-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B+Xqe6+aGv5I1SQGLH/nF1msyV7kBEnwXp82kcwUrYRhNqfICWF2W0qz4bpnA9B2 Ongg/G5VFIgUPb0vu1g5CA== 0000912057-02-002981.txt : 20020414 0000912057-02-002981.hdr.sgml : 20020414 ACCESSION NUMBER: 0000912057-02-002981 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020128 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEXCEL CORP /DE/ CENTRAL INDEX KEY: 0000717605 STANDARD INDUSTRIAL CLASSIFICATION: ABRASIVE ASBESTOS & MISC NONMETALLIC MINERAL PRODUCTS [3290] IRS NUMBER: 941109521 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08472 FILM NUMBER: 02519562 BUSINESS ADDRESS: STREET 1: TWO STAMFORD PLAZA STREET 2: 281 TRESSER BLVD., 16TH FLOOR CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 203-969-0666 MAIL ADDRESS: STREET 1: TWO STAMFORD PLAZA STREET 2: 281 TRESSER BLVD., 16TH FLOOR CITY: STAMFORD STATE: CT ZIP: 06901 8-K 1 a2068953z8-k.txt 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 January 25, 2002 (January 28, 2002) -------------------------------------- Date of report (Date of earliest event reported) Hexcel Corporation ------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-8472 94-1109521 -------------------------------------------------------------------- (State of Incorporation) (Commission File No.) (IRS Employer Identification No.) Two Stamford Plaza 281 Tresser Boulevard Stamford, Connecticut 06901-3238 ------------------------------------------------------ (Address of Principal Executive Offices and Zip Code) (203) 969-0666 -------------------------------------------------- (Registrant's telephone number, including area code) N/A ----------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Item 5. OTHER EVENTS. AMENDMENT TO CREDIT AGREEMENT Effective as of January 25, 2002, Hexcel Corporation and its bank syndicate entered into an amendment to its senior credit facility. The amendment provides for revised financial covenants through 2002 to accommodate Hexcel's anticipated financial performance during 2002. Hexcel agreed to grant additional collateral to the banks to secure the outstanding loans under the credit facility. The additional collateral includes, among other things, receivables in Europe and intellectual property and additional real estate in the United States. This description of the credit agreement amendment is only a summary of the terms of the amendment. A copy of the amendment is filed as Exhibit 99.1 to this Current Report and is incorporated herein by reference. This description is qualified in its entirely by reference to all terms and conditions of the amendment. The amendment provides for a 100 basis point increase in the interest spread payable over LIBOR for advances under the facility. The amendment also provides for an immediate decrease in the revolving loan and overdraft loan facilities from a cumulative amount of $235 million to $220 million, and for a further reduction to $212 million on September 30, 2002. In addition, during the term of the amendment, all proceeds generated through asset sales, litigation settlements and judgments and most other events, to the extent in excess of $2.5 million for each event, must be used to prepay loans under the credit facility. Hexcel has also agreed to limit capital expenditures to $25 million during 2002, with a $10 million maximum during any quarter in 2002. The amendment also requires that on June 30, 2002, the total amount available under the revolving loan and overdraft facilities, together with all cash and cash equivalents held by Hexcel as of such date, equal at least $30 million. In connection with the credit agreement amendment, Hexcel also agreed to an amendment to its collateral agreement. Under the collateral agreement, Hexcel has granted to the banks a security interest in substantially all of its property and assets in the United States. A copy of the amendment to the collateral agreement is filed as Exhibit 99.2 to this Current Report and is incorporated herein by reference. FOURTH QUARTER AND FULL YEAR 2001 FINANCIAL RESULTS On January 24, 2002, the Company reported its financial results for the fourth quarter and full year 2001. A copy of the press release issued by the Company on January 24, 2002 is filed as Exhibit 99.3 to this Current Report and is incorporated herein by reference. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits 99.1 Seventh Amendment and Consent, dated as of January 25, 2002, to the Second Amended and Restated Credit Agreement, dated as of September 15, 1998, among Hexcel Corporation and the Foreign Borrowers from time to time party thereto, the banks and other financial institutions from time to time parties thereto, Citibank, N.A., as Documentation Agent, and Credit Suisse First Boston, as Administrative Agent. 99.2 First Amendment to Amended and Restated Collateral Agreement dated as of January 25, 2002, to the Amended and Restated Collateral Agreement, dated as of March 7, 2000, made by Hexcel Corporation and the other grantors party thereto in favor of Citibank, N.A., as Documentation Agent for the banks and other financial institutions from time to time parties to the Second and Amended Restated Credit Agreement, dated as of September 15, 1998, among Hexcel Corporation and the Foreign Borrowers from time to time party thereto, the banks and other financial institutions from time to time parties thereto, Citibank, N.A., as Documentation Agent, and Credit Suisse First Boston, as Administrative Agent. 99.3 Press Release issued by the Company on January 24, 2002. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HEXCEL CORPORATION Date: January 28, 2002 /s/ Stephen C. Forsyth --------------------------------- Stephen C. Forsyth Executive Vice President and Chief Financial Officer EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 99.1 Seventh Amendment and Consent, dated as of January 25, 2002, to the Second Amended and Restated Credit Agreement, dated as of September 15, 1998, among Hexcel Corporation and the Foreign Borrowers from time to time party thereto, the banks and other financial institutions from time to time parties thereto, Citibank, N.A., as Documentation Agent, and Credit Suisse First Boston, as Administrative Agent. 99.2 First Amendment to Amended and Restated Collateral Agreement dated as of January 25, 2002, to the Amended and Restated Collateral Agreement, dated as of March 7, 2000, made by Hexcel Corporation and the other grantors party thereto in favor of Citibank, N.A., as Documentation Agent for the banks and other financial institutions from time to time parties to the Second and Amended Restated Credit Agreement, dated as of September 15, 1998, among Hexcel Corporation and the Foreign Borrowers from time to time party thereto, the banks and other financial institutions from time to time parties thereto, Citibank, N.A., as Documentation Agent, and Credit Suisse First Boston, as Administrative Agent. 99.3 Press Release issued by the Company on January 24, 2002. EX-99.1 3 a2068953zex-99_1.txt EXHIBIT 99.1 EXHIBIT 99.1 SEVENTH AMENDMENT AND CONSENT SEVENTH AMENDMENT AND CONSENT, dated as of January 25, 2002 (this "AMENDMENT"), to the Second Amended and Restated Credit Agreement, dated as of September 15, 1998 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Hexcel Corporation (the "COMPANY") and the Foreign Borrowers from time to time party thereto (together with the Company, the "BORROWERS"), the banks and other financial institutions from time to time parties thereto (the "LENDERS"), Citibank, N.A., as Documentation Agent (the "DOCUMENTATION AGENT") and Credit Suisse First Boston, as Administrative Agent (the "ADMINISTRATIVE AGENT"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, certain loans and other extensions of credit to the Borrowers; WHEREAS, the Borrowers have requested, and, upon this Amendment becoming effective, the Lenders shall have agreed, that certain provisions of the Credit Agreement be amended in the manner provided for in this Amendment; WHEREAS, the Administrative Agent, the Company and the Local Lenders have consented, and by their signatures below hereby acknowledge such consent, to amending the Foreign Borrower Sublimits; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of the premises and mutual agreements contained herein, the parties hereto hereby agree as follows: SECTION 1. DEFINED TERMS 1.1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement are used herein as defined therein. SECTION 2. CONSENTS 2.1. LOCAL EUROPEAN LOANS TO LOCAL LOAN BORROWERS. (a) Each of the financial institutions listed in the table below agrees that it shall be the Local Lender to the Foreign Borrower (who shall, as of the Effective Date, become Local Loan Borrowers) listed opposite its name: - -------------------------------------- ---------------------------------------- LOCAL LENDER FOREIGN BORROWER (each of which shall become, as of the Effective Date, a Local Loan Borrower) - -------------------------------------- ---------------------------------------- Credit Suisse First Boston ("CSFB") Hexcel Composites S.P.R.L. (Belgium) - -------------------------------------- ---------------------------------------- Credit Lyonnais Hexcel Fabrics S.A. (France) - -------------------------------------- ---------------------------------------- - -------------------------------------- ---------------------------------------- Credit Lyonnais Hexcel Composites S.A. (France) - -------------------------------------- ---------------------------------------- CSFB Hexcel (U.K.) Limited (U.K.) - -------------------------------------- ---------------------------------------- CSFB Hexcel Composites Limited (U.K.) - -------------------------------------- ---------------------------------------- CSFB Hexcel Composites S.L. (Spain) - -------------------------------------- ---------------------------------------- CSFB Hexcel Composites GmbH (Austria) - -------------------------------------- ---------------------------------------- Pursuant to Section 4.2 of this Amendment, each of the Local Loan Borrowers and the relevant Local Lender listed in the table above shall execute, or shall have executed, a Local Lender Joinder Agreement substantially in the form of Exhibit H to the Credit Agreement with such modifications as may be reasonably required by the Local Lender. (b) The Administrative Agent, the Company and the relevant Local Lenders hereby consent and agree that the Foreign Borrower Sublimits for each of the Local Loan Borrowers listed below shall be set forth in the table below: - ----------------------------------------------- ----------------------------- LOCAL LOAN BORROWER SUBLIMIT - ----------------------------------------------- ----------------------------- Hexcel Composites S.P.R.L. (Belgium) $10 million - ----------------------------------------------- ----------------------------- Hexcel Fabrics S.A. (France) $20 million - ----------------------------------------------- ----------------------------- Hexcel Composites S.A. (France) $20 million - ----------------------------------------------- ----------------------------- Hexcel (U.K.) Limited (U.K) $20 million - ----------------------------------------------- ----------------------------- Hexcel Composites Limited (U.K.) $20 million - ----------------------------------------------- ----------------------------- Hexcel Composites S.L. (Spain) $15 million - ----------------------------------------------- ----------------------------- Hexcel Composites GmbH (Austria) $5 million - ----------------------------------------------- ----------------------------- SECTION 3. AMENDMENT 3.1. AMENDMENT TO SUBSECTION 1.1. Subsection 1.1 of the Credit Agreement is hereby amended: (a) by inserting in proper alphabetical order the following new definitions: "Accounts" has the meaning specified in the Collateral Agreement. "Account Debtor" has the meaning specified in the Collateral Agreement. "Approved Deposit Account" has the meaning specified in the Collateral Agreement. 