED LOCAL LENDER:
JURISDICTION:
OPTIONAL CURRENCY:
FOREIGN BORROWER SUBLIMIT: US$
NAME OF DESIGNATED ADDITIONAL BORROWER:
EFFECTIVE DATE OF LOCAL LENDER JOINDER AGREEMENT:
[NAME OF LOCAL LENDER]
By:____________________________
Title:
ACKNOWLEDGED AND AGREED:
CREDIT SUISSE FIRST BOSTON, as Administrative Agent
By:___________________________
Title:
<PAGE>
EXHIBIT 10.5
HEXCEL CORPORATION
INCENTIVE STOCK PLAN,
AS AMENDED AND RESTATED JANUARY 30, 1997
AND FURTHER AMENDED DECEMBER 10, 1997
I. PURPOSE
This Incentive Stock Plan, as approved by the stockholders of the
Corporation on February 21, 1996, combined the Hexcel Corporation Long-Term
Incentive Plan and the Hexcel Corporation 1995 Directors' Stock Option Plan
and, subject to approval by the stockholders of the Corporation, is now
amended and restated herein (as so amended and restated, the "Plan"). The
Plan is intended to attract, retain and provide incentives to Employees,
officers, Directors and consultants of the Corporation, and to thereby
increase overall stockholders' value. The Plan generally provides for the
granting of stock, stock options, stock appreciation rights, restricted
shares, other stock-based awards or any combination of the foregoing to the
eligible participants.
II. DEFINITIONS
(a) "Award" includes, without limitation, stock options (including
Director Options and incentive stock options within the meaning of Section
422(b) of the Code) with or without stock appreciation rights, dividend
equivalent rights, stock awards, restricted share awards, or other awards
that are valued in whole or in part by reference to, or are otherwise based
on, the Common Stock ("other Common Stock-based Awards"), all on a
stand-alone, combination or tandem basis, as described in or granted under
this Plan.
(b) "Award Agreement" means a written agreement setting forth the
terms and conditions of each Award made under this Plan.
(c) "Beneficial Owner" (and variants thereof) shall have the
meaning given in Rule 13d-3 promulgated under the Exchange Act.
(d) "Board" means the Board of Directors of the Corporation.
(e) "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.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
<PAGE>
(g) "Committee" means the Executive Compensation Committee of the
Board or such other committee of the Board as may be designated by the Board
from time to time to administer this Plan.
(h) "Common Stock" means the $.01 par value common stock of the
Corporation.
(i) "Corporation" means Hexcel Corporation, a Delaware corporation.
(j) "Director" means a member of the Board.
(k) "Director Option" means a stock option granted pursuant to
Section VII hereof to a Director.
(l) "Director Optionee" means a recipient of an Award of a
Director Option.
(m) "Employee" means an employee of the Corporation or a
Subsidiary.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Fair Market Value" means the closing price for the Common
Stock as reported in publications of general circulation from the New York
Stock Exchange Consolidated Transactions Tape on such date, or, if there were
no sales on the valuation date, on the next preceding date on which such
closing price was recorded; provided, however, that the Committee may specify
some other definition of Fair Market Value in good faith with respect to any
particular Award.
(p) "Governance Agreement" shall have the meaning given in the
Strategic Alliance Agreement.
(q) "Participant" means an Employee, officer, Director or
consultant who has been granted an Award under the Plan.
(r) "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.
(s) "Plan Year" means a calendar year.
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<PAGE>
(t) "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.
(u) "Subsidiary" means any corporation or other entity, whether
domestic or foreign, in which the Corporation has or obtains, directly or
indirectly, a proprietary interest of more than 50% by reason of stock owner
ship or otherwise.
III. ELIGIBILITY
Any Employee, officer, Director or consultant of the Corporation or
Subsidiary selected by the Committee is eligible to receive an Award pursuant
to Section VI hereof. Additionally, Directors described in Section VII(a)
hereof are eligible to receive Awards of Director Options pursuant to Section
VII.
IV. PLAN ADMINISTRATION
(a) Except as otherwise determined by the Board, the Plan shall be
administered by the Committee. The Board, or the Committee to the extent
determined by the Board, shall periodically make determinations with respect
to the participation of Employees, officers, Directors and consultants in the
Plan and, except as otherwise required by law or this Plan, the grant terms
of Awards, including vesting schedules, price, restriction or option period,
dividend rights, post-retirement and termination rights, payment alternatives
such as cash, stock, contingent awards or other means of payment consistent
with the purposes of this Plan, and such other terms and conditions as the
Board or the Committee deems appropriate which shall be contained in an Award
Agreement with respect to a Participant.
(b) The Committee shall have authority to interpret and construe
the provisions of the Plan and any Award Agreement and make determinations
pursuant to any Plan provision or Award Agreement which shall be final and
binding on all persons. No member of the Committee shall be liable for any
action or determination made in good faith, and the members shall be entitled
to indemnification and reimbursement in the manner provided in the
Corporation's Certificate of Incorporation, as it may be amended from time to
time.
The Committee shall have the authority at the time of the grant of any
Award to provide for the conditions and circumstances under which such Award
shall be forfeited. The Committee shall have the authority to accelerate the
vesting of any Award and the time at which any Award becomes exercisable.
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<PAGE>
V. CAPITAL STOCK SUBJECT TO THE PROVISIONS OF THIS PLAN
(a) The capital stock subject to the provisions of this Plan shall
be shares of authorized but unissued Common Stock and shares of Common Stock
held as treasury stock. Subject to adjustment in accordance with the
provisions of Section XI, and subject to Section V(c) below, the maximum
number of shares of Common Stock that shall be available for grants of Awards
under this Plan shall be 4,012,533 (the number of shares remaining available
under the Incentive Stock Plan immediately prior to its amendment and
restatement on January 30, 1997 plus 3,850,000 additional shares).
(b) The grant of a restricted share Award shall be deemed to be
equal to the maximum number of shares which may be issued under the Award.
Awards payable only in cash will not reduce the number of shares available
for Awards granted under the Plan.
(c) There shall be carried forward and be available for Awards
under the Plan, in addition to shares available for grant under paragraph (a)
of this Section V, all of the following: (i) shares represented by Awards
which are cancelled, forfeited, surrendered, terminated, paid in cash or
expire unexercised; and (ii) the excess amount of variable Awards which
become fixed at less than their maximum limitations.
