SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 14, 1998
OWENS CORNING
(Exact name of registrant as specified in its charter)
Delaware 1-3660 34-4323452
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
One Owens Corning Parkway, Toledo, Ohio 43659
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (419)248-8000
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Item 2. Acquisition or Disposition of Assets.
On September 30, 1998, Owens Corning, a Delaware
corporation (the "Company"), completed the sale (the
"Sale Transaction") of a 51% membership interest (the
"Transferred Interest") in Advanced Glassfiber Yarns LLC,
a Delaware limited liability company ("AGY"), to AGY
Holdings, Inc., a Delaware corporation ("Holdings").
Holdings is a wholly-owned subsidiary of Glass Holdings
Corp., a Delaware corporation ("GHC") and a wholly-owned
subsidiary of Groupe Porcher Industries, a French
corporation ("Porcher"). Porcher and its affiliates are
existing customers of AGY. The Company has indirectly
retained a 49% membership interest in AGY through
Jefferson Holdings, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Company ("Jefferson").
On July 1, 1998, the Company contributed to AGY
substantially all of the assets (including, but not
limited to, equipment, real estate, intellectual
property, inventory, customer contracts and accounts
receivables) comprising its glass fiber yarns and
specialty materials business in exchange for a 100%
membership interest in AGY. On July 31, 1998, the
Company contributed a 49% membership interest in AGY to
Jefferson and entered into an LLC Interest Sale and
Purchase Agreement (as amended by Amendment No. 1 to LLC
Interest Sale and Purchase Agreement dated September 30,
1998, the "Sale Agreement") with AGY and GHC pursuant to
which the Company agreed to sell the Transferred Interest
to GHC or its wholly-owned subsidiary for a purchase
price of $331,500,000. Upon the closing of the Sale
Transaction, AGY made a special pro rata distribution of
$390,000,000 to its members, including a $191.1 million
distribution to Jefferson. Additionally, in accordance
with the Sale Agreement, Jefferson received a further
distribution from AGY of $9,262,000 in regard to AGY's
estimated closing date net asset valuation. At the
conclusion of the Sale Transaction and distributions, the
Company and its subsidiaries received aggregate cash
proceeds of $529,612,000 (net of certain transaction
costs).
Simultaneously with the closing of the Sale Transaction,
the Company and AGY entered into a number of agreements
pursuant to which the Company and AGY have agreed to sell
or make available to one another various raw materials,
certain services, capital equipment and products over a
five to seven-year period on agreed terms and prices.
All of the foregoing information is qualified in its
entirety by reference to the copy of the Sale Agreement
which is attached hereto as Exhibit 1 and incorporated
herein by reference.
Item 7. Financial Statements and Exhibits.
Pro Forma Financial Statements
EXHIBITS
Designation Description Method of Filing
Exhibit 2 LLC Interest Sale and Filed with this report
Purchase Agreement
Exhibit 2.1 Amendment No. 1 to LLC Filed with this report
Interest Sale and
Purchase Agreement
Exhibit 99 Pro Forma Financial Filed with this report
Statements
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
OWENS CORNING
Registrant
Date: October 14, 1998 By: /s/Domenico Cecere
Domenico Cecere
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit 2 LLC Interest Sale and Purchase Agreement
Amendment No 1
Exhibit 2.1 LLC Interest Sale and Purchase Agreement
Exhibit 99 Notes to Pro Forma Financial Statements
Pro Forma Financial Statements
LLC INTEREST SALE AND PURCHASE AGREEMENT
among
OWENS CORNING;
LINCOLN YARNS, LLC; and
GLASS HOLDINGS, CORP;
Dated as of July 31, 1998
LLC INTEREST SALE AND PURCHASE AGREEMENT
This LLC Interest Sale and Purchase Agreement, dated as of July 31,
1998, among OWENS CORNING, a Delaware corporation ("Seller"); LINCOLN
YARNS, LLC, a Delaware limited liability Company (the "Company") and GLASS
HOLDINGS, CORP., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, the Company is engaged in the business of manufacturing and
selling glass fiber yarns and specialty materials (the "Business");
WHEREAS, Seller owns a 51% membership interest in the Company (the
"Buyer Interest").
WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer, on the terms and subject to the conditions of this
Agreement, the Buyer Interest;
WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in Section 10.10 and all monetary amounts
specified in this Agreement are in United States Dollars.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1 SALE OF INTEREST; PURCHASE PRICE AND ADJUSTMENTS
1.1 Sale of Interest.
Subject to the satisfaction or waiver of the conditions set forth
in this Agreement, at the Closing and as of the Closing Date, Seller shall
sell, assign, transfer, convey and deliver to Buyer, free of all liens and
encumbrances, and Buyer shall purchase, the Buyer Interest.
1.2 Purchase Price.
The aggregate purchase price for the Buyer Interest shall be
three hundred fifty-seven million Dollars ($357,000,000) in the aggregate,
subject to adjustment as provided in Section 1.4 (the "Purchase Price").
1.3 Payment of Purchase Price.
The Purchase Price shall be payable on the Closing Date by wire
transfer of immediately available federal funds to such bank account or
accounts as shall be designated by Seller to Buyer prior to the Closing.
1.4 Purchase Price Adjustment
(a) Calculation of the Purchase Price Adjustment. The Purchase
Price shall be increased or decreased, on a dollar-for-dollar basis, by 51%
of the amount by which the Net Asset Value of the Company as of the Closing
Date (the "Closing NAV"), as finally determined pursuant to Section 1.4(d)
below, is greater or less than twenty nine million two hundred seventy
thousand dollars ($29,270,000) (the "Base NAV"). The calculation of the
Base NAV is set forth on Schedule 1.4(a). If the Closing NAV is greater
than the Base NAV, then Buyer shall pay to Seller 51% of the amount of such
excess. If the Closing NAV is less than the Base NAV, then Seller shall
pay to Buyer 51% of the amount of such deficiency. Such Purchase Price
adjustment shall be paid as set forth in Sections 1.4(b) and (e) below.
(b) Estimated Adjustment. On the Closing Date, Seller shall
deliver to Buyer a statement (the "Estimated Closing Statement") prepared
in accordance with GAAP setting forth a calculation of Seller's good faith
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estimate of the Closing NAV (the "Estimated Closing NAV"). If the
Estimated Closing NAV as set forth on the Estimated Closing Statement is in
excess of the Base NAV, the Purchase Price payable at the Closing shall be
increased by an amount equal to 51% of such excess. If the Estimated
Closing NAV as set forth on the Estimated Closing Statement is less than
the Base NAV, then the Purchase Price payable at the Closing shall be
decreased by an amount equal to 51% of such deficiency.
(c) Closing NAV. Within ninety (90) days after the Closing,
Seller will prepare and deliver to Buyer a balance sheet of the Company as
of the Closing Date prepared in accordance with GAAP together with a
statement setting forth a calculation of the Closing NAV (the "Closing
Statement"). At the option of the Buyer, exercisable in writing on or
before the Closing Date, the Closing Statement shall be audited by
PricewaterhouseCoopers LLP, the cost of such audit shall be borne by the
Company. Buyer shall cooperate fully and shall cause the Company to
provide Seller with all assistance and access to books and records
necessary for Seller to prepare the Closing Statement. In connection
therewith, Buyer and Seller will jointly conduct a physical inventory of
the Inventory as of the Closing Date in accordance with the procedures to
be mutually agreed by Buyer and Seller acting reasonably and in good faith]
and, at Buyer's option, such physical inventory will be observed by Buyer's
auditors, PricewaterhouseCoopers LLP, and at Seller's option, such physical
inventory will be observed by Seller's auditors, Arthur Andersen LLP.
(d) Closing Calculation.
(i) Buyer shall be entitled to full access to the relevant
records and working papers prepared by or for Seller, and to Seller's
employees involved in such preparation, to aid in its review of the
calculation of the Closing NAV set forth on the Closing Statement. If
Buyer believes that the Closing NAV calculation (hereinafter the "Closing
Calculation") has not been properly calculated in accordance with the
calculation methodologies set forth in this Section 1.4, it shall, within
thirty (30) days after receipt of the Closing Calculation, give written
notice (the "Buyer's Objection") to Seller, setting forth the basis of the
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Buyer's Objection in reasonable detail and, to the extent practicable, the
adjustments to the Closing Calculation which Buyer believes should be made.
Failure to so notify Seller within such thirty (30) day period shall
constitute acceptance and approval of the Closing Calculation. There shall
be no adjustment to the Closing Calculation unless the cumulative amount of
Buyer's Objection equals or exceeds one million dollars ($1,000,000.00) and
provided that any individual item of adjustment contained in Buyer's
Objection which is less than fifty thousand dollars ($50,000.00) shall be
excluded in its entirety. If Seller agrees that any change proposed by
Buyer is appropriate, the change shall be made to the Closing Calculation,
whereupon Buyer shall be deemed to have accepted and approved the Closing
Calculation with respect to such change and any other non-disputed item of
the Closing Calculation. If the proposed change is disputed by Seller,
then Seller and Buyer shall negotiate in good faith to resolve such dispute
as expeditiously as possible. If, after a period of thirty (30) days
following the date on which Buyer gives Seller notice of any such proposed
change, any such proposed change still remains disputed, then:
(ii) KPMG Peat Marwick LLP (the "Neutral Accounting Firm")
shall be engaged to resolve any remaining disputes. The Neutral Accounting
Firm shall act as an arbitrator to determine, based solely on presentations
submitted by Seller and Buyer, and not by independent review, only those
issues still in dispute. Each of Buyer and Seller shall have made its
complete submission to the Neutral Accounting Firm within ten (10) days
following the expiration of the thirty (30) day negotiation period
described in Section 1.4(d)(i). The failure by either party to make a
complete submission prior to the expiration of such ten (10) day period
shall be deemed a waiver of such party's right to make a submission or a
further submission to the Neutral Accounting Firm. The Neutral Accounting
Firm's determination, based upon the calculation methodologies set forth in
this Section 1.4, shall be made within thirty (30) days following the date
on which the dispute is submitted, shall be set forth in a written
statement delivered to Seller and Buyer, and shall be final, binding and
conclusive. The fees and any expenses of the Neutral Accounting Firm shall
be shared equally by Seller and Buyer. In the event a party does not
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comply with the procedure and time requirements contained herein, the
Neutral Accounting Firm shall render a decision based solely on the
evidence it has which was timely filed by either of the parties.
(e) Payment of Cash Purchase Price Adjustment. If the Closing
NAV shown on the Closing Statement exceeds the Estimated Closing NAV, then
the Purchase Price shall be increased by an amount equal to 51% of such
excess and if the Closing NAV shown on the Closing Statement is less than
the Estimated Closing NAV, then the Purchase Price shall be decreased by an
amount equal to 51% of such deficiency. Payment of any adjustment in the
Purchase Price pursuant to this Section 1.4(e) shall be made by wire
transfer to an account designated by Seller or Buyer, as the case may be,
in United States Dollars, in immediately available federal funds within
three (3) business days after the Closing Calculation has been finally
determined together with interest from the Closing Date to the date of
payment at the "base rate" of Citibank, N.A. or any successor thereto in
New York, New York in effect on the Closing Date, based on a 360-day year.
2 REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
2.1 Corporate Existence
Seller is a Delaware corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation.
2.2 LLC Organization and Qualification
The Company is a limited liability company duly formed, validly
existing and in good standing under the laws of Delaware and the Company
has the requisite power and authority to own, lease and operate the Assets
and to carry on the Business as the same is now being conducted, except
where the failure to do so would not have a material adverse effect on the
results of operations, financial condition or business of the Business,
taken as a whole, or upon the ability of Seller or its Affiliates to
consummate the transaction contemplated hereby or perform their obligations
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under the Agreement or the Ancillary Agreements (a "Material Adverse
Effect"). The Company is duly authorized, qualified or licensed to do
business as a foreign limited liability company and in good standing in
every jurisdiction wherein, by reason of the nature of the Business or the
character of the Assets, the failure to be so qualified would have a
Material Adverse Effect. Seller has delivered to Buyer complete, true and
correct copies of the Company's Certificate of Formation and its Operating
Agreement. The Company has no assets other than those related to the
Business and conducts no business other than the Business. Except as may
be contemplated by Section 4.29, the Company has no subsidiaries and on the
Closing Date will have no subsidiaries.
2.3 Capitalization of the LLC.
The Company has authorized capitalization consisting solely of
ownership interests as described in the Operating Agreement (the "Interests").
Seller is the owner of the Buyer Interest and Jefferson Holdings Inc.,
a Delaware corporation and a wholly-owned subsidiary of Seller, owns the
remaining 49% ownership interest of the Company. All of the Interests have
been duly authorized, validly issued and are fully paid. None of the
Interests has been issued in violation of any preemptive right. The
Company has no other equity securities or other evidences of ownership
outstanding other than the Interests. Except as contemplated by this
Agreement, there are no outstanding subscriptions, options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans or
other agreements of any character providing for the purchase, issuance,
transfer or sale of any of the Interests or any other equity securities of
the Company or other evidence of ownership in the Company. There are no
voting trusts, proxies or other agreements or understandings with respect
to the Interests.
2.4. Corporate Authority.
The execution and delivery of this Agreement, the Ancillary
Agreements to which Seller, NVOC and OCC are parties and the consummation
of all of the transactions provided for herein and therein have been or, in
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the case of NVOC and OCC, will be duly authorized by the Board of Directors
of each of Seller, NVOC and OCC and no other corporate or stockholder
approval is required to be obtained prior to the Closing. The execution
and delivery of this Agreement has been duly authorized by the Company.
Each of Seller, NVOC and OCC has the corporate power and authority to
execute and deliver this Agreement and/or the Ancillary Agreements (as
applicable) and to perform its obligations hereunder and thereunder. The
Company has the power and authority to execute and deliver this Agreement.
This Agreement has been and the Ancillary Agreements will be duly executed
and delivered by each of Seller and, to the extent they are parties
thereto, NVOC and OCC, and constitutes or will constitute a valid and
legally binding obligation of Seller, NVOC and OCC (as applicable)
enforceable in accordance with its terms, except as enforceability may be
(i) limited by bankruptcy, insolvency, fraudulent conveyance or other
similar laws affecting the enforcement of creditor's rights, or
(ii) subject to general principles of equity. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and legally
binding obligation of the Company enforceable in accordance with its terms,
except as enforceability may be (i) limited by bankruptcy, insolvency,
fraudulent conveyance or other similar laws affecting the enforcement of
creditor's rights, or (ii) subject to general principles of equity.
2.5 No Conflicts.
The execution and delivery of this Agreement and the Ancillary
Agreements do not and the performance by Seller of its obligations under
this Agreement and the consummation of the transactions contemplated hereby
and thereby will not (a) conflict with or result in a violation or breach
of any provision of the Certificate of Incorporation or By-Laws or any
similar documents of Seller, NVOC or OCC and, in the case of the Company,
conflict with or breach any provision of the Certificate of Formation of
the Company or its Operating Agreement; (b) assuming receipt of the
Required Consents, violate any provisions of Law to which Seller or the
Company, NVOC or OCC are subject, or by which the Assets are bound, except
for any such violation which would not have a Material Adverse Effect; or
(c) except as disclosed on Schedule 2.5, conflict with, result in a
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violation or breach of or constitute a default or result in the creation of
any material Encumbrance upon any of the Assets under the terms of any
Material Contract to which Seller, the Company, NVOC or OCC is a party or
is otherwise subject or by which the Assets are bound, or violate any
material statute, rule, regulation, ordinance, code, order, judgment,
ruling, writ, injunction, decree or award to which Seller, the Company,
NVOC, OCC or the Assets are subject, except for any such violations,
breaches or defaults which individually or in the aggregate would not have
a Material Adverse Effect.
2.6 Governmental Approvals: Consents.
Neither Seller nor the Company, NVOC or OCC is subject to any
order, judgment or decree which would prevent the consummation of the
transactions contemplated hereby. No claim, legal action, suit,
arbitration, governmental investigation, action or other legal or
administrative proceeding is pending or, to the knowledge of Seller,
threatened against Seller, the Company, NVOC or OCC which would enjoin or
delay the transactions contemplated hereby. Except as set forth on
Schedule 2.6 hereto, no consent, approval, order or authorization of,
license or permit from, notice to or registration, declaration or filing
with, any governmental authority or entity, domestic or foreign, or any
third party under any Material Agreement is or has been required on the
part of Seller, the Company, NVOC or OCC in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for such consents, approvals, orders or
authorizations of, licenses or permits, notices, registrations,
declarations or filings which have already been obtained or made or the
failure to obtain or make would not have a Material Adverse Effect.
2.7 Financial Statements.
Schedule 2.7 contains a copy of (i) the audited Statement of Net
Assets of the Aiken and Huntingdon Manufacturing Facilities (including the
OCC Assets) as of December 31, 1996 and 1997 and the related Statements of
Revenues and Certain Expenses for the three years ended December 31, 1997
(the "Historical Annual Financial Statements"), (ii) the unaudited
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statement of Net Assets of the Aiken and Huntingdon Manufacturing
Facilities (including the OCC Assets) as of March 31, 1998 and the related
Statement of Revenues and Certain Expenses for the three-month period ended
March 31, 1998 (the "Historical Interim Financial Statements" and, together
with the Historical Annual Financial Statements, the "Historical Financial
Statements") (iii) the Pro Forma Statements of Net Assets To Be Sold of the
Business, NVOC and OCC as of December 31, 1997 and the related Pro Forma
Statements of Revenues and Certain Expenses for the year ended December 31,
1997 and (iv) the Interim Pro Forma Statement of Net Assets to be sold of
the Business, NVOC and OCC as of March 31, 1998 and the related Interim Pro
Forma Statement of Revenues and certain expenses for the three month period
ended March 31, 1998 (the "Pro Forma Information " and together with the
Historical Financial Statements, the "Financial Statements"). The
Historical Annual Financial Statements have been prepared to present the
net assets of the Aiken and Huntingdon Manufacturing Facilities (including
the OCC Assets). The Historical Annual Financial Statements present
fairly, in all material respects, the net assets of the Aiken and
Huntingdon Manufacturing Facilities (including the OCC Assets) as of
December 31, 1996 and 1997 and the related revenues and certain expenses of
the Aiken and Huntingdon Manufacturing Facilities for the three years ended
December 31, 1997, in conformity with GAAP on the basis specified in the
notes thereto. The Historical Interim Financial Statements have been
prepared in accordance with GAAP and present fairly, in all material
respects, the net assets of the Aiken and Huntington Manufacturing
facilities (including the OCC Assets) as of March 31, 1998 and the revenues
and certain expenses of the Aiken and Huntington Manufacturing facilities
(including the OCC Assets) for the three months ended March 31, 1998,
subject to normal year-end adjustments. The Pro Forma Information has been
prepared to give effect to the events described in Notes 1 and 2 of the
Pro Forma Information and should be read in conjunction with the Historical
Financial Statements. The Pro Forma Information is unaudited and is not
necessarily indicative of the results that would have actually occurred had
the sale been consummated, or of the results which may be obtained in the
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future; however, subject to the foregoing, the Pro Forma Information
reasonably presents the assets and liabilities and revenues and certain
expenses of the Business as of the dates and for the periods presented,
pro forma for the events described in Notes 1 and 2 of the Pro Forma
Information. All Financial Statements and Historical Interim Financial
Statements are qualified by the fact that the Business has not operated as
a separate "stand-alone" entity within Seller and as a result, the Business
received certain allocated charges and credits as discussed more fully in
the notes accompanying such Financial Statements. Such charges and
credits, while believed by Seller to be reasonable, do not necessarily
reflect the amounts which would have resulted from arm's-length
transactions. In order to present the Financial Statements and Historical
Interim Financial Statements for the Business, a number of significant
assumptions regarding the basis of presentation have been made, all of
which are believed by Seller to be reasonable and are outlined in the notes
to such Financial Statements.
