FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 2003
REGISTRATION NO. 333-103664
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HEXCEL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 3089 94-1109521
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification No.)
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3238
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
Ira J. Krakower
Senior Vice President and General Counsel
Hexcel Corporation
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3238
(203) 969-0666
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Joseph A. Coco, Esq.
Thomas W. Greenberg, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box: |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box: [X]
If this Form is filed to register additional securities or an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering: |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: |_|
CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class Amount to Be Offering Price per Aggregate Offering Amount of
of Securities to Be Registered Registered Unit (1) Price (1) Registration Fee
===============================================================================================================================
9-3/4% Senior Subordinated Notes due 2009
of Hexcel Corporation..................... (2) 100% (2) (3)
-------------------------------------------------------------------------------------------------------------------------------
9-3/4% Senior Subordinated Notes due 2009
of Hexcel Corporation..................... $33,195,000(4) 100% $33,195,000 $2,686.00 (5)
===============================================================================================================================
----------------
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of
1933, as amended.
(2) An indeterminate amount of securities covered by the prospectus
contained in this registration statement will be offered for
market-making purposes.
(3) In accordance with Rule 457(q), no filing fee is required in connection
with the registration of an indeterminate amount of securities offered
solely for market-making purposes by an affiliate of the Registrant.
(4) GS Capital Partners 2000, L.P. and certain of its affiliates, each an
affiliate of the Registrant, is offering up to $33,195,000 aggregate
principal amount of the securities owned by them for their own accounts
pursuant to the prospectus contained in this registration statement.
(5) Previously paid.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
INTRODUCTORY NOTE
This Registration Statement contains a form of prospectus that may be used by
(i) any broker-dealer subsidiary of Goldman, Sachs & Co. in connection with
offers and sales of the previously issued securities described therein in
market-making transactions and (ii) GS Capital Partners 2000, L.P. and certain
of its affiliates in connection with offers and sales of securities currently
owned by them for their own account.
SUBJECT TO COMPLETION, DATED MAY 12, 2003
Hexcel Corporation
9 3/4% Senior Subordinated Notes Due 2009
_________________
Investing in the notes involves risks. See "Risk Factors" on page 5.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these notes or passed
upon the adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense.
We will pay interest on the notes on January 15 and July 15 of each
year. The notes will mature on January 15, 2009. At our option, we may redeem
the notes on or after January 15, 2004 at the redemption prices set forth in
this prospectus. There is no sinking fund for the notes.
Private equity funds affiliated with Goldman, Sachs & Co. own
approximately 38% of our voting stock and these funds have the right to
appoint up to three members of our ten member board of directors.
This prospectus has been prepared for and will be used by (i)
Goldman, Sachs & Co. and its broker-dealer subsidiaries in connection with
offers and sales of the notes in market-making transactions from time to time
and (ii) GS Capital Partners 2000, L.P. and certain of its affiliates in
connection with offers and sales of up to $33,195,000 aggregate principal
amount of notes currently owned by them. These transactions may occur in the
open market or may be privately negotiated, at prices related to prevailing
market prices at the time of sale or at negotiated prices. Goldman, Sachs &
Co. may act as principal or agent in these market-making transactions. Hexcel
will not receive any of the proceeds of such sales of the notes. Goldman,
Sachs & Co. and certain of its affiliates have agreed to reimburse Hexcel for
any expenses incurred in connection with this registration.
Goldman, Sachs & Co.
The date of this prospectus is , 2003.
TABLE OF CONTENTS
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this offering circular. You must not
rely on any unauthorized information or representations. This prospectus is an
offer to sell only the notes offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so.
About this Prospectus................................................2
Available Information................................................2
Forward-Looking Statements...........................................3
Hexcel Corporation...................................................4
Risk Factors.........................................................5
Consolidated Ratio of Earnings to Fixed Charges.....................10
Use of Proceeds.....................................................11
Description of Notes................................................11
Plan of Distribution................................................41
Selling Security Holder.............................................42
Legal Matters.......................................................42
Experts.............................................................42
1
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed
with the SEC using a "shelf" registration process. You should read this
prospectus together with the additional information described under the
heading "Available Information." You may also obtain from the SEC a copy of
the registration statement and exhibits that we filed with the SEC. The
registration statement may contain additional information that may be
important to you.
The outstanding notes were originally issued by us on July 20, 1999
and September 11, 2001.
This prospectus may be used by (i) Goldman, Sachs & Co. ("Goldman
Sachs") and its broker-dealer subsidiaries in connection with offers and sales
of the notes in market-making transactions from time to time and (ii) GS
Capital Partners 2000, L.P. and certain of its affiliates (collectively, "GS
2000 Funds") in connection with offers and sales of notes currently owned by
them. These transactions may occur in the open market or may be privately
negotiated, at prices related to prevailing market prices at the time of sale
or at negotiated prices. The GS 2000 Funds are affiliates of Goldman Sachs and
its broker-dealer subsidiaries.
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission, or SEC. You may
read and copy any document Hexcel files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
SEC at 1-888-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public from the SEC's web site at
www.sec.gov or from our web site at www.hexcel.com. However, the information
on our web site does not constitute a part of this prospectus.
In this document, we "incorporate by reference" the information we
file with the SEC, which means that we can disclose important information to
you by referring to that information. The information incorporated by
reference is considered to be a part of this prospectus, and later information
filed with the SEC will update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of this prospectus until the offering is completed.
o Annual Report on Form 10-K for the fiscal year ended December 31,
2002, filed with the SEC on March 3, 2003;
o Annual Report on Form 10-K/A (Amendment No. 1) for the fiscal year
ended December 31, 2002, filed with the SEC on March 31, 2003;
o Annual Report on Form 10-K/A (Amendment No. 2) for the fiscal year
ended December 31, 2002, filed with the SEC on April 29, 2003; and
o Current Reports on Form 8-K dated January 27, 2003, March 10, 2003,
March 20, 2003 and April 4, 2003.
You may request a copy of these filings at no cost, by writing or
telephoning Hexcel at: Two Stamford Plaza, 281 Tresser Boulevard, Stamford,
Connecticut 06901, (203) 969-0666, Attention: Investor Relations.
You should rely only upon the information provided in this prospectus
or incorporated by reference into this prospectus. We have not authorized
anyone to provide you with different information. You should not assume that
the information in this prospectus, including any information incorporated by
reference, is accurate as of any date other than the date of this prospectus.
______________________
2
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements relate to analyses and other
information that are based on forecasts of future results and estimates of
amounts not yet determinable. These statements also relate to future
prospects, developments and business strategies. These forward-looking
statements are identified by their use of terms and phrases such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "may,"
"plan," "predict," "project," "should," "will," and similar terms and phrases,
including references to assumptions. Such statements are based on current
expectations, are inherently uncertain, and are subject to changing
assumptions. These statements are contained in sections entitled "Summary,"
"Risk Factor," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and other sections of this prospectus
and in the documents incorporated by reference in this prospectus.
Such forward-looking statements include, but are not limited to:
o estimates of commercial aerospace production and delivery
rates, including those of Airbus Industries ("Airbus") and The
Boeing Company ("Boeing");
o expectations regarding growth in sales to regional and business
aircraft manufacturers, and to the aircraft aftermarket;
o expectations regarding the growth in the production of military
aircraft, helicopters and launch vehicle programs in 2003 and
beyond;
o expectations regarding the recovery of demand for electronics
fabrics used in printed wiring boards, as well as future
business trends in the electronics fabrics industry;
o expectations regarding the demand for soft body armor made of
aramid and specialty fabrics;
o expectations regarding growth in sales of composite materials
for wind energy, automotive and other industrial applications;
o estimates of changes in net sales by market compared to 2002;
o expectations regarding our equity in the earnings or losses of
joint ventures, as well as joint venture investments and loan
guarantees;
o expectations regarding working capital trends and capital
expenditures;
o the availability and sufficiency of the existing senior credit
facility and other financial resources to fund our worldwide
operations in 2003 and beyond; and
o the impact of various market risks, including fluctuations in
the interest rates underlying our variable-rate debt,
fluctuations in currency exchange rates and fluctuations in
commodity prices.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to be materially
different. Such factors include, but are not limited to, the following:
changes in general economic and business conditions; changes in current
pricing and cost levels; changes in political, social and economic conditions
and local regulations, particularly in Asia and Europe; foreign currency
fluctuations; changes in aerospace delivery rates; reductions in sales to any
significant customers, particularly Airbus or Boeing; changes in sales mix;
changes in government defense procurement budgets; changes in military
aerospace programs technology; industry capacity; competition; disruptions of
established supply channels; manufacturing capacity constraints; and the
availability, terms and deployment of capital.
If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, actual results may vary materially
from those expected, estimated or projected. In addition to other factors that
affect our operating results and financial position, neither past financial
performance nor our expectations should be considered reliable indicators of
future performance. Investors should not use historical trends to anticipate
results or trends in future periods. Further, our stock price is subject to
volatility. Any of the factors discussed above could have an adverse impact on
our stock price. In addition, failure of sales or income in any quarter to
meet the investment community's expectations, as well as broader market
trends, can have an adverse impact on our stock price. We do not undertake an
obligation to update its forward-looking statements or risk factors to reflect
future events or circumstances.
3
HEXCEL CORPORATION
We are the world's leading producer of advanced structural materials.
We develop, manufacture and market lightweight, high-performance reinforcement
products, composite materials and structures for use in commercial aerospace,
space and defense, electronics and general industrial applications. Our
materials are used in a wide variety of end products, such as commercial and
military aircraft, space launch vehicles and satellites, printed wiring
boards, computers, cellular telephones, televisions, soft body armor,
high-speed trains and ferries, cars and trucks, wind turbine blades,
reinforcements for bridges and other structures, window blinds, and a wide
variety of recreational equipment.
We are incorporated under the laws of the State of Delaware. Our
principal executive offices are located at Two Stamford Plaza, 281 Tresser
Boulevard, Stamford, Connecticut 06901. Our general telephone number is
203-969-0666.
4
RISK FACTORS
You should carefully consider the risks described below as well as
other matters described in this prospectus.
Risks Relating to Our Indebtedness and the Notes
We have substantial debt that could limit our ability to make payments on the
notes and reduce the effectiveness of our operations.
We have substantial debt and debt service requirements. We may not be
able to generate sufficient cash flow from operations or obtain sufficient
funding to satisfy our debt service obligations, including the payment of
interest and principal at final maturity on the notes. As of March 31, 2003,
we had approximately $531.9 million of total debt (of which $340.0 million
consisted of the notes and the balance consisted of other debt). This
substantial level of debt has important consequences, including:
o making it more difficult for us to satisfy our obligations with
respect to these notes;
o placing us at competitive disadvantage compared to our
competitors that have less debt;
o limiting our ability to borrow additional amounts for working
capital, capital expenditures, debt service requirements,
execution of our growth strategy and research and development
costs;
o limiting our ability to use operating cash flow for working
capital, capital expenditures, debt service requirements, and
other areas of our business;
o increasing our vulnerability to general adverse economic and
industry conditions; and
o limiting our ability to capitalize on business opportunities
and to react to competitive pressures and adverse changes in
government regulation.
We may not be able to generate sufficient cash flow to meet our debt service
obligations, including payments on the notes.
Our ability to generate sufficient cash flow from operations to make
scheduled payments on our debt obligations will depend on our future financial
performance, which will be affected by a range of economic, competitive and
business factors, many of which are outside of our control. If we do not
generate sufficient cash flow from operations to satisfy our debt obligations,
including payments on the notes, we may have to undertake alternative
financing plans, such as refinancing or restructuring our debt, selling
assets, reducing or delaying capital investments or seeking to raise
additional capital. We may not be able to refinance our existing debt or
obtain additional financing on acceptable terms. We may not be able to sell
assets and if assets are sold, the amount of proceeds or timing of such sales
may not be sufficient to satisfy our debt obligations. In addition, the sales
of assets or the terms of a refinancing or additional debt may not be
permitted under the terms of our various debt instruments then in effect. Our
inability to generate sufficient cash flow to satisfy our debt obligations, or
to refinance our obligations on commercially reasonable terms would likely
result in an event of default under all of our material debt and impair our
ability to satisfy our obligations on the notes.
We do not expect to generate sufficient cash flow from operations to
repay our senior credit facility when it matures or the notes when they
mature. We expect that our ability to repay the notes at their scheduled
maturity will be dependent in whole or in part on (i) replacing our senior
credit facility on or prior to its maturity and (ii) refinancing all or a
portion of the notes before they mature.
Despite current indebtedness levels, we and our subsidiaries may still be able
to incur substantially more debt. This could further exacerbate the risks
associated with our substantial leverage.
5
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit
us or our subsidiaries from doing so. If new debt is added to our and our
subsidiaries' current debt levels, the related risks that we and they now face
could intensify.
We may not be able to finance future operations and capital needs because of
restrictions contained in our debt agreements.
The operating and financial restrictions and covenants that are
contained in our existing debt agreements and that will be contained in any
future financing agreements may impair our ability to finance future
operations or capital needs. In addition, our senior credit facility requires
that we maintain compliance with specified financial ratios. A breach of any
of these restrictions or covenants could cause a default under the notes and
our other debt. A significant portion of our debt may then become immediately
due and payable. We may not have, or be able to obtain, sufficient funds to
make these accelerated payments, including payments on the notes.
We may not have the ability to raise the funds necessary to finance the change
of control offer required by the indenture.
Upon the occurrence of specific kinds of change of control events, we
will be required to offer to repurchase all outstanding notes at 101% of the
principal amount thereof plus accrued and unpaid interest to the date of
repurchase. However, it is possible that we will not have sufficient funds at
the time of the change of control to make the required repurchase of notes or
that restrictions in our senior credit facility will not allow such
repurchases. In addition, certain important corporate events, such as
leveraged recapitalizations that would increase the level of our indebtedness,
would not constitute a "Change of Control" under the indenture.
If a reasonably active trading market does not continue for these notes you
may not be able to resell them.
Though the notes are eligible for trading in PORTAL and have a
reasonably active trading market, an active trading market may not continue
for the notes. If an active trading market ceases, you may not be able to
resell your notes at their fair market value or at all. Future trading prices
of the notes will depend on many factors, including, among other things,
prevailing interest rates, our operating results and the market for similar
securities. We have been informed by Goldman Sachs that they currently intend
to make a market in these notes. However, Goldman Sachs may cease their
market-making at any time. We do not intend to apply for listing the notes on
any securities exchange.
Risks Relating to Our Business
Decreased demand in the commercial aerospace industry could significantly
impair our sales, profit margins and financial condition.
Further reductions in the demand for new commercial aircraft could
result in reduced net sales for our commercial aerospace products and could
further reduce our profit margins. Approximately 46% of our net sales for the
year ended December 31, 2002 were derived from sales to the commercial
aerospace industry. Reductions in demand for commercial aircraft or a delay in
deliveries could result from many factors, including a terrorist event similar
to that which occurred on September 11, 2001 and any subsequent military
response, changes in the propensity for the general public to travel by air, a
rise in the cost of aviation fuel, consolidation of airlines and slower
macroeconomic growth.
In addition, our customers continue to emphasize the need for
improved yield in the use of our products and cost reduction throughout the
commercial aerospace supply chain. In response to these pressures, we reduced
the price of some commercial aerospace products in recent years and are likely
to continue to do so in the future. Where possible, we seek to offset or
mitigate the impact of such price and cost reductions by productivity
improvements and reductions in the costs of the materials and services we
procure.
6
The industries in which we operate are cyclical, and downturns in them may
result in significant volatility in our sales, earnings and cash flows.