VI. DISCRETIONARY AWARDS UNDER THIS PLAN
As the Board or Committee may determine, the following types of
Awards and other Common Stock-based Awards may be granted under this Plan on
a stand-alone, combination or tandem basis:
(a) STOCK OPTION. A right to buy a specified number of shares of
Common Stock at a fixed exercise price during a specified time, all as the
Committee may determine.
(b) INCENTIVE STOCK OPTION. An Award which may be granted only to
Employees in the form of a stock option which shall comply with the
requirements of Code Section 422 or any successor section as it may be
amended from time to time. The exercise price of any incentive stock option
shall not be less than 100% of the Fair Market Value of the Common Stock on
the date of grant of the incentive stock option Award. Subject to adjustment
in accordance with the provisions of Section XI, the aggregate number of
shares which may be subject to incentive stock option Awards under this Plan
shall not exceed the maximum number of shares provided in paragraph (a) of
Section V above. To the extent that the aggregate Fair
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<PAGE>
Market Value of Common Stock with respect to which options intended to be
incentive stock options are exercisable for the first time by any individual
during any calendar year exceeds $100,000, such options shall be treated as
options which are not incentive stock options.
(c) STOCK OPTION IN LIEU OF COMPENSATION ELECTION. A right given
with respect to a year to a Director, officer or key Employee to elect to
exchange annual retainers, fees or compensation for stock options.
(d) STOCK APPRECIATION RIGHT. A right which may or may not be
contained in the grant of a stock option or incentive stock option to receive
the excess of the Fair Market Value of a share of Common Stock on the date
the option is surrendered over the option exercise price or other specified
amount contained in the Award Agreement.
(e) RESTRICTED SHARES. A transfer of Common Stock to a
Participant subject to forfeiture until such restrictions, terms and
conditions as the Committee may determine are fulfilled.
(f) DIVIDEND OR EQUIVALENT. A right to receive dividends or their
equivalent in value in Common Stock, cash or in a combination of both with
respect to any new or previously existing Award.
(g) STOCK AWARD. An unrestricted transfer of ownership of Common
Stock.
(h) OTHER STOCK-BASED AWARDS. Other Common Stock-based Awards
which are related to or serve a similar function to those Awards set forth in
this Section VI.
VII. FORMULA AWARDS UNDER THIS PLAN
In addition to discretionary Awards (including, without limitation,
options) that may be granted to Directors pursuant to Section VI hereof,
Director Options shall be granted as provided below:
(a) GRANTS OF DIRECTOR OPTIONS.
(i) As of April 4, 1995, each Director shall be granted an
Option to acquire 40,000 shares of Common Stock upon the terms and subject to
the conditions set forth in the Plan and this Section VII. With respect to
any individual who becomes a Director and who is not also a full-time
employee of the Corporation or any Subsidiary (provided such individual has
not previously received a grant
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<PAGE>
pursuant to this Section VII(a)(i)), such individual shall be granted as of
the date of his election or appointment as a Director a Director Option to
acquire (x) 40,000 shares of Common Stock if elected or appointed between
April 4, 1995 and December 31, 1996 inclusive or, (y) 10,000 shares of
Common Stock if elected or appointed on or after January 1, 1997, upon the
terms and subject to the conditions set forth in the Plan and this Section
VII.
(ii) On April 4, 1996 and immediately after each annual
meeting of stockholders of the Corporation held after January 1, 1997 and
before February 7, 2005, each person who is not on such date also a full-time
employee of the Corporation or any Subsidiary and who (x) is a Director on
April 4, 1996 or (y) has been re-elected at such meeting, shall be granted a
Director Option to acquire 2,000 shares of Common Stock upon the terms and
subject to the conditions set forth in the Plan and this Section VII.
(iii) If on any date when Options are to be granted
pursuant to Section VII(a)(i) or (ii) the total number of shares of Common
Stock as to which Director Options are to be granted exceeds the number of
shares of Common Stock remaining available under the Plan, there shall be a
PRO RATA reduction in the number of shares of Common Stock as to which each
Director Option is granted on such day.
(b) TERMS OF DIRECTOR OPTIONS.
The terms of each Director Option granted under this Section VII
shall be determined by the Board consistent with the provisions of the Plan,
including the following:
(i) The purchase price of the shares of Common Stock subject
to each Director Option shall be equal to the Fair Market Value of such
shares on the date such option is granted.
(ii) Each Director Option shall be exercisable as to one-third
of the shares subject thereto immediately upon the grant of the option and as
to an additional one-third of such shares on the first and second
anniversaries of the date of such grant.
(iii) Shares of Common Stock obtained upon exercise of a
Director Option may not be sold until six months after the date such option
was granted.
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<PAGE>
(iv) Each Director Option shall expire ten years after the
granting thereof. Each Director Option shall be subject to earlier
expiration as expressly provided in Section VII(c) hereof.
(c) DISABILITY, DEATH OR TERMINATION OF DIRECTOR STATUS; CHANGE IN
CONTROL.
(i) If a Director Optionee ceases to be a Director for any
reason other than his disability or death, each Director Option held by him
to the extent exercisable on the effective date of his ceasing to be a
Director shall remain exercisable until the earlier to occur of (i) the first
anniversary of such effective date and (ii) the expiration of the stated term
of the Director Option; PROVIDED, HOWEVER, that if the Director Optionee is
removed, withdraws or otherwise ceases to be a Director due to his fraud,
dishonesty or intentional misrepresentation in connection with his duties as
a Director or his embezzlement, misappropriation or conversion of assets or
opportunities of the Corporation or any Subsidiary, all unexercised Director
Options held by the Director Optionee shall expire forthwith. Each Director
Option held by the Director Optionee to the extent not exercisable on the
effective date of his ceasing to be a Director for any reason other than his
disability or death shall expire forthwith.
(ii) If a Director Optionee ceases to be a Director as a
result of his disability or death, each Director Option held by him to the
extent that the Director Option is exercisable on the effective date of his
ceasing to be a Director shall remain exercisable by the Director Optionee or
the Director Optionee's executor, administrator, legal representative or
beneficiary, as the case may be, until the earlier to occur of (x) the third
anniversary of such effective date and (y) the expiration of the stated term
of the Director Option. Each Director Option held by the Director Optionee
to the extent not exercisable on the effective date of his ceasing to be a
Director as a result of his disability or death shall expire forthwith.