2 "Available Credit": with respect to any Local Loan Borrower, at any time, an amount equal to (a) the lesser of (i) the Foreign Borrower Sublimit for such Local Loan Borrower in effect at such time or (ii) the Borrowing Base for such Local Loan Borrower at such time, MINUS (b) the aggregate Local European Loans outstanding to such Local Loan Borrower at such time. "Blockage Notice" has the meaning specified in each Deposit Account Control Agreement. "Borrowing Base": with respect to any Local Loan Borrower, (a) 75% of the face amount of all Eligible Receivables of such Local Loan Borrower (calculated net of all finance charges, late fees and other fees which are unearned, sales, excise or similar taxes, and credits or allowances granted at such time) MINUS (b) any Eligibility Reserves for such Local Loan Borrower then in effect. "Borrowing Base Certificate" means a certificate of the Company, with respect to each Local Loan Borrower, substantially in the form of Exhibit J. "Control Account Agreement" has the meaning specified in the Collateral Agreement. "Compliance Date": the date upon which the Administrative Agent receives the compliance certificate required to be delivered with respect to the first fiscal quarter of 2003 provided that, on such date, there exists no Default or Event of Default. "Deposit Account Bank" has the meaning specified in the Collateral Agreement. "Deposit Account Control Agreement" has the meaning specified in the Collateral Agreement. "Eligible Receivable": with respect to any Local Loan Borrower, the gross outstanding balance of those Accounts of Local Loan Borrower arising out of sales of merchandise, goods or services in the ordinary course of business, which are made by such Local Loan Borrower to a Person that is not an Affiliate of such Local Loan Borrower, which are not in dispute, and that constitute Collateral in which the Local Lender has a fully perfected first priority Lien; PROVIDED, HOWEVER, that an Account shall in no event be an Eligible Receivable if: (a) such Account is more than 60 days past due according to the original terms of sale, or 120 days past the original invoice date thereof; or (b) any material warranty contained in this Agreement or any other Loan Document with respect to such specific Account is not true and correct with respect to such Account; or (c) the Account Debtor on such Account has disputed liability or made any bona fide claim with respect to any other Account due from such Account Debtor 3 to such Local Loan Borrower but only with respect to such disputed Account and only to the extent of such dispute or claim; or (d) the Account Debtor on such Account has: (i) filed a petition for bankruptcy or any other relief under the Bankruptcy Code or any other law relating to bankruptcy, insolvency, reorganization or relief of debtors; (ii) made an assignment for the benefit of creditors; (iii) had filed against it any petition or other application for relief under the Bankruptcy Code or any such other law; (iv) has failed, suspended business operations, become insolvent, called a meeting of its creditors for the purpose of obtaining any financial concession or accommodation; or (v) had or suffered a receiver or a trustee to be appointed for all or a significant portion of its assets or affairs; or (e) the Account Debtor on such Account or any of its Affiliates is also a supplier to or creditor of the Company unless such supplier or creditor has executed a no-offset letter reasonably satisfactory to the Administrative Agent; or (g) the sale to such Account Debtor on such Account is on a bill-on-hold, guaranteed sale, sale-and-return, sale-on-approval or consignment basis; or (h) such Account is not subject to a first priority Lien (which is perfected provided that the Administrative Agent and the Local Lender determine in their sole discretion whether such perfection is required to make such Account an Eligible Receivable) securing the Local European Loans outstanding by the Local Loan Borrower; or (i) such Account is subject to any deduction, offset, counterclaim, return privilege or other conditions other than volume sales discounts given in the ordinary course of such Local Loan Borrower's business, but only to the extent of such deduction, offset, counterclaim, return privilege or other condition; or (j) such Account is not evidenced by an invoice or other writing in form reasonably acceptable to the Administrative Agent; or (k) such Local Loan Borrower, in order to be entitled to collect such Account, is required to perform any additional service for, or perform or incur any additional obligation to, the Person to whom or to which it was made if the failure to perform such additional service or incur such additional obligation would in any way impede the ability to collect such Account. "Eligibility Reserves": with respect to any Local Loan Borrower, effective as of two Business Days after the date of written notice of any determination thereof to the Company by the Administrative Agent, such amounts as the Administrative Agent, in its good faith judgment exercised in a commercially reasonably manner consistent with the Administrative Agent's or Documentation Agent's customary practice for comparable asset based transactions, may from time to time establish against the gross amounts of Eligible Receivables of such Local Loan Borrower to reflect the risks or contingencies which may adversely affect any one or class of such Eligible Receivables and which have 4 not already been taken into account in the calculation of the Borrowing Base of such Local Loan Borrower. "Initial Commitment Reduction" is defined in subsection 10.5(h). "Litigation Proceeds": Net Proceeds received by any Borrower resulting from (a) the civil proceeding entitled Hexcel Corporation v. Hercules Incorporated, now pending in the Supreme Court of the State of New York, County of New York or (b) any claims and lawsuits of any of the Borrowers against third parties in excess of $1,000,000 per claim or law suit (assuming, in each case, such litigation were a Net Proceeds Event). "Maximum Credit" means, with respect to (X) any Local Loan Borrower at any time, the lesser of (i) the Foreign Borrower Sublimit for such Local Loan Borrower in effect at such time or (ii) the Borrowing Base for such Local Loan Borrower at such time and (Y) Hexcel Holdings (U.K.) Limited, its Foreign Borrower Sublimit. "Mortgages" means the mortgages, deeds of trust or other real estate security documents made or required herein to be made by the Company or any of the Domestic Subsidiaries. "Revolving Loan Facilities" is defined in subsection 10.5(i). "Total Commitment": the collective reference to the Aggregate Commitment and the European Overdraft Commitment. (b) by replacing in its entirety the table of Leverage Ratios and Applicable Margins contained in the definition of "Applicable Margin" with the following new table:
- --------------------------------------------- ---------------------------------------------------------------------- Applicable Margin ---------------------------------------------------------------------- Tranche A Loans Revolving Credit Loans Swing Line Loans European Revolving Loans Tranche B Loans ----------------------------------- ---------------------------------- Eurocurrency Eurocurrency Leverage Ratio Loans ABR Loans Loans ABR Loans - --------------------------------------------- ------------------ ---------------- ----------------- ---------------- Greater than or equal to 5.0 to 1.0 275 b.p. 175 b.p. 325 b.p. 225 b.p. - --------------------------------------------- ------------------ ---------------- ----------------- ---------------- Greater than or equal to 4.5 to 1.0, 250 b.p. 150 b.p. 300 b.p. 200 b.p. but less than 5.0 to 1.0 - --------------------------------------------- ------------------ ---------------- ----------------- ---------------- Greater than or equal to 4.0 to 1.0, 225 b.p. 125 b.p. 275 b.p. 175 b.p. but less than 4.5 to 1.0 - --------------------------------------------- ------------------ ---------------- ----------------- ---------------- Greater than or equal to 3.5 to 1.0, 200 b.p. 100 b.p. 275 b.p. 175 b.p. but less than 4.0 to 1.0 - --------------------------------------------- ------------------ ---------------- ----------------- ---------------- Greater than or equal to 3.0 to 1.0, but 150 b.p. 50 b.p. 225 b.p. 125 b.p. less than 3.5 to 1.0 - --------------------------------------------- ------------------ ---------------- ----------------- ---------------- 5 - --------------------------------------------- ------------------ ---------------- ----------------- ---------------- Greater than or equal to 2.5 to 1.0, 112.5 b.p. 25 b.p. 200 b.p. 100 b.p. but less than 3.0 to 1.0 - --------------------------------------------- ------------------ ---------------- ----------------- ---------------- Less than 2.5 to 1.0 100 b.p. 25 b.p. 200 b.p. 100 b.p. - --------------------------------------------- ------------------ ---------------- ----------------- ----------------
(c) by replacing the period at the end of subclause (e) in the definition of "Applicable Margin" with a semicolon and inserting a new subclause (f) immediately after subclause (e) to read as follows: "(f) from January 25, 2002 to and including the Compliance Date (and thereafter, if the Compliance Date does not occur), the Applicable Margin for all Loans shall be increased by 100 b.p. over the Applicable Margin in effect from time to time; PROVIDED, HOWEVER, that if the Company shall fail to reduce the Total Commitment from January 1, 2002 to December 31, 2002 by $48,000,000 (which reduction is inclusive of the Initial Commitment Reduction and any reduction resulting from the payment of Net Cash Proceeds or Litigation Proceeds (including, without limitation, pursuant to Section 10.5(h)) and exclusive of any scheduled amortization payments of the Tranche A Loans pursuant to Section 2.3 of the Credit Agreement and any scheduled amortization payment of the Tranche B Loans pursuant to Section 3.3 of the Credit Agreement), the Applicable Margin for all Loans shall be further increased by an additional 25 b.p. over the Applicable Margin in effect from time to time." (d) by amending the definition of EBITDA by (i) adding in the fifth line thereof after "charges and business acquisition and consolidation expenses", the words "and any non-cash impairments of good-will and other purchased intangibles" and (ii) adding at the end thereof, before the period: "; provided, however, EBITDA of the Company shall exclude all earnings, losses and write-downs attributable to the Company's or its Subsidiaries' joint ventures or non-majority owned affiliates" (e) by replacing the definition of "Local Lender" in its entirety with the following paragraph to read in its entirety as follows: "`LOCAL LENDER' means, with respect to Local European Loans borrowed by the Local Loan Borrowers set forth below, (a) the lender set forth opposite the name of such Local Loan Borrower: - --------------------------------------- --------------------------------------- LOCAL LENDER LOCAL LOAN BORROWER - --------------------------------------- --------------------------------------- Credit Suisse First Boston ("CSFB") Hexcel Composites S.P.R.L. (Belgium) - --------------------------------------- --------------------------------------- Credit Lyonnais Hexcel Fabrics S.A. (France) - --------------------------------------- --------------------------------------- Credit Lyonnais Hexcel Composites S.A. (France) - --------------------------------------- --------------------------------------- CSFB Hexcel (U.K.) Limited (U.K.) - --------------------------------------- --------------------------------------- CSFB Hexcel Composites Limited (U.K.) - --------------------------------------- --------------------------------------- CSFB Hexcel Composites S.L. (Spain) - --------------------------------------- --------------------------------------- CSFB Hexcel Composites GmbH (Austria) - --------------------------------------- --------------------------------------- 6 and (b) any Lender (or Affiliate or Subsidiary thereof) which has delivered a Local Lender Joinder Agreement with respect to any Additional Borrower shall become an additional Local Lender, in each case in such Local Lender's capacity as the lender of such Local European Loans." 