The books, records, and accounts of Seller maintained with
respect to the Business accurately and fairly reflect, in all material
respects, the assets and liabilities of the Business on the basis described
in the Notes to the Financial Statements.
2.8 Absence of Changes.
Except as otherwise disclosed on Schedule 2.8 or as contemplated
by this Agreement or the ACA, since March 31, 1998, (i) the Business has
been conducted in all material respects in the ordinary course consistent
with past practice; and (ii) there has not been any:
(i) change in the Business, other than seasonal changes,
changes relating to the economy in general or changes relating to the
industry in which the Business operates in general, none of which
individually or in the aggregate has had a Material Adverse Effect;
(ii) material change in accounting methods, principles or
practices utilized by Seller with respect to the Business, or the Company
except as required by law or by generally applicable changes instituted in
the accounting profession;
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(iii) material damage, destruction or loss (whether or
not covered by insurance) to a material tangible Asset;
(iv) waiver or release of any material right or claim of
Seller or the Company with respect to the Business;
(v) increase in the rate of compensation payable or to
become payable to any employee of the Business, except increases in the
ordinary course of business or pursuant to a collective bargaining
agreement;
(vi) adverse change in employee relations having a Material
Adverse Effect;
(vii) amendment, cancellation or termination (other than
a scheduled termination as set forth therein) of any Material Contract;
(viii) sale, assignment or transfer of any material
portion of the Assets, other than pursuant to the Asset Contribution
Agreement or in the ordinary course of business of the Business;
(ix) material changes in payment terms with material
customers or suppliers;
(x) failure to make capital expenditures in the ordinary
course consistent with past practice;
(xi) failure to maintain the Assets in the ordinary course
consistent with past practice; or
(xii) agreement by Seller, the Company, NVOC or OCC (as
applicable) to do any of the things described in the preceding clauses (i)
through (xi) other than as expressly provided for herein.
2.9 Real and Personal Properties.
(a) The Company has or will have on the Closing Date good title
to, or a valid and binding leasehold interest in, the real or personal
property included in the Assets, free and clear of all liens, charges and
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other encumbrances, except (i) as set forth on Schedule 2.9(a); (ii) as
disclosed in the Financial Statements; (iii) liens for Taxes not yet due
and payable or, if due, (A) not delinquent or (B) being contested in good
faith by appropriate proceedings during which collection or enforcement
against the property is stayed; (iv) mechanics', workmen's, repairmen's,
warehousemen's, carriers' or other like liens arising or incurred in the
ordinary course of business if the underlying obligations are not past due,
original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business; (v)
with respect to real property, (A) easements, licenses, covenants,
rights-of-way and other similar restrictions, including, without
limitation, any other agreements or restrictions shown by the current title
reports described on Schedule 2.9(a)(v)(A), (B) any conditions that may be
shown by a current survey, title report or physical inspection and (C)
zoning, building and other similar restrictions, so long as none of (A),
(B) or (C) renders the title of such real property unmarketable or prevents
the use of such real property substantially as currently used; (vi) other
liens, charges or other encumbrances which would not have a Material
Adverse Effect and (vii) with respect to the Leased Real Property, liens or
encumbrances created by, through or under the lessor thereof or its
predecessors in interest, (such liens, charges and encumbrances described
in clauses (i)-(vii) hereof are referred to herein as "Permitted Liens").
(b) Schedule 2.9(b) contains a list of the Owned Real Property
and all Real Property Leases principally used in the Business (the real
property covered by such Real Property Leases is hereinafter referred to
the "Leased Real Property" and, together with the Owned Real Property, the
"Real Property"), including all buildings, structures and other
improvements situated thereon (individually referred to as a "Facility"
and, collectively, as the "Facilities"). Except as set forth on Schedule
2.9(b) and except in each case as would not have a Material Adverse Effect,
(i) there are no parties in possession of any portion of the Owned Real or
the Leased Real Properties included in the Assets as lessees, tenants at
sufferance or trespassers other than the Company; and (ii) to the knowledge
of Seller, there is no pending special assessment affecting the Owned Real
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Properties or any part thereof included in the Assets. Except as provided
on Schedule 2.9(b), Seller has received no actual notice, and Seller
otherwise has no actual knowledge, that the location, construction,
occupancy, operation or use of the buildings located on the Owned Real
Properties or the Leased Real Properties included in the Assets violates
any restrictive covenant or deed restriction or any other governmental
laws, orders, rules or regulations, except for such violations or
restrictions which would not have a Material Adverse Effect.
(c) All Inventory, whether reflected on the Financial Statements
or subsequently acquired, (i) has been or will be manufactured by Seller or
the Company in the ordinary course of business consistent with past
practice or acquired by Seller or the Company only in bona fide
transactions entered into in the ordinary course of business, (ii) is of
good and merchantable quality except to the extent adequately reserved for
in the Financial Statements consistent with past practice, (iii) is not now
and at the Closing Date will not be subject to any write-down or write-off
in excess of the reserves established based on past practice, and (iv) is
valued at the lesser of cost or net realizable market value, with
appropriate adjustments for stale and slow-moving Inventory in accordance
with GAAP.
(d) All Accounts Receivable shown on the Financial Statements
represent, and the Accounts Receivable of Seller or the Company outstanding
on the Closing Date will represent, sales actually made or services
actually performed in the ordinary course of business in bona fide
transactions completed materially in accordance with the terms and
provisions contained in any documents relating thereto. The reserves for
uncollectible Accounts Receivable reflected on the Financial Statements
were established in accordance with GAAP and in accordance with Seller's
historical methods and practices in establishing such reserves.
2.10 Contracts.
(a) Schedule 2.10(a) sets forth a true, correct and complete
list of all Contracts of the following categories (Contracts disclosed on
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Schedule 2.10(a) are hereafter referred to as "Material Contracts"):
(i) Employment contracts and severance agreements,
including, without limitation, Contracts (A) to employ or terminate
executive officers or other personnel and other contracts with present or
former employees of the Business currently in effect or (B) that will
result in the payment by, or the creation of any commitment or obligation
(absolute or contingent) to pay on behalf of Seller or the Company any
severance, termination, "golden parachute," or other similar payments to
any present or former employees of the Business following termination of
employment or otherwise as a result of the consummation of the transactions
contemplated by this Agreement;
(ii) Material distribution, franchise, license, sales,
commission, consulting agency or advertising contracts which are not
cancelable on thirty (30) calendar days notice;
(iii) Material options to buy or sell any property, real
or personal, included in the Assets;
(iv) Contracts, NVOC Contracts and OCC Contracts each
individually involving aggregate expenditures of $100,000 or aggregate
receipts in excess of $1,000,000;
(v) Contracts containing covenants limiting the freedom of
the Company to compete with any Person during any period following the
Closing;
(vi) Partnership and joint venture agreements related to the
Business; and
(vii) Commitments for capital expenditures that have
been approved or made prior to the date of this Agreement in excess of
$250,000 by Seller in respect of the Business or the Company and that
remain outstanding as of the date hereof.
(b) Each of Seller, the Company, NVOC or OCC (as applicable) has
furnished or shall have made available to Buyer prior to the Closing a true
and correct and complete copy of each Material Contract. Each Material
<PAGE>
Contract assigned or to be assigned (i) by Seller to the Company pursuant
to the ACA, (ii) by NVOC to the Company pursuant to the NVOC Asset Purchase
Agreement, or (iii) by OCC to the Company pursuant to the OCC Asset
Purchase Agreement, is valid and in full force and effect according to its
terms. Except in regard to collective bargaining agreements (which is the
subject of Section 2.15), each of Seller, the Company, NVOC, or OCC (as
applicable) has duly performed all of its material obligations under such
Material Contracts to the extent those obligations to perform have accrued
and no material violation of, or material default or breach under, such
Material Contracts by Seller, the Company, NVOC or OCC (as applicable) has
occurred. To the Knowledge of Seller, the Company, NVOC or OCC (as
applicable), the other parties to any of the Material Contracts are not in
material default or breach under any such Material Contract nor has Seller,
the Company, NVOC or OCC received notice that with notice or lapse of time
or both such other parties would be in violation or breach of or default
under any such Material Contract.
(c) Except for those Material Contracts listed on
Schedule 2.10(c), no Material Contract assigned to the Company pursuant to
the Asset Contribution Agreement, assigned by NVOC to the Company pursuant
to the NVOC Asset Purchase Agreement or assigned by OCC to the Company
pursuant to the OCC Asset Purchase Agreement requires the consent of any
other party thereto to effectuate the assignment thereof to the Company or
its subsidiaries.
(d) Except as indicated on Schedule 2.10(d), neither Seller nor
the Company has received written notice of any actual or threatened
termination, cancellation, or limitation of, or any amendment,
modification, or change to (i) any Material Contract, (ii) the business
relationship of Seller or the Company with any customer, distributor or
related group of customers or distributors whose purchases individually or
in the aggregate are material to the operations and financial condition of
the Business, (iii) the requirements of any customer or related group of
customers of Seller or the Company whose purchases individually or in the
aggregate are material to the operations and financial condition of the
Business, or (iv) the business relationship of Seller or the Company with
any material supplier to the Business, which termination, cancellation,
<PAGE>
limitation, amendment, modification or change would have a Material Adverse
Effect.
2.11 Litigation.
Except as set forth on Schedule 2.11, there are no actions,
suits, proceedings or investigations pending or, to the Knowledge of
Seller, threatened in law or in equity, or before any governmental agency
(a) related to or affecting the Assets or the Business, (b) seeking to
delay, limit or enjoin the transactions contemplated by this Agreement or
(c) that would materially impair the abilities of Seller or its Affiliates
to perform their respective obligations under this Agreement or any of the
Ancillary Agreements. Except as set forth on Schedule 2.11, neither Seller
nor the Company is in default under any judgment, order, injunction or
decree of any court or government agency relating to the Business. There
are no unsatisfied judgments against the Assets or Seller, the Company,
NVOC or OCC.
2.12 Intangible Property Rights.
The Proprietary Rights, together with the Intellectual Property
Rights licensed to the Company pursuant to the Patent and Know How License
Agreement (the "Licensed Proprietary Rights"), constitute all of the
material Intellectual Property Rights as: (a) are in use, or have been
used, or are or were under development for use, in the Manufacturing
Facilities to manufacture Business Products on or before the Closing Date;
(b) are necessary to the use of the Business Manufacturing Technology; or
(c) are necessary to the continued manufacture of the Business Products
using the Business Manufacturing Technology. Except as set forth on
Schedule 2.12, (a) the Company will on the Closing Date own and possess all
right, title and interest in and to all of the Proprietary Rights and will
have valid and subsisting licenses to continue to use the Licensed
Proprietary Rights in a manner consistent with past business practices of
the Business; (b) no claim by any third party contesting the validity,
enforceability, use or ownership of any of the Proprietary Rights or the
Licensed Proprietary Rights is pending or, to Seller's Knowledge, is
threatened and (c) neither Seller nor the Company has received any notice
<PAGE>
of, and neither Seller nor the Company has any Knowledge of, any
infringement or misappropriation by any third party with respect to the
Proprietary Rights or the Licensed Proprietary Rights by the manufacture,
use or sale of Business Products, or any claim that any Proprietary Rights
or Licensed Proprietary Rights is invalid or unenforceable by Seller or the
Company; and (d) to Seller's Knowledge, the Company's use of the
Proprietary Rights is not infringing upon or otherwise violating the rights
of any third party. All Proprietary Rights are assignable by Seller to the
Company, and all Licensed Proprietary Rights may be licensed by Seller or
one or more of its Affiliates to the Company in the manner contemplated by
the Master Patent and Know How Assignment Agreement and the Patent and
Know How License Agreement.
2.13. Insurance.
Seller has in force the policies of insurance set forth on
Schedule 2.13. Seller has not been refused any insurance with respect to
the Business, by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the past five (5)
years. There are no outstanding requirements or recommendations by any
current insurer or underwriter with respect to the Business or the Assets
which require changes in the conduct of the Business, or require any
repairs or other work to be done with respect to any of the Assets or
operations of the Business.
2.14 Tax Matters.
(a) Liens. There are no liens (other than Permitted Liens) for
Taxes on any of the Assets.
(b) Safe Harbor Lease Property; Tax Exempt Use Property;
Security for Tax-Exempt Obligations. None of the Assets (i) are required
to be treated as being owned by any other person pursuant to the so-called
safe harbor lease provisions of former Section 168(f)(8) of the Code; (ii)
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code or (iii) is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
<PAGE>
(c) United States Person. Seller is a United States person
within the meaning of 7701(a)(30) of the Code.
2.15 Employment and Benefits.
(a) Labor Controversies. Except as described on
Schedule 2.15(a) or as a result of the transactions contemplated by the
ACA, (i) Seller and the Company are in compliance in all material respects
with all applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours; (ii) Seller and the
Company have no material Liability for non-compliance with any collective
bargaining agreement related to the Business; (iii) there is no unfair
labor practice complaint against Seller or the Company pending before the
National Labor Relations Board; (iv) there is no labor strike, dispute,
slowdown or stoppage actually pending or threatened against or affecting
Seller or the Company; (v) within the past five years, neither Seller nor
the Company has experienced any strike, work stoppage or other labor
difficulty; and (vi) neither Seller nor the Company is a party to, or
subject to, a collective bargaining agreement, and no collective bargaining
agreement relating to employees included within the Business is currently
being negotiated.
(b) Employee Benefit Plans.
(i) For purposes of this Agreement, "Benefit Plans" shall
mean all employee benefit plans and programs (including any "employee
benefit plan" within the meaning of Section 3(3) of ERISA) maintained or
contributed to by Seller for the benefit of any Business Employee (or any
dependent thereof). Schedule 2.15(b)(i) sets forth a list of each material
Benefit Plan. No Benefit Plan is a multiemployer plan as defined in
Section 4001(a)(3) or 3(37) of ERISA.
(ii) With respect to each material Benefit Plan, Seller has
made available to Buyer (A) copies of any written plan document relating
thereto and any description thereof, (B) the most recent determination or
<PAGE>
opinion issued by the Internal Revenue Service, if applicable, (C) the most
recent Form 5500 filing, if applicable, and (D) lists of certain data
relating to Business Employees.
(iii) Except as described on Schedule 2.15(b)(iii), each
material Benefit Plan has been established and administered in accordance
with its terms and in material compliance with the applicable provisions of
ERISA, the Code and other applicable laws. Each Benefit Plan intended to
qualify under Section 401(a) of the Code is the subject of a favorable
determination from the Internal Revenue Service as to its qualified status,
and to the knowledge of Seller, no event has occurred since the date of
such letter which would adversely affect such qualified status.
(c) Employment Contracts. Except as described on
Schedule 2.15(c), there are no employment bonus, severance or similar
contracts between the Company, and any employee included within the
Business on the other hand, other than contracts representing the standard
terms and conditions prevailing between the Company and the Business
Employees.
<PAGE>
2.16 Compliance with Laws.
To the best of Seller's knowledge, except as disclosed on
Schedule 2.16 and except for violations or defaults the existence of which
would not have a Material Adverse Effect, none of Seller, the Company, NVOC
or OCC is in any material respect in violation of or default under any Law
with respect to the operation of the Business or the Assets or has received
any notification thereof.
2.17 Finders; Brokers.
With the exception of fees and expenses payable to SBC Warburg
Dillon Read Inc., which shall be Seller's sole responsibility, neither
Seller nor the Company is a party to any agreement with any finder or
broker, or in any other way obligated to any finder or broker, for any
commissions, fees or expenses in connection with the origin, negotiation,
execution or performance of this Agreement.
2.18 Environmental Matters.
Except as disclosed on Schedule 2.18 and except as a result of
the transactions contemplated by the ACA:
(a) Seller is in compliance and on the Closing Date the Company
will be in compliance with all Environmental Laws applicable to the
Business as presently conducted, except for violations of such
Environmental Laws that would not have a Material Adverse Effect.
(b) Seller holds and is in compliance with, and on the Closing
Date the Company will hold and be in compliance with, all Licenses and
Permits required under Environmental Laws applicable to the Assets or the
conduct of the Business as presently conducted, except for the absence of,
or the noncompliance with, such Licenses and Permits that would not have a
Material Adverse Effect.
(c) Neither Seller nor the Company has received any written or,
to Seller's knowledge, other notice of any pending lawsuit, action,
proceeding, investigation or claim by any person or private or governmental
entity alleging a violation of or liability under any Environmental Law
<PAGE>
arising from the conduct of the Business or with respect to any Real
Property, except in all such cases that would not have a Material Adverse
Effect.
(d) There has been no Release of any Hazardous Substance at any
Real Property or any real property previously owned, leased or operated by
Seller or the Company in respect of the Business that is in violation of or
is reasonably likely to lead to any liability arising under any
Environmental Law, except for any such violations or liability that would
not have a Material Adverse Effect.
(e) There is no material environmental assessment,
investigation, study, test, review, or audit report prepared by or for
Seller or the Company in relation to the Business or the Assets that has
not been delivered to or made available to Buyer prior to the date hereof.
(f) Neither Seller nor the Company has transported or arranged
for the treatment, storage, or disposal of any Hazardous Substances to any
off-site location in connection with the Business that has resulted in or
could result in a liability to Seller or the Company under applicable
Environmental Laws, except for any such liability that would not have a
Material Adverse Effect.