The core industries in which we operate are, to varying degrees,
cyclical and have historically experienced downturns. We are currently in the
midst of cyclical downturns in the commercial aerospace, electronics and
ballistics industries. A further deterioration in these industries may
continue and it is uncertain as to whether, when and to what extent these
industries will recover. Any further deterioration or a lack of recovery in
these industries could lead to further reductions in our operating
profitability, increase our net losses, and result in a breach of the
financial maintenance covenants under our senior credit facility.
A significant decline in business with Boeing or Airbus could materially
impair our business, operating results, prospects and financial condition.
Approximately 22% and 23% of our sales for the years ended December
31, 2002 and December 31, 2001, respectively were made to Boeing and its
related subcontractors. Approximately 15% and 16% of our sales for the years
ended December 31, 2002 and December 31, 2001, respectively, were made to the
European Aeronautic Defence Company, including Airbus and related
subcontractors. Accordingly, the loss of, or significant reduction in
purchases by, either of these customers from the Company could materially
impair our operating results and weaken our financial condition.
Reductions in space and defense spending could result in a decline in our net
sales.
The growth in military aircraft production that has occurred in
recent years may not be sustained and production may cease to grow. The
production of military aircraft depends upon U.S. and European defense budgets
and the related demand for defense and related equipment. These defense
budgets may decline and sales of defense and related equipment to foreign
governments may not continue at expected levels. Approximately 17% of our net
sales for the year ended December 31, 2002 were derived from the space and
defense industry. The space and defense industry is largely dependent upon
government defense budgets, particularly the U.S. defense budget.
A decrease in supply or increase in cost of our raw materials could result in
a material decline in our profitability.
Because we purchase large volumes of raw materials, such as epoxy and
phenolic resins, aluminum foil, carbon fiber, fiberglass yarn and aramid paper
and fiber, any decrease in the supply or increase in the cost of the our raw
materials could significantly reduce our profit margins. We may experience a
decrease in the supply or an increase in price of our raw materials. Our
profitability depends largely on the price and continuity of supply of these
raw materials, which are supplied by a limited number of sources. In addition,
qualification to use raw materials in some of our products limits the extent
to which we are able to substitute alternative materials for these products.
Our ability to pass on these costs to our customers is, to a large extent,
dependent on the terms of our contracts with our customers and industry
conditions, including the extent to which our customers would switch to
alternative materials we do not produce in the event of an increase in the
prices of our products.
Our substantial international operations are subject to uncertainties which
could affect our operating results.
We believe that revenue from sales outside the U.S. will continue to
account for a material portion of our total revenue for the foreseeable
future. Additionally, we have invested significant resources in our
international operations and we intend to continue to make such investments in
the future. Our international operations are subject to numerous risks,
including:
7
o the difficulty of enforcing agreements and collecting
receivables through some foreign legal systems;
o fluctuations in currency exchange rates;
o foreign customers may have longer payment cycles than customers
in the U.S.;
o compliance with U.S. Department of Commerce export controls;
o tax rates in some foreign countries may exceed those of the
U.S. and foreign earnings may be subject to withholding
requirements or the imposition of tariffs, exchange controls or
other restrictions;
o general economic and political conditions in the foreign
countries where we operate may result in reduced profitability
of our foreign operations and increase the need for loans or
cash investments from other Hexcel subsidiaries to certain of
our foreign subsidiaries;
o the risk that foreign governments may adopt regulations, such
as tariffs or regulations relating to restrictions on the
transfer of capital, or take other actions, such as
expropriations, that could increase the costs of operating our
business, limit our market opportunities or otherwise harm our
business; and
o the potential difficulty in enforcing intellectual property
rights in some foreign countries.
Any one of the above could reduce our net sales, cash flows and
profitability, cause us to fail to make scheduled payments of principal of or
interest on the notes and reduce the market value and liquidity of the notes.
During the past several years, some countries in which we operate or
plan to operate have been characterized by varying degrees of inflation and
uneven growth rates. We currently do not have political risk insurance in the
countries in which we conduct business. While we carefully consider these
risks when evaluating our international operations and investments, our broad
international operations could cause a reduction in our net sales, cash flows
or profitability.
We could be required to devote substantial financial and
personnel resources to comply with environmental and safety requirements.
Our operations, like those of other companies engaged in similar
businesses, require the handling, use, storage and disposal of certain
regulated materials. As a result, we are subject to various federal, state,
regional, local and foreign laws and regulations pertaining to pollution and
protection of the environment, health and safety, governing among other
things, emissions to air, discharge to waters and the generation, handling,
storage, treatment and disposal of waste and other materials, and remediation
of contaminated sites. We have made and will continue to make capital and
other expenditures in order to comply with these laws and regulations.
However, the requirements of these laws and regulations are complex, change
frequently, and could become more stringent in the future.
We have been named as "potentially responsible parties" under the
federal Superfund law or similar state laws at several sites requiring clean
up based on disposal of wastes they generated. These laws generally impose
liability for costs to investigate and remediate contamination without regard
to fault and under certain circumstances liability may be joint and several
resulting in one responsible party being held responsible for the entire
obligation. Liability may also include damages to natural resources. In
addition to the foregoing, we have incurred and likely will continue to incur
expenses to investigate and clean up several existing and former company-owned
or leased properties. We have incurred substantial expenses for all these
sites over a number of years, a portion of which has been covered by
insurance. Although it is possible that new information could require us to
reassess our potential exposure to all pending investigations and
remediations, we believe that, based on currently available information, the
resolution of these matters will not require the expenditure of material
financial resources or require an unduly burdensome devotion of our personnel.
See the section entitled "Legal Proceedings" in our Annual Report on Form
10-K/A (Amendment No. 1) for the year ended December 31, 2002, which is
incorporated herein by reference.
8
We believe that our business, operations and facilities are being
operated in substantial compliance with applicable environmental and health
and safety laws and regulations, many of which provide for substantial fines
and criminal sanctions for violations. Based on information presently known to
us and accrued environmental reserves, we do not expect environmental costs or
contingencies to be material. However, potentially material expenditures could
be required in the future. For example, we may be required to comply with
evolving environmental and health and safety laws, regulations or requirements
that may be adopted or imposed in the future or to address newly discovered
information or conditions that require a response. The operation of
manufacturing plants entails risks in these areas, however, and we may incur
material costs or liabilities in the future.
Most of our properties have been the subject of Phase I Environmental
Site Assessments. However, not all potential instances of soil and groundwater
contamination may have been identified, even at those sites where
Environmental Site Assessments have been conducted. Accordingly, we may
discover previously unknown environmental conditions and the cost of
remediating such conditions may be material.
The interests of our significant shareholders may be different than your
interests.
Investors affiliated with Berkshire Partners LLC and Greenbriar
Equity Group LLC (the "Berkshire and Greenbriar investors") and investors
affiliated with The Goldman Sachs Group, Inc. (the "Goldman Sachs investors")
each have the ability to influence our affairs so long as each maintains its
ownership of respective specified percentages of our outstanding voting
securities, and the interests of each of these investors may not in all cases
be the same as your interests. As of March 31, 2003, the Goldman Sachs
investors owned approximately 38% of our outstanding voting securities and the
Berkshire and Greenbriar investors together owned approximately 35% of our
outstanding voting securities. Under our governance agreement with the Goldman
Sachs investors, the Goldman Sachs investors are entitled to designate up to
three people to serve on our ten-member Board of Directors, and are entitled
to designate one director to serve on each committee of our Board of
Directors. Under our stockholders agreement with the Berkshire and Greenbriar
investor group, the Berkshire and Greenbriar investors are entitled to
designate up to two people to serve on our Board of Directors, and are
entitled to designate one director to serve on each committee of our Board of
Directors. In addition, the governance agreement and the stockholders
agreement each provide that our Board of Directors will not authorize
specified types of significant transactions without the approval of the
directors designated by each of the respective investors. The interests of
these investors may be different than your interests.
9
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to
fixed charges for each of the last five years.
Year Ended December 31,
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1998 1999 2000 2001 2002
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(dollars in millions)
------------------------------------------------------
Income (loss) before Taxes, Equity in Earnings $ 78.3 $ (5.0) $ 75.0 $ (383.7) $ 7.7
Interest Expense, Including Amortization of Debt Issuance Costs 38.7 73.9 68.7 64.8 62.8
Interest Portion of Rentals (1) 2.7 3.1 2.3 1.8 1.3
-------- ------- -------- -------- -------
Earnings Before Provision for Taxes and Fixed Charges $ 119.7 $ 72.0 $ 146.0 $ (317.1) $ 71.8
======== ======= ======== ========= ========
Interest Expense, Including Amortization of Debt $ 38.7 $ 73.9 $ 68.7 $ 64.8 $ 62.8
Issuance Costs
Interest Portion of Rentals (1) 2.7 3.1 2.3 1.8 1.3
-------- ------- --------- --------- --------
Total Fixed Charges $ 41.4 $ 77.0 $ 71.0 $ 66.6 $ 64.1
======== ======= ========= ========= ========
Ratio of Earnings to Fixed Charges (2) 2.9 N/A 2.1 N/A 1.1
======== ======= ========= ========= =========
_____________
(1) Calculated as one third of rentals, which is a reasonable
approximation of the interest factor.
(2) Earnings were inadequate to cover fixed charges for 2001 and 1999. The
deficiency in earnings for the years ended December 31, 2001 and
December 31, 1999 is $(383.7) and $(5.0), respectively.
USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the notes
by (i) Goldman Sachs and its broker-dealer subsidiaries in market-making
transactions and (ii) GS 2000 Funds in connection with offers and sales of
notes currently owned by them for their own account. We will not receive any
of the proceeds from such transactions.
10
DESCRIPTION OF NOTES
On January 21, 1999, we issued $240.0 million aggregate principal
amount of 9 3/4% Senior Subordinated Notes Due 2009 under an indenture between
Hexcel and The Bank of New York as trustee in a private offering. In July
1999, we completed an exchange offer in which all of the 9 3/4% Senior
Subordinated Notes Due 2009 sold in January 1999 were exchanged for the notes,
which are identical in all material respects to the notes issued in January
1999, except that the notes issued in July 1999 were registered with the SEC
and are generally not subject to transfer restrictions.
On June 29, 2001, we issued an additional $100.0 million aggregate
principal amount of 9 3/4% Senior Subordinated Notes Due 2009 under the
indenture in a private offering. In September 2001, we completed an exchange
offer in which all of the 9 3/4% Senior Subordinated Notes Due 2009 sold in
June 2001 were exchanged for the notes, which are identical in all material
respects to the notes issued in June 2001, except that the notes issued in
September 2001 were registered with the SEC and are generally not subject to
transfer restrictions. The notes issued under the indenture in July 1999 and
September 2001 are treated as a single series under the indenture, including
for purposes of determining whether the required percentage of noteholders
have given their approval or consent to an amendment or waiver or joined in
directing the trustee to take certain actions on behalf of all noteholders.
The terms of the notes include those stated in the indenture and
those made part of the indenture by reference to the Trust Indenture Act of
1939. This description of the notes contains definitions of terms, including
those defined under the caption "--Definition of Terms Used in the Indenture"
that are necessary to understand this section of the prospectus. Capitalized
terms not defined in this section shall have the meanings assigned to them in
the indenture. In this section, "Hexcel" refers only to Hexcel Corporation and
not to any of its subsidiaries.
The following description is only a summary of the material terms of
the indenture and the registration rights agreement. We urge you to read the
indenture and the registration rights agreement because they, and not these
summary descriptions, define your rights as holders of the notes. You may
request copies of these agreements at our address set forth under "Available
Information."
Brief Description Of The Notes
These notes:
- are unsecured senior subordinated obligations of Hexcel;
- are subordinated in right of payment to all existing and future
Senior Indebtedness of Hexcel; and
- are senior in right of payment to any future Subordinated
Obligations of Hexcel.
Principal, Maturity And Interest
The notes are issued in denominations of $1,000 and any integral
multiple of $1,000. The notes will mature on January 15, 2009. Subject to our
compliance with the covenant described under the caption "--Covenants--
Limitation on Indebtedness," we are permitted to issue additional notes under
the indenture in an unlimited principal amount. The indenture defines notes so
issued as "additional notes."
Interest on the notes accrues at the rate of 9 3/4% per annum.
Interest is payable semiannually in arrears on January 15 and July 15. Hexcel
will make each interest payment to the holders of record of the notes on the
immediately preceding January 1 and July 1. Interest is computed on the basis
of a 360-day year comprised of twelve 30-day months.
Additional interest may accrue on the notes in specified
circumstances according to the registration rights agreement.
11
Optional Redemption
We will not be entitled to redeem the notes at our option before
January 15, 2004.
On and after January 15, 2004, we will be entitled at our option to
redeem all or a portion of the notes upon not less than 30 nor more than 60
days' notice. We will be entitled to redeem the notes at the redemption prices
set forth below plus accrued and unpaid interest to the redemption date, if
redeemed during the 12-month period beginning on January 15 in the years
indicated below:
Year Percentage of
Principal Amount
2004............................................. 104.875%
2005............................................. 103.900
2006............................................. 102.925
2007............................................. 101.950
2008............................................. 100.975
2009............................................. 100.00
Selection And Notice Of Redemption
If we redeem less than all the notes at any time, the trustee will
select notes on a pro rata basis, by lot or by another method as the trustee
will deem to be fair and appropriate.
We will redeem notes of $1,000 or less in whole and not in part. We
will cause notices of redemption to be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each holder of notes
to be redeemed at its registered address.
If any note is redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that
note to be redeemed. We will issue a new note in principal amount equal to the
unredeemed portion of the original note in the name of the holder of the note
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption.
Ranking
Senior Indebtedness Versus Notes
The payment of the principal of, premium and interest on the notes
will be subordinate in right of payment to the prior payment in full of all
Senior Indebtedness, including Hexcel's obligations under the Credit
Agreement.
As of March 31, 2003, Hexcel's Senior Indebtedness was $196.1
million. The indenture limits the amount of additional Indebtedness that
Hexcel may incur. However, under specified circumstances the amount of the
Indebtedness could be substantial. In any case, the Indebtedness may be Senior
Indebtedness.
Liabilities Of Subsidiaries Versus Notes
A portion of Hexcel's operations is conducted through its
subsidiaries. Claims of creditors of these subsidiaries generally will have
priority with respect to the assets and earnings of the subsidiaries over the
claims of creditors of Hexcel, including holders of the notes. Accordingly,
the notes will be effectively subordinated to creditors and preferred
stockholders, if any, of subsidiaries of Hexcel.
12
At March 31, 2003, the total liabilities of our subsidiaries were
approximately $161.1 million, including trade payables. Although the indenture
limits the incurrence of Indebtedness and preferred stock of some of our
subsidiaries, this limitation is subject to a number of significant
qualifications. Moreover, the indenture does not limit the incurrence by our
subsidiaries of liabilities that are not considered Indebtedness under the
indenture. See "--Covenants--Limitation on Indebtedness."
Other Senior Subordinated Indebtedness Versus Notes
Under the indenture, only Senior Indebtedness of Hexcel will rank
senior to the notes. The notes will in all respects rank pari passu with all
other Senior Subordinated Indebtedness of Hexcel. As of March 31, 2003,
Hexcel's outstanding Senior Subordinated Indebtedness was $338.9 million, net
of unamortized discount of $1.1 million.
We have agreed in the indenture that we will not Incur any
Indebtedness that is contractually subordinate or junior in right of payment
to our Senior Indebtedness, unless the Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to Senior
Subordinated Indebtedness. The indenture does not treat unsecured Indebtedness
as subordinated or junior to Secured Indebtedness merely because it is
unsecured.