(iii) In the event of a Change in Control (as hereinafter
defined) while a Director Optionee is a Director, each Director Option held
by the Director Optionee to the extent not then exercisable shall thereupon
become exercisable. If a Change in Control occurs on or before the effective
date of a Director Optionee's ceasing to be a Director, the provisions of
this subsection (iii) shall govern with respect to the exercisability of the
Director Options held by him as of the date on which the Director Optionee
ceases to be a Director and the provisions of subsection (i) or (ii) of this
Section VII(c) shall govern with respect to the period of time during which
such Director Options shall remain exercisable. For purposes of this
subsection (iii), "Change in Control" shall mean any of the following events:
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<PAGE>
(1)(a) any Person 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 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 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 January 30, 1997, 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 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 Trans action 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,
8
<PAGE>
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
(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.
VIII. AWARD AGREEMENTS
Each Award under the Plan shall be evidenced by an Award Agreement
setting forth the terms and conditions of the Award and executed by the
Corporation and Participant.
IX. OTHER TERMS AND CONDITIONS
(a) ASSIGNABILITY. Unless provided to the contrary in any Award,
no Award shall be assignable or transferable except by will, by the laws of
descent and distribution and during the lifetime of a Participant, the Award
shall be exercisable only by such Participant. No Award granted under the
Plan shall be subject to execution, attachment or process.
(b) TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP. Except as
provided in Section VII(c) with respect to Director Options, the Committee
shall determine the disposition of the grant of each Award in the event of
the retirement, disability, death or other termination of a Participant's
employment or other relationship with the Corporation or a Subsidiary.
(c) RIGHTS AS A STOCKHOLDER. A Participant shall have no rights
as a stockholder with respect to shares covered by an Award until the date
the Participant is the holder of record. No adjustment will be made for
dividends or other rights for which the record date is prior to such date.
(d) NO OBLIGATION TO EXERCISE. The grant of an Award shall impose
no obligation upon the Participant to exercise the Award.
9
<PAGE>
(e) PAYMENTS BY PARTICIPANTS. The Committee may determine that
Awards for which a payment is due from a Participant may be payable: (i) in
U.S. dollars by personal check, bank draft or money order payable to the
order of the Corporation, by money transfers or direct account debits; (ii)
through the delivery or deemed delivery based on attestation to the ownership
of shares of Common Stock with a Fair Market Value equal to the total payment
due from the Participant; (iii) pursuant to a "cashless exercise" program if
established by the Corporation; (iv) by a combination of the methods
described in (i) through (iii) above; or (v) by such other methods as the
Committee may deem appropriate.
(f) WITHHOLDING. Except as otherwise provided by the Committee,
(i) the deduction of withholding and any other taxes required by law will be
made from all amounts paid in cash and (ii) in the case of payments of Awards
in shares of Common Stock, the Participant shall be required to pay the
amount of any taxes required to be withheld prior to receipt of such stock,
or alternatively, a number of shares the Fair Market Value of which equals
the amount required to be withheld may be deducted from the payment.
(g) MAXIMUM AWARDS. The maximum number of shares of Common Stock
that may be issued to any single Participant pursuant to options under this
Plan is equal to the maximum number of shares provided for in paragraph (a)
of Section V.
X. TERMINATION, MODIFICATION AND AMENDMENTS
(a) The Executive Compensation Committee may at any time terminate
the Plan or from time to time make such modifications or amendments of the
Plan as it may deem advisable; provided, however, that no amendments to the
Plan which require stockholder approval under applicable law, rule or
regulation shall become effective unless the same shall be approved by the
requisite vote of the Corporation's stockholders.
(b) No termination, modification or amendment of the Plan may
adversely affect the rights conferred by an Award without the consent of the
recipient thereof.
(c) Notwithstanding anything herein to the contrary, the
provisions of Section VII shall not be amended more than once every six
months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules thereunder.
10
<PAGE>
XI. RECAPITALIZATION
The aggregate number of shares of Common Stock as to which Awards
may be granted to Participants, the number of shares thereof covered by each
outstanding Award, and the price per share thereof in each such Award, shall
all 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 receipt of
consideration by the Corporation, or other change in corporate or capital
structure; provided, however, that any fractional shares resulting from any
such adjustment shall be eliminated. The Committee shall also make the
foregoing changes and any other changes, including changes in the classes of
securities available, to the extent it is deemed necessary or desirable to
preserve the intended benefits of the Plan for the Corporation and the
Participants in the event of any other reorganization, recapitalization,
merger, consolidation, spin-off, extraordinary dividend or other distribution
or similar transaction.
XII. NO RIGHT TO EMPLOYMENT
Except as provided in Section VII with respect to Director Options,
no person shall have any claim or right to be granted an Award, and the grant
of an Award shall not be construed as giving a Participant the right to be
retained in the employ of, or in the other relationship with, the Corporation
or a Subsidiary. Further, the Corporation and each Subsidiary expressly
reserve the right at any time to dismiss a Participant free from any
liability, or any claim under the Plan, except as provided herein or in any
Award Agreement issued hereunder.
XIII. GOVERNING LAW
To the extent that federal laws do not otherwise control, the Plan
shall be construed in accordance with and governed by the laws of the State
of Delaware.
XIV. SAVINGS CLAUSE
This Plan is intended to comply in all aspects with applicable laws
and regulations. In case any one more of the provisions of this Plan shall
be held invalid, illegal or unenforceable in any respect under applicable law
and regulation, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and the
invalid, illegal or unenforceable provision shall be deemed null and void;
however, to the extent permissible by law, any provision which could be
deemed null and void shall first be construed, interpreted
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<PAGE>
or revised retroactively to permit this Plan to be construed in compliance
with all applicable laws so as to foster the intent of this Plan.
XV. EFFECTIVE DATE AND TERM
The Hexcel Corporation Incentive Stock Plan is amended and restated
herein on January 30, 1997. The effectiveness of such amendment and
restatement is subject to approval by stockholders of the Corporation.
AWARDS GRANTED UNDER THE AMENDED AND RESTATED PLAN PRIOR TO SUCH
APPROVAL BY THE STOCKHOLDERS SHALL BE SUBJECT TO SUCH APPROVAL. THE PLAN
SHALL TERMINATE ON FEBRUARY 8, 2005. NO AWARDS SHALL BE GRANTED AFTER THE
TERMINATION OF THE PLAN.