2.19 Entire Business.
Except as set forth on Schedule 2.19, the Assets, together with
the rights and services made available in the agreements described in
Sections 4.5, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17,
4.18, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24, 4.25, 4.26, 4.27, 4.28 and 4.29,
constitute all the assets, properties and rights necessary to conduct the
Business in all material respects as currently conducted.
2.20 Disclaimer of Warranty.
SELLER MAKES NO WARRANTY WITH RESPECT TO THE VALUE, CONDITION OR
USE OF THE ASSETS OWNED OR USED BY THE COMPANY, WHETHER EXPRESSED OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
<PAGE>
2.21 Inventory.
Neither Seller, in respect of the Business, nor the Company is
under any liability or obligation with respect to the return of inventory
in the possession of distributors or other customers which shall not be
reserved against in the Closing Statement.
2.22 Accounts Receivable.
The Accounts Receivable outstanding on the Closing Date will be
subject to no defenses, counterclaims or rights of setoff other than those
arising in the ordinary course of business and for which adequate reserves
will have been established in the Closing Statement.
<PAGE>
2.23 No Other Representations or Warranties.
Except for the representations and warranties contained in this
Section 2, none of Seller, the Company or any other person makes any other
express or implied representation or warranty on behalf of Seller or the
Company, including, without limitation, as to the probable success or
profitability of the ownership, use or operation of the Business or the
Assets by the Company after the Closing.
Buyer represents and warrants that:
3 REPRESENTATIONS OF BUYER
Buyer represents and warrants that:
3.1 Corporate Existence.
Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and
has the requisite power and authority to acquire the Buyer Interest. Buyer
is duly authorized, qualified or licensed to do business as a foreign
corporation and in good standing in every jurisdiction wherein, by reason
of the nature of the Business or the character of the Assets, the failure
to be so qualified would have a material adverse effect on the Company or
the ability of Buyer to consummate the transactions contemplated hereby (a
"Buyer Material Adverse Effect").
3.2 Corporate Authority.
The execution and delivery of this Agreement, the Ancillary
Agreements and the consummation of all of the transactions provided for
herein and therein have been duly authorized by the Board of Directors of
Buyer, and no other corporate or stockholder approval is required to be
obtained by Buyer prior to the Closing. Buyer has the corporate power and
authority to execute and deliver this Agreement and the Ancillary
Agreements to which it is a party and to perform its obligations hereunder
and thereunder. This Agreement has been duly executed and delivered by
Buyer, and constitutes a valid and legally binding obligation of Buyer,
enforceable in accordance with its terms, except as enforceability may be
(i) limited by bankruptcy, insolvency, fraudulent conveyance or other
similar laws affecting the enforcement of creditor's rights, or
<PAGE>
(ii) subject to general principles of equity.
3.3 No Conflicts.
The execution and delivery of this Agreement by Buyer and the
Ancillary Agreements to which it is a party and the consummation by Buyer
of the transactions contemplated hereby and thereby will not violate or
conflict with any provision of the Certificate of Incorporation or By-Laws
of Buyer, or result in any breach or constitute any material default under
any contract, indenture, mortgage, lease, note or other agreement or
instrument to which Buyer is a party or otherwise subject, except for any
such violation, breach or default which would not have a Buyer Material
Adverse Effect.
3.4 Governmental Approvals: Consents.
Neither Buyer nor any of its Affiliates is subject to any order,
judgment or decree which would prevent the consummation of the transactions
contemplated hereby. No claim, legal action, suit, arbitration,
governmental investigation, action or other legal or administrative
proceeding is pending or, to the knowledge of Buyer, threatened against
Buyer or any of its Affiliates which would enjoin or delay the transactions
contemplated hereby. Except as set forth on Schedule 3.4 hereto, no
consent, approval, order or authorization of, license or permit from,
notice to or registration, declaration or filing with, any governmental
authority or entity, domestic or foreign, or of any third party, is or has
been required on the part of Buyer in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby and, except for such consents, approvals, orders or
authorizations of, licenses or permits, notices, registrations,
declarations or filings which have already been obtained or made or the
failure of which to obtain or make would not have a Buyer Material Adverse
Effect.
3.5 Finders; Brokers.
With the exception of fees and expenses payable to First Union
Capital Markets, Buyer is not a party to any agreement with any finder or
<PAGE>
broker, or in any other way obligated to any finder or broker, for any
commissions, fees or expenses in connection with the origin, negotiation,
execution or performance of this Agreement.
3.6 Financial Capacity.
Buyer has in hand cash and binding commitment letters (the
"Commitment Letters"), which are currently in effect and true and correct
copies of which are attached hereto as Schedule 3.6, with a reputable
financial institution or institutions, to provide all funds necessary to
enable Buyer and the Company to consummate the transactions described in
this Agreement (including the Company Financing, the "Financings").
3.7 Knowledge of Buyer.
In the course of performing its due diligence investigation,
neither Buyer nor its Affiliates, their respective officers, directors,
agents, employees or advisors have identified any facts which would render
any of Seller's representations incorrect, false or misleading.
<PAGE>
3.8 No Other Representations or Warranties.
Except for the representations and warranties contained in this
Section 3, neither Buyer nor any other person makes any other express or
implied representation or warranty on behalf of Buyer.
4 AGREEMENTS OF BUYER AND SELLER
4.1 Operation of the Business.
Except as otherwise contemplated by this Agreement, the ACA or as
disclosed on Schedule 4.1, Seller covenants that until the Closing it will
and it will cause the Company to use all reasonable efforts to operate the
Business in a manner consistent with the past practices of the Business, to
maintain and preserve intact the Business and to maintain the ordinary and
customary relationships of the Business with its suppliers, customers and
others having business relationships with it with a view toward preserving
to and after the Closing Date the Business, the Assets and the goodwill
associated therewith. Until the Closing Date, Seller shall cause the
Company to continue to operate and conduct the Business in the ordinary
course and maintain its books and records in accordance with Seller's past
practices with respect to the Business and will cause the Company not to,
without the prior written approval of Buyer or as otherwise contemplated by
this Agreement, Schedule 4.1 or the existing business plans related to the
Business, take any of the following actions:
(a) sell, transfer or otherwise dispose of or encumber any of
the properties or assets pertaining to the Business, other than (A) in the
ordinary course of business consistent with past practice, (B) any property
or asset which is not material to the results of operations, financial
condition or business of the Business and (C) the subdivision of Seller's
Aiken, South Carolina property as contemplated by the ACA;
(b) cancel any debt or waive any claim or right pertaining to
the Business, except in the ordinary course of business consistent with
past practice;
(c) grant any increase in the compensation of officers or
<PAGE>
employees principally engaged in the Business (including any such increase
pursuant to any bonus, pension, profit sharing or other plan or commitment)
or enter into any employment agreement with any employee of the Business,
except for increases (i) in the ordinary course of business and consistent
with past practice, (ii) as a result of the collective bargaining described
on Schedule 4.1(c) or (iii) as required by any Benefit Plan;
(d) make any capital expenditure or commitment pertaining to the
Business or prepay any obligation related to the Business or the Assets,
other than (A) in the ordinary course of business consistent with past
practice, (B) pursuant to existing commitments disclosed to Buyer prior to
the execution of this Agreement or (C) those which are not material to the
results of operations, financial condition or business of the Business;
(e) except with respect to endorsement of negotiable instruments
in the ordinary course of the Business, incur, assume or guarantee any
indebtedness for borrowed money;
(f) dispose of or permit to lapse, other than through expiration
by operation of law (or in the case of the Licensed Proprietary Rights
pursuant to the terms of the relevant license) any rights to the
Proprietary Rights or the Licensed Proprietary Rights or any of the
intellectual property to be licensed to the Company under the Seller
License Agreement;
(g) enter into, materially modify, materially amend or terminate
any Material Contract, License or Permit intended to be assumed by the
Company pursuant to the ACA other than in the ordinary course of business
consistent with past practice (including the entering into any license in
respect of Proprietary Rights other than those described on Schedule
4.1(g));
(h) commence any litigation other than consistent with past
practice or settle any litigation involving liability for material money
damages or restrictions which will have a Material Adverse Effect on the
operation of the Business or the use of the Assets or on the ability of
Seller to perform its material obligations under this Agreement; or
(i) agree, whether in writing or otherwise, to do any of the
foregoing.
<PAGE>
4.2 Investigation of the Business; Confidentiality.
(a) Buyer may, prior to the Closing Date, make or cause to be
made such investigation of the business and properties of the Business and
of its financial and legal condition as Buyer deems necessary or advisable.
Seller will cause the Company to permit Buyer, Buyer's lenders and their
respective counsel, accountants, technical consultants and, to the extent
reasonably acceptable to Seller and the Company, other agents or
representatives of each of them, to have full access to the properties,
books and records of the Business at reasonable hours to review information
and documentation relative to the properties, books, contracts, commitments
and other records of the Business; provided, however, that Buyer shall not
have access to customer lists (or other customer-specific information) or
trade secrets prior to the Closing.
(b) Seller covenants that, from and after the date of this
Agreement (including after the Closing), it will not and it shall cause the
Company to not, without the prior written consent of the Buyer, disclose to
any person confidential information relating to or concerning the Company,
the Assets, the Business, or the Buyer obtained by, or in the possession
of, the Seller or the Company prior to the Closing Date (the "Buyer
Confidential Information"), except to its officers, directors, employees
and representatives who need to know such information for purposes of
taxes, accounting, litigation and other matters necessary in respect of the
Seller's ownership, prior to the Closing, of its Interest in the Company,
the Assets or the Business, unless, (i) upon the advice of the Seller's
counsel, disclosure is required to be made under the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, any
other applicable Law or the Regulations of the New York Stock Exchange or
any other relevant securities exchange or trading market or (ii) disclosure
is necessary in the conduct of the Business. In the event that Seller or
the Company is requested or required by subpoena, civil investigative
demand, interrogatories, requests for information, or other similar process
to disclose any Buyer Confidential Information which otherwise may not be
disclosed except as set forth in the preceding sentence, Seller will
provide Buyer with prompt notice of such request or demand or other similar
<PAGE>
process so that Buyer may seek an appropriate protective order or, if such
request, demand or other similar process is not mandatory, waive Seller's
and the Company's compliance with the provisions of this Section 4.2(b), as
appropriate. Notwithstanding the foregoing, neither Seller nor the Company
shall be obligated to comply with the terms of the immediately preceding
sentence if such compliance could result in the imposition of any
liability, civil or criminal on Seller or the Company. The term "Buyer
Confidential Information" does not include information which (i) becomes
generally available to the public other than as a result of disclosure by
Seller or the Company, (ii) was available on a non-confidential basis prior
to its disclosure by Seller or the Company, or (iii) becomes available to
Seller or the Company on a non-confidential basis from a source other than
the Business, provided that such source is not bound by a confidentiality
agreement with Buyer or its representatives.
(c) Buyer covenants that, from and after the date of this
Agreement (including after the Closing), it will not, without the prior
written consent of Seller, disclose to any person confidential information
relating to or concerning Seller (the "Seller Confidential Information"),
except to its officers, directors, employees and representatives who need
to know such information for purposes of taxes, accounting, litigation and
other matters necessary in respect of Buyer's ownership, subsequent to the
Closing, of the Buyer Interest, unless, (i) upon the advice of Buyer's
counsel, disclosure is required to be made under the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, any
other applicable Law or the regulations of any relevant securities exchange
or trading market or (ii) disclosure is reasonably necessary in the conduct
of the Business and such disclosure would not have an adverse effect on
Seller. In the event the Buyer is requested or required by subpoena, civil
investigative demand, interrogatories, requests for information, or other
similar process to disclose any Seller Confidential Information which
otherwise may not be disclosed except as set forth in the preceding
sentence, Buyer will provide Seller with prompt notice of such request,
demand or other similar process so that Seller may seek an appropriate
protective order or, if such request, demand or other similar process is
<PAGE>
not mandatory, waive Buyer's compliance with the provisions of this Section
4.2(c), as appropriate. Notwithstanding the foregoing, Buyer shall not be
obligated to comply with the terms of the immediately preceding sentence if
such compliance could result in the imposition of any liability, civil or
criminal, on Buyer. The term "Seller Confidential Information" does not
include information which (i) becomes generally available to the public
other than as a result of disclosure by Buyer, (ii) was available on a
non-confidential basis prior to its disclosure by Buyer, or (iii) becomes
available to Buyer on a non-confidential basis from a source other than
Seller, provided that such source is not bound by a confidentiality
agreement with Seller or its representatives.
(d) For purposes of Sections 4.2(b) and 4.2(c), "Seller" shall
include Seller, its subsidiaries and Affiliates, and any of their
respective directors, officers, employees and representatives, and "Buyer"
shall include Buyer, its subsidiaries and Affiliates, and any of their
respective directors, officers, employees and representatives.
(e) No failure or delay by either party hereto in exercising any
right, power or privilege under Section 4.2(b) or 4.2(c) shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege hereunder.
4.3 Mutual Cooperation; No Inconsistent Action.
(a) Subject to the terms and conditions hereof, Seller and Buyer
agree to use their reasonable best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement, including all of the following: (i) obtain prior to the
Closing all licenses, certificates, permits, approvals, authorizations,
qualifications and orders of governmental authorities as are necessary for
the consummation of the transactions contemplated hereby and (ii) effect
all necessary registrations and filings. Seller and Buyer shall cooperate
fully with each other to the extent reasonable in connection with the
foregoing.
<PAGE>
(b) Buyer and Seller shall timely and promptly make all filings
which may be required by each of them in connection with the consummation
of the transactions contemplated hereby including but not limited to those
set forth on Schedule 4.3(b). Each party shall furnish to each other such
necessary information and assistance as the other party may reasonably
request in connection with the preparation of any necessary filings or
submissions by it to any U.S. or foreign governmental agency.
(c) Each of Seller and Buyer shall notify and keep the other
advised as to (i) any litigation or administrative proceeding pending and
known to such party, or to its knowledge threatened, which challenges the
transactions contemplated hereby and (ii) any event or circumstance which
would constitute a breach of their respective representations and
warranties in this Agreement; provided, however, that the failure of Seller
or Buyer to comply with clause (ii) shall not subject Seller or Buyer to
any liability hereunder except as and to the extent Seller or Buyer would
be responsible for a breach of such representations and warranties pursuant
to Section 8 (including, without limitation, the limitations on recovery
and the time periods for bringing claims thereunder). Subject to the
provisions of Section 8 hereof, Seller and Buyer shall not take any action
inconsistent with their obligations under this Agreement or which would
materially hinder or delay the consummation of the transactions
contemplated by this Agreement.
(d) Seller and Buyer shall use their reasonable efforts to
obtain at the earliest practicable date and prior to the Closing all
Contractual Consents contemplated herein, and will provide to each other
copies of each such Contractual Consent promptly after it is obtained. To
the extent any such approval, waiver or consent is not received prior to
the Closing, Seller and Buyer shall continue for a reasonable time after
Closing to use their reasonable efforts to obtain at the earliest
practicable date all such approvals, waivers or consents.
4.4 Public Disclosures.
Prior to the Closing Date, no party to this Agreement will issue
<PAGE>
any press release or make any other public disclosures concerning this
transaction or the contents of this Agreement without the prior written
consent of the other party. Notwithstanding the above, nothing in this
Section will preclude any party from making any disclosures required by law
or regulation or necessary and proper in conjunction with the filing of any
Tax Return or other document required to be filed with any federal, state
or local governmental body, authority or agency; provided, however, that
the party required to make the release or statement shall allow the other
party reasonable time to comment on such release or statement in advance of
such issuance.
4.5 Patent and Know How License Agreement.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, a
license agreement, substantially in the form attached as Exhibit A hereto
(the "Patent and Know How License Agreement"), pursuant to which Seller
shall grant to the Company, and Company shall grant to the Seller, a
license to use certain patents and know-how as set forth therein.
4.6 Non-Solicitation.
Until the Closing shall actually have occurred, Buyer
acknowledges that it remains subject to the term of the Confidentiality
Agreement dated February 24, 1998 by and between Seller and Groupe Porcher
Industries.
4.7 Financing.
If Buyer requires the Financings to consummate the transactions
contemplated by this Agreement, Buyer will use its best efforts to obtain,
and to cause the Company to obtain, and Seller shall reasonably cooperate
in obtaining and causing the Company to obtain the Financings on and
subject to substantially the same terms and conditions as those previously
set forth in the Commitment Letters. Buyer shall use its best efforts to
satisfy at or before the Closing all requirements which are conditions to
its closing all transactions constituting the Financings and to its and the
Company's drawing down the cash proceeds thereunder. Buyer expressly
acknowledges that the consummation of any financing transaction shall not
be a condition to Buyer's obligations under this Agreement.
4.8 Services Agreement.
Following the date hereof Seller and Buyer shall negotiate in
good faith a transitional services agreement to be executed at the Closing
pursuant to which Seller and the Company shall agree to provide each other
agreed upon transactional services for periods and upon terms to be agreed
between the parties.
4.9 Glass Marbles Supply Agreement.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, an
agreement, substantially in the form attached hereto as Exhibit C (the
"Glass Marbles Supply Agreement"), pursuant to which Seller shall agree to
supply glass marbles to the Company on the terms and subject to the
conditions set forth therein.
4.10 Alloy Services Agreement.
<PAGE>
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, an
agreement, substantially in the form attached hereto as Exhibit D (the
"Alloy Services Agreement"), pursuant to which Seller shall agree to
provide alloy services to the Company on the terms and subject to the
conditions set forth therein.
4.11 Huntingdon Lease Agreement.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, an
agreement, substantially in the form attached hereto as Exhibit E (the
"Huntingdon Lease Agreement"), pursuant to which the Company shall agree to
lease a portion of the Huntingdon property to Seller on the terms and
subject to the conditions set forth therein.
4.12 Battice Facility Supply Agreement.
On the Closing Date, Seller shall cause NVOC and Buyer shall
cause the Company to and the Company shall execute and deliver an
agreement, substantially in the form attached hereto as Exhibit F (the
"Battice Facility Supply Agreement"), pursuant to which NVOC shall supply
heavy yarns to the Company through NVOC's facility in Battice, Belgium (the
"Battice Facility") on the terms and subject to the conditions set forth
therein.
<PAGE>
4.13 Guelph Facility Supply Agreement.
On the Closing Date, Seller shall cause OCC and Buyer shall cause
the Company to and the Company shall execute and deliver, an agreement,
substantially in the form attached hereto as Exhibit G (the "Guelph
Facility Supply Agreement"), pursuant to which OCC shall supply heavy yarns
to the Company through OCC's Facility in Guelph, Ontario, Canada (the
"Guelph Facility") on the terms and subject to the conditions set forth
therein.