Payment Of Notes
We are not permitted to pay principal of, premium or interest on the
notes or make any deposit pursuant to the provisions described under
"--Defeasance" below and may not purchase, redeem or otherwise retire any
notes if:
(1) any Designated Senior Indebtedness is not paid when due; or
(2) any other default on Designated Senior Indebtedness occurs and
its maturity is accelerated;
unless, in either case, the default has been cured or waived and any
acceleration has been rescinded or the Designated Senior Indebtedness has been
paid in full. Regardless of these provisions, we are permitted to pay the
notes if we and the trustee receive written notice approving the payment from
the representative of any Designated Senior Indebtedness.
During the continuance of any default, other than a default described
in clause (1) or (2) above, with respect to any Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated without further
notice, except such notice as may be required to effect such acceleration, or
the expiration of any applicable grace periods, we are not permitted to pay
the notes for a "Payment Blockage Period." The Payment Blockage Period
commences upon the receipt by the trustee of a "Blockage Notice" of the
default from the holders of the Designated Senior Indebtedness and ends 179
days later. The Payment Blockage Period will end earlier if it is terminated:
- by written notice to the trustee and us from the person who gave
the Blockage Notice;
- because the default giving rise to the Blockage Notice is cured,
waived or otherwise no longer continuing; or
- because the Designated Senior Indebtedness has been discharged or
repaid in full.
Unless the holders of the Designated Senior Indebtedness have
accelerated the maturity of the Designated Senior Indebtedness, we are
permitted to resume paying the notes after the end of the Payment Blockage
Period. The notes will not be subject to more than one Payment Blockage Period
in any consecutive 360-day period, except that if any Blockage Notice is
delivered to the trustee by or on behalf of holders of Designated Senior
Indebtedness, other than holders of the Bank Indebtedness, a representative of
holders of Bank Indebtedness may give another Blockage Notice within such
period. However, in no event may the total number of days during which any
Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any consecutive 360-day period.
Upon any payment or distribution of the assets of Hexcel upon a
liquidation, dissolution or reorganization of Hexcel or its property:
13
- the holders of Senior Indebtedness will be entitled to receive
payment in full of the Senior Indebtedness before the holders of the
notes are entitled to receive any payment;
- until the Senior Indebtedness is paid in full, any payment or
distribution to which holders of the notes would be entitled but for
the subordination provisions of the indenture will be made to holders
of the Senior Indebtedness as their interests may appear, except that
holders of notes may receive shares of stock and any debt securities
that are subordinated to the Senior Indebtedness to at least the same
extent as the notes; and
- if a distribution is made to holders of the notes that should not
have been made to them, the holders of the notes are required to hold
it in trust for the holders of Senior Indebtedness and pay it over to
them.
If payment of the notes is accelerated because of an Event of
Default, Hexcel or the trustee shall promptly notify the holders of Designated
Senior Indebtedness of the acceleration.
In the event of a liquidation or insolvency proceeding, creditors of
ours who are holders of Senior Indebtedness may recover more than the holders
of the notes. Creditors of ours who are not holders of Senior Indebtedness may
recover less than holders of Senior Indebtedness and may recover more than the
holders of the notes.
The terms of the subordination provisions described above will not
apply to payments from money held in trust by the trustee for the payment of
principal of and interest on the notes. See "--Defeasance."
Change Of Control
Upon the occurrence of a "Change of Control," each holder may require
us to purchase its notes at a purchase price equal to 101% of the principal
amount of the notes plus accrued and unpaid interest to the date of purchase.
The following are "Change of Control" events:
(1) any person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) other than one or more Permitted Holders, becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause (1), such
person shall be deemed to have "beneficial ownership" of all shares
that any such person has the right to acquire, whether or not such
right is exercisable immediately) of more than 40% of the total
voting power of voting stock of Hexcel; provided, however, that the
Permitted Holders beneficially own (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) in the aggregate a lesser percentage of
the total voting power of voting stock of Hexcel than the other
person and do not have the right or ability to elect or designate for
election a majority of the board of directors;
(2) during any period of two consecutive years, individuals who at
the beginning of that period constituted the board of directors,
together with any new directors whose election by the board of
directors or whose nomination for election by the stockholders of
Hexcel was approved under the governance agreement or by a vote of 66
2/3% of the directors of Hexcel then still in office who were either
directors at the beginning of the two-year period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute a majority of the board of directors then in
office; or
(3) the merger or consolidation of Hexcel with or into another person
other than a Permitted Holder, or the merger of another person other
than a Permitted Holder with Hexcel, or the sale of all or
substantially all the assets of Hexcel to another person other than a
person controlled by the Permitted Holders, and in the case of any
such merger or consolidation, the securities of Hexcel that are
outstanding immediately prior to the transaction and that represent
100% of the aggregate voting power of the voting stock of Hexcel are
changed into or exchanged for cash, securities or property, unless
pursuant to the transaction, the securities are changed into or
exchanged for, in addition to any other consideration, securities of
the surviving person that represent, immediately after the
transaction, at least a majority of the aggregate voting power of the
voting stock of the surviving person or transferee.
14
If the event described in (1) above occurs as a result of a transfer
of voting stock by the Permitted Holders, a Change of Control shall not be
deemed to occur unless and until the publicly announced rating of the notes by
either Rating Agency shall, within 90 days after the date of occurrence of the
event, be less than the rating of the notes by that Rating Agency on the date
which is 90 days before the date of the occurrence of that event; provided,
however, if the notes have an investment grade rating by both Rating Agencies
on the date which is 90 days before the date of occurrence of that event, a
Change of Control shall be deemed not to occur following that event unless and
until the publicly announced rating of the notes by either Rating Agency shall
be less than investment grade rating within 90 days after the date of the
occurrence of that event. In each case the 90-day period shall be extended so
long as the rating of the notes is under publicly announced consideration for
possible downgrade by either Rating Agency.
Within 30 days after any Change of Control, we will mail a notice to
each holder of notes, a "Change of Control Offer," stating:
(1) that a Change of Control has occurred and that the holder has the
right to require us to purchase its notes at a purchase price in cash
equal to 101% of the principal amount of the notes plus accrued and
unpaid interest to the date of purchase;
(2) the circumstances and relevant facts regarding the Change of
Control, including a statement of pro forma historical income, cash
flow and capitalization after giving effect to the Change of Control;
(3) the purchase date, which shall be no earlier than 30 days nor
later than 60 days from the date the notice is mailed; and
(4) the instructions determined by us, consistent with the covenant
described under this caption, that a holder must follow in order to
have its notes purchased.
We will not be required to make a Change of Control Offer following a
Change of Control if a third party makes the Change of Control Offer in
compliance with the requirements set forth in the indenture and purchases all
notes validly tendered and not withdrawn under the Change of Control Offer.
We will comply with the requirements of the securities laws in
connection with the purchase of notes as a result of a Change of Control. To
the extent that the provisions of any securities laws conflict with the
provisions of the covenant described under this caption, we will comply with
the applicable securities laws and will not be deemed to have breached our
obligations under the change of control covenant.
The Change of Control purchase feature of the notes may make more
difficult or discourage a sale or takeover of Hexcel and, thus, the removal of
incumbent management. The Change of Control purchase feature is a result of
negotiations between Hexcel and the initial purchasers. It is not the result
of our knowledge of any specific effort to accumulate common stock of Hexcel
or to obtain control of Hexcel or part of a plan by management to adopt a
series of anti-takeover provisions. We have no present intention to engage in
a transaction involving a Change of Control, although it is possible that we
could decide to do so in the future.
Subject to the limitations discussed below, we could enter into
transactions that would not constitute a Change of Control under the
indenture, but that could increase the amount of Indebtedness outstanding at
that time or otherwise affect our capital structure or credit ratings.
Restrictions on our ability to incur additional Indebtedness are contained in
the covenant described under the caption --Covenants--Limitation on
Indebtedness." These restrictions can only be waived with the consent of the
holders of a majority in principal amount of the notes then outstanding.
Except for the limitations contained in this covenant, however, the indenture
will not contain any covenants or provisions that may afford holders of the
notes protection in the event of a highly leveraged transaction.
The Credit Agreement prohibits us from purchasing any notes and will
also provide that the occurrence of specified change of control events would
constitute a default under the Credit Agreement. In the event a change of
control occurs when we are prohibited from purchasing notes, we may seek the
consent of our lenders to the purchase of notes or attempt to refinance the
15
borrowings that contain the prohibition. If we do not obtain the consent or
repay the borrowings, we will remain prohibited from purchasing the notes. In
that case, our failure to purchase tendered notes would constitute an Event of
Default under the indenture which would, in turn, constitute a default under
the Credit Agreement. In these circumstances, the subordination provisions in
the indenture would likely restrict payment to the holders of notes.
Future Indebtedness that we may incur may contain prohibitions on the
occurrence of events that would constitute a Change of Control or require us
to repurchase the Indebtedness upon a Change of Control. Moreover, the
exercise by the holders of notes of their right to require us to purchase the
notes could cause a default under the Indebtedness, even if the Change of
Control itself does not. Finally, our ability to pay cash to the holders of
notes following the occurrence of a Change of Control may be limited by our
then existing financial resources. We cannot assure you that sufficient funds
will be available when necessary to make any required repurchases.
Our obligation to purchase the notes as a result of a Change of
Control may be waived or modified with the written consent of the holders of a
majority in principal amount of the notes.
Covenants
Limitation On Indebtedness
(a) Hexcel will not, and will not permit any Restricted Subsidiary
to, Incur, directly or indirectly, any Indebtedness; provided, however, that
Hexcel and its Restricted Subsidiaries may Incur Indebtedness if, on the date
of the Incurrence and after giving effect to the Incurrence on a pro forma
basis, the Consolidated Coverage Ratio exceeds 2.25 to 1.0.
(b) Notwithstanding paragraph (a) above, Hexcel and the Restricted
Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred by Hexcel or any Restricted Subsidiary
under the Credit Agreement; provided, however, that, after giving
effect to the Incurrence, the aggregate principal amount of such
Indebtedness then outstanding does not exceed (A) the greater of (x)
$680.0 million less the sum of all term loan principal amortization
payments scheduled to be made, whether or not in fact made, through
the date of the Incurrence under the Credit Agreement as in effect on
the issue date (the "Maximum Committed Credit Agreement Amount") and
(y) the sum of 50% of the book value of the consolidated inventory of
Hexcel and its Restricted Subsidiaries and 80% of the consolidated
accounts receivable of Hexcel and its Restricted Subsidiaries (the
"Consolidated Working Capital Amount") less the principal amount of
any Indebtedness Incurred under clause (2) below and then
outstanding, less (B) the sum of all principal payments on such
Indebtedness made under paragraph (a)(3)(A) of the covenant described
under the caption "--Limitation on Asset Dispositions";
(2) Indebtedness Incurred by foreign subsidiaries to finance the
working capital requirements of foreign subsidiaries; provided,
however, that the aggregate principal amount of such Indebtedness,
when added together with the amount of Indebtedness Incurred by all
foreign subsidiaries under this clause (2) and then outstanding, does
not exceed the lesser of (A) the sum of 50% of the book value of the
consolidated inventories of all foreign subsidiaries and 80% of the
consolidated accounts receivable of all foreign subsidiaries and (B)
the amount by which the greater of (x) the Consolidated Working
Capital Amount and (y) the Maximum Committed Credit Agreement Amount,
exceeds the principal amount of Indebtedness Incurred under clause
(1) above and then outstanding;
(3) Indebtedness owed to and held by Hexcel or any Wholly Owned
Subsidiary; provided, however, that (A) any subsequent issuance or
transfer of any capital stock which results in the Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of the Indebtedness, other than to Hexcel or a Wholly Owned
Subsidiary, shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness and (B) if Hexcel is the obligor on
such Indebtedness, the payment of such Indebtedness is expressly
subordinate to the prior payment in full in cash of all obligations
with respect to the notes;
16
(4) the notes, other than additional notes, and the exchange notes;
(5) Indebtedness, other than the Indebtedness described in clauses
(1), (2), (3) or (4) above, outstanding on the issue date;
(6) Refinancing Indebtedness in respect of Indebtedness Incurred
under paragraph (a) above or under clause (4), (5) or this clause
(6);
(7) hedging obligations directly related to Indebtedness permitted to
be Incurred by Hexcel and Restricted Subsidiaries under the indenture
or, in the case of a currency exchange protection agreement,
reasonably related to the ordinary course of business of Hexcel and
its Restricted Subsidiaries;
(8) Indebtedness, including Capitalized Lease Obligations and
purchase money Indebtedness, Incurred by Hexcel or its Restricted
Subsidiaries to finance the acquisition of tangible assets or other
capital expenditures, and Indebtedness Incurred by Hexcel or its
Restricted Subsidiaries to refinance such Capitalized Lease
Obligations and purchase money Indebtedness, in an aggregate
outstanding principal amount which, when added together with the
amount of Indebtedness Incurred under this clause (8) and then
outstanding, does not exceed $20.0 million;
(9) Indebtedness in respect of performance, surety or appeal bonds
provided in the ordinary course of Hexcel and its Restricted
Subsidiaries; or
(10) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of Hexcel and Restricted Subsidiaries
outstanding on the date of the Incurrence, other than Indebtedness
permitted by clauses (1) through (9) above or paragraph (a), does not
exceed $25.0 million.
(c) Notwithstanding the above provisions, Hexcel will not Incur any
Indebtedness under paragraph (b) above, if the proceeds of the Indebtedness
are used, directly or indirectly, to refinance any Subordinated Obligations,
unless the Indebtedness will be subordinated to the notes to at least the same
extent as the Subordinated Obligations.
(d) For purposes of determining compliance with this covenant:
(1) in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described above, Hexcel,
in its sole discretion, will classify the item of Indebtedness and
only be required to include the amount and type of the Indebtedness
in one of the above clauses and
(2) an item of Indebtedness may be divided and classified under more
than one of the types of Indebtedness described above.
(e) Notwithstanding paragraphs (a) and (b) above, Hexcel will not
Incur:
(1) any Indebtedness if that Indebtedness is contractually
subordinate or junior in right of payment in any respect to any
Senior Indebtedness, unless the Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness or
(2) any Secured Indebtedness that is not Senior Indebtedness, unless
contemporaneously therewith effective provision is made to secure the
notes equally and ratably with the Secured Indebtedness for so long
as the Secured Indebtedness is secured by a lien.
(f) In determining amounts of Indebtedness outstanding under the
Limitation on Indebtedness covenant and to avoid duplication, Indebtedness of
a person resulting from the grant by that person of security interests with
respect to, or from the issuance by that person of guarantees of, or from the
assumption of obligations with respect to letters of credit supporting,
Indebtedness Incurred by that person under the indenture, or Indebtedness
17
which that person is otherwise permitted to Incur under the indenture, shall
not be deemed to be a separate Incurrence of Indebtedness by that person.
(g) Indebtedness of any person which is outstanding at the time that
person becomes a Restricted Subsidiary, including upon designation of any
subsidiary or other person as a Restricted Subsidiary, or is merged with or
into or consolidated with Hexcel or a Restricted Subsidiary shall be deemed to
have been Incurred at the time that person becomes a Restricted Subsidiary or
merged with or into or consolidated with Hexcel or a Restricted Subsidiary, as
applicable.