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<PAGE>
EXHIBIT 10.8
RETAINER FEE OPTION AGREEMENT
For
Non-Employee Directors
OPTION AGREEMENT, dated as of the Grant Date, by and between the Optionee and
Hexcel Corporation (the "Corporation").
W I T N E S S E T H:
WHEREAS, the Corporation has adopted the Hexcel Corporation Incentive Stock
Plan, as amended and restated January 30, 1997 and approved by the
stockholders on May 22, 1997 (the "Plan"); and
WHEREAS, the Board of Directors of the Corporation (the "Board") has
determined that it is desirable and in the best interests of the Corporation
to grant to the Optionee a stock option as an incentive for the Optionee to
advance the interests of the Corporation;
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 Option Agreement, and this 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"),
<PAGE>
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.
4. TERMS OF OPTION.
(a) EXPIRATION DATE; TERM. Subject to Section 4(d) below, the Option
shall expire on, and shall no longer be exercisable following, the fifth
anniversary of the Grant Date. The five-year period from the Grant Date
to its fifth anniversary shall constitute the "Term" of the Option.
(b) VESTING PERIOD; EXERCISABILITY. Subject to Section 4(c) and 4(d)
below, the Option shall vest in proportion to the time elapsed between the
Grant Date and the first anniversary of the Grant Date.
(c) CHANGE OF CONTROL. In the event of a Change in Control (as defined in
the last Section hereof), the Option shall immediately become fully vested
and exercisable.
(d) TERMINATION OF SERVICE AS DIRECTOR. (i) Except as provided in Section
4(d)(ii) hereof, if the Optionee's service as a member of the Board is
terminated for any reason (other than death or disability), the Option (to
the extent vested on the date of termination) may be exercised at any time
within ninety 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.
(ii) In the event the Optionee's service as a member of the Board is
terminated because of death or disability, the Option (to the extent
vested on the date of termination) 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 vested, shall immediately
expire upon such termination.
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
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<PAGE>
other changes, including changes in the classes of securities available,
to the extent reasonably necessary or desirable to preserve the intended
benefits under this 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.
(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
3
<PAGE>
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 CONTINUED SERVICE AS DIRECTOR. Nothing contained herein
shall be deemed to confer upon the Optionee any right to continue to
serve as a member of the Board.
10. GOVERNING LAW/JURISDICTION. This 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 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 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 records with the
Corporation, 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 Option Agreement shall in no
way be construed to be a waiver of such provision or of any other
provision hereof.
14. COUNTERPARTS. This 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.
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<PAGE>
15. MISCELLANEOUS. This Option Agreement cannot be changed or terminated
orally. This 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 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 "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 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
5
<PAGE>
(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 trans
action 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
(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;
(III) 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;
(IV) the term "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time;
(V) the term "Governance Agreement" shall have the meaning given in the
Strategic Alliance Agreement (as defined in this Section);
(VI) 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
6
<PAGE>
Exchange Act, but excluding Ciba for so long as Ciba is subject to the
restrictions imposed by the Governance Agreement; and
(VII) 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.
7
<PAGE>
ANNEX A
NOTICE OF GRANT
STOCK OPTION
HEXCEL CORPORATION INCENTIVE STOCK PLAN
The following member of the Board of Directors of Hexcel Corporation, a
Delaware corporation ("Hexcel"), has been granted an option to purchase
shares of the Common Stock of Hexcel, $.01 par value per share, in accordance
with the terms of this Notice of Grant and the Retainer Fee Option Agreement
to which this Notice of Grant is attached.
The following is a summary of the principal terms of the option which
has been granted. The terms below shall have the meanings ascribed to them
below when used in the Option Agreement.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
<S> <C>
Optionee
- ------------------------------------------------------------------------------
Address of Optionee
- ------------------------------------------------------------------------------
Grant Date
- ------------------------------------------------------------------------------
Purchase Price
- ------------------------------------------------------------------------------
Aggregate Number of Shares
Granted (the "Option Shares")
- ------------------------------------------------------------------------------
</TABLE>
IN WITNESS WHEREOF, the parties hereby agree to the terms of this Notice
of Grant and the Retainer Fee Option Agreement to which this Notice of Grant
is attached and execute this Notice of Grant and Option Agreement as of the
Grant Date.
_________________________ HEXCEL CORPORATION
Optionee
By:
____________________________
Name:
____________________________
Title:
____________________________
<PAGE>
[COMPANY LOGO]
EXHIBIT 10.12
AGREEMENT BETWEEN HEXCEL CORPORATION
AND
IRA J. KRAKOWER
AGREEMENT, dated as of September 3, 1996, by and between Hexcel
Corporation, a Delaware corporation (the "Company") and Ira J. Krakower
("Employee").
WHEREAS, the Company and Employee both desire that Employee commence
employment with the Company as Senior Vice President, General Counsel, and
Corporate Secretary of the Company with such authority, responsibilities and
duties customarily attendant to such position including acting as the chief
legal officer of the Company; and
WHEREAS, the parties desire to enter into this Agreement setting forth the
terms and conditions applicable to the termination of such employment under
certain circumstances;
NOW, THEREFORE, for and in consideration of the mutual promises made
herein, the Company and Employee agree as follows:
1. In the event that Employee's employment by the Company is terminated
(a) by the Company at any time for any reason other than Cause (as defined in
Exhibit A hereto) or (b) by Employee for Good Reason (as defined in Exhibit A)
the Company shall pay Employee an amount equal to the sum of (i) one year of
salary based on the highest salary rate in effect with respect to Employee at
any time during the 12-month period ending on Employee's last day of employment
with the Company, plus (ii) an amount equal to Employee's target bonus under the
Company's annual bonus plan for the Company's fiscal year during which
Employee's employment terminates ("Severance Pay"). Severance Pay shall be paid
in equal installments, in accordance with the Company's regular payroll
practice, less applicable federal, state, and local tax withholdings. Except as
otherwise provided in this Agreement, Severance Pay shall be in full
satisfaction of all other amounts due Employee from the Company.
<PAGE>
2. In addition, if Employee becomes entitled to Severance Pay (i) the
Company shall pay Employee, as soon as practicable after termination of
employment, any amounts earned, accrued or owing to Employee for services prior
to the date of termination and (ii) for a period of one year following
Employee's last day of employment with the Company, the Company shall provide to
Employee, at no cost to Employee, coverage under (or equivalent to) the
medical/dental plans, disability insurance program and life insurance program in
which Employee participated as of such last day of employment (or at any time
within the 12-month period preceding such day).