4.14 Sanitary Sewer amd Stormwater Agreements.
On the Closing Date, Seller shall execute and deliver 9i0 a Sanitary
Sewer Agreement and (ii) a Stormwater Agreement substantially in the forms
attached hereto as Exhibit H-1 and H-2 (the Sanitary Sewer and Stormwater
Agreements").
4.15 Non-Compete Agreement.
On the Closing Date, Buyer Groupe Porcher Industries, the Company
and Seller shall execute and deliver a Non-Compete Agreement substantially in
the form attached hereto as Exhibit I (the "Non-Compete Agreement").
4.16 Manufacturing Services Agreement.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, an
agreement substantially in the form attached hereto as Exhibit J (the
"Manufacturing Services Agreement"), pursuant to which the Company shall
provide to Seller certain manufacturing services on the terms and subject
to the conditions set forth therein.
4.17 Intentionally Omitted.
4.18. Air Modeling Agreements.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver (i) a
<PAGE>
joint modeling agreement in respect of the Aiken facility and (ii) a joint
modeling agreement in respect of the Huntington facility, substantially in
the forms attached hereto as Exhibit, L-1 and L-2 (the "Air Modeling
Agreements").
4.19 Wastewater Treatment Agreement.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to, and the Company shall, execute and deliver, a
Wastewater Treatment Services Agreement, substantially in the form attached
hereto as Exhibit M (the "Wastewater Treatment Agreement"), pursuant to
which the Company shall provide to Seller Waste Water Treatment Services
with respect to the retained portion of Seller's Aiken, South Carolina
Facility on the terms and subject to the conditions set forth therein.
4.20 Operating Agreement.
On the Closing Date, Seller shall cause Jefferson Holdings, Inc.
and Buyer shall execute and deliver the Lincoln Yarns LLC Amended and
Restated Limited Liability Operating Agreement, substantially in the form
attached hereto as Exhibit N (the "Operating Agreement").
4.21 Trademark Assignment/Master Patent and Know How Assignment.
On the Closing Date, Seller shall and shall cause Owens-Corning
Fiberglas Technology, Inc. to execute and deliver a (i) trademark
assignment (the "Trademark Assignment") and (ii) Master Patent and Know How
Assignment (the "Master Patent and Know How Assignment") substantially in
the form attached hereto as Exhibits O-1 and O-2, respectively.
4.22 Use of Packaging.
Buyer acknowledges that Seller and the Company have agreed that,
following the Closing Date, the Company may use the existing inventory of
packaging materials displaying Seller's trademarks for a period of six (6)
months. After such six-month period, the Company shall destroy any such
unused packaging material; provided, however, that the Company shall not be
required to repackage any finished goods which on the Closing Date shall
<PAGE>
have already been packaged in packaging material displaying the Company's
trademarks. After such six (6) month period, Company may only continue to
use pallets and recyclable materials if any of Seller's trademarks thereon
are obliterated or obscured. The Company shall not manufacture new pallets
or recyclable materials bearing Seller's trademarks.
4.23 Sliver Supply Agreement.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, an
agreement substantially in the form attached hereto as Exhibit P (the
"Sliver Supply Agreement"), pursuant to which the Company shall supply
Seller certain products on the terms and subject to the conditions set
forth therein.
4.24 Borates Supply Agreement.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, an
agreement substantially in the form attached hereto as Exhibit Q (the
"Borates Supply Agreement"), pursuant to which Seller shall supply the
Company certain products on the terms and subject to the conditions set
forth therein.
4.25 Carly Sublease.
On the Closing Date, Seller and the Company shall execute and
deliver an agreement substantially in the form attached hereto as Exhibit R
(the "Carly Sublease"), pursuant to which Seller shall sublease to the
Company certain equipment on the terms and subject to the conditions set
forth therein.
4.26 Pitney Bowes 1997 Sublease.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, an
agreement substantially in the form attached hereto as Exhibit S (the
"Pitney Bowes 1997 Sublease"), pursuant to which Seller shall sublease to
the Company certain equipment on the terms and subject to the conditions
set forth therein.
4.27 Pitney Bowes 1996 Sublease.
<PAGE>
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, an
agreement substantially in the form attached hereto as Exhibit T (the
"Pitney Bowes 1996 Sublease"), pursuant to which Seller shall sublease to
the Company certain equipment on the terms and subject to the conditions
set forth therein.
4.28 Landfill Agreement.
On the Closing Date, Seller shall execute and deliver, and Buyer
shall cause the Company to and the Company shall execute and deliver, an
agreement substantially in the form attached hereto as Exhibit U (the
"Landfill Agreement").
4.29 NVOC and OCC Assets.
(a) Seller shall cause its subsidiary, NVOC, to execute and
deliver and Buyer shall cause the Company, or an Affiliate of the Company,
to and the Company shall execute and deliver an Asset Purchase Agreement in
the form of Exhibit V (the "NVOC Asset Purchase Agreement") concerning the
sale of the assets described therein (the "NVOC Assets") and the assumption
of the liabilities described therein by the Company or its wholly-owned
subsidiary.
(b) Seller shall cause its subsidiary, OCC, to execute and
deliver and Buyer shall cause the Company, or an Affiliate of the Company,
to and the Company shall execute and deliver an Asset Purchase Agreement in
the form of Exhibit W (the "OCC Asset Purchase Agreement") concerning the
sale of the assets described therein (the "OCC Assets") and the assumption
of the liabilities described therein by the Company or its wholly-owned
subsidiary.
4.30 "GLAS Marks"
Buyer acknowledges that, as between the parties, Seller is the owner
of all right, title and interest in and to the GLAS family of GLAS marks
(the "GLAS Marks") in any form or embodiment thereof and is also the owner
of the goodwill attached or which shall become attached to the GLAS Marks.
Neither Buyer nor the Company shall, at any time, knowingly do or permit to
be done any act or thing which may in any way adversely affect any rights
<PAGE>
of Seller in and to the GLAS Marks or any registrations thereof or which,
directly or indirectly, may reduce the value of the GLAS Marks or detract
from their reputation, other than at the express request of Seller.
Neither Buyer nor the Company shall join any name or names with the GLAS
Marks so as to form a new mark. Neither Buyer nor the Company shall use
any name or names in connection with the GLAS Marks in any advertising,
publicity, labeling, packaging or printed matter of any kind, unless and
until Seller consents to these particular uses in writing. At Seller's
request, Buyer and the Company shall execute any documents reasonably
required by Seller to confirm Seller's ownership of all rights in and to
the GLAS Marks and the respective rights of LALLC and the Surviving
Company pursuant to this Agreement.
4.31 No Solicitation.
(a) Seller will not, and will ensure that the Company and their
respective directors, officers, employees or other Affiliates or
representatives do not, directly or indirectly encourage, solicit,
participate in or initiate discussions or negotiation with, or provide any
information to, any person or entity (other than Buyer or its directors,
officers, employees or other Affiliates or representatives) with respect to
any sale, disposition, lease or other transfer of any of the Assets (except
as contemplated by the ACA or sales of inventory and other routine sales
of assets in the ordinary course of business consistent with past practice)
or the Business (an "Acquisition Transaction"). Seller shall notify Buyer
upon receipt of any bona-fide proposal concerning an Acquisition
Transaction and the terms thereof.
(b) In the period between the date of this Agreement and the
Closing and for 12 months after the Closing Date, neither Seller nor any of
its Affiliates shall, directly or indirectly, on its own behalf or in the
service or on behalf of others, initiate any solicitation of or offer
employment to any Business Employee until the employee rejects Company's
offer of employment or, as to any Transferred Employee, while such employee
is employed by Company or any of its Affiliates. For this purpose, the
general posting of placement of job openings and descriptions by Seller on
newspapers, magazines, intranet or internet websites, bulletin boards or
<PAGE>
any other form of communication or advertisement not specifically targeted
at the Business or Transferred Employees or through any other method of
general solicitation will not be deemed to be an act of initiating
solicitation of a Business or Transferred Employee. The Business Employees
shall not be treated as employees of Seller or its Affiliates for the
purposes of any "hiring freeze" or "job transfer" program of Seller or any
of its Affiliates.
4.32 Casualty to Assets; Eminent Domain.
(a) If on or prior to the Closing Date any of the tangible
Assets shall have suffered loss or damage on account of fire, flood,
accident, act of war, civil commotion, or any other cause or event beyond
the reasonable power and control of Seller or the Company (whether or not
similar to the foregoing) which has a Material Adverse Effect, Seller shall
promptly notify the Buyer and Buyer shall have the right to elect within
fourteen (14) days from and after such notice, by notice to Seller either
(a) to terminate this Agreement and all of Buyer's obligations hereunder
(other than those set forth in Section 4.2(c) hereof) without incurring any
liability to Seller as a result of such termination or (b) to consummate
the transactions provided for herein provided that the full amount of all
insurance proceeds, if any, paid or payable to Seller for the benefit of
the Company in respect of such loss plus an amount equal to any deductible
applicable to such loss shall be paid to the Company. If under the
circumstances described in the foregoing sentence, Buyer shall elect to
consummate the transactions provided for herein, Seller shall, on demand,
pay, or assign its right to receive, to the Company at or after the Closing
the full amount of any insurance proceeds actually received by Seller for
the benefit of the Company in respect of any such loss together with the
amount of any deductible applicable to such loss. If Buyer does not elect
to terminate this Agreement within the aforesaid fourteen (14) day period,
Buyer shall be deemed to have elected to consummate the transactions
contemplated hereby.
(b) If, after the date hereof and prior to the Closing, Seller
or the Company receives notice of the commencement or threatened
commencement of eminent domain or other like proceedings against the Real
Properties or any portion thereof which has a Material Adverse Effect,
<PAGE>
Seller shall promptly notify Buyer, and Buyer shall have the right to elect
within fourteen (14) days from and after such notice, by notice to Seller,
to terminate this Agreement and all of Buyer's obligations hereunder (other
than those set forth in Section 4.2(c)). If Buyer does not make such
election within the aforesaid fourteen (14) day period, Buyer shall be
deemed to have elected to consummate the transactions contemplated hereby.
4.33 Intentionally Omitted.
4.34 Employees and Employee Benefits
(a) Hiring of Employees. Buyer shall cause the Company to offer
employment as of the Closing Date to each employee of Seller engaged in
the Business who is listed on Schedule 4.34(a) (collectively, the
"Business Employees"), which schedule shall be provided as
soon as practicable after the date hereof and shall be updated from time to time
prior to the Closing Date, and shall include current annual salary or wage
rates; provided, however, that if any such Business Employee is on leave of
absence as of the Closing, such offer of employment shall be effective upon the
employee's return to active employment, provided such return is within two
(2) years following the Closing Date. Each such offer shall be on at least
the same wage rates or cash salary levels, and on such other terms and
conditions including benefit plan coverages) that are, in the aggregate, no
less favorable than those in effect immediately prior to the Closing Date.
With respect to each such Business Employee who accepts the Company's offer
of employment (a "Transferred Employee"), Buyer shall cause the Company to
(i) maintain such equivalent or higher cash salary levels and substantially
similar terms and conditions from the Closing Date until at least December
31, 1999 (or shall maintain such other terms and conditions and for such
period as may be required pursuant to any collective bargaining agreement
assumed pursuant to clause (iii) below), and (ii) credit periods of service
prior to the Closing for purposes of determining seniority, eligibility,
vesting and benefit entitlement under all compensation and benefit plans,
programs and policies maintained by the Company after the Closing . If
Seller materially amends or terminates any Benefit Plan, the Company shall
have the right to amend or terminate its corresponding plan in the same or
<PAGE>
similar manner. Seller shall notify the Company of any such material
amendment or termination.
(b) Health and Life Coverages; Workers Compensation. Without
limiting the scope of Section 4.34(a), Buyer shall cause the Company to
cause each Transferred Employee (and his or her eligible dependents) to be
covered immediately following the Closing by a group health plan that
provides health benefits (within the meaning of Section 5000(b)(1) of the
Code) that (i) does not limit or exclude coverage on the basis of any
pre-existing condition of such Transferred Employee or dependent, and (ii)
that provides each Transferred Employee full credit, for the year during
which the Closing occurs, with any deductible already incurred by the
Transferred Employee under Seller's group health plan and with any other
out-of-pocket expenses that count against any maximum out-of-pocket expense
provision of Seller's or the Company's group health plan (or if the
Company's plan does not provide such credit, Buyer will cause the Company
to reimburse each Transferred Employee for such deductibles and
out-of-pocket expenses incurred under Seller's plan during the calendar
year in which the Closing occurs). In addition, from the Closing Date
until at least December 31, 1999 (or such other period as may be required
pursuant to any collective bargaining agreement assumed hereunder)
following the Closing Date, Buyer shall cause the Company to provide
Transferred Employees with post-retirement health and life coverage at
levels that are substantially similar to the levels provided to such
employees under Seller's group health and life plans immediately prior to
the Closing. The Company shall be solely responsible for, and Buyer shall
indemnify Seller against, any and all claims by a Transferred Employee or
his dependents for retiree health and life benefits, and Seller shall
remain responsible for such benefits as to any employee or former employee
of the Business other than a Transferred Employee. Following the Closing,
Buyer shall cause the Company to provide continuation health coverage to
all Transferred Employees or any qualified beneficiary thereof who incur a
qualifying event after the Closing in accordance with the continuation
<PAGE>
health care requirements of "COBRA" and Seller shall provide such COBRA
coverage to any employee or former employee of the Seller engaged in the
Business, or any qualified beneficiary thereof who incurs a qualifying
event on or prior to the Closing. Seller shall remain responsible for, and
shall indemnify the Company and Buyer against, any and all claims incurred
by Transferred Employees prior to the Closing Date that are covered (or
alleged to be covered) under Seller's group health plans. For purposes of
clarity, a claim shall be considered incurred when the treatment for a
given condition is provided, and not when the condition arose. Workers
Compensation benefits for any Transferred Employee shall be the
responsibility of Seller only if the claim therefor was properly filed by
the Transferred Employee prior to the Closing Date, and otherwise shall be
the responsibility of the Company.
(c) Severance. Without limiting the scope of Section 4.34(a),
with respect to each Transferred Employee whose employment is terminated by
the Company within one year of the Closing Date, Buyer shall cause the
Company to provide severance benefits which are no less favorable than
those to which such Transferred Employee would have been entitled under
Seller's severance policies set forth on Schedule 2.15(b)(i) had such
Transferred Employee been terminated by Seller immediately prior to the
Closing.
(d) Accrued Vacation. With respect to any accrued but unused
vacation time to which any Transferred Employee is eligible to take
pursuant to the vacation policy applicable to such Transferred Employee
immediately prior to Closing, Buyer shall cause the Company to allow such
Transferred Employee to use such accrued vacation. The Company shall have
no obligation to provide any cash payments for unused vacation.
(e) Disability Benefits. Without limiting the scope of Section
4.34(a), Buyer shall cause the Company to provide long-term disability
benefits to any Transferred Employee who becomes disabled after the Closing
Date. Any Business Employee who was on short-term disability leave
immediately prior to the Closing and who subsequently satisfies the
eligibility requirements for long-term disability benefits on or after the
<PAGE>
Closing Date (including any benefit elimination period) shall be covered
under Seller's long-term disability plan. Any Business Employee who was on
short-term disability leave immediately prior to the Closing and who
subsequently is able to return to work before qualifying for long-term
disability coverage shall be offered employment by the Company as required
pursuant to Section 4.34(a). If the offer of employment is accepted, Buyer
shall cause the Company to reimburse Seller its cost of providing
short-term disability payments to such employee from the Closing Date until
the date such employee commences employment with the Company. Seller shall
retain responsibility for the making of long-term disability payments for
employees who are receiving long-term disability payments as of the
Closing. If any former employee of the Business who is identified to Buyer
as receiving long-term disability payments as of the Closing is, subsequent
to the Closing, legally entitled to be re-employed by Seller, Buyer shall
cause the Company to offer employment to such employee as if such employee
were a Transferred Employee on the Closing Date.
(f) Flexible Spending Accounts. Without limiting the scope of
Section 4.34(a), effective as of the Closing and through at least December
31, 1998, Buyer shall cause the Company to establish flexible spending
accounts for medical and dependent care expenses, and shall credit such
accounts with the amount credited as of the Closing under comparable
accounts maintained with Seller from the beginning of the plan year to the
Closing. As soon as practicable after the Closing, (A) Seller shall pay to
the Company in cash the amount, if any, by which aggregate contributions
made by Transferred Employees to Seller's flexible spending accounts
exceeded the aggregate benefits provided to Transferred Employees as of the
Closing, or (B) Buyer shall cause the Company to pay to Seller in cash the
amount, if any, by which the aggregate benefits provided to Transferred
Employees under Seller's flexible spending accounts exceeded the aggregate
contributions made by Transferred Employees as of the Closing. The Company
<PAGE>
shall have no obligation to contribute to or allow contributions to any
flexible spending accounts that exceed Seller's prior obligation to
contribute or allow contributions.
(g) Defined Benefit Plans. Seller shall cause each Transferred
Employee to become fully vested in his accrued benefit under any
tax-qualified defined benefit pension plan maintained by Seller (a "Seller
Pension Plan") in which such Transferred Employee participates as of the
Closing. Seller will amend each Seller Pension Plan to provide for the
continuing eligibility for early retirement of each Transferred Employee
who does not, as of the Closing Date, qualify for an early retirement
benefit thereunder, and for this purpose shall treat service with the
Company as service with Seller. If any such Transferred Employee remains
employed by the Company until he qualifies for early retirement, then such
plans will treat such Transferred Employee as having elected early
retirement when he retires from the Company. Such early retirement benefit
shall be based solely upon service and compensation earned prior to the
Closing. The Company will provide Seller with as much notice as possible
of the retirement of any such Transferred Employee. Seller shall calculate
the difference between the lump sum benefit payable to such Transferred
Employee as an early retiree and the lump sum
benefit payable to such Transferred Employee as a deferred vested benefit
on the date of retirement from the Company and under the provisions of the
applicable Seller Pension Plan, determined in the same manner that such
plan calculates lump sum benefits at the time such Transferred Employee
shall retire. The Company shall pay Seller such difference within 60 days
of such transferred Employee's retirement. In addition, should the Company
institute any reduction in force, early retirement window program or
otherwise provide any financial inducement that results in the termination
of employment of any Transferred Employee who, as of the Closing, qualifies
for an early retirement benefit under a Seller Pension Plan, Buyer shall
cause the Company to promptly pay to Seller an amount equal to the
incremental cost of providing such early retirement benefit. Such cost
shall be determined by an enrolled actuary engaged by Seller based on the
excess of the present value of such subsidized early retirement benefits
for all such Transferred Employees over the present value of the accrued
<PAGE>
benefits for all such Transferred Employees determined as if such employees
had not elected to commence retirement benefits and using normal actuarial
assumptions with respect to projected retirement dates.