Limitation On Restricted Payments
(a) Hexcel will not, and will not permit any Restricted Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time Hexcel or
any Restricted Subsidiary makes a Restricted Payment:
(1) a Default shall have occurred and be continuing, or would
result from the Restricted Payment;
(2) Hexcel is not able to Incur an additional $1.00 of Indebtedness
under paragraph (a) of the covenant described under the caption
"--Limitation on Indebtedness"; or
(3) the aggregate amount of the Restricted Payment and all other
Restricted Payments made since the issue date would exceed the sum
of, without duplication:
(A) 50% of the Consolidated Net Income accrued during the period,
which will be treated as one accounting period, from the beginning
of the fiscal quarter in which the issue date occurs to the end of
the most recent fiscal quarter ending at least 45 days before the
date of the Restricted Payment, or, in case the Consolidated Net
Income is a deficit, less 100% of that deficit; plus
(B) 100% of the aggregate Net Cash Proceeds received by Hexcel from
the issuance or sale of its capital stock, other than capital stock
within the meaning of "Disqualified Stock" as defined in the
indenture, subsequent to the issue date and on or before the date
of the Restricted Payment, other than an issuance or sale to a
subsidiary of Hexcel or an issuance or sale to an employee stock
ownership plan or to a trust established by Hexcel or any of its
subsidiaries for the benefit of their employees; plus
(C) the amount by which the Indebtedness of Hexcel is reduced on
Hexcel's balance sheet upon the conversion or exchange, other than
by a subsidiary of Hexcel, subsequent to the issue date and on or
before the date of the Restricted Payment of any Indebtedness of
Hexcel convertible or exchangeable for capital stock, other than
disqualified stock, of Hexcel, less the amount of any cash, or the
fair value of any other property, distributed by Hexcel upon the
conversion or exchange; plus
(D) an amount equal to the sum of (x) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets, in
each case to Hexcel or any Restricted Subsidiary from Unrestricted
Subsidiaries, and (y) the portion, proportionate to Hexcel's equity
interest in the subsidiary, of the fair market value of the net
assets of an Unrestricted Subsidiary at the time the Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided,
however, that this sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made
and treated as a Restricted Payment by Hexcel or any Restricted
Subsidiary in the Unrestricted Subsidiary.
(b) The preceding provisions will not prohibit:
(1) any acquisition of any capital stock of Hexcel made by exchange
for, or out of the proceeds of the substantially concurrent sale
of, capital stock of Hexcel, other than disqualified stock and
other than capital stock issued or sold to a subsidiary of Hexcel,
or options, warrants or other rights to purchase the capital stock;
provided, however, that
18
(A) the purchase or redemption shall be excluded in the calculation
of the amount of Restricted Payments and
(B) the Net Cash Proceeds from the sale shall be excluded from
clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or acquisition
or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially
concurrent sale of, capital stock of Hexcel, other than
disqualified stock and other than capital stock issued or sold to a
subsidiary of Hexcel, or options, warrants or other rights to
purchase the capital stock; provided, however, that
(A) the purchase, repurchase, redemption, defeasance or acquisition
or retirement for value shall be excluded in the calculation of the
amount of Restricted Payments and
(B) the Net Cash Proceeds from the sale shall be excluded from
clause (3)(B) of paragraph (a) above;
(3) any purchase, repurchase, redemption, defeasance or acquisition
or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of Hexcel which is permitted to be
Incurred under the covenant described under the caption
"--Limitation on Indebtedness"; provided, however, that the
Indebtedness
(A) shall have a stated maturity later than the stated maturity of
the notes and
(B) shall have an Average Life greater than the remaining Average
Life of the notes;
provided further, however, that the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value
shall be excluded in the calculation of the amount of Restricted
Payments;
(4) any purchase or redemption of Subordinated Obligations from Net
Available Cash after application according to clauses (A), (B) and
(C) of paragraph (a)(3) of the covenant described under the caption
"--Limitation on Asset Dispositions"; provided, however, that the
purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments;
(5) dividends paid within 60 days after the date of declaration
thereof if at the date of declaration the dividend would have
complied with this covenant; provided, however, that at the time of
payment of the dividend, no other Default shall have occurred and
be continuing, or result therefrom; provided further, however, that
the declaration, but not the payment, of such dividend shall be
included in the calculation of the amount of Restricted Payments;
(6) so long as no Default shall have occurred and be continuing, or
result therefrom, Investments in Joint Ventures or other persons
engaged in a related business in an aggregate amount which, when
added together with the amount of all other Investments made
according to this clause (6) which at the time have not been repaid
through dividends, repayments of loans or advances or other
transfers of assets, does not exceed $60.0 million; provided,
however, that the amount of the Investments shall be excluded in
the calculation of Restricted Payments;
(7) so long as no Default shall have occurred and be continuing, or
result therefrom, payments with respect to employee or director
stock options, stock incentive plans or restricted stock plans of
Hexcel, including any redemption, repurchase, acquisition,
cancellation or other retirement for value of shares of capital
stock of Hexcel, restricted stock, options on any of these shares
or similar securities held by directors, officers or employees or
former directors, officers or employees or by any Plan upon death,
disability, retirement or termination of employment of any of these
persons under the terms of the Plan or agreement under which the
shares or related rights were issued or acquired; provided,
however, that the amount of any of these payments shall be included
in the calculation of Restricted Payments;
19
(8) so long as no Default shall have occurred and be continuing, or
result therefrom, any purchase or defeasance of Subordinated
Obligations upon a Change of Control to the extent required by the
indenture or other agreement or instrument under which the
Subordinated Obligations were issued, but only if Hexcel has first
complied with all its obligations under the provisions described
under the caption "--Change of Control"; provided, however, that
the amount of the purchase or defeasance shall be excluded in the
calculation of Restricted Payments; or
(9) so long as no Default shall have occurred and be continuing, or
result therefrom, Restricted Payments in an aggregate amount which,
when added together with the amount of all other Restricted
Payments made under, this clause (9) which at that time have not
been repaid through dividends, repayments of loans or advances or
other transfers of assets, does not exceed $40.0 million; provided,
however, that the amount of the Restricted Payments shall be
included in the calculation of Restricted Payments.
Limitation On Restrictions On Distributions From Restricted
Subsidiaries
Hexcel will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(a) pay dividends or make any other distributions on its capital
stock to Hexcel or a Restricted Subsidiary or pay any Indebtedness
owed to Hexcel,
(b) make any loans or advances to Hexcel or any Restricted
Subsidiary, or
(c) transfer any of its property or assets to Hexcel or any
Restricted subsidiary (collectively "Payment Restrictions"), except:
(1) any Payment Restriction imposed under the Credit Agreement, the
indenture, Refinancing Indebtedness in respect of the notes and any
agreement in effect at or entered into on the issue date;
(2) any Payment Restriction with respect to a Restricted Subsidiary
under an agreement relating to any Indebtedness Incurred by the
Restricted Subsidiary on or before the date on which the Restricted
Subsidiary was acquired by Hexcel, other than Indebtedness Incurred
as consideration in, or to provide all or any portion of the funds or
credit support utilized to complete, the transaction or series of
related transactions as a result of which the Restricted Subsidiary
became a Restricted Subsidiary of, or was acquired by, Hexcel, and
outstanding on that date;
(3) any Payment Restriction under an agreement effecting a
refinancing of Indebtedness Incurred under an agreement referred to
in clause (1) or (2) of this covenant or this clause (3) or contained
in any amendment to an agreement referred to in clause (1) or (2) of
this covenant or this clause (3); provided, however, that the Payment
Restrictions with respect to the Restricted Subsidiary contained in
the refinancing agreement or amendment are no less favorable to the
holders of the notes than those with respect to the Restricted
Subsidiary contained in the predecessor agreements;
(4) in the case of clause (c) above, any encumbrance or restriction
consisting of customary non-assignment provisions in leases or other
contracts governing leasehold interests to the extent these
provisions restrict the transfer of the lease or the property leased
under the leases and contracts;
(5) any restriction with respect to a Restricted Subsidiary imposed
under an agreement entered into for the sale or disposition of all or
substantially all the capital stock or assets of the Restricted
Subsidiary pending the closing of the sale or disposition; and
(6) any encumbrance or restriction contained in the governing
documents of any Joint Venture Subsidiary.
Limitation On Asset Dispositions
20
(a) Hexcel will not, and will not permit any Restricted Subsidiary
to, make any Asset Disposition unless:
(1) Hexcel or a Restricted Subsidiary receives consideration at
least equal to the fair market value, of the shares and assets
subject to the Asset Disposition;
(2) at least 75% of the consideration for the Asset Disposition
received by Hexcel or the Restricted Subsidiary is in the form of
cash; and
(3) an amount equal to 100% of the Net Available Cash from the
Asset Disposition is applied by Hexcel or the Restricted
Subsidiary, as the case may be: (A) first, to the extent Hexcel or
the Restricted Subsidiary elects or is required by the terms of any
Senior Indebtedness or Indebtedness of the Restricted Subsidiary,
to prepay, repay or purchase Senior Indebtedness or Indebtedness,
other than any disqualified stock, of a Restricted Subsidiary, in
each case other than Indebtedness owed to Hexcel or an affiliate of
Hexcel, within one year from the later of the Asset Disposition or
the receipt of the Net Available Cash; (B) second, to the extent
Hexcel or the Restricted Subsidiary elects, to acquire additional
assets within one year from the later of the Asset Disposition or
the receipt of the Net Available Cash; (C) third, to make an offer
to the holders of the notes, and to holders of other Senior
Subordinated Indebtedness designated by Hexcel, to purchase notes,
and the other Senior Subordinated Indebtedness, according to the
indenture; and (D) fourth, to the extent of the balance of the Net
Available Cash after application according to clauses (A), (B) and
(C), for any purpose not prohibited by the terms of the indenture.
Notwithstanding the above provisions of this paragraph, Hexcel and
the Restricted Subsidiaries will not be required to apply any Net Available
Cash according to the foregoing paragraph except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which are not applied
according to the foregoing paragraph exceeds $15.0 million. Pending
application of Net Available Cash under this covenant, the Net Available Cash
will be invested in Temporary Cash Investments.
For the purposes of the covenant described under this caption, the
following shall be deemed to be cash:
(x) the assumption of Indebtedness of Hexcel or any Restricted
Subsidiary and the release of Hexcel or the Restricted Subsidiary
from all liability with respect to the Indebtedness in connection
with the Asset Disposition, provided, however, that the amount of
the Indebtedness shall not be deemed to be cash for the purpose of
the term "Net Available Cash"; and (y) securities received by
Hexcel or any Restricted Subsidiary from the transferee that are
promptly converted by Hexcel or the Restricted Subsidiary into
cash.
(b) In the event of an Asset Disposition that requires the purchase
of the notes and other Senior Subordinated Indebtedness, we will
purchase notes tendered and other Senior Subordinated Indebtedness
at a purchase price of 100% of their principal amount, without
premium, plus accrued but unpaid interest, or, in respect of the
Senior Subordinated Indebtedness, the lesser price, if any, as may
be provided for by the terms of the Senior Subordinated
Indebtedness according to the procedures set forth in the
indenture. If the aggregate purchase price of notes and any other
Senior Subordinated Indebtedness tendered is less than the Net
Available Cash, we will be entitled to apply the remaining Net
Available Cash according to clause (a)(3)(D) above. We will not be
required to make the offer to purchase notes and other Senior
Subordinated Indebtedness if the Net Available Cash available for
the offer, after application of Net Available Cash according to
clauses (A) and (B) of paragraph (a) above, is less than $10.0
million. The lesser amount shall be carried forward to determine
whether the offer is required for any subsequent Asset Disposition.
(c) Hexcel will comply with the requirements of the securities laws
in connection with the purchase of the notes under this covenant.
To the extent that the provisions of any securities laws conflict
with provisions of this covenant, Hexcel will comply with the
applicable securities laws and shall not be deemed to have breached
its obligations under this covenant.
Limitation On Affiliate Transactions
21
(a) Hexcel will not, and will not permit any Restricted Subsidiary
to, enter into or permit to exist any "Affiliate Transaction,"
including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service,
with any affiliate of Hexcel unless:
(1) the Affiliate Transaction is made in good faith and on terms
which are fair and reasonable to Hexcel or the Restricted
Subsidiary, as the case may be;
(2) if the Affiliate Transaction involves an amount in excess of
$5.0 million, the terms of the Affiliate Transaction are set forth
in writing and a majority of the non-employee directors of Hexcel
disinterested with respect to the Affiliate Transaction have
determined in good faith that the terms are fair and reasonable;
and
(3) if the Affiliate Transaction involves an amount in excess of
$10.0 million, the board of directors shall also have received a
written opinion from an investment banking firm to the effect that
the Affiliate Transaction is fair, from a financial standpoint, to
Hexcel and its Restricted Subsidiaries.
(b) The provisions of paragraph (a), above, shall not prohibit:
(1) any Permitted Investment and any Restricted Payment permitted
to be paid under the covenant described under the caption
"--Limitation on Restricted Payments";
(2) any issuance of securities, or other payments, awards or grants
in cash, securities or otherwise under, or the funding of,
employment arrangements, stock options and stock ownership plans
approved by the board of directors;
(3) the payment of reasonable fees to directors of Hexcel and its
Restricted Subsidiaries;
(4) transactions between Hexcel or a Restricted Subsidiary and one
or more Restricted Subsidiaries; provided, however, that no
affiliate of Hexcel, other than another Restricted Subsidiary,
owns, directly or indirectly, any capital stock in any of the
Restricted Subsidiaries;
(5) transactions in the ordinary course of business, including
loans, expense advances and reimbursements, between Hexcel or any
of its Restricted Subsidiaries, on the one hand, and any employee
of Hexcel or any of its Restricted Subsidiaries, on the other hand;
(6) transactions with affiliates entered into in the ordinary
course of business of Hexcel or its Restricted Subsidiaries, on
terms which are, in the opinion of Hexcel's management or the board
of directors, fair and reasonable to Hexcel or its Restricted
Subsidiaries;
(7) the granting and performance of registration rights for shares
of capital stock of Hexcel under a written registration rights
agreement approved by a majority of directors of Hexcel that are
disinterested with respect to the transactions;
(8) transactions with affiliates solely in their capacity as
holders of Indebtedness or capital stock of Hexcel or any of its
subsidiaries, so long as Indebtedness or capital stock of the same
class is also held by persons that are not affiliates of Hexcel and
these affiliates are treated no more favorably than holders of the
Indebtedness or the capital stock generally, and the redemption of
the outstanding principal amount of the Ciba Notes, together with
accrued interest;
(9) transactions according to the governance agreement, and any
amendments to the governance agreement that are not adverse to the
interests of the holders of the notes and which are approved by a
majority of the directors of Hexcel disinterested with respect to
the amendment; and
(10) any transaction between Hexcel or any Restricted Subsidiaries
and any of the Existing Joint Ventures under agreements in effect
on the issue date.
22
Limitation On The Sale Or Issuance Of Capital Stock Of Restricted
Subsidiaries
Hexcel will not sell any shares of capital stock of a Restricted
Subsidiary, and shall not permit any Restricted Subsidiary to issue or sell
shares of its capital stock, in each case, other than preferred stock within
the meaning of "Qualified Preferred Stock" as defined in the indenture,
except:
(1) to Hexcel or a Wholly Owned Subsidiary;
(2) directors' qualifying shares;
(3) if, immediately after giving effect to the issuance or sale,
neither Hexcel nor any of its subsidiaries own any capital stock of
the Restricted Subsidiary; or
(4) if, immediately after giving effect to the issuance or sale,
the Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in the person remaining after giving
effect to the issuance or sale would have been permitted to be made
under the covenant described under the caption "--Limitation on
Restricted Payments" if made on the date of the issuance or sale.