3.2. AMENDMENT TO SECTION 7. Section 7 (Amounts and Terms of the European Facility) is hereby amended by adding a new Subsection 7.12 at the end thereof to read in its entirety as follows: "7.12 REPAYMENT OF LOCAL EUROPEAN LOANS. If at any time, with respect to any Local Loan Borrower, the aggregate principal amount of Local European Loans owing by such Local Loan Borrower exceeds the Maximum Credit of such Local Loan Borrower at such time, such Local Loan Borrower shall forthwith prepay the Local European Loans then outstanding in an amount equal to such excess." 3.3. AMENDMENT TO SUBSECTION 7.1. Subsection 7.1 (European Revolving Credit Facility) of the Credit Agreement is hereby amended by replacing the paragraph beginning with the phrase "provided that, after giving effect..." in subclause (a) immediately after romanette (ii) with the following paragraph to read in its entirety as follows: "PROVIDED that, after giving effect to the making of such European Revolving Loans and the simultaneous use of proceeds thereof, (x) each European Lender's Aggregate Outstanding European Extensions of Credit shall not exceed its European Loan Commitment then in effect, (y) the Aggregate Outstanding European Extensions of Credit of all European Lenders shall not exceed the Aggregate European Loan Commitment then in effect and (z) the aggregate outstanding amount of European Revolving Loans and European Letters of Credit made to such Foreign Borrower shall not exceed at any time such Foreign Borrower's Maximum Credit. Any European Loans borrowed by the Foreign Borrowers in Dollars shall be made and maintained as Eurocurrency Loans. 3.4. AMENDMENT TO SUBSECTION 7.2. Subsection 7.2 (Procedure for Borrowing Syndicated European Loans) of the Credit Agreement is hereby amended by (a) replacing the word "and" at the end of subclause (iii) with a comma and (b) adding, at the end of the first sentence, before the period, the following phrase: "and (v) with respect to Local Loan Borrowers, a calculation of such Local Loan Borrower's Borrowing Base and Available Credit as of the Borrowing Date." 3.5. AMENDMENT TO SUBSECTION 7.3. Subsection 7.3 (Procedure for Borrowing Local European Loans) of the Credit Agreement is hereby amended by (a) replacing the word "and" at the end of subclause (iii) with a comma and (b) adding, at the end of the first sentence, before the period, the following phrase: "and (v) with respect to Local Loan Borrowers, a calculation of such Local Loan Borrower's Borrowing Base and Available Credit as of the Borrowing Date." 3.6. AMENDMENTS TO SUBSECTION 10.5. Subsection 10.5 (Mandatory Reduction of Commitments and Prepayments) of the Credit Agreement is hereby amended: 7 (a) by renaming clause (h) as clause (k) and inserting a new clause (h) immediately after clause (g) to read in its entirety as follows: "(h) From and after January 25, 2002 until the Compliance Date Date (and thereafter, if the Compliance Date does not occur), the Total Commitment shall be reduced by (and the Loans repaid by): (x) the amount equal to 100% of any Net Proceeds (other than Reserved Proceeds) derived by the Company and its Subsidiaries from any Net Proceeds Event (to the extent not required to be used to make a payment pursuant to Section 10.5(g), which prepayment obligations are covered by Section 10.5(g)); PROVIDED, HOWEVER, that no such reduction shall be required with respect to the first $2,500,000 of such Net Proceeds derived from such Net Proceeds Event; and (y) the amount equal to 100% of any Litigation Proceeds. Any repayment of the Loans and reduction of the Total Commitment pursuant to this subclause (h) shall be applied: to (i) Tranche A Loans then outstanding, (ii) the Tranche B Loans then outstanding, (iii) the Aggregate Revolving Credit Commitment, (iv) the Aggregate European Loan Commitment and (v) the European Overdraft Commitment, ratably among such Tranche A Loans, Tranche B Loans and commitments based on the amount of such Tranche A Loans, Tranche B Loans and commitments; PROVIDED that (A) unless the Company elects otherwise, prepayments made pursuant to this subsection 10.5(h) shall be applied to Loans under any commitment, FIRST, to ABR Loans and SECOND, to Eurocurrency Loans, (B) (a) all application of proceeds against Tranche A Loans and Tranche B Loans shall be allocated ratably among the remaining installments of each and (b) all reductions of the Revolving Loan Facilities shall permanently reduce the commitment under each such facility and (c) the Company agrees to repay Revolving Credit Loans, European Revolving Loans and European Overdraft Loans in the aggregate amount of commitment reduction of the Revolving Loan Facilities set forth in this subsection (h). (b) by inserting a new clause (i) immediately after clause (h) (as amended by this Amendment) to read in its entirety as follows: "(i) On January 25, 2002, the aggregate of the Aggregate Revolving Credit Commitment, the Aggregate European Loan Commitment and the European Overdraft Commitment (collectively, the Aggregate Revolving Credit Commitment, the Aggregate European Loan Commitment and European Overdraft Commitment, the "Revolving Loan Facilities") shall be permanently reduced to $220,000,000 (the "Initial Commitment Reduction") as follows: (i) the Aggregate Revolving Credit Commitment shall be reduced to $93,617,000, (ii) the Aggregate European Loan Commitment shall be reduced to $117,021,000 and (iii) the European Overdraft Commitment shall be reduced to $9,362,000." (c) by inserting a new clause (j) immediately after the clause (i) to read in its entirety as follows: 8 "(j) On or before September 30, 2002, the aggregate amount of the Revolving Loan Facilities shall be reduced to $212,000,000 and (x) each Revolving Credit Lender's Revolving Credit Commitment, (y) each European Lender's Aggregate European Loan Commitment and (z) the European Overdraft Lender's European Overdraft Commitment shall be reduced PRO RATA in accordance with the commitments outstanding thereunder." 3.7. AMENDMENT TO SECTION 13. Section 13 (Affirmative Covenants) of the Credit Agreement is hereby amended by adding a new subsection 13.10 immediately after Subsection 13.9 to read in its entirety as follows: "13.10 BORROWING BASE DETERMINATION. (a) no later than the tenth (10th ) Business Day of each calendar month, the Company or the Local Loan Borrower shall deliver to the Administrative Agent and the respective Local Lender with respect to each Local Loan Borrower, a Borrowing Base Certificate for such Local Loan Borrower as of the first day of such month executed by a Responsible Officer of the Company or the Local Loan Borrower. (b) the Company shall conduct, or cause to be conducted, at its expense, and upon request of the Administrative Agent or any Local Lender, and present to the Administrative Agent for approval, such appraisals, investigations and reviews as the Administrative Agent or any Local Lender shall request for the purpose of determining the Borrowing Base of each Local Loan Borrower, all upon notice and at such times during normal business hours and as often as may be reasonably requested; PROVIDED, HOWEVER, that as long as no Default or Event of Default has occurred and is continuing, with respect to any Local European Loan, the Administrative Agent or the relevant Local Lender may only request two such appraisals or investigations for each fiscal year of the Company. The Company shall furnish to the Administrative Agent or any Local Lender any information which the Administrative Agent or Local Lender may reasonably request regarding the determination and calculation of the Borrowing Base of each Local Loan Borrower, including correct and complete copies of any invoices, underlying agreements, instruments or other documents and the identity of all Account Debtors in respect of Accounts referred to therein. (c) the Company shall promptly notify the Administrative Agent and the applicable Local Lender in writing in the event that at any time the Company receives or otherwise gains knowledge that (i) the Borrowing Base of any Local Loan Borrower is less than 80% of the Borrowing Base of such Local Loan Borrower reflected in the most recent Borrowing Base Certificate delivered pursuant to Section 13.4(a) or that (ii) the outstanding Local European Loans of such Local Loan Borrower exceed the Borrowing Base as a result of a decrease therein, and the amount of such excess. (d) the Administrative Agent or any Local Lender may, at the Company's sole cost and expense, make reasonable test verifications of the Accounts, and the Company shall furnish (or shall cause to be furnished) all such assistance and information as the Administrative Agent may reasonably require in connection therewith." 