3. Upon termination of his employment with the Company or at any time the
Company may so request, Employee will promptly deliver to the Company all
memoranda, notices, records, reports, and other documents (and all copies
thereof) relating to the business of the Company and all property associated
therewith which may then be in his possession or under this control, such as a
personal computer, printer, cellular phone and/or facsimile machine.
Furthermore, Employee's agreements with respect to confidentiality and secrecy
shall remain in full force and effect.
4. The Company and Employee agree that any dispute as to the
interpretation or enforcement of this Agreement shall be resolved by final and
binding arbitration in Stamford, Connecticut before a single arbitrator selected
by mutual agreement or (failing agreement) selected in accordance with the rules
of the American Arbitration Association then in effect (the "Arbitrator"). The
award of the Arbitrator may include an award of the costs of arbitration.
5. The terms of this Agreement shall be regarded as severable. If any
term is found by the Arbitrator to be unenforceable, that shall not affect the
enforceability of the remainder of the terms of the Agreement. If any term as
written should be interpreted by the Arbitrator to be so broad as to be
unenforceable, then such term shall be restricted as necessary to make such term
enforceable to the fullest extent permitted by law.
2
<PAGE>
6. The Company mid Employee acknowledge that they have read this
Agreement, that they are fully aware of its contents and of its legal effect,
that the preceding paragraphs recite the sole consideration for this Agreement,
that all agreements and understandings between the parties are embodied and
expressed herein and that each party enters into this Agreement freely, without
coercion, and based on the party's own judgment and not in reliance upon any
representations or promises made by the other party, other than those contained
herein.
7. This Agreement shall be construed and governed by the laws of the State
of Connecticut.
8. Employee shall execute and deliver such further documents, instruments
and agreements and shall do such further acts and things as may be necessary or
desirable and proper to effectuate the terms hereof and in consideration and as
a condition to payment of Severance Pay, a release of the Company in the form it
then uses pursuant to its severance Policy; provided, however, that such release
shall not result in the release or waiver by Employee of any of this rights
under (i) this Agreement or (ii) any other agreement, plan or arrangement to the
extent that Employee's rights thereunder have vested.
9. Employee shall not be required to mitigate amounts payable to him
under this Agreement by seeking employment or otherwise, nor shall there be any
offset against such amounts for any reason.
10. This Agreement is binding upon and shall enure to the benefit of the
Company and its successors and Employee and this heirs or legal representatives.
3
<PAGE>
11. Notices required or permitted hereunder shall be in writing and deemed
duly given upon personal delivery or when received following mailing by United
States certified mail, return receipt requested, postage prepaid, addressed, if
to Employee at:
Ira J. Krakower
30 Norrans Ridge Drive
Ridgefield, CT 06877
and if to the Company at:
John J. Lee, Chairman & Chief
Executive Officer
Hexcel Corporation
Two Stamford Plaza
281 Tresser Boulevard
Stamford, CT 06901-3238
HEXCEL CORPORATION
By: /s/ John J. Lee
--------------------------------------
JOHN J. LEE
EMPLOYEE
/s/ Ira J. Krakower
--------------------------------------
IRA J. KRAKOWER
4
<PAGE>
EXHIBIT A
---------
Cause Defined. "Cause" for termination of employment shall consist of
the following:
(a) Gross misconduct specifically intended to injure or cause
financial loss to the Company, and failure to discontinue same immediately
after written notice thereof;
(b) Repeated willful disregard of or willful failure to
substantially perform duties (other than any such disregard or failure
resulting from Employee's incapacity due to physical or mental illness) and
failure to cure such disregard or failure within thirty (30) days after
written notice thereof (and no act, or failure to act, shall be deemed
"willfull" unless done, or omitted to be done, by Employee not in good faith
and without reasonable belief that the act, or failure to act was in the best
interest of the Company);
(c) Conviction of a felony or the pleading of nolo contenders to a
felony, provided such conviction or pleading results in incarceration; or
(d) Conviction of, or the pleading of nolo contendere to, a crime
involving dishonesty in dealing with Company property, such as theft,
embezzlement, etc.
Good Reason Defined. "Good Reason" for termination by Employee of
Employee's employment shall mean the occurrence (without Employee's express
written consent) of any one of the following acts by the Company, or failures
by the Company to act, unless, in the case of any act or failure to act
described in paragraph (a) below, such act or failure to act is corrected
within 30 days of receipt by the Company of written notice thereof from
Employee:
(a) An adverse alteration in the nature or status of Employee's
responsibilities, including a diminution in Employee's position, duties,
responsibilities or authority or the failure of Employee to report directly
to the Chief Executive Officer of the Company;
(b) Reduction by the Company in (i) Employee's annual base salary
as in effect on the date hereof or as the same may be increased from time to
time, or (ii) Employee's level of participation in any compensation plan,
including but not limited to the Company's Annual Management Incentive
Compensation Plan or equity-based incentive compensation plans or (iii)
benefits enjoyed by Employee under any of the Company's pension, savings,
life insurance, medical, health and accident or disability plans in which
Employee was participating immediately prior to the date of termination,
unless, in any
<PAGE>
such case, such reduction is part of an across-the-board program similarly
affecting all officers of the Company;
(c) The Company's requiring Employee to be based anywhere other than
the New York/Stamford metropolitan area except for required travel on the
Company's business;
(d) The failure by the Company without Employee's consent to pay to
Employee any portion of Employee's current compensation or to pay to Employee
any portion of an installment of deferred compensation under any deferred
compensation program of the Company, within seven (7) days of the date such
compensation is due; or
(e) The failure by the Company to provide adequate office and/or
support facilities suitable to Employee's position and available to other
Company executives.
<PAGE>
EXHIBIT 10.13
SEPARATION AND RELEASE AGREEMENT
This Agreement (the "Agreement") is made as of the 29th day of
January, 1998 between Hexcel Corporation (the "Company"), for itself and on
behalf of its direct and indirect affiliated entities, and Juergen Habermeier
(the "Employee").