The issuance or sale of shares of capital stock of any Restricted
Subsidiary of Hexcel will not violate the provisions above if the shares are
issued or sold in connection with:
- the formation or capitalization of a Restricted Subsidiary which,
at the time of the issuance or sale or immediately after the
issuance or sale, is a Joint Venture Subsidiary or
- a single transaction or a series of substantially contemporaneous
transactions by which the Restricted Subsidiary becomes a
Restricted Subsidiary of Hexcel by reason of the acquisition of
securities or assets from another person.
Merger And Consolidation
Hexcel will not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, all or
substantially all its assets to, any other person, unless:
(1) the successor company shall be a person organized and existing
under the laws of the United States of America, any U.S. State or
the District of Columbia, and the successor company, if other than
Hexcel, shall expressly assume, by a supplemental indenture all the
obligations of Hexcel under the notes and the indenture;
(2) immediately after giving effect to the transaction, and
treating any Indebtedness which becomes an obligation of the
successor company or any Restricted Subsidiary as a result of the
transaction as having been Incurred by the successor company or the
Restricted Subsidiary at the time of the transaction, no Default
shall have occurred and be continuing;
(3) immediately after giving effect to the transaction, the
successor company would be able to Incur an additional $1.00 of
Indebtedness under paragraph (a) of the covenant described under
the caption "--Limitation on Indebtedness";
(4) immediately after giving effect to the transaction, the
successor company shall have Consolidated Net Worth in an amount
that is not less than the Consolidated Net Worth of Hexcel before
the transaction; and
(5) Hexcel shall have delivered to the trustee an officers'
certificate and an opinion of counsel, each stating that the
consolidation, merger or transfer and the supplemental indenture,
if any, comply with the indenture.
Nothing contained in the preceding paragraphs shall prohibit any
wholly owned subsidiary from merging with or into, or transferring all or part
of its assets to, Hexcel.
23
The successor company will succeed to, and be substituted for Hexcel
under the indenture, but the predecessor company in the case of a conveyance,
transfer or lease shall not be released from the obligation to pay the
principal of and interest on the notes.
Limitation On Business Activities
Hexcel will not, and will not permit any Restricted Subsidiary to,
engage in any business other than in businesses conducted by Hexcel and its
Restricted Subsidiaries on the issue date and businesses which are reasonably
related, ancillary or complementary thereto.
SEC Reports
Hexcel will file with the SEC and provide the trustee and the holders
of the notes with the annual reports and the applicable information, documents
and other reports as are specified in the Exchange Act.
In addition Hexcel will file a copy of all of the information and
reports referred to above with the SEC for public availability within the time
periods specified in the SEC's rules and regulations. Hexcel will make this
information available to securities analysts and prospective investors upon
request.
Defaults
Each of the following is an Event of Default:
(1) a default for 30 days in the payment when due of interest on
the notes, whether or not prohibited by the subordination
provisions of the indenture;
(2) a default in payment when due of the principal of any note at
its stated maturity, upon optional redemption, upon required
repurchase, upon declaration or otherwise, whether or not
prohibited by the subordination provisions of the indenture;
(3) the failure by Hexcel to comply with its obligations described
under the caption "--Covenants--Merger and Consolidation" above;
(4) the failure by Hexcel to comply for 30 days after notice with
any of its obligations in the covenants described above under the
caption "--Change of Control," other than a failure to purchase
notes, or under the captions "--Covenants--Limitation on
Indebtedness," "--Limitation on Restricted Payments," "--Limitation
on Restrictions on Distributions from Restricted Subsidiaries,"
"--Limitation on Asset Dispositions," other than a failure to
purchase notes, "--Limitation on Affiliate Transactions,"
"--Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries," "--Limitation on Business Activities" or
"--SEC Reports";
(5) the failure by Hexcel to comply for 60 days after notice with
any of the other agreements contained in the indenture;
(6) Indebtedness of Hexcel or any significant subsidiary is not
paid within any applicable grace period after final maturity or is
accelerated by the holders of the Indebtedness because of a default
and the total amount of Indebtedness unpaid or accelerated exceeds
$10.0 million;
(7) events of bankruptcy, insolvency or reorganization of Hexcel or
a significant subsidiary; or
(8) any judgment or decree for the payment of money in excess of
$10.0 million is entered against Hexcel or a significant
subsidiary, remains outstanding for a period of 60 days following
the judgment and is not discharged, waived or stayed within 10 days
after notice.
24
However, a default under clauses (4), (5) or (8) will not constitute
an Event of Default until the trustee or the holders of 25% in principal
amount of the outstanding notes notify Hexcel of the default and Hexcel does
not cure the default within the time specified after receipt of the notice.
If an Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the outstanding notes may
declare the principal of and accrued but unpaid interest on all the notes to
be due and payable. Upon this declaration, the principal and interest shall be
due and payable immediately. If an Event of Default relating to events of
bankruptcy, insolvency or reorganization of Hexcel occurs and is continuing,
the principal of and interest on all the notes will become and be immediately
due and payable. Under some circumstances, the holders of a majority in
principal amount of the outstanding notes may rescind any acceleration with
respect to the notes and its consequences.
In case an Event of Default occurs and is continuing, the trustee
will be under no obligation to exercise any of the rights or powers under the
indenture at the request or direction of any of the holders of the notes
unless the holders have offered to the trustee indemnity or security
satisfactory to it against any loss, liability or expense. Except to enforce
the right to receive payment of principal, premium, if any, or interest when
due, no holder of a note may pursue any remedy with respect to the indenture
or the notes unless:
(1) the holder has previously given the trustee notice that an
Event of Default is continuing;
(2) holders of at least 25% in principal amount of the outstanding
notes have requested the trustee to pursue the remedy;
(3) the holders have offered the trustee security or indemnity
satisfactory to it against any loss, liability or expense;
(4) the trustee has not complied with the request within 60 days;
and
(5) the holders of a majority in principal amount of the
outstanding notes have not given the trustee a direction
inconsistent with the request within the 60-day period.
The holders of a majority in principal amount of the outstanding
notes are given the right to direct the time, method and place of conducting
any proceeding for any remedy available to the trustee or of exercising any
trust or power conferred on the trustee. The trustee, however, may refuse to
follow any direction that conflicts with law or the indenture or that the
trustee determines is unduly prejudicial to the rights of any other holder of
a note or that would involve the trustee in personal liability.
The indenture provides that if a Default occurs and is continuing and
is known to the trustee, the trustee must mail to each holder of the notes
notice of the Default within 90 days after it occurs. Except in the case of a
Default in the payment of principal of or interest on any note, the trustee
may withhold notice if a committee of its trust officers in good faith
determines that withholding notice is in the interests of the holders of the
notes. In addition, Hexcel is required to deliver to the trustee, after the
end of each fiscal year, a certificate indicating whether the signers of the
certificate know of any Default that occurred during the previous year. Hexcel
also is required to deliver to the trustee, within 30 days after its
occurrence, written notice of any event which would constitute a Default, its
status and what action Hexcel is taking or proposes to take in respect to the
event.
Amendments And Waivers
Subject to exceptions, the indenture may be amended with the consent
of the holders of a majority in principal amount of the notes then
outstanding. This may include consents obtained in connection with a tender
offer or exchange for the notes. Any past default or compliance with any
provisions may also be waived with the consent of the holders of a majority in
principal amount of the notes then outstanding. However, without the consent
of holders of 80% or more in principal amount of the notes then outstanding,
Hexcel may not, with respect to any notes held by a non-consenting holder,
25
make any change to the subordination provisions of the indenture that would
adversely affect holders of the notes.
In addition, without the consent of each holder affected, an
amendment or waiver may not:
(1) reduce the principal amount of notes whose holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of interest
on any note;
(3) reduce the principal of or extend the stated maturity of any
note;
(4) reduce the amount payable upon the redemption of any note or
change the time at which any note may be redeemed as described
under "--Optional Redemption";
(5) make any note payable in money other than that stated in the
notes;
(6) impair the right of any holder of the notes to receive payment
of principal of and interest on the holder's notes on or after the
due dates for payment or to institute suit for the enforcement of
any payment on or with respect to the holder's notes; or
(7) make any change in the amendment provisions which require each
holder's consent or in the waiver provisions.
Notwithstanding the preceding, without the consent of any holder of
notes, Hexcel and the trustee may amend or supplement the indenture or the
notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place
of certificated notes, provided, that the uncertificated notes are
issued in registered form for purposes of Section 163(f) of the
Code, or in a manner such that the uncertificated notes are
described in Section 163(f)(2)(B) of the Code;
(3) to provide for the assumption by a successor corporation of the
obligations of Hexcel under the indenture;
(4) to add guarantees with respect to the notes or to secure the
notes;
(5) to add to the covenants of Hexcel for the benefit of the
holders of the notes or to surrender any right or power conferred
upon Hexcel;
(6) to make any change that does not adversely affect the rights
under the indenture of any holder; or
(7) to comply with requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust
Indenture Act.
No amendment may be made to the subordination provisions of the
indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of the Senior Indebtedness
consent to the change.
The consent of the holders of the notes is not necessary under the
indenture to approve the particular form of any proposed amendment. It is
sufficient if the consent approves the substance of the proposed amendment.
After an amendment under the indenture becomes effective, Hexcel is
required to mail to holders of the notes a notice briefly describing the
amendment. However, the failure to give notice to all holders of the notes, or
any defect in the notice, will not impair or affect the validity of the
amendment.
26
The notes will be issued in registered form and will be transferable
only upon the surrender of the notes being transferred for registration of
transfer. We may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges.
Defeasance
Hexcel may terminate at any time all its obligations under the notes
and the indenture, except for specified obligations, including those
respecting the defeasance trust and obligations to register the transfer or
exchange of the notes, to replace mutilated, destroyed, lost or stolen notes
and to maintain a registrar and paying agent in respect of the notes. This
type of termination is referred to as legal defeasance.
In addition, Hexcel may terminate at any time its obligations
described under the caption "--Change of Control" and under the covenants
described under the caption "--Covenants", other than the covenant described
under the caption "--Covenants--Merger and Consolidation", the operation of
the cross acceleration provision, the bankruptcy provisions with respect to
significant subsidiaries and the judgment default provision described under
the caption "--Defaults" above and the limitations contained in clauses (3)
and (4) of the covenant described under the caption "--Covenants--Merger and
Consolidation" above. This type of termination is referred to as covenant
defeasance.
Hexcel may exercise its legal defeasance option regardless of its
prior exercise of its covenant defeasance option. If Hexcel exercises its
legal defeasance option, payment of the notes may not be accelerated because
of an Event of Default. If Hexcel exercises its covenant defeasance option,
payment of the notes may not be accelerated because of an Event of Default
specified in clause (4), (6), (7), with respect only to significant
subsidiaries, or (8) under the caption "--Defaults" above or because of the
failure of Hexcel to comply with clause (3) or (4) of the covenant described
under the caption "--Covenants--Merger and Consolidation" above.
In order to exercise either legal defeasance or covenant defeasance,
Hexcel must irrevocably deposit in a defeasance trust money or U.S. government
obligations for the payment of principal and interest on the notes to
redemption or maturity. Hexcel must also comply with other conditions,
including delivery to the trustee of an opinion of counsel to the effect that
holders of the notes will not recognize income, gain or loss for federal
income tax purposes as a result of the deposit and defeasance and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if the deposit and defeasance had
not occurred. In the case of legal defeasance only, this opinion of counsel
must be based on a ruling of the IRS or other change in applicable federal
income tax law.
Concerning The Trustee
The Bank of New York is the trustee under the indenture and has been
appointed by Hexcel as registrar and paying agent for the notes.
The holders of a majority in principal amount of the then outstanding
notes will have the right to direct the time, method and place for exercising
any remedy available to the trustee, subject to various exceptions. The
indenture provides that in case an Event of Default shall occur and be
continuing, the trustee will be required to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to these provisions,
the trustee will be under no obligation to exercise any of its rights or
powers under the indenture at the request of any holder of notes, unless the
holder shall have offered to the trustee security and indemnity satisfactory
to it against any loss, liability or expense.
Governing Law
The indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
27
Definitions Of Terms Used In The Indenture
The following defined terms are used in the indenture and are
included in this prospectus because they are necessary to understand the
description of the notes contained in this prospectus.
"Additional Assets" means any:
(1) property or assets (other than Indebtedness and capital stock)
to be used by Hexcel, a Restricted Subsidiary or a Joint Venture;
(2) capital stock of a person that becomes a Restricted Subsidiary
as a result of the acquisition of such capital stock by Hexcel or
another Restricted Subsidiary; or
(3) capital stock constituting a minority interest in any person
that at such time is a Restricted Subsidiary or a Joint Venture;
provided, however, that any Restricted Subsidiary described in clauses (2) and
(3) is primarily engaged in related business.
"Affiliate" of any specified person means:
(1) any other person, directly or indirectly, controlling or
controlled by or under direct or indirect common control with such
specified person; or
(2) any other person who is a director or officer (A) of such
specified person, (B) of any subsidiary of such specified person or
(C) of any person described in clause (1).
For the purposes of this definition, "control" when used with respect
to any person means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. For purposes of the
covenants described under the captions "--Covenants--Limitation on Affiliate
Transactions" and "--Covenants--Limitation on Asset Dispositions" only,
"affiliate" shall also mean any beneficial owner of capital stock representing
10% or more of the total voting power of the voting stock (on a fully diluted
basis) of Hexcel or of rights or warrants to purchase such capital stock
(whether or not currently exercisable) and any person who would be an
affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any direct or indirect sale, lease,
transfer, conveyance or other disposition (or series of related sales, leases,
transfers, conveyances or dispositions) of shares of capital stock of a
Restricted Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this definition as a
"disposition") by Hexcel or any Restricted Subsidiary (including any
disposition by means of a merger, consolidation or similar transaction)
involving an amount in excess of $3.0 million other than:
(1) a disposition by a Restricted Subsidiary to Hexcel, by Hexcel
or a Restricted Subsidiary to a Restricted Subsidiary or between
Restricted Subsidiaries;
(2) a disposition of property or assets at fair market value in the
ordinary course of business and consistent with past practices of
Hexcel or any of its Restricted Subsidiaries, as applicable
(including sales of products to customers, disposition of excess
inventory and dispositions of used or replaced equipment);
(3) the disposition or grant of licenses to third parties in
respect of intellectual property;
(4) a sale or disposition of assets for the purpose of forming any
Joint Venture, in exchange for an interest in such Joint Venture;
(5) the sale of Specified Properties;
28
(6) a disposition by Hexcel or any subsidiary of assets within 24
months after such assets were directly or indirectly acquired as
part of an acquisition of other properties or assets (including
capital stock) (the "Primary Acquisition"), if the assets being
disposed of are "non-core" assets (as determined in good faith by a
majority of the board of directors) or are required to be disposed
of pursuant to any law, rule or regulation or any order of or
settlement with any court or governmental authority, and the
proceeds therefrom are used within 18 months after the date of sale
to repay any Indebtedness Incurred in connection with the Primary
Acquisition of such assets;
(7) for purposes of the covenant described under the caption
"--Covenants--Limitation on Asset Dispositions" only, a disposition
that constitutes a Restricted Payment permitted by the covenant
described under the caption "--Covenants--Limitation on Restricted
Payments"; or
(8) an Asset Disposition that also constitutes a Change of Control;
provided, however, that Hexcel complies with all its obligations
described under the caption "--Change of Control."
"Average Life" means, as of the date of determination, with respect
to any Indebtedness, the quotient obtained by dividing (x) the sum of the
products of the numbers of year from the date of determination to the date of
each successive scheduled principal payment of such Indebtedness or scheduled
redemption multiplied by the amount of such payment by (y) the sum of all such
payments.