(h) 401(k) Plan. Without limiting the scope of Section 4.34(a),
as of the Closing, Buyer shall cause the Company to make available, and
maintain from the Closing Date until at least December 31, 1999 (or such
other period as may be required pursuant to any collective bargaining
agreement assumed hereunder), a tax-qualified defined contribution plan or
plans with a cash or deferred feature (a "Company 401(k) Plan") for the
benefit of each Transferred Employee who was eligible (or would have been
eligible but for any waiting period) to participate in a tax-qualified
defined contribution plan maintained by Seller with a cash or deferred
feature (a "Seller 401(k) Plan"). Immediately prior to the Closing, Seller
shall cause all account balances of all Transferred Employees under each
Seller 401(k) Plan to become fully vested as of the Closing, and as soon as
practicable after the Closing (or, if Transitional Coverage is provided
under a Seller 401(k) Plan, after cessation of such Transitional Coverage)
shall cause such account balance to be transferred to a Company 401(k)
Plan, and Buyer shall cause such Company 401(k) Plan to accept such
transfer. Prior to such transfer, Buyer shall cause the Company to provide
to Seller such evidence or assurance as reasonably requested by Seller as
to the tax-qualified status of each Company 401(k) Plan (including an IRS
determination letter, a submission therefor and/or an opinion of counsel).
The transfer shall be made in cash, provided that (i) the portion of the
transferred accounts represented by participant loans shall be transferred
in kind, and (ii) the portion of the transferred accounts invested in an
Owens Corning stock fund shall be transferred in kind. The Company may, in
its discretion, prohibit additional investment into such stock fund, but
shall notify affected participants of its intention to liquidate such stock
fund at least two years prior to such liquidation; provided, however, that
liquidation of the Owens Coring stock fund shall be allowed at any time if
a fiduciary of the plan reasonably determines that failure to liquidate the
stock fund would cause the fiduciary to breach his fiduciary obligations
under ERISA. The parties shall comply with all provisions of the Code and
<PAGE>
ERISA applicable to such transfer, including Sections 414(l) and 411(d)(6)
of the Code and the corresponding provisions of ERISA. After such
transfer, Buyer shall be solely responsible for, and shall indemnify Seller
against, all liabilities relating to the transferred accounts. Each
Transferred Employee participating in a Seller 401(k) Plan as of the
Closing shall be eligible for an allocation of any profit sharing
contribution made by Seller thereto with respect to Seller's 1998 fiscal
year based on such Transferred Employee's participation therein through the
Closing, provided that such Transferred Employee would otherwise have been
eligible for an allocation had he remained an employee of Seller through
the end of such year. The Company shall reimburse Seller for the profit
sharing contribution allocated to such Transferred Employees.
(i) Stock Options. With respect to vesting and exercisability
of outstanding options to purchase Seller common stock held by Transferred
Employees as of the Closing, Seller shall treat employment with the Company
as employment with Seller.
(j) Performance Awards. With respect to Seller's 1998 fiscal
year, the Company shall pay to Transferred Employees performance share
bonuses under Seller's Global Stock Plan and bonuses under Seller's Annual
Corporate Incentive Plan in the amounts that such employees would have been
paid by Seller had they remained employed by Seller through the end of such
fiscal year.
(k) Transitional Coverage. If requested by Company, Seller
shall allow Transferred Employees to continue to participate in, be covered
by, or accrue benefits under any Benefit Plan of Seller that provides
pension or welfare coverage (any such continued participation, coverage or
accrual hereinafter referred to as "Transitional Coverage "). Such
Transitional Coverage shall be made available only to the extent permitted
by applicable law, and in any event shall not in extend beyond December 31,
1999. Buyer shall cause the Company to reimburse Seller for the cost of
providing the Transitional Coverage. Buyer agrees that the provision (or
subsequent cessation) of such Transitional Coverage shall not relieve Buyer
of its obligations contained elsewhere in the Section 4.35 (i.e., Buyer
shall remain responsible for the retiree medical obligations of all
<PAGE>
Transferred Employees, even those who retire and are provided Transitional
Coverage through a Seller retiree medical plan).
(l) No Third-Party Beneficiary. Nothing herein, expressed or
implied, shall confer upon any employee or former employee of Seller or
Company or any of their Affiliates (including, without limitation, the
Transferred Employees), any rights or remedies including, without
limitation, any right to employment or continued employment for any
specified period) of any nature or kind whatsoever, under or by reason of
this Agreement.
4.35 Forward-Underwriting Commitment.
Buyer agrees that if the Financings are not consummated by
October 15, 1998, Buyer will consummate the Financing through the
execution of their bridge financing with First Union Capital Markets or by
other means.
4.36 Cash Assets.
Buyer agrees and acknowledges that immediately prior to the
closing all cash and cash equivalents, including, without limitation, bank
deposits, investments in so-called "money market" funds, commercial paper
funds, Certificates of Deposits, Treasury bills and accrued interest
thereon, of the Company will be withdrawn or otherwise transferred from the
Company to Seller and/or Jefferson Holdings, Inc.
4.37 Contribution of Assets of the Company.
On or prior to the Closing, Seller shall have consummated any and
all transactions contemplated in the ACA and shall have caused all of its
rights and title to the Business Assets to be transferred to the Company in
accordance with the terms of the ACA.
4.38 Post-Closing Distributions by the Company.
Immediately upon the Closing, the parties shall cause the Company
to and the Company shall make a cash distribution in the aggregate amount
of four hundred twenty-five million Dollars ($425,000,000) to its members,
pro rata in accordance with their then respective ownership interests in
the Company, and Buyer shall have caused the Company to obtain any and all
financing necessary to fund such cash distribution (the "Company
Financing") in accordance with the terms and conditions set forth in the
Commitments.
4.39 Toll Manufacturing.
The parties agree that prior to Closing they will discuss the
possibility that Seller may be willing to toll manufacture for the Company
products with TEX up to 400 (including low TEX type 30) that have
historically been manufactured by the Business but are not Business
Products.
5 CONDITIONS
5.1 Conditions Precedent to the Obligations of Buyer and Seller.
The respective obligations of Buyer and Seller to consummate the
transactions contemplated by this Agreement shall be subject to the
<PAGE>
satisfaction at or prior to the Closing Date of the following conditions:
(a) No Injunction, etc. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any court or
governmental agency or body of competent jurisdiction that is in effect
that restrains or prohibits the consummation of the purchase or the
transfer to Buyer by Seller of the Buyer Interest.
(b) Regulatory Authorizations. All (i) consents, approvals,
authorizations and orders of federal, state and foreign governmental and
regulatory authorities as are necessary in connection with the transfer of
the Buyer Interest to Buyer or which if not obtained would be reasonably
likely to subject Buyer or Seller, or any officer, director or agent of any
such person, to civil or criminal liability or could render such transfer
void or voidable (the "Required Consents") shall have been obtained, except
for Required Consents the failure of which to obtain are not material,
individually or in the aggregate, to the operations of the Business taken
as a whole and the failure of which to obtain would not subject Buyer or
Seller, or any officer, director or agent of any such person, to civil or
criminal liability.
5.2 Conditions Precedent to the Obligation of Seller.
The obligation of Seller to consummate the transactions provided
for in this Agreement is subject to fulfillment of each of the following
conditions:
(a) Accuracy of Buyer's Representations and Warranties;
Covenants of Buyer. The representations and warranties of Buyer contained
in this Agreement that are qualified as to materiality shall be true and
correct and the representations and warranties of Buyer set forth in this
Agreement that are not so qualified shall be true and correct in all
material respects, in each case on the date of this Agreement (except to
the extent cured prior to the Closing Date) and on the Closing Date as
though made on the Closing Date, except to the extent such representations
and warranties speak as of an earlier date; Buyer shall have complied in
all material respects with all covenants contained in this Agreement to be
performed by it prior to the Closing; and Seller shall have received a
certificate signed by an authorized officer of Buyer to such effect.
<PAGE>
(b) Ancillary Agreements. Buyer and the Company shall have
executed the Ancillary Agreements to which they are parties or shall have
caused the Company to and the Company shall have executed the Ancillary
Agreements to which it is a party.
(c) Company Financing. Buyer and the Company shall have
executed and delivered any and all agreement, documents and instruments
required to effect the Company Financing and no further conditions shall
exist to the funding of the Company Financing other than the consummation
of the Closing.
5.3 Conditions Precedent to the Obligation of Buyer.
The obligation of Buyer to consummate the transactions provided
for in this Agreement is subject to fulfillment of each of the following
conditions:
(a) Accuracy of Representations and Warranties of Seller;
Covenants of Seller. The representations and warranties of Seller
contained in this Agreement that are qualified as to materiality shall be
true and correct and the representations and warranties of Seller set forth
in this Agreement that are not so qualified shall be true and correct in
all material respects, in each case on the date of this Agreement (except
to the extent cured prior to the Closing Date) and on the Closing Date as
though made on the Closing Date, except to the extent such representations
and warranties speak as of an earlier date; Seller shall have complied in
all material respects with all covenants contained in this Agreement to be
performed by it prior to the Closing; and Buyer shall have received a
certificate signed by an authorized officer of Seller to such effect.
(b) Ancillary Agreements. Seller, NVOC and OCC shall have
executed the Ancillary Agreements to which they are parties.
(c) Contractual Consents. All contractual approvals, waivers
and consents set forth on Schedule 5.3(c) (" Contractual Consents") shall
have been obtained and shall remain in full force and effect.
6 CLOSING
6.1 Closing Date.
Unless this Agreement shall have been terminated and the
transactions herein shall have been abandoned pursuant to Section 8 hereof,
the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Morgan, Lewis & Bockius LLP,
at 10:00 a.m., New York City time, on September 30,1998 (or as soon as
practicable thereafter as all of the conditions to the Closing set forth in
Section 5 hereof are satisfied or waived), or such other date, time and
place as shall be agreed upon by Seller and Buyer (the actual date and time
being herein called the "Closing Date"). The Closing shall be deemed
effective as of 12:01 a.m. on the Closing Date.
6.2 Buyer Deliveries.
At the Closing, Buyer shall deliver to Seller or one or more of
its Affiliates (as directed by Seller) (i) the Purchase Price as provided
in Section 1.2 hereof, (ii) the documents described in Section 5.2 hereof
and (iii) such other documents and instruments as counsel for Buyer and
Seller mutually agree to be reasonably necessary to consummate the
transactions described herein.
6.3 Seller Deliveries.
At the Closing, Seller shall deliver or cause one or more of its
Affiliates to deliver to Buyer (i) the documents described in Section 5.3
hereof, (ii) the Buyer Interest and (iii) such other documents and
instruments as counsel for Buyer and Seller mutually agree to be reasonably
necessary to consummate the transactions described herein.
7 TAX MATTERS
7.1. Asset Allocation.
Buyer and Seller each agrees that Schedule 7.1 attached hereto
reflects (i) the fair market value of each category of Company assets
listed thereon, including all property of the Company that constitutes
"unrealized receivables" of the Company for purposes of Section 751 of the
Code, and (ii) the Seller's interest and gain in each such category of
Company assets. The parties further agree that the valuations listed on
Schedule 7.1 shall be used by Buyer, Seller and the Company for any and all
<PAGE>
income tax purposes, including, without limitation, adjustments to the tax
basis of the Company's assets pursuant to Section 743(b) of the Code.
8 INDEMNIFICATION
8.1 Survival of Representations and Warranties; Time for Assertion of Claims.
Subject to the limitations and other provisions of this
Agreement, and regardless of any investigation made by or on behalf of
Seller or Buyer, (i) the representations and warranties of the parties
hereto contained herein shall survive the Closing and shall remain in full
force and effect, for a period of one year after the Closing Date;
provided, however, that the representations and warranties set forth in
Section 2.18 (environmental) and Section 2.14 (tax) shall remain in full
force and effect for a period of five (5) years after the Closing Date and
(ii) the covenants and agreements of the parties hereto contained herein
shall survive the Closing and shall remain in full force and effect for a
period of one year after the date on which performance of such covenant or
agreement was due (in each case, the "Termination Date"). Any right of
indemnification pursuant to this Section 8 shall expire on the Termination
Date of the respective representation, warranty, covenant or agreement
claimed to be breached unless, on or prior to the Termination Date, a Claim
(as defined below) has been timely made to the party from whom
indemnification is sought, in which case such Claim may continue to be
asserted beyond the respective Termination Date.
8.2 Indemnification by Seller.
(a) Seller shall defend, indemnify and hold Buyer and its
Affiliates (including the Company after the Closing) harmless from and
against and in respect of any and all actual losses, liabilities, damages,
demands, claims, suits, proceedings, judgments, settlements, assessments,
costs and expenses, including reasonable attorneys' fees, incurred directly
by Buyer or its Affiliates (hereinafter "Buyer Losses") which arise out of
(i) any breach of any of the representations and warranties contained in
Section 2 hereof or the certificate delivered pursuant to Section 5.3(a),
or (ii) any breach by Seller of any of its covenants in this Agreement but
not of any Ancillary Agreement which shall be governed by the terms
<PAGE>
thereof. Buyer shall give Seller prompt written notice of any third party
claim which may give rise to any indemnity obligation under this Section,
together with the estimated amount of such claim, and Seller shall have the
right to assume the defense of any such claim through counsel of its own
choosing, by so notifying Buyer within thirty (30) days of receipt of
Buyer's written notice; provided, however , that Seller's counsel shall be
reasonably satisfactory to Buyer. Failure to give prompt notice shall not
affect the indemnification obligations hereunder in the absence of actual
prejudice. If Buyer desires to participate in any such defense assumed by
Seller, it may do so at its sole cost and expense. If Seller declines or
fails to assume any such defense, it shall be liable for all reasonable
costs and expenses of defending such claim incurred by Buyer, including
reasonable fees and disbursements of counsel. Neither party shall, without
the prior written consent of the other party, which shall not be
unreasonably withheld, settle, compromise or offer to settle or compromise
any such claim or demand on a basis which would result in the imposition of
a consent order, injunction or decree which would restrict the future
activity or conduct of the other party or any subsidiary or Affiliate
thereof or if such settlement or compromise involves a finding or admission
of any violation of law, or if such settlement or compromise does not
include an unconditional release of the other party for any liability
arising out of such claim or demand or any related claim or demand.
(b) The foregoing obligation to indemnify Buyer set forth in
Section 8.2(a) shall be subject to each of the following limitations:
(i) No reimbursement for Buyer Losses asserted against
Seller under Section 8.2(a)(i) shall be required unless and until the
cumulative aggregate amount of such Buyer Losses equals or exceeds seven
million five hundred thousand dollars ($7,500,000) (the "Threshold") and
then only to the extent that the cumulative aggregate amount of Buyer
Losses, as finally determined, exceeds the Threshold; provided that in
calculating the Threshold any Buyer Losses which individually total less
than fifty thousand dollars ($50,000.00) each ("De Minimis Buyer Losses")
shall be excluded in their entirety and Seller in any event shall have no
<PAGE>
liability hereunder to Buyer and its Affiliates for any such De Minimis
Buyer Losses.
(ii) Seller's liability to Buyer under Section 8.2(a)(i) for
Buyer Losses in excess of the Threshold shall not exceed one hundred fifty
million dollars ($150,000,000.00).
(iii) Seller's indemnification obligation for any breach
of the representation and warranties contained in Section 2.18 with respect
to matters relating to the investigation, remediation, cleanup, removal or
monitoring of Hazardous Substances at or migrating from the Real Property
("Remedial Action") shall be limited to compliance with standards
established under applicable Environmental Laws, (including, without
limitation the imposition of institutional or engineering controls, deed
restrictions, natural attenuation, capping and site-specific risk-based
standards) based on the existing use of the relevant Real Property as of
the Closing Date.
(iv) Notwithstanding anything to the contrary in this
Agreement or the ACA, Seller shall have satisfied its indemnification
obligation and shall be released from any further indemnification
obligation or liability for any Remedial Action in the event and to the
extent it receives a notice of final approval (including, without
limitation, a no further action letter, certificate of completion, or
release-and-covenant-not-to-sue) from a state or federal Governmental or
Regulatory Authority with jurisdiction over the relevant Real Property
pursuant to a clean-up program, voluntary or otherwise.
(c) The indemnities provided in this Section 8.2 shall survive
the Closing. Except as expressly provided in this Agreement, the indemnity
provided in this Section 8.2 shall be the sole and exclusive remedy of the
indemnified party against the indemnifying party at law or equity for any
matter covered by Sections 8.2(a) and 8.2(b); provided, that nothing in
this Section 8 shall prevent or otherwise limit Buyer from seeking
temporary or permanent injunctive relief for any breach by Seller of
Section 4.2(b).
(d) In no event shall Seller be liable to Buyer for special,
indirect, incidental, consequential or punitive damages but, to the extent
<PAGE>
Buyer is required to pay punitive damages to a third party, such payment
shall constitute an indemnifiable expense.
8.3 Indemnification by Buyer.
(a) Buyer shall defend, indemnify and hold Seller and the
Company harmless from and against and in respect of any and all actual
losses, liabilities, damages, demands, claims, suits, proceedings,
judgments, settlements, assessments, costs and expenses, including
reasonable attorney's fees, incurred directly by Seller, the Company and
their respective Affiliates (hereinafter "Seller Losses"; together with
Buyer Losses, "Losses") arising out of (i) any breach of any of the
representations and warranties contained in Section 2 hereof or (ii) any
breach by Buyer of any of its covenants in this Agreement other than in the
Ancillary Agreements which shall be governed by the terms thereof. Seller
shall give Buyer prompt written notice of any third party claim which may
give rise to any indemnity obligation under this section, together with the
estimated amount of such claim, and Buyer shall have the right to assume
the defense of any such claim through counsel of its own choosing, by so
notifying Seller within thirty (30) days of receipt of Seller's written
notice; provided, however , that Buyer's counsel shall be reasonably
satisfactory to Seller. Failure to give prompt notice shall not affect the
indemnification obligations hereunder in the absence of actual prejudice.