9 3.8. AMENDMENT TO SUBSECTION 13.1. Subsection 13.1 (Financial Statements) is hereby amended by: (a) inserting at the end of subclause (a) immediately at the end thereof, before the semi-colon: "and unaudited consolidating balance sheets of the Company and its Subsidiaries, as at the end of such fiscal year and the related unaudited statements of income and cash flows for such fiscal year; provided that, notwithstanding the foregoing, (x) the consolidating cash flows do not need to be provided for any period prior to April 30, 2002 and (y) the consolidating financial statements referred to in this clause (a) shall be delivered on the earlier of the time period specified in this section and the day after the Company announces its earnings": (b) inserting at the end of subclause (b) immediately after the words "previous year" and before the words ", certified by a Responsible Officer" in the eighth line thereof, the following phrase: "and unaudited consolidating balance sheets of the Company and its Subsidiaries, as at the end of such quarter and the related unaudited statements of income and cash flows for such quarter and the portion of the fiscal year through the end of such quarter; provided that, notwithstanding the foregoing, (x) the consolidating cash flows do not need to be provided for any period prior to April 30, 2002 and (y) the consolidating financial statements referred to in this clause (b) shall be delivered on the earlier of the time period specified in this section and the day after the Company announces its earnings, ": (c) inserting at the end of subclause (c) immediately after the words "Subsidiaries for such month" and before the words ", certified by a Responsible Officer" in the sixth line thereof, the following phrase: "and unaudited consolidating balance sheets of the Company and its Subsidiaries, as at the end of such month and the related unaudited statements of income and cash flows of the Company and its Subsidiaries for such month; provided that, notwithstanding the foregoing, (x) the consolidating cash flows do not need to be provided for any period prior to April 30, 2002 and (y) the consolidating financial statements referred to in this clause (c) shall be delivered no later than the twelfth Business Day after the end of each month": (d) (i) deleting the word "and" at the end of subclause (b), (ii) inserting the word "and" at the end of subclause (d) and (iii) inserting new subclauses (d) and (e) immediately after subclause (c) to read in its entirety as follows: "(d) promptly following the filing thereof in accordance with local law, for each Foreign Borrower, copies of their statutory accounts, audited or otherwise prepared in accordance with all local laws;" 10 "(e) not later than ten (10) Business Days after the end of each fiscal month of the Company, a 13 week cash flow forecast together with (i) a report of variances, if any, from the preceding 13 week cash flow forecasts delivered, and (ii) a comparison of actual cash flows to the most recently forecasted cash flows for the month most recently ended." 3.9. AMENDMENT TO SUBSECTION 13.2. Subsection 13.2 (Certificates; Other Information) of the Credit Agreement is hereby amended by: (a) amending clause (b) to read: "(b) within thirty days after the end of each fiscal quarter, a certificate of a Responsible Officer, substantially in the form of Exhibit F;" (b) renaming clause (h) as clause (j); (c) inserting a new clause (h) immediately after clause (g) to read as follows: "(h) not later than July 3, 2002, a certificate of a Responsible Officer, certifying that the Company is in compliance with Section 14.1(e) of the Credit Agreement." (d) inserting a new subclause (i) immediately after subclause (h) to read in its entirety as follows: "(i) within five (5) Business Days after receipt by the Company, copies of each executed management letter, exception report or similar letter or report received by the Company or any Subsidiary from its independent certified public accountants." 3.10. AMENDMENTS TO SECTION 14. Section 14 (Negative Covenants) of the Credit Agreement is hereby amended by: (a) adding a new Subsection 14.16 immediately after Subsection 14.15 to read in its entirety as follows: "14.16 LIMITATION ON CAPITAL EXPENDITURES. Make any Capital Expenditures in excess of (a) $25,000,000 during the fiscal year ending December 31, 2002 or (b) $10,000,000 during any fiscal quarter of the fiscal year ending December 31, 2002." (b) adding a new Subsection 14.17 immediately after Subsection 14.16 to read in its entirety as follows: "14.17 ACCOUNTS; APPROVED DEPOSIT ACCOUNTS. (a) Permit any of the Company or any of its Domestic Subsidiaries to (i) deposit or cause to be deposited in any deposit account other than an Approved Deposit Account any cash or Cash Equivalents received by the Company or any of its Domestic Subsidiaries, except that the Company and its Domestic Subsidiaries may establish and maintain one or more deposit accounts with one or more financial institutions other than a Deposit Account Bank, a Lender or an Affiliate of a Lender if the aggregate balance in all 11 such accounts does not exceed $5,000,000 at any time or (ii) establish or maintain any securities account that is not subject to a Control Account Agreement. (b) Permit any of the Foreign Borrowers to deposit or cause to be deposited in any bank, deposit or securities account (an "Approved Account") other than with such Foreign Borrower's respective Local Lender, any other Lender or such other financial institution acceptable to the Administrative Agent (the "Approved Local Deposit Bank") in which such Foreign Borrower has granted a first priority, perfected security interest in such Approved Account at such Approved Local Deposit Bank to secure such Foreign Borrower's outstanding Loans, any cash or Cash Equivalents, or any securities, except that (i) each Foreign Borrower may establish and maintain one or more deposit accounts with one or more financial institutions other than the Approved Local Deposit Bank if (x) the aggregate balance in all such accounts for such Foreign Borrower does not exceed $1,000,000 in the aggregate at the end of any day, (y) the aggregate balance in all such accounts for all Foreign Borrowers does not exceed $10,000,000 in the aggregate at the end of any day and (z) the aggregate balance in all such accounts for all Foreign Borrowers does not exceed $5,000,000 in the aggregate at the end of any month; PROVIDED, HOWEVER, that (1) the Company shall not be required to comply with the requirements of the negative covenant contained in this Subsection 14.17(b) until May 31, 2002 and (2) the Company shall not be required to comply with the requirements of the negative covenant contained in this Subsection 14.17(b) to the extent that the Administrative Agent reasonably determines that such compliance is impracticable and/or causes material adverse tax consequences to, legal liability on or material adverse effects on the operation of, the Company or any of its Subsidiaries or any of their respective officers and directors. 3.11. AMENDMENT TO SUBSECTION 14.1. Subsection 14.1 (Financial Conditions Covenants) of the Credit Agreement is hereby amended in its entirety to read as follows: "(a) MINIMUM INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio of the Company and its Subsidiaries on the last day of any fiscal quarter of the Company occurring during a period set forth below to be less than the ratio set forth opposite such period:
- ---------------------------------------------------------------------------- Period Ratio - ---------------------------------------------------------------------------- October 1, 2001 - December 31, 2001 1.75 to 1.0 January 1, 2002 - March 31, 2002 1.45 to 1.0 April 1, 2002 - June 30, 2002 1.35 to 1.0 July 1, 2002 - September 30, 2002 1.30 to 1.0 October 1, 2002 - December 31, 2002 1.45 to 1.0 January 1, 2003 and thereafter 2.35 to 1.0 - ----------------------------------------------------------------------------
(b) MAXIMUM LEVERAGE RATIO. Permit the Leverage Ratio of the Company and its Subsidiaries on the last day of any fiscal quarter of the Company occurring during a period set forth below to be greater than the ratio set forth opposite such period: 12
- ---------------------------------------------------------------------------- Period Ratio - ---------------------------------------------------------------------------- October 1, 2001 - December 31, 2001 6.00 to 1.0 January 1, 2002 - March 31, 2002 7.40 to 1.0 April 1, 2002 - June 30, 2002 7.75 to 1.0 July 1, 2002 - September 30, 2002 7.75 to 1.0 October 1, 2002 - December 31, 2002 7.25 to 1.0 January 1, 2003 and thereafter 4.60 to 1.0 - ----------------------------------------------------------------------------
(c) MINIMUM FIXED CHARGE COVERAGE RATIO. Permit the Fixed Charge Coverage Ratio of the Company and its Subsidiaries on the last day of any fiscal quarter of the Company occurring during a period set forth below to be less than the ratio set forth opposite such period:
- ---------------------------------------------------------------------------- Period Ratio - ---------------------------------------------------------------------------- October 1, 2001 - December 31, 2001 1.20 to 1.0 January 1, 2002 - March 31, 2002 0.90 to 1.0 April 1, 2002 - June 30, 2002 0.80 to 1.0 July 1, 2002 - September 30, 2002 0.80 to 1.0 October 1, 2002 - December 31, 2002 0.90 to 1.0 January 1, 2003 and thereafter 1.20 to 1.0 - ----------------------------------------------------------------------------
(d) MAXIMUM SENIOR DEBT LEVERAGE RATIO. Permit the Senior Debt Leverage Ratio of the Company and its Subsidiaries on the last day of any fiscal quarter of the Company occurring during a period set forth below to be greater than the ratio set forth opposite such period:
- ---------------------------------------------------------------------------- Period Ratio - ---------------------------------------------------------------------------- October 1, 2001 - December 31, 2001 2.40 to 1.0 January 1, 2002 - March 31, 2002 3.15 to 1.0 April 1, 2002 - June 30, 2002 3.30 to 1.0 July 1, 2002 - September 30, 2002 3.25 to 1.0 October 1, 2002 - December 31, 2002 2.90 to 1.0 January 1, 2003 and thereafter 2.25 to 1.0 - ----------------------------------------------------------------------------
(e) MINIMUM AVAILABILITY. Permit the aggregate amount of (i) the sum of the amount available to be borrowed under (x) Available European Loan Commitment and (y) Available Revolving Credit Commitment and (z) the European Overdraft Commitment (without duplication and subject to the Maximum Credit of the Foreign Borrowers) and (ii) cash and Cash Equivalents as of the date set forth below to be less than the amount set forth opposite such date: 13 - ----------------------------------------------- ------------------- Period Amount - ----------------------------------------------- ------------------- June 30, 2002 $30,000,000 - ----------------------------------------------- ------------------- 3.12. AMENDMENT TO SUBSECTION 14.2. Subsection 14.2 (Limitation on Indebtedness) of the Credit Agreement is amended by (a) replacing subclause (g) with the following phrase to read in its entirety as follows: "(g) (INTENTIONALLY OMITTED)" (b) replacing the phrase "not to exceed $20,000,000" in subclause (l) thereof with the phrase "not to exceed $5,000,000"; provided if the Compliance Date occurs, such amendment of this subclause (l) shall be of no further force and effect. 3.13. AMENDMENT TO SUBSECTION 14.3. Subsection 14.3 (Limitation on Liens) of the Credit Agreement is hereby amended by replacing subclause (m) with the following phrase to read in its entirety as follows: "(m) (INTENTIONALLY OMITTED)" 3.14. AMENDMENT TO SUBSECTION 14.7. Subsection 14.7 (Limitation on Restricted Payments) of the Credit Agreement is hereby amended by adding the following sentence at the end thereof: "Notwithstanding anything in this Subsection 14.7 to the contrary, during the period commencing on January 25, 2002 and ending on the Compliance Date, if such date occurs, Restricted Payments by the Company and its Subsidiaries shall be limited to mandatory sinking fund payments and those payments currently permitted pursuant to Section 14.7(a)(i), (ii) and (iv) of the Agreement (but not in respect of Section 14.14(v) of the Agreement (except (i) such cash payments shall not exceed $2,000,000 in the aggregate and (ii) any payments in shares of common stock shall be permitted) and Section 14.14(vii) of the Agreement)." 3.15. AMENDMENTS TO SUBSECTION 14.8. Subsection 14.8 (Limitation on Investments) of the Credit Agreement is hereby amended by: (a) replacing subclause (j) with the following phrase to read in its entirety as follows: "(j) (INTENTIONALLY OMITTED)" ; provided if the Compliance Date occurs, such amendment of this subclause (j) shall be of no further force and effect. 