"Bank Indebtedness" means any and all Indebtedness and other amounts
payable under or in respect of the Credit Agreement including principal,
premium (if any), interest (including interest accruing at the contract rate
specified in the Credit Agreement (including any rate applicable upon default)
on or after the filing of any petition in bankruptcy, or the commencement of
any similar state, federal or foreign reorganization or liquidation
proceeding, relating to Hexcel and interest that would accrue but for the
commencement of such proceeding whether or not a claim for post-filing
interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, guarantees and all other amounts payable thereunder
or in respect thereof.
"Board Of Directors" means the board of directors of Hexcel or any
committee thereof duly authorized to act on behalf of the board.
"Capitalized Lease Obligation" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP. The amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP. The stated maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (x) the aggregate amount of EBITDA for the most recent four
consecutive fiscal quarters ending at least 45 days prior to the date of such
determination to (y) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that:
(1) if Hexcel or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains
outstanding on such date of determination or if the transaction
giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, or both, EBITDA and
Consolidated Interest Expense for such period shall calculated
after giving effect on a pro forma basis to (a) such Indebtedness
as if such Indebtedness had been Incurred on the first day of such
period and (b) the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of
such new Indebtedness as if such discharge had occurred on the
first day of such period;
(2) if Hexcel or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other
than Indebtedness Incurred under any revolving credit facility
unless such Indebtedness has been permanently repaid and has not
been replaced) on the date of the transaction giving rise to the
need to calculate the Consolidated Coverage Ratio, EBITDA and
Consolidated Interest Expense for such period shall be calculated
on a pro forma basis as if such discharge had occurred on the first
day of such period and as if Hexcel or such Restricted Subsidiary
has not earned the interest income actually earned during such
29
period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such
Indebtedness;
(3) if since the beginning of such period Hexcel or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject
of such Asset Disposition for such period or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for
such period and Consolidated Interest Expense for such period shall
be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of Hexcel or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to Hexcel and its continuing Restricted
Subsidiaries in connection with such Asset Disposition for such
period (or, if the capital stock of any Restricted Subsidiary is
sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to
the extent Hexcel and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale);
(4) if since the beginning of such period Hexcel or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment
in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction
causing a calculation to be made hereunder, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving
pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the
first day of such period; and
(5) if since the beginning of such period any person (that
subsequently became a Restricted Subsidiary or was merged with or
into Hexcel or any Restricted Subsidiary since the beginning of
such period) shall have made any Asset Disposition, any Investment
or acquisition of assets requiring an adjustment pursuant to clause
(3) or (4) above if made by Hexcel or a Restricted Subsidiary
during such period, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition of
assets occurred on the first day of such period. For purposes of
this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated
with any Indebtedness Incurred in connection therewith, the pro
forma calculations shall be determined in good faith by a
responsible financial or accounting officer of Hexcel. If any
Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall
be calculated as if the rate in effect on the date of determination
had been the applicable rate for the entire period (taking into
account any interest rate protection agreement applicable to such
Indebtedness if such interest rate protection agreement has a
remaining term as at the date of determination in excess of 12
months).
"Consolidated Interest Expense" means, for any period, the sum of,
without duplication:
(a) total interest expense of Hexcel and its consolidated
Restricted Subsidiaries for such period, including, to the extent
not otherwise included in such interest expense, and to the extent
Incurred by Hexcel or its Restricted Subsidiaries in such period,
without duplication,
(1) interest expense attributable to capital leases;
(2) amortization of debt discount and debt issuance cost;
(3) amortization of capitalized interest;
(4) non-cash interest expense;
(5) accrued interest;
30
(6) amortization of commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers'
acceptance financing;
(7) interest actually paid by Hexcel or any such Restricted
Subsidiary under any guarantee of Indebtedness of any other person;
(8) net payments, if any, made pursuant to interest rate protection
agreements (including amortization of fees);
(b) preferred stock dividends paid during such period in respect of
all preferred stock of Restricted Subsidiaries of Hexcel held by
persons other than Hexcel; and
(c) cash contributions made during such period to any employee
stock ownership plan or other trust for the benefit of employees to
the extent such contributions are used by such plan or trust to pay
interest or fees to any person (other than Hexcel) in connection
with Indebtedness Incurred by such plan or trust to purchase
capital stock of Hexcel.
"Consolidated Net Income" means, for any period, the net income
(loss) of Hexcel and its consolidated subsidiaries; provided, however, that
there shall not be included in such Consolidated Net Income:
(1) any net income (loss) of any person if such person is not a
Restricted Subsidiary, except that
(A) Hexcel's equity in the net income of any such person for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
person during such period to Hexcel or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend
or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (3) below); and
(B) Hexcel's equity in a net loss of any such person for such
period shall be included in determining such Consolidated Net
Income;
(2) any net income (loss) of any person acquired by Hexcel or a
subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition;
(3) any net income (loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of
distributions by such Restricted Subsidiary, directly or
indirectly, to Hexcel, except that
(A) Hexcel's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash that could have been
distributed by such Restricted Subsidiary during such period to
Hexcel or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend to another
Restricted Subsidiary, to the limitation contained in this clause);
and
(B) Hexcel's equity in a net loss of any such Restricted Subsidiary
for such period shall be included in determining such Consolidated
Net Income;
(4) any gain (but not loss) realized upon the sale or other
disposition of any assets of Hexcel, its consolidated subsidiaries
or any other person which is not sold or otherwise disposed of in
the ordinary course of business and any gain (but not loss)
realized upon the sale or other disposition of any capital stock of
any person;
(5) any extraordinary gain or loss;
(6) cumulative effect of a change in accounting principles; and
(7) any non-cash business consolidation and acquisition charges
recognized with respect to the Clark-Schwebel acquisition (except
to the extent such non-cash charges represent an accrual of or a
reserve for cash expenditures in any future period).
31
Notwithstanding the foregoing, for the purposes of the covenant
described under the caption "--Covenants--Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net
Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to Hexcel or a
Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted
under such covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Hexcel and its consolidated subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of Hexcel ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as the sum
of:
(1) the par or stated value of all outstanding capital stock of
Hexcel; plus
(2) paid-in capital or capital surplus relating to such capital
stock; plus
(3) any retained earnings or earned surplus; less
(4) any accumulated deficit; less
(5) any amounts attributable to disqualified stock.
"Credit Agreement" means:
(1) one or more credit agreements, loan agreements or similar
agreements providing for working capital advances, term loans, letter
of credit facilities or similar advances, loan or facilities to
Hexcel, any Restricted Subsidiary, domestic or foreign, or any or all
of such persons, including the Second Amended and Restated Credit
Agreement in effect on the issue date of the notes, among Hexcel and
specified subsidiaries of Hexcel, as borrowers, the lenders party
thereto and Credit Suisse First Boston as administrative agent for
the lenders, Citibank, N.A., as documentation agent for the lenders,
as the same may be amended, modified, restated or supplemented from
time to time, or any other indebtedness referred to in clause (b)(1)
of the covenant described under the caption "--Covenants--Limitation
on Indebtedness"; and
(2) any one or more agreements governing advances, loans or
facilities provided to refund, refinance, replace or renew (including
subsequent or successive refundings, financings, replacements and
renewals) Indebtedness under the agreement or agreements referred to
in the foregoing clause (1), as the same may be amended, modified,
restated or supplemented from time to time.
As of the date of this prospectus, "Credit Agreement" means (i) the
Credit and Guaranty Agreement, dated as of March 19, 2003, by and among Hexcel
Corporation, Hexcel Composites Limited, Hexcel Composites GmbH (Austria),
Hexcel Composites GmbH (Germany), the Guarantors named therein, the lenders
from time to time party thereto, Fleet Capital Corporation, as Administrative
Agent, Fleet National Bank, London U.K. branch, trading as FleetBoston
Financial, as Fronting Bank and Issuing Bank, Fleet National Bank, as Issuing
Bank, and Fleet Securities Inc., as Lead Arranger and (ii) Hexcel's 9.875%
Senior Secured Notes due 2008 issued pursuant to the Indenture, dated as of
March 19, 2003 among Hexcel Corporation, the Guarantors named therein and
Wells Fargo Bank Minnesota, National Association, as trustee.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Designated Senior Indebtedness" means:
(1) the Bank Indebtedness; and
32
(2) any other Senior Indebtedness (other than hedging obligations)
which, at the date of determination, has an aggregate principal
amount outstanding of, or under which, at the date of determination,
the holders of which are committed to lend up to, at least $25.0
million and is specifically designated by Hexcel in the instrument
evidencing or governing the Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the indenture in an Officers'
Certificate received by the Trustee.
"EBITDA" for any period means the sum of Consolidated Net Income
plus, without duplication, the following to the extent deducted in calculating
such Consolidated Net Income:
(1) all income tax expense of Hexcel and its consolidated Restricted
Subsidiaries for such period;
(2) Consolidated Interest Expense for such period;
(3) depreciation expense and amortization expense of Hexcel and its
consolidated Restricted Subsidiaries for such period (excluding
amortization expense attributable to a prepaid cash item that was
paid in a prior period);
(4) all other non-cash items of Hexcel and its consolidated
Restricted Subsidiaries for such period (excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for
cash expenditures in any future period) reducing Consolidated Net
Income less all non-cash items increasing Consolidated Net Income for
such period; and
(5) business consolidation and acquisition charges recognized for
such period to the extent recognized during or prior to the fiscal
year ended December 31, 2000; provided, however, that the aggregate
amount of the charges described in this clause (5) through the end of
such fiscal year shall not exceed $25.0 million.
Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Restricted
Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to
the extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to Hexcel by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders.
"Existing Joint Ventures" means: (1) Asahi-Schwebel, (2)
Asahi-Schwebel (Taiwan), (3) Asahi-Schwebel Interglas (Philippines), (4) CS
Tech-Fab, (5) CS Interglas, (6) Asian Composite Manufacturing, (7) BHA Aero
Composite Parts and (8) DIC. The indenture also defines each of the terms set
forth in (1)-(8) hereof.
"Foreign Subsidiary" means a subsidiary that is incorporated in a
jurisdiction other than, and the majority of the assets of which are located
outside of, the United States, a State thereof and the District of Columbia.
"GAAP" means generally accepted accounting principles.
"Governance Agreement" means the Governance Agreement dated as of
February 29, 1996, between Ciba Specialty Chemicals Holdings Inc. and Hexcel.
"Guarantee" means any obligation, contingent or otherwise, of any
person directly or indirectly guaranteeing any Indebtedness of any other
person and any obligation, direct or indirect, contingent or otherwise, of
such person:
(1) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness of such other person (whether
arising by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay or to maintain financial statement conditions or
otherwise); or
33
(2) entered into for purposes of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "guarantee" shall not include:
(1) endorsements for collection or deposit in the ordinary course
of business; or
(2) obligations, warranties and indemnities, not with respect to
Indebtedness of any person, that have been or are undertaken or
made in the ordinary course of business or in connection with any
Asset Disposition permitted by the covenant described under the
caption "--Covenants--Limitation on Asset Dispositions" and not for
the benefit of or in favor of an affiliate of Hexcel or any of its
subsidiaries.
The term "Guarantee" used as a verb has a corresponding meaning.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or capital stock of a
person existing at the time such person becomes a Restricted Subsidiary
(whether by merger, consolidation, acquisition or otherwise) shall be deemed
to be Incurred by such Restricted Subsidiary at the time it becomes a
Restricted Subsidiary; provided, FURTHER, that any amendment, modification or
waiver of any provision of any document pursuant to which Indebtedness was
previously Incurred shall not be deemed to be an Incurrence of Indebtedness as
long as such amendment, modification or waiver does not:
(1) increase the principal or premium thereof or interest rate
thereon;
(2) change to an earlier date the stated maturity thereof or the
date of any scheduled or required principal payment thereon or the
time or circumstances under which such Indebtedness may or shall be
redeemed; or
(3) if such Indebtedness is contractually subordinated in right of
payment to the notes, modify or affect, in any manner adverse to
the holders, such subordination. The term "Incurrence" when used as
a noun shall have a correlative meaning. The accretion of principal
of a non-interest bearing or other discount security shall not be
deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any person on any date of
determination (without duplication):
(1) the principal of and premium (if any such premium is then due
and owing) in respect of (A) indebtedness of such person for money
borrowed; and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such
person is responsible or liable;
(2) all Capitalized Lease Obligations of such person;
(3) all obligations of such person issued or assumed as the
deferred purchase price of property, all conditional sale
obligations of such person and all obligations of such person under
any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business);
(4) all obligations of such person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar
credit transaction (other than obligations with respect to letters
of credit securing obligations (other than obligations described in
(1) through (3) above) entered into in the ordinary course of
business of such person to the extent such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the tenth business day following receipt
by such person of a demand for reimbursement following payment on
the letter of credit);
(5) the amount of all obligations of such person with respect to
the redemption, repayment or other repurchase of any disqualified
stock of such person, or with respect to any subsidiary of such
person, the liquidation preference with respect to any preferred
stock (but excluding, in each case, any accrued dividends);
34
(6) all obligations of the type referred to in clauses (1) through
(5) of other persons and all dividends of other persons for the
payment of which, in either case, such person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise,
including by means of any guarantee;
(7) all obligations of the type referred to in clauses (1) through
(6) of other persons secured by any lien on any property or asset
of such person (whether or not such obligation is assumed by such
person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the
obligation so secured; and
(8) to the extent not otherwise included in this definition,
hedging obligations of such person.
For purposes of this definition, the obligation of such person with respect to
the redemption, repayment or repurchase price of any disqualified stock that
does not have a fixed redemption, repayment or repurchase price shall be
calculated in accordance with the terms of such stock as if such stock were
redeemed, repaid or repurchased on any date on which Indebtedness shall be
required to be determined pursuant to the indenture; provided, however, that
if such stock is not then permitted to be redeemed, repaid or repurchased, the
redemption, repayment or repurchase price shall be the book value of such
stock as reflected in the most recent financial statements of such person. The
amount of Indebtedness of any person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the amount of liability required by
GAAP to be accrued or reflected on the most recently published balance sheet
of such person; provided, however, that:
(1) the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original
issue discount of such Indebtedness at such time as determined in
conformity with GAAP; and
(2) Indebtedness shall not include any liability for federal,
state, local or other taxes.
"Investment" by any person in any other person means any direct or
indirect advance, loan (other than advances to customers or suppliers in the
ordinary course of business that are recorded as accounts receivable on the
balance sheet of such former person) or other extension of credit (including
by way of guarantee or similar arrangement) or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition of capital stock, Indebtedness or other similar instruments issued
by such latter person that are or would be classified as investments on a
balance sheet of such former person prepared in accordance with GAAP. In
determining the amount of any Investment in respect of any property or assets
other than cash, such property or asset shall be valued at its fair market
value at the time of such Investment (unless otherwise specified in this
definition), as determined in good faith by the board of directors. For
purposes of the definition of "Unrestricted Subsidiary", the definition of
"Restricted Payment" and the covenant described under the caption
"--Covenants--Limitation on Restricted Payments,"
(1) "Investment" shall include the portion (proportionate to
Hexcel's equity interest in such subsidiary) of the fair market
value of the net assets of any subsidiary of Hexcel at the time
that such subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such subsidiary as
a Restricted Subsidiary, Hexcel shall be deemed to continue to have
a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) Hexcel's "Investment" in such
subsidiary at the time of such redesignation less (y) the portion
(proportionate to Hexcel's equity interest in such subsidiary) of
the fair market value of the net assets of such subsidiary at the
time of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the board of
directors.