If Seller desires to participate in any such defense assumed by Buyer, it
may do so at its sole cost and expense. If Buyer declines or fails to
assume any such defense, it shall be liable for all costs and expenses of
defending such claim incurred by Seller, including reasonable fees and
disbursements of counsel. Neither party shall, without the prior written
consent of the other party, which shall not be unreasonably withheld,
settle, compromise or offer to settle or compromise any such claim or
demand on a basis which would result in the imposition of a consent order,
injunction or decree which would restrict the future activity or conduct of
the other party or any subsidiary or Affiliate thereof or if such
settlement or compromise involves a finding or admission of any violation
of law, or if such settlement or compromise does not include an
unconditional release of the other party for any liability arising out of
such claim or demand.
<PAGE>
(b) The foregoing obligation to indemnify Seller and the Company
set forth in Section 8.3(a) shall be subject to each of the following
limitations:
(i) No reimbursement for Seller Losses asserted against
Buyer under Section 8.3(a)(i) above shall be required unless and until the
cumulative aggregate amount of such Seller Losses equals or exceeds seven
million five hundred thousand dollars ($7,500,000.00) (the "Buyer
Threshold") and then only to the extent that the cumulative aggregate
amount of Seller Losses, as finally determined, exceeds the Buyer
Threshold; provided that in calculating the Buyer Threshold, any Seller
Losses which individually total less than fifty thousand dollars
($50,000.00) each ("De Minimis Seller Losses") shall be excluded in their
entirety and Buyer in any event shall have no liability hereunder to Seller
or the Company for any such De Minimis Seller Losses; and
(ii) Buyer's liability to Seller and the Company under
Section 8.2(a)(i) for Seller Losses in excess of the Buyer Threshold shall
not exceed one hundred fifty million dollars ($150,000,000.00).
(c) The indemnities provided in this Section 8.3 shall survive
the Closing. Except as expressly provided in this Agreement, the indemnity
provided in this Section 8.3 shall be the sole and exclusive remedy of the
indemnified party against the indemnifying party at law or equity for any
matter covered by paragraphs (a) and (b); provided, that nothing in this
Section 8 shall prevent or otherwise limit Seller from seeking temporary or
permanent injunctive relief for any breach by Buyer of Section 4.2(c).
(d) In no event shall Buyer be liable to Seller or its
Affiliates for special, indirect, incidental, consequential or punitive
damages but, to the extent Seller is required to pay punitive damages to a
third party, such payment shall constitute an indemnifiable expense.
8.4 Indemnification Calculations.
(a) The amount of any Seller Losses or Buyer Losses for which
indemnification is provided under this Section 8.4 shall be computed net of
any insurance proceeds received by the indemnified party in connection with
<PAGE>
such Losses. If the amount with respect to which any claim is made under
this Section 8.4 (an "Indemnity Claim") gives rise to a currently
realizable Tax Benefit to the party making the claim, the indemnity payment
shall be reduced by the amount of the Tax Benefit available to the party
making the claim. To the extent such Indemnity Claim does not give rise to
a currently realizable Tax Benefit, if the amount with respect to which any
Indemnity Claim is made gives rise to a subsequently realized Tax Benefit
to the party that made the claim, such party shall refund to the
indemnifying party the amount of such Tax Benefit when, as and if realized.
For the purposes of this Agreement, any subsequently realized Tax Benefit
shall be treated as though it were a reduction in the amount of the initial
Indemnity Claim, and the liabilities of the parties shall be redetermined
as though both occurred at or prior to the time of the indemnity payment.
For purposes of this Section 8.4, a "Tax Benefit" means an amount by which
the tax liability of the party (or group of corporations including the
party) is reduced (including, without limitation, by deduction, reduction
of income by virtue of increased tax basis or otherwise, entitlement to
refund, credit or otherwise) plus any related interest received from the
relevant taxing authority. Where a party has other losses, deductions,
credits or items available to it, the Tax Benefit from any losses,
deductions, credits or items relating to the Indemnity Claim shall be
deemed to be realized proportionately with any other losses, deductions,
credits or items. For the purposes of this Section 8.4, a "Tax Benefit" is
"currently realizable" to the extent it can be reasonably anticipated that
such Tax Benefit will be realized in the current taxable period or year or
in any Tax Return with respect thereto (including through a carry-back to a
prior taxable period) or in any taxable period or year prior to the date of
the Indemnity Claim. In the event that there should be a determination
disallowing the Tax Benefit, the indemnifying party shall be liable to
refund to the indemnified party the amount of any related reduction
previously allowed or payments previously made to the indemnifying party
pursuant to this Section 8.4.
(b) The parties agree that any indemnification payments made
pursuant to this Agreement shall be treated for tax purposes as an
<PAGE>
adjustment to the Purchase Price, unless otherwise required by applicable
law, in which case such payments shall be made in an amount sufficient to
indemnify the relevant party on a net after-tax basis.
8.5 Cooperation.
Each party will provide, and will cause its Affiliates to
provide, to the other party and its Affiliates, with reasonable access
during business hours to all records, documents and relevant personnel of
such party relating to any third party Claim asserted against such party or
its Affiliates or against such other party and its Affiliates in order to
assist each party in defending any such third party Claim.
9 TERMINATION
9.1 Termination Events.
Without prejudice to other remedies which may be available to the
parties by law or this Agreement, this Agreement may be terminated and the
transactions contemplated herein may be abandoned:
(a) by mutual consent of the parties hereto;
(b) by Seller, in its sole discretion, after the date which is
thirty (30) days after the date of this Agreement, if Seller shall not have
received either (i) evidence, in form and substance reasonably satisfactory
to Seller, that Buyer has sufficient cash on hand to consummate the
transactions contemplated by this Agreement or (ii) copies of definitive
written agreements (the "Definitive Financing Agreements") with reputable
financial institutions to provide at the Closing, subject only to customary
conditions, all of the Financing, in form and substance reasonably
satisfactory to Seller, or if at any time thereafter any such Definitive
Financing Agreements shall cease to be in full force and effect;
(c) by any party by notice to the other party if the Closing
shall not have been consummated on or before December 31, 1998, unless
extended by written agreement of the parties hereto, so long as the party
<PAGE>
terminating this Agreement shall not be in default or breach hereunder;
(d) by Seller if Buyer shall fail to consummate the Financing by
October 15, 1998; and
(e) by Buyer under the circumstances described in Section 4.32.
9.2 Effect of Termination.
In the event of any termination of the Agreement as provided in
Section 9.1 above, this Agreement shall forthwith become wholly void and of
no further force and effect and there shall be no liability on the part of
Buyer or Seller, except that (i) the obligations of Buyer and Seller under
Sections 4.2 (relating to confidentiality only), 4.5 and 10.3 of this
Agreement shall remain in full force and effect and (ii) termination shall
not preclude either party from suing the other party for breach of this
Agreement.
10 MISCELLANEOUS AGREEMENTS OF THE PARTIES
10.1. Notices.
All communications provided for hereunder shall be in writing and
shall be deemed to be given when delivered in person or by private courier
with receipt, when telecopied and received, or three (3) days after being
deposited in the United States mail, first-class, registered or certified,
return receipt requested, with postage paid and,
If to Buyer: Glass Holdings Corp.
3802 Robert Porcher Way
Greensboro, NC 27410
Fax: 336-545-7715
Attention: President
With a copy to: Alston & Bird LLP
601 Pennsylvania Avenue, N.W. , North Building
Washington, D.C. 20004-2601
Fax: 212-756-3333
Attention: Frank M. Conner III
If to Seller : Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-8445
Attention: Corporate Secretary
<PAGE>
With a copy to: Owens Corning World Headquarters
One Owens Corning Parkway
Toledo, Ohio 43659
Fax: 419-248-1723
Attention: Law Department
or to such other address as any such party shall designate by written
notice to the other parties hereto.
10.2 Transaction Taxes.
Buyer and Seller agree that they shall cause the Company to
discharge any liability for the payment of all sales, use, transfer,
vehicle transfer, real property transfer (including any deed recording
fee), recording, gains and other similar taxes, if any, payable with
respect to Seller's contribution of the Assets to the Company or the sale
of the Buyer's Interest to the Buyer. The Company shall file all necessary
documentation and Tax Returns with respect to such taxes and, to the extent
any exemptions from such taxes are available, Buyer and Seller shall
cooperate to prepare any certificates or other documents necessary to claim
such exemptions. For purposes of Section 1.4, the amount of any taxes paid
or payable by the Company pursuant to this Section 10.2 shall not reduce
(or shall be added back to) the Closing NAV of the Company.
10.3 Expenses.
Subject to Section 10.2, Seller and Buyer shall each pay their
respective expenses (such as legal, investment banking and accounting fees)
incurred in connection with the origination, negotiation, execution and
performance of this Agreement. The Company and Buyer shall be solely
responsible for any costs incurred in connection with the Financing.
10.4 Non-Assignability.
This Agreement shall inure to the benefit of and be binding on
the parties hereto and their respective successors and permitted assigns.
Except as otherwise expressly provided in this Agreement, this Agreement
shall not be assigned by either party hereto without the express prior
<PAGE>
written consent of the other party, and any attempted assignment, without
such consents, shall be null and void. Notwithstanding any non-assignment
provisions contained in this Section 10.4 Buyer may assign or otherwise
transfer all of its rights and/or obligations hereunder (i) to any entity
or entities, providing financing for the transactions contemplated by this
Agreement or to any entity or entities providing to Buyer or Buyer's
Affiliates financing relating to the Business or (ii) to any Affiliate of
Buyer, provided that (x) such Affiliate shall agree with Seller and its
permitted assignees or transferees, if any, in writing to assume the
Buyer's obligations hereunder and (y) any such assignment to an Affiliate
of the Buyer shall not relieve the Buyer from its obligations hereunder.
10.5 Amendment; Waiver.
This Agreement may be amended, supplemented or otherwise modified
only by a written instrument executed by the parties hereto. No waiver by
either party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving.
Except as provided in the preceding sentence, no action taken pursuant to
this Agreement, including without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained herein, and in any documents delivered or
to be delivered pursuant to this Agreement and in connection with the
Closing hereunder. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach.
10.6 Schedules and Exhibits.
All exhibits and schedules hereto are hereby incorporated by
reference and made a part of this Agreement. Any fact or item which is
clearly disclosed on any Schedule or Exhibit to this Agreement or in the
Financial Statements in such a way as to make its relevance to a
representation or representations made elsewhere in this Agreement or to
the information called for by another Schedule or other Schedules (or
Exhibit or other Exhibits) to this Agreement readily a shall be deemed to
<PAGE>
be an exception to such representation or representations or to be
disclosed on such other Schedule or Schedules (or Exhibit or Exhibits), as
the case may be, notwithstanding the omission of a reference or cross
reference thereto. Any fact or item disclosed on any Schedule or Exhibit
hereto shall not by reason only of such inclusion be deemed to be material
and shall not be employed as a point of reference in determining any
standard of materiality under this Agreement.
10.7 Third Parties.
Except as provided herein, this Agreement does not create any
rights, claims or benefits inuring to any person that is not a party hereto
nor create or establish any third party beneficiary hereto.
10.8 Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to a contract executed
and performed in such State without giving effect to the conflicts of laws
principles thereof, except that matters herein strictly within the purview
of the matters covered by the Limited Liability Company Act of the State of
Delaware shall be governed by such Limited Liability Company Act.
10.9 Consent to Jurisdiction.
Each of the parties hereto, irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Southern District
of New York located in the borough of Manhattan in the City of New York, or
if such court does not have jurisdiction, the Supreme Court of the State of
New York, New York County, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated
hereby. Each of the parties hereto, further agrees that service of any
process, summons, notice or document by U.S. registered mail to such
party's respective address set forth in Section 10.1 shall be effective
service of process for any action, suit or proceeding in New York with
respect to any matters to which it has submitted to jurisdiction as set
<PAGE>
forth above in the immediately preceding sentence. Each of the parties
hereto, irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement or
the transactions contemplated hereby in (a) the United States District
Court for the Southern District of New York or (b) the Supreme Court of the
State of New York, New York County, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
10.10 Definitions.
(a) As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"ACA" means the Amended and Restated Asset Contribution Agreement
dated as of July 30, 1998 by and between Seller and the Company.
"Acquisition Transaction" has the meaning ascribed to it in
Section 4.31.
"Affiliate" means any Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause
the direction of the management and policies of such Person whether by
Contract or otherwise and, in any event and without limitation of the
previous sentence, any Person owning ten percent (10%) or more of the
voting securities of a second Person shall be deemed to control that second
Person.
"Agreement" means this Asset Purchase Agreement and the Exhibits
and the Schedules hereto.
"Alloy Services Agreement" has the meaning ascribed to it in
Section 4.10.
"Ancillary Agreements" shall mean the Agreements contained in
Exhibits A through W.
"Assets" means the Business Assets, the NVOC Assets and the OCC
Assets.
<PAGE>
"Base NAV" has the meaning ascribed to it in Section 1.4(a).
"Battice Facility" has the meaning ascribed to in Section 4.12.
"Battice Facility Supply Agreement" has the meaning ascribed to
it in Section 4.12.
"Benefit Plans" has the meaning ascribed to it in Section
2.15(b).
"Borates Supply Agreement" has the meaning ascribed to it in
Section 4.24.
"Business" has the meaning ascribed to it in the forepart of this
Agreement.
"Business Assets" means all of the assets, rights, properties,
claims, contracts and business of Seller, which, except as expressly
provided in the ACA, are principally related to the Business, other than
Excluded Assets.
"Business Manufacturing Technology" means the manufacturing
equipment, machinery, tooling, and processes which are or have been in use,
operational, ordered, or being refurbished on or prior to the Closing: (i)
in the Manufacturing Facilities to manufacture Business Products; or (ii)
in the Battice or Guelph facilities dedicated exclusively to the
manufacture of Business Products.
"Business Products" means glass fiber specialty products made of:
(i) untwisted glass fibers or filaments with a maximum
nominal diameter of 13.96 microns (micronage values herein shall refer to
maximum or minimum nominal values in common usage in the industry, in this
instance, a K filament), which products have a linear density of a TEX
value of less than or equal to 300 g/km, and which filaments are
continuous;
(ii) chopped strands or fibers having a maximum nominal
diameter of 13.96 microns and a fiber length greater than 1.5" as dry
chop for use in carding processes;
(iii) any glass fiber products of any TEX or micronage
mechanically twisted and/or plied in a secondary operation;
(iv) S Glass products in any form;
(v) conventional or assembled roving of glass fiber coated
with a conductive material to produce a roving having a resistance greater
than 3,000 ohms for use in applications in which such resistance is a
<PAGE>
required property;
(vi) air texturized glass fiber strands with a maximum
nominal diameter of greater than 12.70 microns; and
(vii) waste products from the production of any of the
Business Products defined in (i) through (iii) in the form of chopped glass
fiber strands made with twisted bobbin input, dry chopped glass fiber with
starch-based sizing, and hanks (cut forming packages), provided that such
waste products not exceed 3% of the production of the underlying product;
Business Products as defined in (i) through (iii) shall not
include:
(viii) any air texturized product made of glass filaments
or fibers having a minimum nominal diameter of 13.97 microns; or
(ix) assembled or multiend roving of fibers except for the
purpose of making (i) texturized strands, (ii) textile yarn beams, or
(iii) wound products currently made at the Huntingdon, Pennsylvania
facility.
"Buyer" has the meaning ascribed to it in the forepart of this
Agreement.
"Buyer Confidential Information" has the meaning ascribed to it
in Section 4.2(b).
"Buyer Interest" has the meaning ascribed to it in the forepart
of this Agreement.
"Buyer Losses" has the meaning ascribed to it in Section 8.2(a).
"Buyer Material Adverse Effect" has the meaning ascribed to it in
Section 3.1.
"Buyer Threshold" has the meaning ascribed to it in Section
8.3(b).
"Buyer's Objection" has the meaning ascribed to it in Section
1.4(d).
"Carly Sublease" has the meaning ascribed to it in Section 4.25.
"Claim" means a written notice asserting a breach of a
representation, warranty, covenant, agreement or obligation specified in
this Agreement, which shall reasonably set forth, in light of the
information then known to the party giving such notice, a reasonably
detailed description of and estimate (if then reasonable to make) of the
amount involved in such breach. "Closing" has the meaning ascribed
to it in Section 6.1.
<PAGE>
"Closing Calculation" has the meaning ascribed to it in Section
1.4(d).
"Closing Date" has the meaning ascribed to it in Section 6.1.
"Closing NAV" has the meaning ascribed to it in Section 1.4(a).
"Closing Statement" has the meaning ascribed to it in
Section 1.4(c).
"Commitment Letters" has the meaning ascribed to it in Section
3.6.
"Company 401(k) Plan" has the meaning ascribed to it in Section
4.34(g).
"Company Financing" has the meaning ascribed to it in Section
4.38.
"Company Pension Plan" has the meaning ascribed to it in Section
4.34(f).
"Contracts" means all commitments, contracts, indentures and
agreements, written or oral, to which Seller transferred to the Company
pursuant to the ACA.
"Contractual Consents" has the meaning ascribed to it in Section
5.3(c).
"Cross License Agreement" has the meaning ascribed to it in
Section 4.19.
"Definitive Financing Agreements" has the meaning ascribed to it
in Section 9.1(b).
"De Minimis Buyer Losses" has the meaning ascribed to it in
Section 8.2(b).
"De Minimis Seller Losses" has the meaning ascribed to it in
Section 8.3(b).
"Disclosed Contracts" has the meaning ascribed to in Section
2.10(a).
"Environmental Law" means any applicable law, order, regulation,
decree, permit, license, ordinance, or other federal, state or local
governmental requirements relating to pollution, the protection of human
health and the environment, the discharge or Release of Hazardous
Substances into the environment, or the exposure to Hazardous Substances
(including odors) in the work place.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Estimated Closing NAV" has the meaning ascribed to it in
Section 1.4(b).
"Estimated Closing Statement" has the meaning ascribed to it in
Section 1.4(b).
"Facilities" has the meaning ascribed to it in Section 2.9(b).
<PAGE>
"Financial Statements" has the meaning ascribed to it in Section
2.7.
"Financing" has the meaning ascribed to it in Section 3.6.
"GAAP" means United States generally accepted accounting
principles, consistently applied throughout the specified period and in the
immediately prior comparable period.
"GLAS Marks" has the meaning ascribed to it in Section 4.30.
"Glass Marbles Supply Agreement" has the meaning ascribed to it
in Section 4.9.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic
or foreign state, county, city or other political subdivision.
"Guarantees" has the meaning ascribed to it in Section 4.33.