14 (b) replacing in its entirety the phrase "does not exceed the greater of (A) $50,000,000 and" in the sixth line of subclause (k) with the phrase "does not exceed the greater of (A) $32,000,000" ; provided if the Compliance Date occurs, such amendment of this subclause (k) shall be of no further force and effect; (c) inserting at the end of Subsection 14.8(k) the following new paragraph: "Notwithstanding anything in this clause (k) to the contrary, the Company shall not repay and shall not permit or cause to be repaid any of the Local European Loans with proceeds derived from (i) Investments by the Company in any of the Local Loan Borrowers or (ii) the repayment of any intercompany Indebtedness owing to any of the Local Loan Borrowers (other than the proceeds derived from the payments of trade receivables made in the ordinary course of business consistent with past practices)." 3.16. AMENDMENT TO SUBSECTION 14.14. Subsection 14.14 (Limitation on Modification of Agreements and Payments on Account of Debt) is hereby amended by: (a) adding at the end of both subclause (ii) and (iii) thereto the following phrase to read in its entirety as follows: "PROVIDED, HOWEVER the proceeds of such repayments are not used to repay any of the Local European Loans (other than the proceeds derived from the payments of trade receivables made in the ordinary course of business consistent with past practices);" (b) replacing clause (C) of subclause (v) with the following phrase to read in its entirety as follows: "(C) payments of cash do not exceed $2,000,000 in the aggregate;" 3.17. AMENDMENT TO SECTION 15. Section 15 (Events of Default) of the Credit Agreement is hereby amended by: (a) inserting the word "or" at the end of clause (k) and adding a new clause (l), immediately after clause (k) to read in its entirety as follows: "(l) The Company or any other Credit Party shall default in the observance or performance of Subsection 10.5(j) in this Agreement;" (b) inserting the following proviso immediately after the phrase "whereupon the same shall immediately become due and payable" in the last sentence of the first paragraph following subclause (k): "PROVIDED, HOWEVER that, notwithstanding the foregoing, there shall not be an Event of Default with respect to any Local Loan Borrower and the Local European Loans, except as otherwise provided herein, and provided further if (i) there is a default pursuant to Section 15(a) of this Agreement (other than a payment default by such Local Loan Borrower covered by clause (ii) below) or an Event of Default pursuant to Section 15(f) of this Agreement (other than a bankruptcy or insolvency by such Local Loan Borrower covered by clause (ii) below), upon 90 days' notice to such Local Loan 15 Borrower, or (ii) there is a failure on the part of such Local Loan Borrower to pay any amount when due or such Local Loan Borrower takes any action which would result in any Default or Event of Default under this Agreement, then the Local European Loans shall become payable upon demand and, thereafter, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall (X) demand payment of the Local European Loans owed by such Local Loan Borrower (and such Local European Loans shall be immediately due and payable) and (Y) upon any failure by such Local Loan Borrower to pay, pursue any and all remedies with respect thereto including with respect to any Collateral granted in respect thereto. The acceleration of, demand in respect of, or pursued of remedies in respect of any Local European Loans shall not affect effectiveness of Section 7.5 and rights and remedies of the Local Lender and the Administrative Agent or the obligations of the European Lenders thereunder" 3.18. AMENDMENT TO EXHIBITS. The list of Exhibits to the Credit Agreement is hereby amended by adding a new Exhibit J "Form of Borrowing Base Certificate" which shall be in the form of Annex I attached hereto. SECTION 4. AFFIRMATIVE COVENANTS 4.1. CONDITIONS SUBSEQUENT - 30 DAYS. Within 30 days of the Effective Date, (a) DEPOSIT ACCOUNT CONTROL AGREEMENTS. the Company shall deliver Deposit Account Control Agreements substantially in the form of Annex II to the Collateral Agreement (as amended) duly executed by the appropriate Deposit Account Bank, with respect to the concentration accounts and such other deposit accounts of the Company and the Guarantors as the Documentation Agent may require; (b) CONTROL ACCOUNT AGREEMENTS. the Company shall deliver Control Account Agreements substantially in the form of Annex III to the Collateral Agreement (as amended) duly executed by (x) the appropriate securities intermediaries with respect to all securities accounts and securities entitlements of the Company and its Domestic Subsidiaries and (y) all futures commission agents and clearing houses with respect to all commodities contracts and commodities accounts held by the Company and its Domestic Subsidiaries; and (c) LEGAL OPINIONS OF COUNSEL. the Company shall deliver the executed legal opinions of counsel concerning the perfection of the Liens granted on the Approved Deposit Accounts and such other matters requested by the Administrative Agent which opinion shall be in form and substance reasonably acceptable to the Administrative Agent. 4.2. CONDITIONS SUBSEQUENT - 60 DAYS. Within 60 days of the Effective Date, (a) MORTGAGES. the Company shall deliver duly executed Mortgages for each of the Properties set forth in Schedule 2 attached hereto and any other domestic real estate owned in fee (which does not have a Lien in favor of the Lenders) with a value in excess of $ 1,000,000 and evidence that counterparts of the Mortgages have been delivered to the title company for recording, in the reasonable judgment of the Documentation Agent, so as to effectively create 16 upon such recording valid and enforceable Liens upon such Property, of the requisite priority, in favor of the Documentation Agent; (b) PERFECTION. the Company shall deliver in form and substance satisfactory to the Administrative Agent all filings, recordings, registrations and shall take any other actions necessary or, in the opinion of the Administrative Agent, desirable to perfect the Liens created by the Security Documents referred to in Section 4.2(a); and (c) LOCAL LENDER JOINDER AGREEMENTS. Each of the Local Lenders shall executed and deliver the Local Lender Joinder Agreements for the following Local Lenders: (x) Credit Suisse First Boston and (y) Credit Lyonnais, as provided for in Section 2.1(a) of this Amendment; and (d) LEGAL OPINIONS OF LOCAL COUNSEL. the Company shall deliver the executed legal opinions of local counsel with respect to each mortgage referred to on Section 4.2(a) hereof, which opinions shall be in form and substance reasonably acceptable to the Administrative Agent. 4.3. CONDITIONS SUBSEQUENT - 90 DAYS. Within 90 days of the Effective Date, (a) PLEDGED COLLATERAL. the Company shall deliver to the Documentation Agent (i) a pledge agreement, in form and substance satisfactory to the Documentation Agent, pledging 65% of the stock of Hexcel-China Holdings Corp. (which pledge agreement shall provide that, in the event the Documentation Agent becomes the owner of such stock, the Documentation Agent will be bound by the same obligations under the Equity Joint Venture Contract by and among Aviation Industries of China ("AVIC"), Hexcel-China Holdings Corp. and Boeing International Holdings Ltd., dated January 13, 1999, by which Hexcel Corporation is bound, as required by that certain Consent to Transfer Shares of Hexcel-China Holdings Corp. by Pledge dated January 13, 1999 among AVIC, the Boeing Company and Hexcel Corporation) and (ii) certificate(s) representing 65% of the stock of Hexcel-China Holdings Corp. (b) PERFECTION. the Company shall deliver in form and substance satisfactory to the Administrative Agent all filings, recordings, registrations and take all other actions necessary or, in the opinion of the Administrative Agent, desirable to perfect the Liens created by the Security Documents referred to in Section 4.3(a); and (c) LEGAL OPINIONS OF LOCAL COUNSEL. the Company shall deliver an executed legal opinion of Clarel Benoit, Mauritius counsel to the Company, with respect to the pledge described in Section 4.3(a) hereof, which opinion shall be in form and substance reasonably acceptable to the Administrative Agent. (d) LOCAL EUROPEAN LOANS. The Company and each of the Local Loan Borrowers hereby agree that within 90 days of the Effective Date (which may be extended by the Company for an additional 30 days with the written consent of the Administrative Agent), the Local Loan Borrowers shall collectively borrow a minimum aggregate amount of $25,000,000 as Local European Loans and the proceeds of such Local European Loans will be used to repay the European Revolving Loans made to Hexcel Holdings (U.K.) Limited ("HEXCEL HOLDINGS") under the European Loan Commitment in the amount of $20,000,000. On the earlier of the 90th day 17 following the Effective Date (or such other date to which compliance with this Section 4.4 has been extended) and the date such Local European Loans have been made pursuant to this Section 4.4, the Foreign Borrower Sublimit of Hexcel Holdings shall be reduced by $20,000,000. The excess amount of the proceeds after repaying the aforementioned European Revolving Loans made to Hexcel Holdings shall be used to repay Revolving Credit Loans. The making of the initial Local European Loans to any Local Loan Borrower shall be subject to the following conditions precedent (in addition to those contained in Section 12 of the Credit Agreement): The Administrative Agent and the Local Lender shall have received the following, each of which shall be satisfactory in form and substance to the Administrative Agent and the Local Lender (any of which may be waived by the Administrative Agent and the Local Lender): (i) a security or pledge agreement, executed by such Local Loan Borrower pledging its Accounts as collateral for the Local European Loans borrowed by such Local Loan Borrower; (ii) all filings, recordings, registrations and other actions necessary or, in the opinion of the Administrative Agent, desirable to perfect the Liens created by the Security Documents referred to in Section 4.3(d)(i); (iii) true and complete copies of the certificate of incorporation and by-laws (or similar organizational documents) of such Local Loan Borrower, certified as of the initial Local European Loan as complete and correct copies thereof by an officer of such Local Loan Borrower; (iv) a copy of the resolutions of the Board of Directors or other governing body of such Local Loan Borrower authorizing (i) the borrowings contemplated hereunder and (ii) the granting by it of the Liens created pursuant to the Security Documents to which it is a party, certified by the Secretary or an Assistant Secretary of such Local Loan Borrower as of the date of the initial Local European Loan; (v) a Certificate of such Local Loan Borrower, dated the date of the initial Local European Loans, as to the incumbency and signature of the officers of such Local Loan Borrower executing the Security Document; (vi) all such other agreements, documents and certificates as the Administrative Agent or the Local Lender may reasonably request; and (vii) executed legal opinions of counsel. 4.4. PROPERTY, PLANT AND EQUIPMENT ANALYSIS. Within 90 days of the Effective Date, the Company shall provide an analysis of its property, plant and equipment by physical location, book value, ownership (by entity), pledge/lien status and type of asset, reasonably satisfactory to the Administrative Agent. 