"Investment Grade Rating" means a rating of BBB- or higher by
Standard & Poor's Ratings Group, Inc. and Baa3 or higher by Moody's Investors
Service, Inc. or the equivalent of such ratings by Standard & Poor's Ratings
Group, Inc. or Moody's Investors Service, Inc. or by any other Rating Agency
selected as provided in the definition of Rating Agency.
35
"Issue Date" means the date on which the notes are originally issued.
"Joint Venture" means the Existing Joint Ventures, and any other
joint venture, partnership or other similar arrangement whether in corporate,
partnership or other legal form which is formed by Hexcel or any Restricted
Subsidiary and one or more persons which own, operate or service a related
business.
"Joint Venture Subsidiary" means a Restricted Subsidiary formed by
Hexcel or any Restricted Subsidiary and one or more persons which own, operate
or service a related business.
"Lenders" has the meaning specified in the Credit Agreement.
"Net Available Cash" from an Asset Disposition means the aggregate
amount of cash received in respect of an Asset Disposition (including any cash
payments received by way of deferred payment of principal pursuant to a note
or installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring person of Indebtedness or other obligations relating to such
properties or assets or received in any other noncash form) therefrom, in each
case net of:
(1) all legal, accounting, title and recording tax expenses,
commissions and other fees and expenses incurred, and all federal,
state, provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP as a consequence of such Asset
Disposition;
(2) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the
terms of any lien upon such assets, or which must by its terms, or
in order to obtain a necessary consent to such Asset Disposition,
or by applicable law, be repaid out of the proceeds from such Asset
Disposition;
(3) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries or Joint
Ventures as a result of such Asset Disposition;
(4) any amount of cash required to be placed in escrow by one or
more parties to a transaction relating to contingent liabilities
associated with an Asset Disposition until such cash is released to
Hexcel or a Restricted Subsidiary; and
(5) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset
Disposition, including pension and other post-employment benefit
liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with
such Asset Dispositions, all as determined in conformity with GAAP,
retained by Hexcel or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of capital
stock, means the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, printing costs, underwriters' or placement agents'
fees, discounts or commissions and brokerage stock exchange listing fees,
consultant and other fees actually incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Permitted Holders" means:
(1) Ciba Specialty Chemicals Holding Inc. and its affiliates;
(2) any person succeeding to the business of Ciba Specialty
Chemicals Holding Inc., including pursuant to any merger or
combination of one or more businesses that includes the business of
Ciba Specialty Chemicals Holding Inc.; and
(3) any affiliate of any person described in clause (2).
36
"Permitted Investment" means an Investment
(1) in Hexcel or a Restricted Subsidiary or a person which will,
upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted
Subsidiary is a related business;
(2) in another person, if as a result of such Investment such other
person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, Hexcel or a
Restricted Subsidiary; provided, however, that such person's
primary business is a related business;
(3) in Temporary Cash Investments;
(4) in receivables owing to Hexcel or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such
concessionary trade terms as Hexcel or any such Restricted
Subsidiary deems reasonable under the circumstances;
(5) in loans or advances to officers, directors or employees of
Hexcel or any of its subsidiaries for travel, transportation,
entertainment, and moving and other relocation expenses and other
business expenses that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and
that are made in the ordinary course of business;
(6) in loans or advances to employees made in the ordinary course
of business consistent with past practices of Hexcel or such
subsidiary, as the case may be;
(7) in stock, obligations or securities received
(A) in settlement of debts created in the ordinary course of
business and owing to Hexcel or any subsidiary;
(B) in satisfaction of judgments; or
(C) as consideration in connection with an Asset Disposition
permitted pursuant to the covenant described under the caption
"--Covenants--Limitation on Asset Dispositions;" and
(8) deemed to have been made as a result of the acquisition of a
person that at the time of such acquisition held instruments
constituting Investments that were not acquired in contemplation of
the acquisition of such person.
"Plans" means any employee benefit plan, retirement plan, deferred
compensation plan, restricted stock plan, health, life, disability or other
insurance plan or program, employee stock purchase plan, employee stock
ownership plan, pension plan, stock option plan or similar plan or arrangement
of Hexcel or any subsidiary, or any successor thereof and "Plan" shall have a
correlative meaning.
"Public Equity Offering" means an underwritten primary public
offering of common stock of Hexcel pursuant to an effective registration
statement under the Securities Act.
"Public Market" means any time after (x) a public equity offering has
been consummated and (y) at least 15% of the total issued and outstanding
common stock of Hexcel has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act.
"Rating Agency" means Standard & Poor's Ratings Group, Inc. and
Moody's Investors Service, Inc. or if Standard & Poor's Ratings Group, Inc. or
Moody's Investors Service, Inc. or both shall not make a rating on the notes
publicly available, a nationally recognized statistical rating agency or
agencies, as the case may be, selected by Hexcel (as certified by a resolution
of the board of directors) which shall be substituted for Standard & Poor's
Ratings Group, Inc. or Moody's Investors Service, Inc. or both, as the case
may be.
37
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and
"refinanced" shall have a correlative meaning) any Indebtedness or Incurred in
compliance with the indenture (including Indebtedness of Hexcel that
refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any
Restricted Subsidiary that refinances Indebtedness of another Restricted
Subsidiary) including Indebtedness that refinances Refinancing Indebtedness;
provided, however, that:
(1) the Refinancing Indebtedness has stated maturity no earlier
than any stated maturity of the Indebtedness being refinanced;
(2) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced;
and
(3) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the sum of (x)
either the aggregate principal amount (or if issued with original
issue discount, the aggregate accreted value) of the Indebtedness
being refinanced (including, with respect to both the Refinancing
Indebtedness and the Indebtedness being refinanced, amounts then
outstanding and amounts available thereunder) or, if the
Indebtedness being refinanced is the Capitalized Lease Obligation
entered into on or about September 15, 1998, the aggregate purchase
price of the property subject thereto, plus (y) unpaid interest,
prepayment penalties, redemption premiums, defeasance costs, fees,
expenses and other amounts owing with respect thereto, plus
reasonable financing fees and other reasonable out-of-pocket
expenses incurred in connection therewith; provided further,
however, that Refinancing Indebtedness shall not include
Indebtedness of a subsidiary that refinances Indebtedness of
Hexcel.
"Related Business" means any business conducted by Hexcel and its
Restricted Subsidiaries on the issue date and any business related, ancillary
or complementary to the business of Hexcel and its Restricted Subsidiaries on
the issue date.
"Restricted Payment" with respect to any person means:
(1) the declaration or payment of any dividends or any other
distributions of any sort in respect of its capital stock
(including any payment in connection with any merger or
consolidation involving such person) or similar payment to the
direct or indirect holders of its capital stock (other than
dividends or distributions payable solely in its capital stock
(other than disqualified stock) and dividends or distributions
payable solely to Hexcel or a Restricted Subsidiary, and other pro
rata dividends or other distributions made by a subsidiary that is
not a Wholly Owned Subsidiary to minority stockholders (or owners
of an equivalent interest in the case of a subsidiary that is an
entity other than a corporation));
(2) the purchase, redemption or other acquisition or retirement for
value of any capital stock of Hexcel held by any person or of any
capital stock of the Restricted Subsidiary held by any affiliate of
Hexcel (other than a Restricted Subsidiary), including the exercise
of any option to exchange any capital stock (other than into
capital stock of Hexcel that is not disqualified stock);
(3) the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase, or
other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of
the date of acquisition); or
(4) the making of any Investment (other than a Permitted
Investment) in any person.
"Restricted Subsidiary" means any subsidiary of Hexcel that is not an
Unrestricted Subsidiary.
"Secured Indebtedness" means any Indebtedness of Hexcel secured by a
lien.
38
"Senior Indebtedness" means:
(1) all Bank Indebtedness; and
(2) all other Indebtedness of Hexcel, including interest (including
interest accruing at the contract rate specified in the Credit
Agreement or the documentation governing such other Indebtedness,
as applicable (including any rate applicable upon default) on or
after the filing of any petition in bankruptcy, or the commencement
of any similar state, federal or foreign reorganization or
liquidation proceeding, relating to Hexcel, whether or not allowed
as a claim against Hexcel in any such proceeding) and fees thereon,
whether outstanding on the issue date or thereafter issued or
Incurred, unless in the instrument creating or evidencing the same
or pursuant to which the same is outstanding it is provided that
such obligations are not superior in right of payment to the notes;
provided, however, that Senior Indebtedness shall not include:
(1) any liability for federal, state, local or other taxes owed or
owing by Hexcel;
(2) any accounts payable or other liabilities to trade creditors
arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities);
(3) any Indebtedness, guarantee or obligation of Hexcel which is
subordinate or junior in any respect to any other Indebtedness,
guarantee or obligation of Hexcel, including any Senior
Subordinated Indebtedness and any Subordinated Obligations; and
(4) any obligations with respect to any capital stock.
"Senior Subordinated Indebtedness" means the notes and any other
Indebtedness of Hexcel that specifically provides that such Indebtedness is to
rank pari passu with the notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of
Hexcel which is not Senior Indebtedness.
"Significant Subsidiary" means a Restricted Subsidiary that is a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X promulgated
under the Securities Act and the Exchange Act.
"Specified Properties" shall mean Hexcel's manufacturing plants
located in Lancaster, Ohio, Welkenraedt, Belgium, Brindisi, Italy and Lodi,
New Jersey, and certain real property adjacent to the Hexcel's manufacturing
plant in Livermore, California.
"Subordinated Obligation" means any Indebtedness of Hexcel (whether
outstanding on the issue date or thereafter incurred) that is contractually
subordinated or junior in right of payment to the notes pursuant to a written
agreement, including the convertible notes and the convertible debentures.
"Subsidiary" of any person means any corporation, association,
partnership or other business entity of which more than 50% of the total
voting power of shares of voting stock is at the time owned or controlled,
directly or indirectly, by:
(1) such person,
(2) such person and one or more subsidiaries of such person, or
(3) one or more subsidiaries of such person.
Unless the context requires otherwise, "subsidiary" shall refer to a
subsidiary of Hexcel.
"Temporary Cash Investments" means any of the following:
39
(1) investments in U.S. government obligations;
(2) investments in time deposit accounts, certificates of deposit
and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any State
thereof or any foreign country recognized by the United States of
America having capital, surplus and undivided profits aggregating
in excess of $50.0 million (or the U.S. dollar equivalent thereof)
and whose long-term debt is rated "A-" or higher (or such
equivalent rating) by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the
Securities Act);
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above
entered into with a bank meeting the qualifications described in
clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than
an affiliate of Hexcel) organized and in existence under the laws
of the United States of America or any foreign country recognized
by the with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard & Poor's
Ratings Group; and
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America,
or by any political subdivision or taxing authority thereof, and
rated at least "A" by Standard & Poors Ratings Group or "A" by
Moody's Investors Service, Inc.
"Unrestricted Subsidiary" means:
(1) any subsidiary of Hexcel that at the time of determination
shall be designated an Unrestricted Subsidiary by the board of
directors in the manner provided below; and
(2) any subsidiary of an Unrestricted Subsidiary.
The board of directors may designate any subsidiary of Hexcel
(including any newly acquired or newly formed subsidiary) to be an
Unrestricted Subsidiary unless such subsidiary or any of its Subsidiaries owns
any capital stock or Indebtedness of, or holds any lien on any property of,
Hexcel or any other subsidiary of Hexcel that is not a subsidiary of the
subsidiary to be so designated; provided, however, that either (A) the
subsidiary to be so designated has total assets of $1,000 or less or (B) if
such subsidiary has assets greater than $1,000, such designation would be
permitted under the covenant described under the caption
"--Covenants--Limitation on Restricted Payments."
The board of directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided, however, that immediately after giving
effect to such designation (x) Hexcel could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under the caption
"--Covenants--Limitation on Indebtedness" and (y) no Default shall have
occurred and be continuing. Any such designation by the board of directors
shall be evidenced to the trustee by promptly filing with the trustee a copy
of the resolution of the board of directors giving effect to such designation
and an officers' certificate certifying that such designation complied with
the foregoing provisions.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the
capital stock of which (other than Qualified Preferred Stock and directors'
qualifying shares) is owned by Hexcel or another Wholly Owned Subsidiary.
40
PLAN OF DISTRIBUTION
This prospectus is to be used by (i) Goldman Sachs and other
broker-dealer subsidiaries of Goldman Sachs in connection with offers and
sales of the notes in market-making transactions effected from time to time
and (ii) the GS 2000 Funds in connection with offers and sales of notes
currently owned by them. Each of the GS 2000 Funds is an affiliate of Goldman
Sachs and its broker-dealer subsidiaries. Goldman Sachs may act as a principal
or agent in such market-making transactions, including as agent for the
counterparty when acting as principal or as agent for both counterparties, and
may receive compensation in the form of discounts and commissions, including
from both counterparties when it acts as agent for both. Such sales will be
made at prevailing market prices at the time of sale, at prices related
thereto or at negotiated prices.
Notes may be sold from time to time directly by any selling security
holder to one or more purchasers, to or through underwriters, brokers or
dealers, through agents on a best-efforts basis or otherwise, or through a
combination of such methods of sale. The notes may be sold in one or more
transactions at a fixed price or prices, which may be changed; at prevailing
market prices at the time of sale or at prices related to such prices; at
varying prices determined at the time of sale; or at negotiated prices. Such
sales may be effected in transactions (which may involve crosses or block
transactions) on any national securities exchange or quotation service on
which the notes may be listed or quoted, in the over-the-counter market,
through the writing of options, through the settlement of short sales, or
otherwise. We have been advised by the GS 2000 Funds that each selling
security holder purchased the notes in the ordinary course of business and, at
the time of such purchase, had no agreements or understandings, directly or
indirectly, with any person to distribute the notes.
A selling security holder may pledge or grant a security interest in
some or all of the notes owned by it, and if it defaults in the performance of
its secured obligations, the pledgees or secured party may sell from time to
time the pledged notes pursuant to the registration statement of which this
prospectus is a part. The selling security holders may also transfer and
donate notes in other circumstances in which the transferees, donees, pledgees
or other successors in interest will be the selling security holders for
purposes of this prospectus. In addition, in connection with a sale of notes,
a selling security holder may enter into hedging transactions with brokers,
dealers or others, which may in turn engage in short sales of the notes; sell
short or deliver notes to close out such short positions; or loan or pledge
notes to brokers, dealers or others that may in turn sell such notes.
Underwriters, brokers, dealers and agents may receive compensation in
the form of underwriting discounts, concessions or commissions from the
selling security holders or the purchasers of notes for whom they may act as
agent. The selling security holders and any underwriters, dealers or agents
that participate in the distribution of the notes may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, and any
profit on the sale of notes by them and any discounts, commissions or
concessions received by them might be deemed to be underwriting discounts and
commissions under the Securities Act of 1933.
At the time a particular offering or sale of notes is made, a
prospectus supplement, if required, will be distributed which will set forth
the amount of notes offered or sold and the terms of the offering or sale. A
selling security holder may not sell any of the notes held by it. In addition,
notes covered by this prospectus which qualify for sale pursuant to Rule 144
or Rule 144A under the Securities Act of 1933 may be sold pursuant to Rule 144
or Rule 144A rather than pursuant to this prospectus.
Certain affiliates of Goldman Sachs beneficially own Hexcel equity
securities, which in the aggregate constituted approximately 38% of the equity
ownership of Hexcel as of March 31, 2003. Goldman Sachs has informed us that
it does not intend to confirm sales of the notes to any accounts over which it
exercises discretionary authority without the prior specific written approval
of such transactions by the customer.