WITNESSETH:
WHEREAS, the Company employs Employee on the date hereof and
Employee has resigned his position as the Vice Chairman of the Board of
Directors of the Company effective December 31, 1997;
WHEREAS, Employee desires to resign his employment with the Company
and his officerships and/or directorships with the Company's affiliated
entities;
WHEREAS, Employee has extensive knowledge of the business and
operations of the Company including its technologies, customers, markets and
strategic plans; and
WHEREAS, Employee and the Company are parties to the Agreements
identified on schedule 1 hereto and any other agreements or arrangements
between the Company and Employee (other than this Agreement) (the "Existing
Agreements").
NOW THEREFORE, in consideration of the mutual terms and conditions
hereof, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Employee hereby
agree as follows (subject, however, to the termination of this Agreement as
provided in Section 16 hereof):
1. TERMINATION OF EMPLOYMENT. (a) Effective as of January
31,1998 (the "Termination Date"), Employee hereby voluntarily and amicably
resigns (i) from his employment with the Company and (ii) from all of his
officerships and directorships with the Company's affiliated entities.
Employee acknowledges that all files, records, electronic data, documents and
notes (and all copies, if any, thereof) relating to the Consolidated Group
(as defined below), whether prepared by Employee or otherwise in his
possession, custody or control, together with all office or file keys and
passes and
<PAGE>
all other property of any member of the Consolidated Group, are the exclusive
property of the Consolidated Group and shall be delivered to the Company and
not retained by Employee following the date hereof. The term "Consolidated
Group" shall mean the Company and its direct and indirect affiliated entities.
(b) Except as otherwise provided in Section 2 (B) hereof, the
Termination Date shall be the date of termination of Employee's employment
with the Company for all purposes under the Existing Agreements and Employee
shall not accrue any rights or benefits thereunder after the Termination
Date, nor shall his termination of employment be considered a "retirement"
under any Existing Agreements.
2. SEVERANCE BENEFITS. Subject to the terms and conditions of
this Agreement, the Company shall extend the following severance benefits to
Employee (the "Severance Benefits"):
A. The Company shall pay Employee, as a discretionary
payment, severance pay in an amount equal to $25,000 per calendar month
commencing February 1998 for a period of twelve months (such payments being
collectively referred to herein as "Cash Severance"). Cash Severance will be
directly deposited in Employee's bank account (as he may designate in writing
from time to time) or, if there is no such designation, mailed to Employee at
his address set forth in Section 9 hereof, on a bi-weekly basis in accordance
with the Company's customary payroll practices.
B. With respect to the Option Agreement between Employee and
the Company dated March 1, 1996, the Company agrees to accelerate the vesting
of options that would have vested on March 1, 1998 to January 31, 1998.
C. All PARS granted to Employee under the PARS Agreements
dated March 1, 1996 and January 2, 1997, shall be deemed vested as of the
Termination Date, but none of such PARS shall be converted into shares of the
Company's common stock and distributed to Employee prior to the approval of
this Agreement by the Company's Board of Directors or a committee thereof as
provided in Section 16 hereof.
D. Notwithstanding anything to the contrary contained in
this Agreement, in the event Employee is in breach of this Agreement Employee
shall not be entitled to exercise any options or receive
2
<PAGE>
any shares pursuant to PARS in excess of the number of options or PARS that
are vested under the Existing Agreements on the date hereof, and the Company
shall be entitled to recover from Employee any gains realized from the
exercise of options or receipt of shares pursuant to PARS in excess thereof.
3. POST-EMPLOYMENT BENEFITS. For the one-year period following
the Termination Date, the Company, at its expense, will continue the group
health benefits (medical, prescription, dental and vision) that Employee
and/or his family were receiving immediately prior to the Termination Date.
Following such one-year period, the Company shall arrange to provide Employee
through COBRA with group health benefits, substantially similar to those
benefits which Employee and/or his family were receiving immediately prior to
the Termination Date, for such periods as required by COBRA, subject to
Employee's payment to the Company or its designee of the Company's cost for
such coverage to the extent permitted by COBRA. Employee agrees to notify
the Company in writing promptly upon accepting employment with another
employer and becoming eligible to participate in group health benefits of the
new employer. All benefits and perquisites, other than those specifically
mentioned in Sections 3 and 4 hereof, shall terminate effective upon the
Termination Date.
4. OTHER RIGHTS. This Agreement shall not affect Employee's
vested rights (determined as of the Termination Date), if any, under any
welfare benefit or pension plan, except as otherwise provided in Section 13
hereof with respect to the Executive Deferred Compensation Agreement dated
March 1, 1996 ("EDCA"). Employee's entitlement to a bonus payment for 1997
shall be governed and deter mined by the terms of the Management Incentive
Compensation Plan (the "Plan") (under which the Company acknowledges that
Employee is entitled to 100 percent of the bonus due under the Plan), but
such bonus payment will be made when the Company makes its 1997 bonus
payments to other employees in the ordinary course of business. This
Agreement shall not affect Employee's right to reimbursement (in accordance
the Company's reimbursement policy) for reasonable business expenses
incurred, and to current base salary and accrued vacation earned, on or
before the Termination Date.
5. CONTINUING OBLIGATIONS. (a) During the period commencing upon
the Termination Date and ending on the first anniversary thereof, Employee
(i) shall not, without the prior written consent of the Company, employ or
solicit employment of, or suggest, encourage, or at-
3
<PAGE>
tempt to influence the hiring or termination of any person employed on the
date hereof by any member of the Consolidated Group, and (ii) shall not
interfere with any existing or planned project or proposal of the
Consolidated Group.
(b) Employee acknowledges that the Consolidated Group's trade
secrets and confidential and proprietary information, including without
limitation:
A. Non public information concerning the Consolidated
Group's:
(i) Research activities and plans;
(ii) Marketing or sales plans;
(iii) Pricing or pricing strategies;
(iv) Manufacturing techniques; and
(v) Strategic plans;
B. Non public financial information, including information
concerning revenues, profits and profit margins;
C. Any non public "material inside information" as such
phrase is used for purposes of the Securities Exchange Act of 1934,
as amended;
all constitute valuable, special and unique information of the Consolidated
Group. In recognition of this fact, Employee agrees that he will not
disclose any such trade secrets or confidential or proprietary information
(except information which becomes publicly available without violation of
this Agreement), to any person or entity, for any reason or purpose
whatsoever, nor shall Employee make use of any such information for the
benefit of himself or any person or entity.