4.5. ACCOUNTS; APPROVED DEPOSIT ACCOUNTS FOR LOCAL LOAN BORROWERS. By May 31, 2002, the Company shall cause all cash and Cash Equivalents held by Local Loan Borrowers to be deposited in Approved Deposit Accounts maintained by each such Local Loan Borrower's 18 respective Local Lender, as contemplated by Subsection 14.17(b) of the Credit Agreement, as amended hereby. 4.6. FINANCIAL ADVISOR. If the Company hires a financial advisor to advise the Company with respect to its obligations under this Agreement and/or the other Credit Documents or there occurs after the date hereof a Default or Event of Default under the Credit Agreement, the Company shall reimburse the Lenders for the fees and expenses of such financial advisor (if any) engaged to advise the Lenders with respect to the Company's current and future financial condition. 4.7. FAILURE TO PERFORM. The parties hereto agree that any failure on the part of the Company or its Subsidiaries to comply with the covenants contained in this Section 4 shall constitute an immediate Event of Default under the Credit Agreement (other than Section 4.2(c)), unless the Administrative Agent and any affected Local Lender agree to extend the deadline for compliance with the covenants in this Section 4. SECTION 5. MISCELLANEOUS 5.1. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. This Amendment shall become effective January 25, 2002 (the "EFFECTIVE DATE") provided that: (a) the Administrative Agent shall have received on or before the Effective Date: (i) counterparts hereof, duly executed and delivered by each Borrower, the Administrative Agent, the Documentation Agent, each Subsidiary Guarantor and the Majority Lenders; and (ii) for the account of each Lender executing this Amendment, an amendment fee (the "Amendment Fee") as follows: 25 b.p. to Lenders executing this Amendment by 5:00 p.m. New York City time on January 25, 2002, calculated on such Lender's applicable (i) Commitment, in the case of Revolving Credit Commitment, European Loan Commitment or European Overdraft Commitment and (ii) outstanding Loans, in the case of Tranche A Loans and Tranche B Loans. Such Amendment Fee shall be calculated immediately prior to the effectiveness of this Amendment and shall be payable on the Effective Date. (b) the Administrative Agent shall have received on or before the Effective Date (unless waived in writing by the Administrative Agent): (i) an executed legal opinion of Skadden, Arps, Slate & Meagher & Flom LLP, counsel to the Company and the other Credit Parties, in form and substance reasonably satisfactory to the Administrative Agent. (c) the Documentation Agent shall have received on or before the Effective Date (unless waived in writing by the Administrative Agent and the Documentation Agent): (i) counterparts, duly executed and delivered by the Grantors and the Documentation Agent of Amendment No. 1 to the Collateral Agreement, attached 19 hereto as Exhibit A, which amendment shall include a grant of a first priority, perfected security interest in all of the tangible and intangible domestic assets that are not currently pledged under the Credit Documents as may be requested by the Administrative Agent including, without limitation, a security interest in: (i) 100% of the stock of ACM Holdings Corporation, and (ii) all of the assets of Hexcel Pottsville Corporation (including real property and all intellectual property) and (iii) all deposit and securities accounts; (ii) Assumption Agreements substantially in the form of Annex 1 to the Collateral Agreement duly executed by each of the additional Grantors listed in Schedule 1 attached hereto; (iii) certificates representing any additional shares of Domestic Subsidiaries pledged pursuant to any of the Assumption Agreements referenced in the preceding subclause (ii); and (iv) evidence in form and substance satisfactory to the Administrative Agent and the Documentation Agent that all filings, recordings, registrations and other actions necessary or, in the opinion of the Documentation Agent, desirable to perfect the Liens created by the Security Documents shall have been completed. 5.2. REPRESENTATIONS AND WARRANTIES. The Company, as of the date hereof after giving effect to the amendment contained herein, hereby confirms, reaffirms and restates the representations and warranties made by it and each Foreign Borrower in Subsection 11 of the Credit Agreement and otherwise in the Credit Documents to which it is a party; PROVIDED that each reference to the Credit Agreement therein shall be deemed to be a reference to the Credit Agreement after giving effect to this Amendment. 5.3. LIMITED EFFECT. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Credit Documents, nor constitute a waiver or amendment of any provisions of any of the Credit Documents. Except as expressly modified herein, all of the provisions and covenants of the Credit Agreement and the other Credit Documents are and shall continue to remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed. 5.4. COUNTERPARTS. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts (which may include counterparts delivered by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Any executed counterpart delivered by facsimile transmission shall be effective as for all purposes hereof. 5.5. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 20 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. HEXCEL COMPOSITES S.p.r.L. (Belgium) HEXCEL COMPOSITES S.A. (France) HEXCEL COMPOSITES GMBH (Austria) HEXCEL COMPOSITES, S.L. (Spain) HEXCEL CORPORATION HEXCEL (U.K.) LIMITED HEXCEL HOLDINGS (U.K.) LIMITED HEXCEL COMPOSITES LIMITED HEXCEL S.A. (France) HEXCEL FABRICS S.A. HEXCEL COMPOSITES GMBH (Germany) By:_________________________ Title: 21 CREDIT SUISSE FIRST BOSTON, as Administrative Agent and Lead Arranger By: ------------------------------------------------- Name: Title: By: ------------------------------------------------- Name: Title: CITIBANK, N.A., as Documentation Agent and as a Lender By: ------------------------------------------------- Name: Title: , as a - ----------------------------------- Lender By: ------------------------------------------------- Name: Title: [Other Bank Signature Blocks] 22 The undersigned Subsidiary Guarantors do hereby consent and agree to the execution and delivery of this Amendment: HEXCEL INTERNATIONAL HEXCEL OMEGA CORPORATION HEXCEL BETA CORP. CLARK-SCHWEBEL HOLDING CORP. CLARK-SCHWEBEL CORPORATION CS TECH-FAB HOLDING, INC. By: ----------------------------------------------- Title: [Additional Guarantors] HEXCEL POTTSVILLE CORPORATION ACM HOLDINGS CORPORATION HEXCEL PACIFIC RIM CORPORATION (CA) HEXCEL PACIFIC RIM CORPORATION (DE) HEXCEL FAR EAST HEXCEL TECHNOLOGIES INC. By: ----------------------------------------------- Title: 23 SCHEDULE 1 ADDITIONAL GRANTORS HEXCEL POTTSVILLE CORPORATION ACM HOLDINGS CORPORATION (not as a Grantor of security, but as a Guarantor) HEXCEL PACIFIC RIM CORPORATION (CA) HEXCEL PACIFIC RIM CORPORATION (DE) HEXCEL FAR EAST HEXCEL TECHNOLOGIES INC.(not as a Grantor of security, but as a Guarantor) SCHEDULE 2 PROPERTY POTTSVILLE, PA ST. CLAIR BUSINESS PARK POTTSVILLE, PENNSYLVANIA 17901 BURLINGTON, WA 15062 STEELE ROAD BURLINGTON, WASHINGTON 98233-3600 EXHIBIT A FORM OF AMENDMENT NO. 1 TO COLLATERAL AGREEMENT ANNEX I EXHIBIT J - FORM OF BORROWING BASE CERTIFICATE [To be agreed upon by the Administrative Agent and each relevant Local Lender] EX-99.2 4 a2068953zex-99_2.txt EXHIBIT 99.2 EXHIBIT 99.2 FIRST AMENDMENT TO AMENDED AND RESTATED COLLATERAL AGREEMENT FIRST AMENDMENT, dated as of January 25, 2002 (this "AMENDMENT"), to the Amended and Restated Collateral Agreement, dated as of March 7, 2000 (the "COLLATERAL AGREEMENT"), made by the Grantors, in favor of CITIBANK, N.A., as Documentation Agent (in such capacity, the "DOCUMENTATION AGENT") for the banks and other financial institutions (the "LENDERS") from time to time parties to the Second Amended and Restated Credit Agreement, dated as of September 15, 1998 (as amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), among Hexcel Corporation (the "COMPANY") and the Foreign Borrowers from time to time party thereto (together with the Company, the "BORROWERS"), the Lenders, the Documentation Agent, and Credit Suisse First Boston, as Administrative Agent (the "ADMINISTRATIVE AGENT"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, certain loans and other extensions of credit to the Borrowers; and WHEREAS, the parties to the Collateral Agreement desire to amend the Collateral Agreement as set forth herein; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in consideration of the premises and mutual agreements contained herein, the parties hereto hereby agree as follows: SECTION 1. DEFINED TERMS 1.1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement or the Collateral Agreement are used herein as defined in the Credit Agreement or the Collateral Agreement. SECTION 2. AMENDMENT 2.1. AMENDMENTS TO SUBSECTION 1.1. (a) Subsection 1.1(a) of the Collateral Agreement is hereby replacing in its entirety Subsection 1.1(a) with the following to read in its entirety as follows: "1.1 DEFINITIONS (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms are used herein as defined in the New York UCC: Accounts, Account Debtor, Certificated Security, Chattel Paper, Deposit Account, Documents, Equipment, General Intangibles, Instruments, Inventory, Letter-of-Credit Rights, Proceeds and Securities Account." (b) Subsection 1.1(b) of the Collateral Agreement is hereby amended by (i) deleting the definition of "Proceeds" therein in its entirety and (ii) inserting in proper alphabetical order the following new definitions: "Approved Deposit Account" means a Deposit Account maintained by any Grantor with a Deposit Account Bank which account is the subject of an effective Deposit Account Control Agreement, and includes all monies on deposit therein and all certificates and instruments, if any, representing or evidencing such Approved Deposit Account. "Control Account Agreement" means a letter agreement, substantially in the form of Annex 3 (with such changes as may be agreed to by the Administrative Agent and the Documentation Agent), executed by the relevant Grantor, the Documentation Agent and the relevant Approved Securities Intermediary. "Copyrights" means (a) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished, all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any foreign counterparts thereof and (b) the right to obtain all renewals thereof. "Copyright Licenses" means any written agreement naming any Grantor as licensor or licensee granting any right under any Copyright, including the grant of rights to copy, publicly perform, create derivative works, manufacture, distribute, exploit and sell materials derived from any Copyright. "Deposit Account Bank" means a financial institution selected or approved by the Administrative Agent and with respect to which a Grantor has delivered to the Documentation Agent an executed Deposit Account Control Agreement. "Deposit Account Control Agreement" means a letter agreement, substantially in the form of Annex 2 (with such changes as may be agreed to by the Administrative Agent and the Documentation Agent), executed by the Grantor, the Documentation Agent and the relevant Deposit Account Bank. "Intellectual Property" means, collectively, Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks, Trademark Licenses and trade secrets, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Patents" means (a) all letters patent of the United States, any other country or any political subdivision thereof and all reissues and extensions thereof, (b) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, and (c) all rights to obtain any reissues or extensions of the foregoing. 