We have been advised by Goldman Sachs that, subject to applicable
laws and regulations, Goldman Sachs currently intends to continue to make a
market in the notes. However, Goldman Sachs is not obligated to do so, and any
such market-making may be interrupted or discontinued at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act of 1933 and the Securities Exchange Act of 1934.
There can be no assurance that an active trading market will be sustained. See
"Risk Factors-- If a reasonably active trading market does not continue for
these notes you may not be able to resell them."
41
Goldman Sachs and its affiliates may in the future engage in
commercial and/or investment banking transactions with Hexcel and its
affiliates. Goldman Sachs acted as an initial purchaser in connection with the
initial sale of the notes in 2001 and received a customary underwriting
discount in connection with that transaction. Goldman Sachs and its affiliates
currently own, and may, from time to time, trade the notes for its own account
in connection with its principal activities. Such sales may be made pursuant
to this prospectus or otherwise pursuant to an applicable exemption from
registration. Additionally, in the future, Goldman Sachs and its affiliates
may, from time to time, own notes as a result of its market-making activities.
Hexcel will not receive any of the proceeds of such sales of the
notes. Goldman Sachs and certain of its affiliates have agreed to reimburse
Hexcel for all expenses it incurs in connection with the registration of the
notes.
SELLING SECURITY HOLDER
Name Amount Offered Amount Owned
---- -------------- ------------
Before Offering After Offering
--------------- --------------
GS Capital Partners 2000, L.P. $33,195,000 $33,195,000 _____
and certain of its
affiliates (1)
____________________
(1) Hex Holdings, L.L.C. ("Hex Holdings") directly owns $33,195,000 in
aggregate principal amount of the notes. GS Capital Partners 2000, L.P. ("GS
2000"), GS Capital Partners 2000 Offshore, L.P. ("GS Offshore"), GS Capital
Partners 2000 Employee Fund, L.P. ("GS Employee"), GS Capital Partners 2000
GmbH & Co. Beteiligungs KG ("GS Germany"), and Stone Street Fund 2000, L.P.
("GS Stone") are the members of Hex Holdings and, collectively, own all of the
limited liability company membership interests of Hex Holdings. Each of GS
2000, GS Offshore, GS Employee, GS Germany and GS Stone beneficially owns an
amount of the notes that is directly proportional to the amount of limited
liability company membership interests of Hex Holdings that it owns. GS 2000
beneficially owns $18,905,294.07 in aggregate principal amount of the notes,
GS Offshore beneficially owns $6,869,461.30 in aggregate principal amount of
the notes, GS Employee beneficially owns $6,006,763.82 in aggregate principal
amount of the notes, GS Germany beneficially owns $790,198.67 in aggregate
principal amount of the notes, and GS Stone beneficially owns $623,282.14 in
aggregate principal amount of the notes.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, has
passed upon the validity and enforceability of the notes.
EXPERTS
The consolidated financial statements incorporated in this Amendment
No. 2 to the Registration Statement on Form S-3 by reference to the Annual
Report on Form 10-K, the Annual Report on Form 10-K/A (Amendment No. 1) and
the Annual Report on Form 10-K/A (Amendment No. 2) of Hexcel Corporation for
the year ended December 31, 2002, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements incorporated by reference in
this Amendment No. 2 to the Registration Statement on Form S-3 to the Annual
Report on Form 10-K/A (Amendment No. 1) and the Annual Report on Form 10-K/A
42
(Amendment No. 2) of BHA Aero Composite Parts Co., Ltd. for the year ended
December 31, 2002, have been so incorporated in reliance on the report (which
contains an explanatory paragraph relating to BHA Aero Composite Parts Co.,
Ltd.'s ability to continue as a going concern as described in Note 3 to the
consolidated financial statements ) of Deloitte Touche Tohmatsu Certified
Public Accountants Limited, given on the authority of said firm as experts in
auditing and accounting.
43
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following sets forth expenses, other than underwriting fees and
commissions, expected to be borne by the Registrant, in connection with the
distribution of the Securities being registered:
Securities and Exchange Commission registration fee $ 2,686
NASD filing fee 0
Blue Sky fees and expenses 0
Rating agency fees 0
Transfer agent fees 0
Trustee's fees 0
Legal 15,000
Printing 0
Accounting 7,500
Miscellaneous 7,500
Total $32,686
Goldman, Sachs & Co. and certain of its affiliates have agreed with the
Registrant to reimburse the Registrant for all expenses it incurs in
connection with the distribution of the Securities being registered.
Item 15. Indemnification of Directors and Officers
Set forth below is a description of certain provisions of the
Delaware General Corporation Law (the "DGCL"), the Certificate of
Incorporation of the Company and the Hexcel Corporation Incentive Stock Plan,
as amended and the Hexcel Corporation 1998 Broad Based Incentive Stock Plan,
as amended (together, the "Incentive Stock Plans"), as such provisions relate
to the indemnification of the directors and officers of the Company. This
description is intended only as a summary and is qualified in its entirety by
reference to the applicable provisions of the DGCL, the Certificate of
Incorporation of the Company, the Bylaws of the Company and the Incentive
Stock Plans, which are incorporated herein by reference.
Section 145 of the DGCL provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed legal action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or
in the right of such corporation) by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at its request in such capacity at another corporation or business
organization, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided that such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal proceeding, had no reasonable cause to believe that such person's
conduct was unlawful. A Delaware corporation may indemnify officers and
directors against expenses (including attorneys' fees) in an action by or in
the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses
that such officer or director actually and reasonably incurred.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of a corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of his fiduciary duty as a director; provided, however, that such
clause shall not apply to any liability of a director (i) for any breach of
II-1
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL
(Liability of Directors for Unlawful Payment of Dividend or Unlawful Stock
Purchase or Redemption) or (iv) for any transaction from which the director
derived an improper personal benefit.
The Company's Certificate of Incorporation provides for the
elimination of personal liability of a director for breach of fiduciary duty,
to the full extent permitted by the DGCL. The Company's Certificate of
Incorporation also provides that the Company shall indemnify its directors and
officers to the full extent permitted by the DGCL; provided, however, that the
Company shall indemnify any such person seeking indemnification in connection
with a proceeding initiated by such person only if such proceeding was
authorized by the Board of Directors of the Company. The Certificate of
Incorporation further provides that the Company may, to the extent authorized
from time to time by the Board of Directors, provide rights to indemnification
similar to those provided to the directors and officers of the Company to the
employees and agents of the Company who are not directors or officers of the
Company.
Pursuant to the Incentive Stock Plans, no member of the Executive
Compensation Committee of the Board of Directors of the Company, or such other
committee or committees of the Board of Directors as may be designated by the
Board of Directors from time to time to administer the Incentive Stock Plans,
shall be liable for any action or determination made in good faith, and the
members of such committee or committees shall be entitled to indemnification
in the manner provided in the Company's Certificate of Incorporation.
Item 16. Exhibits
Exhibit No. Description
---------- -----------
2.1 Asset Purchase Agreement dated March 31, 2000 between Hexcel
Corporation and Britax Cabin Interiors, Inc. (incorporated herein
by reference to Exhibit 2.1 to Hexcel's Current Report on Form 8-K
dated May 10, 2000).
3.1 Restated Certificate of Incorporation of Hexcel Corporation
(incorporated herein by reference to Exhibit 1 to Hexcel's
Registration Statement on Form 8-A dated July 9, 1996,
Registration No. 1-08472).
3.2 Certificate of Amendment, dated March 19, 2003, to the Restated
Certificate of Incorporation of Hexcel Corporation (incorporated
herein by reference to Exhibit 3.2 to Hexcel's Annual Report on
Form 10-K/A for the fiscal year ended December 31, 2002, filed on
March 31, 2003).
3.3 Amended and Restated Bylaws of Hexcel Corporation (incorporated
herein by reference to Exhibit 3.3 to Hexcel's Annual Report on
Form 10-K/A for the fiscal year ended December 31, 2002, filed on
March 31, 2003).
4.1 Indenture dated as of January 21, 1999 between Hexcel Corporation
and The Bank of New York, as trustee, relating to the issuance of
the 9-3/4% Senior Subordinated Notes due 2009 (incorporated herein
by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (No. 333-71601), filed on February 2, 1999).
4.2 Indenture dated as of August 1, 1986 between Hexcel and the Bank
of California, N.A., as trustee, relating to the 7% Convertible
Subordinated Notes due 2011 of the Company (incorporated herein by
reference to Exhibit 4.3 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997).
4.2(a) Instrument of Resignation, Appointment and Acceptance, dated as of
October 1, 1993 (incorporated herein by reference to Exhibit 4.10
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993).
II-2
4.3 Indenture, dated as of March 19, 2003 among Hexcel Corporation,
the Guarantors named therein and Wells Fargo Bank Minnesota,
National Association, as trustee, relating to the 9.875% Senior
Secured Notes due 2008 (incorporated herein by reference to
Exhibit 4.4 to Hexcel's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2002, filed on March 31, 2003).
4.4 Certificate of Designation of Series A Convertible Preferred Stock
of Hexcel Corporation (incorporated herein by reference to Exhibit
4.5 to Hexcel's Annual Report on Form 10-K/A for the fiscal year
ended December 31, 2002, filed on March 31, 2003).
4.5 Certificate of Designation of Series B Convertible Preferred Stock
of Hexcel Corporation (incorporated herein by reference to Exhibit
4.6 to Hexcel's Annual Report on Form 10-K/A for the fiscal year
ended December 31, 2002, filed on March 31, 2003).
5.1** Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to the Company.
12.1* Statement regarding the computation of ratio of earnings to fixed
charges for the Company, for the period ending December 31, 1998,
1999, 2000, 2001 and 2002 (included in the prospectus).
21.1 Subsidiaries of the Company (incorporated herein by reference to
Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002).
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Deloitte Touche Tohmatsu Certified Public Accountants
Limited.
23.3** Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 5.1).
24.1** Powers of Attorney (incorporated by reference to Exhibit 24.1 to
the Company's Registration Statement on Form S-3 filed on March 7,
2003 and Amendment No. 1 to the Company's Registration Statement on
Form S-3 filed on April 30, 2003).
25.1 Statement of Eligibility and Qualification on Form T-1 of The Bank
of New York, as trustee, under the Indenture relating to the
9-3/4% Senior Subordinated Notes due 2009 (incorporated by
reference to Exhibits 25.1 to the Company's Registration
Statements on Form S-4 (File Nos. 333-66582 and 333-71601)).
___________
* Filed herewith.
** Previously filed.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
II-3
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be anew registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offer
thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Stamford, state of Connecticut, on
May 12, 2003.
HEXCEL CORPORATION
By: /s/ Ira J. Krakower
---------------------------
Ira J. Krakower
Senior Vice President,
General Counsel
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ David E. Berges* Chairman of the Board; Chief May 12, 2003
---------------------------- Executive Officer; President;
David E. Berges Director
/s/ Stephen C. Forsyth* Executive Vice President; Chief May 12, 2003
--------------------------- Financial Officer
Stephen C. Forsyth
/s/ William J. Fazio* Controller; Principal Accounting May 12, 2003
--------------------------- Officer
William J. Fazio
/s/ Joel S. Beckman* Director May 12, 2003
---------------------------
Joel S. Beckman
/s/ H. Arthur Bellows, Jr.* Director May 12, 2003
---------------------------
H. Arthur Bellows, Jr.
/s/ Sandra L. Derickson* Director May 12, 2003
---------------------------
Sandra L. Derickson
/s/ James J. Gaffney* Director May 12, 2003
---------------------------
James J. Gaffney
/s/ Sanjeev K. Mehra* Director May 12, 2003
---------------------------
Sanjeev K. Mehra
/s/ Lewis Rubin* Director May 12, 2003
---------------------------
Lewis Rubin
/s/ Peter M. Sacerdote* Director May 12, 2003
---------------------------
Peter M. Sacerdote
II-5
/s/ Martin L. Solomon*
---------------------------
Martin L. Solomon Director May 12, 2003
*By: /s/ Ira J. Krakower
Attorney-in-Fact
II-6
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
2.1 Asset Purchase Agreement dated March 31, 2000 between Hexcel
Corporation and Britax Cabin Interiors, Inc. (incorporated
herein by reference to Exhibit 2.1 to Hexcel's Current Report
on Form 8-K dated May 10, 2000).
3.1 Restated Certificate of Incorporation of Hexcel Corporation
(incorporated herein by reference to Exhibit 1 to Hexcel's
Registration Statement on Form 8-A dated July 9, 1996,
Registration No. 1-08472).
3.2 Certificate of Amendment, dated March 19, 2003, to the Restated
Certificate of Incorporation of Hexcel Corporation
(incorporated herein by reference to Exhibit 3.2 to Hexcel's
Annual Report on Form 10-K/A for the fiscal year ended December
31, 2002, filed on March 31, 2003).
3.3 Amended and Restated Bylaws of Hexcel Corporation (incorporated
herein by reference to Exhibit 3.3 to Hexcel's Annual Report on
Form 10-K/A for the fiscal year ended December 31, 2002, filed
on March 31, 2003).
4.1 Indenture dated as of January 21, 1999 between Hexcel
Corporation and The Bank of New York, as trustee, relating to
the issuance of the 9-3/4% Senior Subordinated Notes due 2009
(incorporated herein by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-4 (No. 333-71601),
filed on February 2, 1999).
4.2 Indenture dated as of August 1, 1986 between Hexcel and the
Bank of California, N.A., as trustee, relating to the 7%
Convertible Subordinated Notes due 2011 of the Company
(incorporated herein by reference to Exhibit 4.3 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997).
4.2(a) Instrument of Resignation, Appointment and Acceptance, dated as
of October 1, 1993 (incorporated herein by reference to Exhibit
4.10 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993).
4.3 Indenture, dated as of March 19, 2003 among Hexcel Corporation,
the Guarantors named therein and Wells Fargo Bank Minnesota,
National Association, as trustee, relating to the 9.875% Senior
Secured Notes due 2008 (incorporated herein by reference to
Exhibit 4.4 to Hexcel's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2002, filed on March 31, 2003).
4.4 Certificate of Designation of Series A Convertible Preferred
Stock of Hexcel Corporation (incorporated herein by reference
to Exhibit 4.5 to Hexcel's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2002, filed on March 31, 2003).
4.5 Certificate of Designation of Series B Convertible Preferred
Stock of Hexcel Corporation (incorporated herein by reference
to Exhibit 4.6 to Hexcel's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2002, filed on March 31, 2003).
5.1** Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to the Company.
12.1* Statement regarding the computation of ratio of earnings to
fixed charges for the Company, for the period ending December
31, 1998, 1999, 2000, 2001 and 2002 (included in the
prospectus).
21.1 Subsidiaries of the Company (incorporated herein by reference
to Exhibit 21.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002).
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Deloitte Touche Tohmatsu Certified Public
Accountants Limited.
23.3** Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in Exhibit 5.1).
24.1** Powers of Attorney (incorporated by reference to Exhibit 24.1
to the Company's Registration Statement on Form S-3 filed on
March 7, 2003 and Amendment No. 1 to the Company's Registration
Statement on Form S-3 filed on April 30, 2003).
25.1 Statement of Eligibility and Qualification on Form T-1 of The
Bank of New York, as trustee, under the Indenture relating to
the 9-3/4% Senior Subordinated Notes due 2009 (incorporated by
reference to Exhibits 25.1 to the Company's Registration
Statements on Form S-4 (File Nos. 333-66582 and 333-71601)).
___________
* Filed herewith.
** Previously filed.