6. RELEASE. (a) In consideration of the mutual covenants and
agreements contained herein, Employee, for himself and on behalf of his
heirs, executors, administrators and representatives, hereby irrevocably and
unconditionally, knowingly and voluntarily, releases, acquits, and forever
discharges each member of the Consolidated Group and their respective
stockholders, officers, directors, employees, representatives, attorneys and
agents, and each of their respective successors and assigns (referred to
4
<PAGE>
collectively as the "Releasees") from any and all claims and causes of action
whether known to Employee or unknown, suspected or unsuspected, which exists
or may have existed or may arise in any way relating to any act or omission
or other matter occurring up to and including the date hereof including,
without limitation, Employee's employment relationship with the Company, or
the termination thereof, rights or claims which did exist or which might have
been asserted pursuant to any express or implied contract of employment or
any other agreement (other than the Existing Agreements listed on Schedule 1
hereto), or under any tort, federal, state, or local fair employment practice
or civil rights law, any other statute, executive order, law, ordinance, or
any other duty or obligation of any kind or description. For the avoidance
of doubt and not in limitation of the foregoing, this release includes (i)
all claims which have existed from the beginning of the world to the present
and which may arise in the future out of any and all occurrences or omissions
up to and including the date of this Agreement, and (ii) all claims for
alleged discrimination based upon age, race, sex, religion, national origin,
citizenship, or disability, and includes any claim asserted or unasserted,
which could arise under Title VII of the Civil Rights Act of 1964, 42 U.S.C.
Section 1981, 42 U.S.C. Section 1983, the Connecticut Human Rights and
Opportunities Act, the Age Discrimination in Employment Act of 1967, 29
U.S.C. Section 621 et seq., (individually and collectively, "ADEA"),
California Fair Employment and Housing Act, the Employee Retirement Income
Security Act of 1974, 29 U.S.C. Section 1001 et seq., the Americans With
Disabilities Act of 1990, 42 U.S.C. Section 12101 et seq., the Older Workers
Benefit Protection Act and any fair employment practice, equal employment
opportunity, or employee benefit statute under any federal, state, or local
law, or any judicial decision or executive order now or hereafter recognized,
as well as any unsuspected and unanticipated claims, liens, injuries and
damages as well as those that are known.
(b) Employee hereby expressly waives all rights afforded by
Section 1542 of the Civil Code of the State of California ("Section 1542"),
or any statute of similar effect in any other jurisdiction in which any
action might be brought. Section 1542 states as follows:
A GENERAL RELEASE DOES NO EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
5
<PAGE>
Notwithstanding the provisions of Section 1542, and for the purpose of
implementing a full and complete release, Employee understands and agrees
that this Agreement is intended to include all claims, if any, which Employee
may have that Employee does not now know or suspect to exist in Employee's
favor against the Company or any Releasee, and that this Agreement
extinguishes those claims.
(c) Employee hereby irrevocably and unconditionally, knowingly and
voluntarily, waives and gives up any right Employee has, had, or might have
had to file a charge or commence a legal action against the Releasees with
respect to the matters released in Section 6(a), to the full extent permitted
by applicable law. Employee represents and warrants to the Company that
prior to the date hereof he has not filed or permitted to be filed with any
court, governmental or administrative agency, or arbitration tribunal, any
complaint, lawsuit, charge or claim against the Releasees in respect of any
such matter. Employee further agrees and covenants not to seek or be
entitled to any recovery in any proceeding of any nature whatsoever in
connection with such matters. Should any such proceeding be brought against
the Releasees, Employee shall take all steps necessary to opt out, abandon,
and disclaim interest in such proceeding. If such proceeding is brought
successfully and thereby Employee becomes entitled to a monetary award,
Employee shall promptly return the proceeds received by him to the payor
thereof. Further, to the full extent permitted by applicable law, Employee
shall not testify, assist or participate (except in response to subpoena or
judicial order) in any lawsuit, administrative action, or any judicial or
administrative proceeding brought against the Releasees in connection with
such matters. Neither the existence nor terms of this Agreement nor any
claims or allegations that were or could have been raised by Employee as of
the date hereof, nor the facts and circumstances underlying such claims or
allegations, shall be admissible or submitted as evidence in any litigation
in any forum for any purpose other than to secure enforcement of the terms
and conditions of this Agreement.
(d) Employee acknowledges that he received a draft of this
document on January 21, 1998; that he has been offered by the Company at
least twenty-one days from the date he received this Agreement within which
to consider its terms; that he has been advised by the Company that during
such period he should consult an attorney regarding the terms of this
Agreement and that if he signs before the expiration of said twenty-one days
he does so of his own free will and with the full knowledge that he could
6
<PAGE>
have taken the full twenty-one days and he realizes and understands that this
Agreement applies to and covers all claims, demands, and causes of action,
including those that could be asserted under ADEA against the Consolidated
Group. Employee represents and warrants that he has, in fact, considered
this Agreement and that he knowingly and voluntarily enters into this
Agreement including, but not limited to, the releases and waivers set forth
above. The terms of this Agreement shall become effective and enforceable
upon the date of signing. Notwithstanding the preceding sentence, Employee
shall have seven (7) days from the date of signing to revoke his consent to
the release and waiver of his rights under ADEA set forth in Sections 6 (a)
and (b) by written notice to be received by the Company before 5:00 P.M.
EST on the seventh day. If no such revocation occurs, Employee's release and
waiver of his rights under ADEA shall become effective seven (7) days from
the date of signing of this Agreement. In the event that Employee revokes
his release and waiver of rights under ADEA, the Company shall have no
obligation to Employee for Severance Benefits under Section 2, but all other
terms, provisions and agreements contained in this Agreement shall remain in
full force and effect.
7. PURCHASE OF COMPUTER. The Company hereby grants Employee the
option to purchase the IBM Notebook computer that heretofore has been
provided to him by the Company, provided that (i) Employee shall pay a
purchase price equal to the net book value of such computer as shown on the
Company's books and records and (ii) the Company shall have completely purged
all of its software and data from the computer. This option shall terminate
on the 20th day following the Termination Date.
8. VALIDITY; INJUNCTIVE RELIEF. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect. Employee acknowledges and agrees
that, in the event of his breach of any provision of Sections 5, 6 or 11 of
this Agreement ("Basic Covenants"), the Company would be irreparably and
immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that any member of the Consolidated Group, in addition to
any other remedy to which it may be entitled in law or equity, shall be
entitled to an injunction to prevent breaches of any Basic Covenants and/or
to compel specific performance of any Basic Covenants, and Employee will not
oppose the granting of such form of relief. In addition, in the event of any
breach of any Basic Covenants by Employee, the Company shall have no
7
<PAGE>
further obligations under this Agreement (other than the Company's COBRA
obligations under law, if any) including, without limitation, any obligation
under Section 2 hereof.