2 "Patent Licenses" means all agreements, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, use, import, sell or offer for sale any invention covered in whole or in part by a Patent. "Trademarks" means (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, and (b) the right to obtain all renewals thereof. "Trademark Licenses" means any agreement, whether written or oral, providing for the grant by or to any Grantor of any right to use any Trademark. 2.2. AMENDMENT TO SUBSECTION 3.1. Subsection 3.1 (Grant of Security Interest) of the Collateral Agreement is hereby amended by: (a) deleting the word "and" at the end of subclause (e), renaming subclause (f) as subclause (n) and inserting a new subclause (f) to read in its entirety as follows: "(f) all General Intangibles, including all Intellectual Property;" (b) inserting the following new subclauses (g) through (m) immediately after subclause (f) (as amended in subclause 2.2(a) of this Amendment) to read in their entirety as follows: "(g) all Chattel Paper; (h) all Deposit Accounts; (i) all Documents; (j) all Instruments; (k) all Letter-of-Credit Rights; (l) all other goods and personal property of such Grantor whether tangible or intangible wherever located; (m) all property of any Grantor held by the Documentation Agent or any Lender, including all property of every description, in the possession or custody of or in transit to the Documentation Agent or such Lender for any purpose, including safekeeping, collection or pledge, for the account of such Grantor or as to which such Grantor may have any right or power; and"; 3 (c) deleting the first full paragraph immediately following the end of subclause (n) (as amended in subclause 2.2(a) of this Amendment), beginning with the words "Notwithstanding the foregoing" through and including the words "such preceding sentence.", in its entirety and inserting the following two paragraphs to read in their entirety as follows: "Notwithstanding anything herein to the contrary, in no event shall ACM Holdings Corporation ("ACM") or Hexcel Technologies Inc. ("HTI") be considered a Grantor hereunder, nor shall any property of ACM or HTI constitute Collateral hereunder, it being understood and agreed that ACM and HTI shall be considered Subsidiary Guarantors hereunder and are signatories hereto only with respect to Section 2 and Section 8 hereof. Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Grantor shall be deemed to have granted a security interest in, any of such Grantor's right, title or interest: (a) in any Intellectual Property (i) if the grant of such security interest shall constitute or result in the abandonment, invalidation or rendering unenforceable any right, title or interest of any Grantor therein, (ii) which is licensed to a Grantor pursuant to an agreement which prohibits the assignment, transfer or pledge of such Intellectual Property or (iii) which constitutes the following Patents which are to be transferred from the Company to Clark-Schwebel Tech-Fab Company (a New York general partnership) in connection with the conversion of Clark-Schwebel Tech-Fab Company into a limited liability company to be known as "CS Tech Fab Company, LLC,": U.S. App. No. 09/663274, U.S. Patent No. 6174483, U.S. App. No. 09/636140, U.S. App. No. 09/634415, U.S. Patent No. 6123879, Canada App. No. 2236735, China App. No. 96198431.7, European App. No. 96940356.7, Japan App. No, 519768/97 and U.S. Patent No. 5836715; or (b) in any license, contract or agreement to which such Grantor is a party or any of its rights or interests thereunder, to the extent, but only to the extent, that such a grant, under the terms of such license, contract or agreement (including, without limitation, any partnership agreements or any limited liability company agreements), or otherwise, results in a breach or termination of the terms of, or constitutes a default under or termination of any such license, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the New York UCC or the Uniform Commercial Code as in effect from time to time in any relevant jurisdiction or any other applicable law (including Title 11 of the United States Code entitled "Bankruptcy", as now or hereafter in effect, or any successor statute) or principles of equity)." 2.3. AMENDMENTS TO SECTION 4. Section 4 (Representations and Warranties) of the Collateral Agreement is hereby amended by (a) inserting a new Subsection 4.7 immediately after subsection 4.6 to read in its entirety as follows: "4.7 INTELLECTUAL PROPERTY. (a) Schedule 7 lists all Intellectual Property which is material to the business of such Grantor on the date hereof, separately identifying that owned by such 4 Grantor and that licensed to such Grantor, and such Intellectual Property constitutes all of the intellectual property rights material to the conduct of such Grantor's business; PROVIDED, HOWEVER, that, Schedule 7 does not list (i) licenses of Intellectual Property from one Grantor to another Grantor, (ii) operational licenses for software constituting Intellectual Property used in the day-to-day business operations of such Grantor, (iii) licenses which such Grantor is prohibited from disclosing due to confidentiality restrictions in the license agreement for such Intellectual Property and (iv) Intellectual Property which does not constitute part of the Collateral. (b) On the date hereof, all Intellectual Property which is material to the business of, and is owned by, such Grantor is valid, subsisting, unexpired and enforceable, has not been adjudged invalid and has not been abandoned and the use thereof in the business of such Grantor does not infringe the intellectual property rights of any other Person. (c) Except as set forth in Schedule 7, on the date hereof, none of the Intellectual Property which is material to the business of, and is owned by, such Grantor is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor. (d) No holding, decision or judgment has been rendered by any Governmental Authority that would limit, cancel or question the validity of, or such Grantor's rights in, any Intellectual Property which is material to the business of such Grantor. (e) No action or proceeding seeking to limit, cancel or question the validity of any Intellectual Property which is material to the business of, and is owned by, such Grantor or such Grantor's ownership interest therein is on the date hereof pending or, to the knowledge of such Grantor, threatened, and there are no claims, judgments or settlements to be paid by such Grantor relating to such Intellectual Property." (b) inserting a new Subsection 4.8 immediately after Subsection 4.7 (as amended in subclause 2.3(a) of this Amendment) to read in its entirety as follows: "4.8 DEPOSIT ACCOUNTS; CONTROL ACCOUNTS. The only Approved Deposit Accounts or Securities Accounts maintained by any Grantor on the date hereof are those listed on Schedule 8, which sets forth such information separately for each Grantor." 2.4. AMENDMENT TO SECTION 5. Section 5 (Covenants) of the Collateral Agreement is hereby amended by inserting a new Subsection 5.9 immediately after Subsection 5.8 to read in its entirety as follows: "5.9 INTELLECTUAL PROPERTY. (a) Such Grantor will (i) continue to use each Trademark that is Intellectual Property in order to maintain such Trademark in full force and effect with respect to each class of goods which are material to the business of the Grantor and for 5 which such Trademark is currently used, free from any claim of abandonment for non-use and (ii) not do any act or knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way. (b) Such Grantor will not do any act, or omit to do any act, whereby any Patent which is material to the business of the Grantor may become forfeited, abandoned or dedicated to the public. (c) Such Grantor (i) will not do any act or omit to do any act whereby any portion of the Copyrights which are material to the business of the Grantor may become invalidated or otherwise impaired and (ii) will not do any act whereby any portion of such Copyrights may fall into the public domain. (d) Such Grantor will not do any act, or omit to do any act, whereby any trade secret which is material to the business of the Grantor may become publicly available or otherwise unprotectable. (e) Such Grantor will not do any act that knowingly uses any Intellectual Property to infringe the intellectual property rights of any other Person. (f) Such Grantor will notify the Documentation Agent immediately if it knows, or has reason to know, that any application or registration relating to any Intellectual Property which is material to the business of the Grantor may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding such Grantor's ownership of, right to use, interest in, or the validity of, any such Intellectual Property or such Grantor's right to register the same or to own and maintain the same. (g) Whenever such Grantor, either by itself or through any agent, licensee or designee, shall file an application for the registration of any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency within or outside the United States, such Grantor shall promptly report such filing to the Documentation Agent (but in no event more than 30 days after any Grantor obtains knowledge thereof). Such Grantor shall execute and deliver, and have recorded, any and all agreements, instruments, documents, and papers as the Documentation Agent may reasonably request to evidence the Documentation Agent's security interest in any Copyright, Patent or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby. (h) Such Grantor will take all reasonable actions necessary in the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency, to pursue each application and to maintain each registration of any Copyright, Trademark or Patent owned by such Grantor and material to its business, including filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition and interference and cancellation proceedings. 6 (i) In the event that any Intellectual Property owned by or exclusively licensed to such Grantor is infringed upon or misappropriated or diluted by a third party, such Grantor shall notify the Documentation Agent promptly after such Grantor obtains knowledge thereof. Such Grantor shall take all reasonable action in response to such infringement, misappropriation of dilution, including bringing suit for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation of dilution. (j) Unless otherwise agreed to by the Documentation Agent, such Grantor will execute and deliver to the Documentation Agent for filing in (i) the United States Copyright Office a short-form copyright security agreement in the form attached hereto as Annex 4, (ii) the United States Patent and Trademark Office a short-form patent security agreement in the form attached hereto as Annex 5 and (iii) the United States Patent and Trademark Office a short-form trademark security agreement in form attached hereto as Annex 6." 