"Guelph Facility" has the meaning ascribed to it in Section 4.13.
"Guelph Facility Supply Agreement" has the meaning ascribed to it
in Section 4.13.
"Hazardous Substance" means petroleum, petroleum by-products,
polychlorinated biphenyls and any other chemicals, materials, substances or
wastes which are currently defined or regulated as "hazardous substances,"
"hazardous materials," "hazardous wastes," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"toxic air pollutants," "pollutants," or "contaminants" under any
Environmental Law.
"Historical Annual Financial Statements" has the meaning ascribed
to it in Section 2.7.
"Historical Financial Statements" has the meaning ascribed to it
in Section 2.7.
"Historical Interim Financial Statements" has the meaning
ascribed to it in Section 2.7
"Huntingdon Lease Agreement" has the meaning ascribed to it in
Section 4.11.
"Indebtedness" of any Person means all obligations of such Person
<PAGE>
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) for the deferred purchase price of goods or
services (other than trade payables or accruals incurred in the ordinary
course of business), (iv) under capital leases and (v) in the nature of
guarantees of the obligations described in clauses (i) through (iv) above
of any other Person.
"Indemnity Claim" has the meaning ascribed to it in Section
8.4(a).
"Intellectual Property Rights" means copyrights, patents,
trademarks, know how, design marks, service marks, logos and trade names
and other intangible property, including any and all related goodwill, and
foreign and domestic registrations and applications.
"Interests" has the meaning ascribed to it in Section 2.3.
"Inventory" has the meaning ascribed to it in the ACA.
"Knowledge of Seller, the Company, NVOC or OCC" means the actual
knowledge of any of the following individuals: Chuck Dana, Tim Winfrey, Pat
Lynch, Inger Eckert, Jay Harvey, Bob Fisher, Dennis Chalwick, John Christy,
Joseph Masciangelo and Jerry Hawkins.
"Landfill Agreement" has the meaning ascribed to it in Section
4.28.
"Law" means any law (including common law), statute, code, rule,
regulation, reporting, permitting or licensing requirement, ordinance and
other pronouncement having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision, including those promulgated or enforced by any
Governmental or Regulatory Authority.
"Leased Real Property" has the meaning ascribed to it in Section
2.9(b).
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licensed Proprietary Rights" has the meaning ascribed to it in
Section 2.12.
"Licenses and Permits" means the licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and
similar consents granted or issued by any Governmental or
Regulatory Authority transferred by Seller to the Company pursuant to the
ACA.
<PAGE>
"Losses" has the meaning ascribed to it in Section 8.3(a).
"Manufacturing Facilities" means the portions of Seller's
facilities at Aiken, South Carolina, Huntingdon, Pennsylvania, and South
Hill, Virginia to be transferred to Buyer which do not include the portions
of the Aiken and Huntingdon facilities at which Seller manufactures
continuous filament mat or wet process mat.
"Manufacturing Services Agreement" has the meaning ascribed to it
in Section 4.16.
"Material Adverse Effect" has the meaning ascribed to it in
Section 2.1.
"Material Contracts" has the meaning ascribed to it in Section
2.10(a).
"Net Asset Value" means the sum of Other Current Assets less
Current Liabilities as reflected in the Pro Forma Statement of Net Assets
to be sold as of 12/31/97 but excluding Trade Payables (which shall be paid
in full immediately prior to the Closing Date), with such amounts
determined in accordance with GAAP using the same assumptions reflected in
the 12/31/97 Historical Financial Statements.
"Neutral Accounting Firm" has the meaning ascribed to it in
Section 1.4(d)(ii).
"Non-Compete Agreement" has the meaning ascribed to it in Section
4.15.
"NVOC" shall mean N.V. Owens Corning S.A., a Belgian corporation
and a subsidiary of Seller.
"NVOC Assets" has the meaning ascribed to it in Section 4.29(a).
"NVOC Asset Purchase Agreement" has the meaning ascribed to it in
Section 4.29(a).
"OCC" shall mean Owens-Corning Canada, Inc., a Canadian
corporation and a subsidiary of Seller.
"OCC Assets" has the meaning ascribed to it in Section 4.29(b).
"OCC Asset Purchase Agreement" has the meaning ascribed to it in
Section 4.29(b).
<PAGE>
"Owned Real Property" means those parcels of real property
transferred by Seller to the Company pursuant to the ACA Agreement.
"Patent and Know How License Agreement" has the meaning ascribed
to it in Section 4.5.
"Permitted Liens" has the meaning ascribed to it in Section
2.9(a).
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"Pitney Bowes 1997 Sublease" has the meaning ascribed to it in
Section 4.26.
"Pitney Bowes 1996 Sublease" has the meaning ascribed to it in
Section 4.27.
"Pro Forma Information" has the meaning ascribed to it in
Section 2.7.
"Proprietary Rights" has the meaning ascribed to it in
Section 1.1(e) of the ACA.
"Purchase Price" has the meaning ascribed to it in Section 1.2.
"Real Property" has the meaning ascribed to it in Section 2.9(b).
"Real Property Leases" means the leases and subleases of real
property transferred by Seller to the Company pursuant to the ACA.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing of a Hazardous Substance into the environment.
"Required Consents" has the meaning ascribed to it in Section
5.1(b).
"Schedule" means the record delivered to Buyer by Seller herewith
and dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required to be
included therein by Seller pursuant to this Agreement.
"Seller" has the meaning ascribed to it in the forepart of this
Agreement.
"Seller 401(k) Plan" has the meaning ascribed to it in Section
4.34(g).
<PAGE>
"Seller Confidential Information" has the meaning ascribed to it
in Section 4.2(c).
"Seller Losses" has the meaning ascribed to it in Section 8.3(a).
"Seller Pension Plan" has the meaning ascribed to it in Section
4.34(f).
"Services Agreement" has the meaning ascribed to it in Section
4.8.
"Sliver Supply Agreement" has the meaning ascribed to it in
Section 4.23.
"Tax" or "Taxes" shall mean all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem,
value added, franchise, bank shares, withholding, payroll, employment,
excise, property, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges of
any nature whatever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto;
"Tax Benefit" has the meaning ascribed to it in Section 7.4.
"Termination Date" has the meaning ascribed to it in Section 8.1.
"Threshold" has the meaning ascribed to it in Section 8.2(b).
"Trade Payables" shall mean the obligations of the Business
recorded in the captions "Accounts Payable-Trade and Accounts
Payable-Marbles" in the Pro Forma Statement of Net Assets to be Sold.
"Trademark Assignment" has the meaning ascribed to it in Section
4.21.
"Transferred Employee" has the meaning ascribed to it in Section
4.34.
"Transitional Coverage" has the meaning ascribed to it in Section
4.34.
"Waste Water Treatment Services Agreement" has the meaning
ascribed to it in Section 4.19.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender, (ii) words using the
singular or plural number also include the plural or singular number,
respectively, (iii) the terms "hereof," "herein," "hereby" and derivative
or similar words refer to this entire Agreement, (iv) the term "Section"
<PAGE>
refers to the specified Section of this Agreement, (v) the phrases
"ordinary course of business" and "ordinary course of business consistent
with past practice" refer to the business and practice of Seller in
connection with the Business. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP.
10.11 Entire Agreement.
This Agreement, the Schedules and Exhibits and the other
agreements referred to herein hereto set forth the entire understanding of
the parties hereto, and no modifications or amendments to this Agreement
shall be binding on the parties unless in writing and signed by the party
or parties to be bound by such modification or amendment.
10.12 Section Headings; Table of Contents.
The section headings contained in this Agreement and the Table of
Contents to this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.
10.13 Severability.
If any provision of this Agreement shall be declared by any court
of competent jurisdiction to be illegal, void or unenforceable, all other
provisions of this Agreement shall not be affected and shall remain in full
force and effect.
10.14 Counterparts.
This Agreement may be executed in counterparts, each of which
shall be deemed to be an original and all of which together shall be deemed
to be one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first above written.
OWENS CORNING
By: /s/ Glen H. Hiner
Name: Glen H. Hiner
Title: Chairman of the Board
and Chief Executive Officer
GLASS HOLDINGS CORP.
By: /s/ Robert Porcher
Name: Robert Porcher
Title:President
LINCOLN YARNS, LLC
By: Owens Corning, Member
By: /s/ Glen H. Hiner
Name: Glen H. Hiner
Title: Chairman of the Board
and Chief Executive Officer
<PAGE>
TABLE OF CONTENTS
Page
Exhibits
EXHIBIT A - Form of Patent and Know How License Agreements
EXHIBIT B - Intentionally Omitted
EXHIBIT C - Form of Glass Marble Supply Agreement
EXHIBIT D - Form of Alloy Services Agreement
EXHIBIT E - Form of Huntingdon Lease Agreement
EXHIBIT F - Form of Battice Facility Supply Agreement
EXHIBIT G - Form of Guelph Facility Supply Agreement
EXHIBIT H-1 - Form of Sanitary Sewer Agreement
EXHIBIT H-2 - Form of Stormwater Agreement
EXHIBIT I - Form of Non-Compete Agreement
EXHIBIT J - Form of Manufacturing Services Agreement
EXHIBIT K - Intentionally Omitted
EXHIBIT L-1 - Form of Aiken Air Modeling Agreement
EXHIBIT L-2 - Form of Huntington Air Modeling Agreement
EXHIBIT M - Form of Wastewater Treatment Agreement
EXHIBIT N - Form of Amended and Restated Limited Liability Operating Agreement
EXHIBIT O-1 - Form of Trademark Assignment
EXHIBIT O-2 - Form of Master Patent and Know How Assignment
EXHIBIT P - Form of Sliver Supply Agreement
EXHIBIT Q - Form of Borates Supply Agreement
EXHIBIT R - Form of Carly Sublease
<PAGE>
EXHIBIT S - Form of Pitney Bowes 1997 Sublease
EXHIBIT T - Form of Pitney Bowes 1996 Sublease
EXHIBIT U - Form of Landfill Agreement
EXHIBIT V - Form of NVOC Asset Purchase Agreement
EXHIBIT W - Form of OCC Asset Purchase Agreement
AMENDMENT NO. 1
TO
LLC INTEREST SALE AND PURCHASE AGREEMENT
AMENDMENT NO. 1 TO LLC INTEREST SALE AND PURCHASE AGREEMENT
("Amendment No. 1") dated as of September 30, 1998 among OWENS CORNING, a
Delaware corporation ("Seller"), ADVANCED GLASSFIBER YARNS LLC (formerly,
Lincoln Yarns, LLC), a Delaware limited liability company (the "Company"),
and AGY HOLDINGS, INC., a Delaware corporation ("Buyer").
W I T N E S S E T H
WHEREAS, Seller, the Company and Glass Holdings, Inc. entered into a
LLC Interest Sale and Purchase Agreement dated as of July 31, 1998 (the "
Purchase Agreement"), which Purchase Agreement was assigned by Glass
Holdings, Inc. to Buyer by an Assignment and Assumption Agreement dated
September 30, 1998; and
WHEREAS, Seller, the Company and Buyer desire to make certain
amendments to the Purchase Agreement, all as set forth below;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Defined Terms. Except as otherwise expressly provided herein,
capitalized terms used herein which are defined in the Purchase Agreement,
as amended hereby, shall have the meanings specified for such terms in the
Purchase Agreement, as so amended.
2. Amendments to Purchase Agreement.
(a) Section 1.2 of the Purchase Agreement shall be amended to read as
follows:
"The aggregate purchase price for the Buyer Interest
shall be three hundred thirty one million five hundred
thousand Dollars ($331,500,000) in the aggregate,
subject to adjustment as provided in Section 1.4 (the
"Purchase Price")."
(b) Section 1.4 of the Purchase Agreement is hereby amended to read
as follows:
"1.4 Cash Payment for Change in Net Asset Value.
(a) Calculation of the Cash Payment. The Company shall make a
<PAGE>
cash payment (the "NAV Payment") in the amount by which the Net
Asset Value of the Company as of the Closing Date (the "Closing
NAV"), as finally determined pursuant to Section 1.4(d) below, is
greater or less than thirty one million seven hundred thirty
eight thousand dollars ($31,738,000)(the "Base NAV"). The
calculation of the Base NAV is set forth on Schedule 1.4(a). If
the Closing NAV is greater than the Base NAV, then the Company
shall make the NAV Payment to Jefferson Holdings, Inc.
("Jefferson"). If the Closing NAV is less than the Base NAV,
then the Company shall make the NAV Payment to Buyer. Such NAV
Payment shall be paid as set forth in Sections 1.4(b) and (e)
below.
(b) Estimated Adjustment. On the Closing Date, Seller shall
deliver to Buyer a statement (the "Estimated Closing Statement")
prepared in accordance with GAAP setting forth a calculation of
Seller's good faith estimate of the Closing NAV (the "Estimated
Closing NAV"). If the Estimated Closing NAV as set forth on the
Estimated Closing Statement is in excess of the Base NAV, the
Company shall make the NAV Payment to Jefferson at Closing. If
the Estimated Closing NAV as set forth on the Estimated Closing
Statement is less than the Base NAV, then the Company shall make
the NAV Payment to Buyer at Closing.
(c) Closing NAV. Within ninety (90) days after the Closing,
Seller will prepare and deliver to Buyer a balance sheet of the
Company as of the Closing Date prepared in accordance with GAAP
together with a statement setting forth a calculation of the
Closing NAV (the "Closing Statement"). At the option of the
Buyer, exercisable in writing on or before the Closing Date, the
Closing Statement shall be audited by PricewaterhouseCoopers LLP.
The cost of such audit shall be borne by the Company. Buyer
shall cooperate fully and shall cause the Company to provide
Seller with all assistance and access to books and records
necessary for Seller to prepare the Closing Statement. In
connection therewith, Buyer and Seller will jointly conduct a
physical inventory of the Inventory as of the Closing Date in
accordance with the procedures to be mutually agreed by Buyer and
Seller acting reasonably and in good faith and, at Buyer's
option, such physical inventory will be observed by Buyer's
auditors, PricewaterhouseCoopers LLP, and, at Seller's option,
such physical inventory will be observed by Seller's auditors,
Arthur Andersen LLP.
(d) Closing Calculation.
(i) Buyer shall be entitled to full access to the relevant
records and working papers prepared by or for Seller, and to
Seller's employees involved in such preparation, to aid in its
review of the calculation of the Closing NAV set forth on the
Closing Statement. If Buyer believes that the Closing NAV
calculation (hereinafter the "Closing Calculation") has not been
properly calculated in accordance with the calculation
methodologies set forth in this Section 1.4, it shall, within
<PAGE>
thirty (30) days after receipt of the Closing Calculation, give
written notice (the "Buyer's Objection") to Seller, setting forth
the basis of the Buyer's Objection in reasonable detail and, to
the extent practicable, the adjustments to the Closing
Calculation which Buyer believes should be made. Failure to so
notify Seller within such thirty (30) day period shall constitute
acceptance and approval of the Closing Calculation. There shall
be no adjustment to the Closing Calculation unless the cumulative
amount of Buyer's Objection equals or exceeds one million dollars
($1,000,000.00) and provided that any individual item of
adjustment contained in Buyer's Objection which is less than
fifty thousand dollars ($50,000.00) shall be excluded in its
entirety. If Seller agrees that any change proposed by Buyer is
appropriate, the change shall be made to the Closing Calculation,
whereupon Buyer shall be deemed to have accepted and approved the
Closing Calculation with respect to such change and any other non-
disputed item of the Closing Calculation. If the proposed change
is disputed by Seller, then Seller and Buyer shall negotiate in
good faith to resolve such dispute as expeditiously as possible.
If, after a period of thirty (30) days following the date on
which Buyer gives Seller notice of any such proposed change, any
such proposed change still remains disputed, then:
(ii) KPMG Peat Marwick LLP (the "Neutral Accounting Firm")
shall be engaged to resolve any remaining disputes. The Neutral
Accounting Firm shall act as an arbitrator to determine, based
solely on presentations submitted by Seller and Buyer, and not by
independent review, only those issues still in dispute. Each of
Buyer and Seller shall have made its complete submission to the
Neutral Accounting Firm within ten (10) days following the
expiration of the thirty (30) day negotiation period described
in Section 1.4(d)(i). The failure by either party to make a
complete submission prior to the expiration of such ten (10) day
period shall be deemed a waiver of such party's right to make a
submission or a further submission to the Neutral Accounting Firm.
The Neutral Accounting Firm's determination, based upon the
calculation methodologies set forth in this Section 1.4, shall
be made within thirty (30) days following the date on which the
dispute is submitted, shall be set forth in a written statement
delivered to Seller and Buyer, and shall be final, binding and
conclusive. The fees and any expenses of the Neutral Accounting
Firm shall be shared equally by Seller and Buyer. In the event a
party does not comply with the procedure and time requirements
contained herein, the Neutral Accounting Firm shall render a
decision based solely on the evidence it has which was timely
filed by either of the parties.
(e) Payment of Cash NAV Payment. If the Closing NAV shown on
the Closing Statement exceeds the Estimated Closing NAV, then the
Company shall make the NAV Payment to Jefferson, and if the
Closing NAV shown on the Closing Statement is less than the
Estimated Closing NAV, then the Company shall make the NAV
Payment to Buyer. Payment of any NAV Payment pursuant to this
Section 1.4(e) shall be made by wire transfer to an account
<PAGE>
designated by Jefferson or Buyer, as the case may be, in United
States Dollars, in immediately available federal funds within
three (3) business days after the Closing Calculation has been
finally determined together with interest from the Closing Date
to the date of payment at the "base rate" of Citibank, N.A. or
any successor thereto in New York, New York in effect on the
Closing Date, based on a 360-day year."
(c) Schedule 1.4(a) of the Purchase Agreement is hereby amended to
read as set forth on Exhibit A hereto.
(d) Section 2.20 of the Purchase Agreement is hereby amended to read
as follows:
"Section 2.20 Disclaimer of Warranty.
SELLER MAKES NO WARRANTY WITH RESPECT TO THE VALUE, CONDITION OR,
SUBJECT TO SECTION 2.19, USE OF THE ASSETS OWNED OR USED BY THE
COMPANY, WHETHER EXPRESSED OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE."
(e) Section 4.20 of the Purchase Agreement is hereby amended to
insert the words "to execute and deliver" after the words "Jefferson
Holdings, Inc." in the first line.