9. NOTICE. All notices and all other communications required or
permitted pursuant to this Agreement shall be in writing, and shall be
deemed to have been duly given when personally delivered by courier, or by
fax transmission, or when received by United States certified or registered
mail, postage prepaid, addressed to the respective addresses set forth below:
If to the Company: Hexcel Corporation
281 Tresser Boulevard
Two Stamford Plaza
16th Floor
Stamford, CT 06901-3261
Attn: General Counsel
Fax: 203.358.3972
If to Employee: Juergen Habermeier
4242 Golden Oak Court
Danville, CA 94506
Fax: 510.736.0966
The foregoing address may be changed by a party giving a notice of such
change as provided in this Section 9.
10. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
STATE OF CALIFORNIA WITHOUT REFERENCE TO SUCH STATE'S CONFLICT OF LAW RULES.
ALL DISPUTES CONCERNING THE APPLICATION OR ENFORCEMENT OF THE AGREEMENT
SHALL, IF NECESSARY, BE TRIED IN A COURT OF COMPETENT JURISDICTION IN THE
STATE OF CALIFORNIA OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF CALIFORNIA. EMPLOYEE HEREBY CONSENTS TO THE PERSONAL
JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA.
8
<PAGE>
11. NONDISCLOSURE. (a) Employee hereby covenants and agrees that
he will not (i) except as to his personal representatives or as otherwise
required by law, disclose the existence of this Agreement or the terms and
conditions hereof to any other person or entity or (ii) make, or cause to be
made, any statement, observation, opinion, or communication (whether oral or
written) that disparages the Consolidated Group, any member thereof, or any
of their respective past or present officers, directors, shareholders or
employees, whether concerning his separation from employment or otherwise.
(b) The Company hereby covenants and agrees that it will not (i)
except as to its representatives or as otherwise required by law, disclose
the existence of this Agreement or the terms and conditions hereof to any
other person or entity or (ii) make, or cause to be made, any statement,
observation, opinion, or communication (whether oral or written) that
disparages Employee, whether concerning his separation from employment or
otherwise.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto in respect of the subject matter hereof
and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto or its agent or
representative; and any prior agreement of the parties hereto in respect of
the subject matter hereof is hereby terminated and cancelled. No terms,
conditions, amendments or modifications hereto shall be binding unless made
in writing and signed by the parties hereto.
13. EDCA. The Company and Employee hereby terminate EDCA in its
entirety, and in complete satisfaction of all Employee's or his
beneficiaries' rights thereunder (whether accrued, contingent or otherwise),
the Company shall make a payment to Employee of $21,072.00 simultaneously
with the first monthly payment of Cash Severance to Employee.
14. NO WAIVER. The failure of the Company or Employee to insist
upon strict adherence to any term of this Agreement on any occasion shall not
be considered a waiver thereof or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.
9
<PAGE>
15. WITHHOLDING BY COMPANY. All payments in cash or by delivery
of Shares payable to Employee pursuant to this Agreement shall be made net of
all applicable withholding and payroll taxes under federal, state and local
laws.
16. TERMINATION. Employee has been advised and he hereby agrees
that the obligations of the Company under this Agreement are subject to the
review and approval of this Agreement by the Company's Board of Directors or
a committee thereof. The Company undertakes to seek such review and approval
on or before February 5, 1998. If such approval is obtained, the obligations
of Employee and the Company shall thereupon become unconditional and
absolute; if such approval is not obtained, then this Agreement shall
automatically terminate, and be of no further force or effect, at 12:01 a.m.
on February 6, 1998.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement on the date first set forth above.
HEXCEL CORPORATION
By: ______________________
EMPLOYEE
___________________________
JUERGEN HABERMEIER
Consented to:
_______________________
JUTTA HABERMEIER
10
<PAGE>
SCHEDULE 1
Executive Deferred Compensation Agreement dated March 1, 1996.
PARS Agreement dated March 1, 1996
Option Agreement dated March 1, 1996
Reload Option Agreement dated March 19, 1996
Reload Option Agreement dated April 8, 1996
PARS Agreement dated January 2, 1997
Option Agreement dated January 2, 1997
PASO Agreement dated February 3, 1997 (as amended May 22, 1997)
Reload Option Agreement dated March 6, 1997
11
<PAGE>
Exhibit 21
Subsidiaries of Hexcel Corporation
Hexcel subsidiaries (first-, second- and third-tier) and their jurisdiction
of incorporation:
Hexcel Far East (California)
Hexcel International (California)
Hexcel Omega Corporation (California)
Hexcel Pacific Rim Corporation (California)
Hexcel Beta Corp. (Delaware)
Hexcel Pottsville Corporation (Delaware)
Hexcel Technologies Inc. (Delaware)
Hexcel Composites GmbH (Austria)
Hexcel Composites S.A. (Belgium)
Hexcel do Brasil Servicos S/C Ltda. (Brazil)
Confection et Diffusion de Stores et Rideaux (France)
Hexcel Composites S.A. (France)
Hexcel Composites GmbH (Germany)
Salver S.r.l. (Italy)
Hexcel Composites, S.A. (Spain)
Hexcel Chemical Products Ltd. (U.K.)
Hexcel Composites Limited) (U.K.)
Hexcel (U.K.) Limited (U.K.)
Hexcel Pacific Rim Corporation (Delaware)
Hexcel S.A. (France)
Hexcel Fabrics S.A. (France)
<PAGE>
EXHIBIT 23.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 333-36163, 333-36099 and 333-31125) of Hexcel
Corporation of our report dated January 28, 1998, except as to aggregate
maturities of notes payable in Note 7, which is as of March 5, 1998, which
appears on page 50 of this Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Jose, California
March 26, 1998
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Hexcel Corporation on From S-8 of our report dated February 28, 1997, appearing
in the Annual Report on Form 10-K of Hexcel Corporation for the year ended
December 31, 1996.
/s/ Deloitte & Touche LLP
San Francisco, California
March 26, 1998
82
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 9,033
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<PP&E> 488,916
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0
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