(f) Section 4.29 of the Purchase Agreement is hereby amended to read
as follows:
"4.29 Purchase of Assets from Seller's
Subsidiaries. The parties acknowledge that, pursuant
to agreements dated September 29, 1998, the Company has
purchased certain assets from, and has assumed certain
liabilities of, Owens-Corning (Japan) Ltd., OCC and
NVOC (the "Subsidiary Asset Purchase Agreements"). The
parties agree that to the extent that there is any
adjustment to the Purchase Price pursuant to Section
2(b) of each of the Subsidiary Asset Purchase
Agreements, any payment required to be paid by the
Company shall be paid by the Seller, and any amount
required to be paid to the Company shall be paid to the
Seller."
(g) Section 4.34(i) of the Purchase Agreement is hereby amended to
read as follows:
"(i) Stock Options. Each outstanding option to purchase Seller
common stock held by Transferred Employees shall vest immediately
upon the Closing and expire on the earlier of (a) December 31,
1999 or (b) the date on which the option expires by the terms of
the applicable option contract. The Company agrees to indemnify
Seller for any costs or other damages incurred by Seller in
connection with the extension of any option beyond six months
following the Closing."
(h) Section 4.38 of the Purchase Agreement is hereby amended to read
as follows:
<PAGE>
"4.38 Post-Closing Distributions by the Company.
Immediately upon the Closing, the parties shall cause the
Company to, and the Company shall, make a cash distribution in
the aggregate amount of three hundred ninety million Dollars
($390,000,000) to its members, pro rata in accordance with their
then respective ownership interests in the Company, and Buyer
shall have caused the Company to obtain any and all financing
necessary to fund such cash distribution (the "Company
Financing") in accordance with the terms and conditions set forth
in the Commitments. In addition, the parties shall cause the
Company to, and the Company shall, make the NAV Payment in
accordance with and in the form and manner described in Section
1.4 of this Amendment No. 1."
(i) Schedule 7.1 of the Purchase Agreement is hereby amended to read
as set forth on Exhibit B hereto.
(j) Section 10.10(a) of the Purchase Agreement is hereby amended to
revise the definitions of "Material Adverse Effect" and "Net Asset Value"
to read as follows:
" "Material Adverse Effect" has the meaning ascribed to it in
Section 2.2.
"Net Asset Value" means the sum of Total Current Assets
less Current Liabilities as reflected in the Pro Forma
Statement of Net Assets to be sold as of 12/31/97 but
excluding Trade Payables (which shall be paid in full
immediately prior to the Closing Date), with such
amounts determined in accordance with GAAP using the
same assumptions reflected in the 12/31/97 Historical
Financial Statements and methodology in calculating the
Base NAV as set forth in Schedule 1.4(a)."
(k) Section 10.10(a) of the Purchase Agreement is hereby amended to
add the following new definitions in appropriate alphabetical order:
" "Jefferson" has the meaning ascribed to it in Section 1.4(a).
"NAV Distribution" has the meaning ascribed to it in Section
1.4(a).
"Subsidiary Asset Purchase Agreement" has the meaning ascribed to
it in Section 4.29."
<PAGE>
(l) Section 10.10(a) of the Purchase Agreement is hereby amended to
delete the following definitions: "NVOC Assets," "NVOC Asset Purchase
Agreement," "OCC Assets" and "OCC Asset Purchase Agreement."
(m) The Purchase Agreement is hereby amended to delete Exhibits V and
W therefrom.
3. Condition to Effectiveness of Amendment No. 1.
The amendments contained in this Amendment No. 1 are subject to and
conditioned upon the Closing occurring on or before September 30, 1998.
4. Representations and Warranties.
(a) Seller represents and warrants to Buyer that:
(i) Each of Seller and the Company has the corporate power and
authority to execute and deliver this Amendment No. 1.
(ii) This Amendment No. 1 is the legal, valid and binding
obligation of Seller and the Company enforceable against each of them in
accordance with the terms hereof.
(b) Buyer represents and warrants to Seller that:
(i) Buyer has the corporate power and authority to execute and
deliver this Amendment No. 1.
(ii) This Amendment No. 1 is the legal, valid and binding
obligation of Buyer enforceable against it in accordance with the terms
hereof.
5. Miscellaneous.
(a) Amendment to Purchase Agreement. This Amendment No. 1 shall be
construed, administered and applied in accordance with all of the terms and
provisions of the Purchase Agreement.
(b) Successors and Assigns. This Amendment No. 1 shall inure to the
benefit of and be binding on the parties hereto and their respective
successors and permitted assigns.
(c) Effect of Amendment No. 1. The amendments hereunder shall be
limited precisely as written and shall not constitute a waiver or
modification of any other covenants, terms or provisions of the Purchase
Agreement, which shall remain in full force and effect.
(d) Amendment; Waiver. This Amendment No. 1 may be amended,
supplemented or otherwise modified only by a written instrument executed by
the parties hereto. No waiver by either party of any of the provisions
hereof shall be effective unless explicitly set forth in writing and
executed by the party so waiving.
<PAGE>
(e) Governing Law. This Amendment No. 1 shall be governed by, and
construed in accordance with, the laws of the state of New York applicable
to a contract executed and performed in such State without giving effect to
the conflicts of laws principles thereof, except that matters herein
strictly within the purview of the matters covered by the Limited Liability
Company Act of the State of Delaware shall be governed by such Limited
Liability Company Act.
(f) Counterparts. This Amendment No. 1 may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same agreement, and all signatures need not appear
on any one counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be
duly executed as of the date first above written.
OWENS CORNING
By: /s/ Charles E. Dana
Name: Charles E. Dana
Title: Vice President
GLASS HOLDINGS CORP.
By: /s/ Robert Porcher
Name: Robert Porcher
Title: President
ADVANCED GLASSFIBER YARNS LLC
By: Owens Corning, Member
By: /s/ Charles E. Dana
Name: Charles E. Dana
Title: Vice President
OWENS CORNING
Pro Forma Balance Sheet
as of June 30, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Eliminate
the Business Historical
Historical Balance Net Impact Financial
Financial Sheet of Gain on Statements
Statements (a) Sale as Adjusted
Current Assets:
Cash $ 42 $ - $ - $ 42
Receivables 597 (25) - 572
Inventories 535 (16) - 519
Insurance for asbestos
claims-current portion 125 - - 125
Deferred income taxes 137 - - 137
Income taxes receivable 27 - - 27
Other current assets 64 (1) - 63
------- ------- ------- -------
Total Current Assets 1,527 (42) - 1,485
Property, plant and equip-
ment, at cost 3,647 (265) - 3,382
Less: Accumulated
Depreciation (1,888) 147 - (1,741)
------- ------- ------ -------
Net property, plant
and equipment 1,759 (118) - 1,641
------- ------- ------ -------
Other
Insurance for asbestos
litigation claims 310 - - 310
Asbestos costs to be
reimbursed 89 - - 89
Deferred income taxes 356 - (15)(d) 341
Goodwill 788 - - 788
Investments in affiliates 50 - - 50
Other noncurrent assets 181 - - 181
------- ------ ------ -------
Total Other 1,774 - (15) 1,759
------- ------ ------ -------
Total Assets $5,060 $(160) $ (15) $ 4,885
======= ===== ====== =======
Current Liabilities:
Accounts payable and accrued
liabilities $ 793 $ (8) $ 22(d) $ 807
Reserve for asbestos claims
- current portion 325 - - 325
Short-Term Debt 119 - - 119
Current Portion LT Debt 128 - - 128
------ ----- ------ -------
Total Current Liabilities 1,365 (8) 22 1,379
------ ----- ------ -------
Long-Term Debt 1,761 - (525)(b) 1,236
------ ----- ------ -------
Other
Reserve for asbestos claims 1,121 - - 1,121
Asbestos liabilities
- Fibreboard 96 - - 96
Other employee benefits
liability 340 (10) - 330
Pension plan liability 61 (5) - 56
Other 174 - 162(d) 336
------ ----- ------ -------
Total Other 1,792 (15) 162 1,939
------ ----- ------ -------
Company obligated securities
of entities holding solely
parent debentures 503 - - 503
------ ----- ------ -------
Minority Interest 21 - - 21
------ ----- ------ -------
Stockholders' Equity
Common Stock 669 - - 669
Deficit (987) - 189(c) (798)
Accumulated other
comprehensive income (48) - - (48)
Other (16) - - (16)
------ ----- ------ -------
Total Equity (382) - 189 (193)
------ ----- ------ -------
Total Liabilities &
Stockholders' Equity $5,060 $ (23) $ (152) $ 4,885
====== ===== ====== =======
</TABLE>
Owens Corning
Pro Forma Statement of Income
For the six months ended June 30, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Eliminate
Historical the Business's Pro forma
Financial Operations Pro forma Financial
Statements (a) Adjustments Results
Net Sales $ 2,423 $ (140) $ 22(b) $ 2,305
Cost of Sales (Note 2) 1,923 (91) 19(b) 1,851
------- ------- ------ -------
Gross Margin 500 (49) 3 454
------- ------- ------ -------
Operating Expenses (Note 2)
Marketing and administrative
expenses 281 (4) - 277
Science and technology expenses 29 (1) - 28
Restructure costs 87 (2) - 85
Other (70) 2 - (68)
------- ------- ------ -------
Total operating expenses 327 (5) - 322
------- ------- ------ -------
Income from operations 173 (44) 3 132
Cost of borrowed funds 73 - (15)(c) 58
------- ------- ------- -------
Income before provision for taxes 100 (44) 18 74
Provision for income taxes 27 (17) 7(d) 17
------- ------- ------- -------
Income before minority interest and
equity income of affiliates 73 (27) 11 57
Minority interest (10) - - (10)
Equity in net income of affiliates 4 - -(e) 4
------- ------- ------- -------
Net Income $ 67 $ (27) $ 11 $ 51
Net Income per Common Share
Basic net income per share $ 1.25 $ 0.95
------- -------
Diluted net income per share $ 1.20 $ 0.94
Weighted average number of common
shares outstanding and common
equivalent shares during the
period (in millions)
Basic 53.5 53.5
Diluted 58.7 58.7
</TABLE>
Owens Corning
Pro Forma Statement of Income
For the year ended December 31, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Eliminate
Historical the Business's Pro forma
Financial Operations Pro forma Financial
Statements (a) Adjustments Results
Net Sales $ 4,373 $ (277) $ 41(b) $ 4,137
Cost of Sales (Note 2) 3,446 (182) 36(b) 3,300
Gross Margin 927 (95) 5 837
Operating Expenses (Note 2)
Marketing and administrative
expenses 580 (7) - 573
Science and technology
expenses 69 (1) - 68
Restructure costs 68 - - 68
Other 28 3 - 31
--------- ------- ------ --------
Total operating expenses 745 (5) - 740
--------- ------- ------ --------
Income from operations 182 (90) 5 97
Cost of borrowed funds 111 - (30)(c) 81
--------- ------- ------ --------
Income before provision for taxes 71 (90) 35 16
Provision for income taxes 9 (34) 13(d) (12)
--------- ------- ------ --------
Income before minority
interest and equity
income of affiliates 62 (56) 21 28
Minority interest (11) - - (11)
Equity in net income of
affiliates 11 - -(e) 11
-------- ------ ------ --------
Income before cumulative
effect of accounting
change $ 62 $ (56) $ 21 $ 28
======== ====== ====== ========
Net Income per Common
Share
Basic net income per share $ 1.18 $ 0.53
-------- --------
Diluted net income per share $ 1.17 $ 0.52
-------- --------
Weighted average number of
common shares outstanding
and common equivalent
shares during the period
(in millions)
Basic 52.9 52.9
Diluted 53.5 53.5
</TABLE>
OWENS CORNING
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
On July 1, 1998, Owens Corning (the "Company")
contributed substantially all of the assets of its Glass
Yarns and Specialty Materials Business (the "Business")
to Advanced Glassfiber Yarns LLC, a Delaware Limited
Liability Company ("AGY"). Prior to that time, the
Business had been part of the Company's Composites
Systems Business. The Business has operations in Aiken,
South Carolina, Huntingdon, Pennsylvania and South Hill,
Virginia, and, additionally, purchases glass yarns
products from facilities in Battice, Belgium and Guelph,
Ontario that continue to be owned by subsidiaries of the
Company.
On September 30, 1998, the Company sold a 51% interest in
AGY to AGY Holdings, Inc., a Delaware corporation
("Holdings"), for aggregate consideration of $331.5
million (the "Disposition"). Holdings is a wholly-owned
subsidiary of Glass Holdings Corp., a Delaware
corporation, which itself is a wholly-owned subsidiary of
Groupe Porcher Industries, a French corporation that
(along with its affiliates) is a significant existing
customer of the Business. A wholly-owned subsidiary of
the Company, Jefferson Holdings, Inc., a Delaware
corporation ("Jefferson"), continues to hold a 49%
interest in AGY. Upon the closing of the Disposition,
AGY made a special distribution to Holdings and
Jefferson, of which Jefferson received $191.1 million
(less certain transaction expenses) (the "Distribution").
In connection with the Disposition, the Company entered
into agreements to provide various raw materials, capital
equipment and services to AGY (the "Supply Agreements")
at contractually agreed upon prices.
The pro forma consolidated statements of income for the
year ended December 31, 1997, and for the six months
ended June 30, 1998, give effect to the Disposition and
the Distribution as if they occurred as of the beginning
of the periods presented. The pro forma consolidated
statements of income include certain adjustments directly
attributable to the Disposition and Distribution but do
not reflect any non-recurring charges or credits. The
pro forma consolidated balance sheet at June 30, 1998 has
been prepared assuming the Disposition and Distribution
occurred on June 30, 1998.
The pro forma adjustments are based upon available
information and certain assumptions that the management
of the Company believes are reasonable. The pro forma
consolidated financial statements do not purport to
represent what the Company's financial position or
results of operations actually would have been had such
transactions in fact occurred on the dates indicated.
These pro forma consolidated financial statements and the
notes thereto should be read in conjunction with the
Company's 1997 consolidated financial statements and the
notes thereto.
(2) Restructuring, Other Actions and Dispositions
During 1997, the Company recorded a charge for restructuring
and other actions to close manufacturing facilities, enhance
manufacturing productivity and reduce overhead. The charge
was comprised of a $68 million pretax charge associated with
the restructuring of the Company's business segments and a
$75 million pretax charge associated with asset impairments,
including investments in certain affiliates. The impact of
these charges was to reduce income from operations for the
year ended December 31, 1997 by $143 million and to reduce
income before cumulative effect of accounting changes by
$104 million. (Please refer to the Company's previously
filed Annual report on Form 10-K for further discussion of
these items.)
During the first quarter of 1998, the Company recorded a
charge for restructuring and other actions to enhance
manufacturing productivity and reduce overhead. This charge
represented the Company's second phase of its strategic
restructuring program announced at the beginning of 1998.
The charge was comprised of an $87 million pretax charge
associated with the restructuring of the Company's business
segments, and an $8 million pretax charge associated with
other actions.
In addition, in the first quarter of 1998, the Company sold
its 50% ownership interest in Alpha/Owens-Corning, LLC.
With cash proceeds of approximately $103 million, the
Company recorded a pretax gain of approximately $84 million.
The pretax gain is recorded in other income on the
accompanying Pro Forma Statement of Income for the six
months ended June 30, 1998.
The impact of the above items was to decrease income from
operations and net income by $11 million for the six months
ended June 30, 1998. (Please refer to the Company's
previously filed Quarterly report on Form 10-Q for
further discussion of these items.)
(3) Pro Forma Adjustments - Statements of Income
The following describes the adjustments made to reflect
the transaction described above as if it had occurred at
the beginning of the periods presented, as indicated in
Note 1.
(a) Represents the elimination of the historical results of
operations of the Business, and the related provision for
income taxes at the Company's statutory rate.
<PAGE>
(b) The following table reflects the recurring effects of
the supply agreements on net sales and cost of sales:
<TABLE>
<S> <C> <C> <C> <C>
Net Sales Cost of Sales
--------------------------- --------------------------
Six Months Six Months
Year Ended Ended Year Ended Ended
December 31, June 30, December 31, June 30,
(In millions of dollars) 1997 1998 1997 1998
------------ ------------- ------------ ----------
Raw material supply
agreements $ 11 $ 6 $ 9 $ 5
Capital equipment
and service
agreements 4 2 2 1
Finished good
supply agreements 26 14 28 14
Employee benefits - - (3) (1)
----- ----- ----- -----
$ 41 $ 22 $ 36 $ 19
===== ===== ===== =====
</TABLE>
Raw Material Supply Agreements
The Company had historically provided the Business
with certain raw materials, either purchased or
manufactured by the Company, at cost. Pursuant to
the terms of certain raw material supply agreements,
the Company will supply these raw materials at a
contractually agreed upon price.
Capital Equipment and Service Agreements
The Company had historically provided certain
capital equipment and fabrication services to the
Business at cost. Pursuant to the terms of certain
capital equipment and services agreements, such
equipment and related services will be provided to
AGY at contractually agreed upon prices.
Finished Good Supply Agreements
The Company will continue to manufacture certain
glass yarns products and other specialty materials
and will sell these products to AGY under finished
good supply agreements at contractually agreed upon
prices. The historical net sales and cost of sales
associated with these products were eliminated as
described in 3 (a) above and have been included in
the pro forma adjustments at the agreed upon prices.
Employee Benefits
Reflects the reduction of the net pension expense
and net postretirement benefits expense over the
amounts recorded historically, as a result of the
transfer of employees to AGY.
(c) Reflects the reduction in interest expense due to the
Company's use of the net proceeds to reduce certain
outstanding debt.
<PAGE>
(d) Reflects the tax effects of the pro forma adjustments at
the Company's statutory tax rate.
(e) In connection with the Disposition and Distribution, AGY
made cash distributions to the Company and Glass Holdings
Corp. in excess of the total equity of AGY. As a result,
the Company will not record its equity in the net
income or loss of AGY until such time as AGY eliminates
its equity deficit. Accordingly, the pro forma Statements
of Income for the year ended December 31, 1997 and for the
six months ended June 30, 1998 do not include an adjustment
to record the Company's equity in the net income of AGY.
(4) Pro Forma Adjustments - Balance Sheet
The following adjustments reflect, among other items, the
effects of certain non-recurring items resulting from the
Disposition described in Note 1.
(a) Reflects the removal of the assets contributed to and
the liabilities assumed by AGY from the Company's historical
balance sheet.
(b) Reflects the net reduction in debt from receipt of the
Disposition and Distribution proceeds.
(c) Reflects the net of tax impact of the Disposition and
Distribution.
(d) Reflects the tax effects of the Disposition and
Distribution, the accrual of certain transaction expenses
and a contractual obligation of the Company to provide
financial support to AGY in the event that AGY is unable to
pay interest on its indebtedness for a period of three
years.