2.5. AMENDMENTS TO SCHEDULES. (a) Schedule 2 to the Collateral Agreement is hereby deleted in its entirety and replaced with Schedule I attached hereto. (b) The Schedules to the Collateral Agreement are hereby amended by adding immediately after Schedule 6 (Perfection Matters) (i) a new Schedule 7 (Intellectual Property) attached hereto as Schedule II and (ii) a new Schedule 8 (Approved Deposit Accounts; Securities Accounts) attached hereto as Schedule III. 2.6. AMENDMENTS TO ANNEX. The Annex to the Collateral Agreement is hereby amended by (a) inserting immediately after Annex 1 (Form of Assumption Agreement), a new Annex 2 (Form of Deposit Account Control Agreement), attached hereto as Exhibit A. (b) inserting immediately after Annex 2 (as inserted by this Amendment), a new Annex 3 (Form of Control Account Agreement), attached hereto as Exhibit B. (c) inserting immediately after Annex 3 (as inserted by this Amendment), a new Annex 4 (Form of Copyright Security Agreement), attached hereto as Exhibit C. (d) inserting immediately after Annex 4 (as inserted by this Amendment), a new Annex 5 (Form of Patent Security Agreement), attached hereto as Exhibit D. (e) inserting immediately after Annex 5 (as inserted by this Amendment), a new Annex 6 (Form of Trademark Security Agreement), attached hereto as Exhibit E. SECTION 3. GRANT OF SECURITY INTEREST Each Grantor hereby acknowledges, ratifies and confirms the grant to the Documentation Agent for the ratable benefit of the Administrative Agent, the Documentation Agent and the 7 Lenders (and their affiliates and subsidiaries which hold Obligations) set forth in the Collateral Agreement, and hereby assigns, transfers and grants to the Documentation Agent, for the ratable benefit of the Administrative Agent, the Documentation Agent and the Lenders (and their affiliates and subsidiaries which hold Obligations), a security interest in all of such Grantor's right, title and interest, in and to all of the Collateral (as amended in Subsection 2.2 of this Amendment), as collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of such Grantor's Obligations. SECTION 4. MISCELLANEOUS 4.1. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. This Amendment shall become effective on the date (the "EFFECTIVE DATE") upon which the Documentation Agent shall have received counterparts hereof, duly executed and delivered by each Grantor and the Documentation Agent. 4.2. LIMITED EFFECT. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Documentation Agent under any of the Credit Documents, nor constitute a waiver or amendment of any provisions of any of the Credit Documents. Except as expressly modified herein, all of the provisions and covenants of the Collateral Agreement and the other Credit Documents are and shall continue to remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed. 4.3. COUNTERPARTS. This Amendment may be executed by one or more of the parties hereto in any number of separate counterparts (which may include counterparts delivered by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Any executed counterpart delivered by facsimile transmission shall be effective as for all purposes hereof. 4.4. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 8 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. HEXCEL CORPORATION HEXCEL INTERNATIONAL HEXCEL OMEGA CORPORATION HEXCEL BETA CORP. CLARK-SCHWEBEL HOLDING CORP. CLARK-SCHWEBEL CORPORATION CS TECH-FAB HOLDING, INC. HEXCEL POTTSVILLE CORPORATION ACM HOLDINGS CORPORATION HEXCEL PACIFIC RIM CORPORATION (CA) HEXCEL PACIFIC RIM CORPORATION (DE) HEXCEL FAR EAST HEXCEL TECHNOLOGIES INC. By:________________________________ Title: CITIBANK, N.A., as Documentation Agent By:_________________________________ Title: 9 EX-99.3 5 a2068953zex-99_3.txt EXHIBIT 99.3 EXHIBIT 99.3 [HEXCEL LOGO] NEWS RELEASE Hexcel Corporation, 281 Tresser Boulevard, Stamford, CT 06901 (203) 969-0666 CONTACT: INVESTORS: STEPHEN C. FORSYTH (203) 969-0666 EXT. 425 stephen.forsyth@hexcel.com MEDIA: MICHAEL BACAL (203) 969-0666 EXT. 426 michael.bacal@hexcel.com HEXCEL REPORTS 2001 FOURTH QUARTER AND YEAR-END RESULTS HIGHLIGHTS: o ADJUSTED EBITDA $19.9 MILLION FOR THE FOURTH QUARTER AND $119.2 MILLION FOR THE YEAR o SENIOR CREDIT FACILITY BANK SYNDICATE APPROVES AMENDMENT TO CREDIT AGREEMENT THAT INCLUDES FINANCIAL COVENANTS THAT ACCOMMODATE ANTICIPATED BUSINESS OUTLOOK IN 2002 AND RESTRUCTURING PLANS o INVENTORY REDUCTION OF $32.3 MILLION (20%) TO $131.7 MILLION CONTRIBUTES TO $3.3 MILLION REDUCTION IN NET DEBT IN QUARTER o NON-RECURRING CHARGES IN THE QUARTER OF $400.6 MILLION (TOTAL CASH OF $35.0 MILLION; $6.6 MILLION IN THE QUARTER) AS COMPANY COMMENCES MAJOR RESTRUCTURING PROGRAM, RECORDS GOODWILL IMPAIRMENTS AND WRITES-DOWN DEFERRED TAXES AND AN INVESTMENT IN AN AFFILIATED COMPANY. RESTRUCTURING PROGRAM EXPECTED TO RESULT IN A $60.0 MILLION REDUCTION IN CASH FIXED COSTS o DOUBLE DIGIT REVENUE GROWTH IN SPACE & DEFENSE AND INDUSTRIAL MARKETS OFFSET BY CONTINUED DEPRESSED ELECTRONICS DEMAND AND SLOWING OF COMMERCIAL AEROSPACE. OUTLOOK FOR 2002 REMAINS UNCHANGED 1
- -------------------------------------------------------------------------------------------------------------------- QUARTER ENDED DECEMBER 31, YEAR-ENDED DECEMBER 31, (IN MILLIONS, EXCEPT PER SHARE DATA) 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------------------- PRO FORMA (a): Net Sales $239.1 $256.9 $1,009.4 $1,036.8 Adjusted EBITDA (b) $19.9 $37.1 $119.2 $144.0 - -------------------------------------------------------------------------------------------------------------------- AS REPORTED: Net Sales $239.1 $256.9 $1,009.4 $1,055.7 Gross margin % 14.7% 22.2% 18.9% 21.9% Adjusted operating income (c) $2.8 $22.5 $56.0 $86.3 Adjusted operating income % (c) 1.2% 8.8% 5.5% 8.2% Adjusted EBITDA (b) $19.9 $37.1 $119.2 $144.9 Provision for (benefit from) income taxes (d) $31.5 $(0.4) $40.5 $26.3 Equity in earnings (losses) of affiliated companies and write-down of an investment $(10.1) $1.6 $(9.5) $5.5 Net income (loss) $(413.8) $1.0 $(433.7) $54.2 Diluted earnings (loss) per share $(10.88) $0.03 $(11.54) $1.32 - --------------------------------------------------------------------------------------------------------------------
(a) Pro forma results give effect to the April 26, 2000 sale of the Bellingham aircraft interiors business as if the transaction had occurred on January 1, 2000. (b) Excludes business consolidation and restructuring expenses, impairment of goodwill and other purchased intangibles, compensation expenses associated with the former CEO's retirement, the gain from the April 2000 sale of the Bellingham business, interest, taxes, depreciation, amortization, equity in earnings (losses) of affiliated companies and a write-down of an investment and the extraordinary gain (loss) on early retirement of debt. (c) Excludes business consolidation and restructuring expenses, impairment of goodwill and other purchased intangibles, and compensation expenses associated with the former CEO's retirement. (d) The 2001 fourth quarter and year-end results reflect the impact of the write-down of U.S. deferred tax assets and the impact of ceasing to record the tax benefits from U.S. operating losses commencing during the second quarter of 2001. The 2000 year-end results include approximately $24.0 million of provision for income taxes on the April 2000 gain from the sale of the Bellingham aircraft interiors business. STAMFORD, CT. January 24, 2002 - Hexcel Corporation (NYSE/PCX: HXL) today reported results for the fourth quarter and full year 2001. Net loss for the 2001 fourth quarter was $413.8 million, or $10.88 per diluted share, compared to net income of $1.0 million, or $0.03 per diluted share for the fourth quarter of 2000. Fourth quarter 2001 results include business consolidation and restructuring expenses of $51.1 million and impairments of goodwill, other purchased intangibles, an equity investment and U.S. deferred tax assets totaling $349.5 million. Excluding business consolidation and restructuring expenses and the impairment charges, the Company's pretax loss for the 2 2001 fourth quarter was $12.4 million. This compares to pretax income, excluding business consolidation expenses, of $5.4 million in the fourth quarter of 2000. For the year, the Company's net loss was $433.7 million, or $11.54 per diluted share, compared to net income in 2000 of $54.2 million, or $1.32 per diluted share. Results for 2000 included a gain on the April 26, 2000 sale of the Bellingham aircraft interiors business of $68.3 million ($44.3 million on an after tax basis). Excluding business consolidation and restructuring expenses, impairments of goodwill and other purchased intangibles, and the gain on the sale of the Bellingham business, the Company's pretax loss in 2001 was $13.5 million, as compared to pretax income in 2000 of $17.6 million. Adjusted EBITDA for the fourth quarter of 2001 was $19.9 million as compared to $37.1 million for the fourth quarter of 2000. Adjusted EBITDA for the 2001 year was $119.2 million as compared to $144.0 million on a pro forma basis for 2000. Pro forma results give effect to the April 26, 2000 sale of the Bellingham aircraft interiors business as if the transaction had occurred on January 1, 2000. The Company reports Adjusted EBITDA as this is used as a measure in the financial covenants in its Senior Credit Agreement. CHIEF EXECUTIVE OFFICER COMMENTS Commenting on Hexcel's fourth quarter results, Mr. David E. Berges, Chairman, President and Chief Executive Officer, said, "In the fourth quarter, the Company began to dramatically reshape itself to adapt to the new business realities of the post September 11th world. We are well on our way to removing $60.0 million in cash fixed costs. Also during the quarter, we completed the closure of one of the two plants targeted for elimination, reduced inventories by 20%, reduced our capital spending to approximate 3 60% of depreciation and reassessed the value of all of our assets resulting in several impairments. While the personnel cuts are particularly painful, it is important to note that they are well targeted. Four of the top eleven executive positions have been eliminated (36%), over 30% of the corporate staff has been reduced and almost 20% of all other fixed and indirect positions are being eliminated. R&T, sales and customer service functions were the least affected by the fixed cost actions, and direct labor will only be impacted by customer demand and productivity initiatives. Critical customer programs, growth markets, and strategic research projects have been well funded and staffed." Mr. Berges continued, "I am particularly pleased with our ability to reduce inventory ahead of the decline in customer sales. Our vertical integration allowed us to take immediate action from composite structures, through prepregs and fabric operations, and all the way down to fiber manufacturing once we had visibility to aerospace customer build rate adjustments. While this quick action had a serious impact on absorption and the resultant gross margin, it minimizes the risk of experiencing the kind of multi-tiered inventory glut that the entire electronics industry supply chain suffered from in 2001. With the benefit of lower fixed costs and more normalized inventory to sales tracking, we anticipate recovering from the anomalous fourth quarter gross margins as 2002 progresses." Mr. Berges noted, "We are also pleased with the solid support the banks behind our Senior Credit Facility have continued to provide. I am convinced that in addition to our strong share position and the long-term growth prospects for our markets, our aggressive 4 restructuring actions demonstrated that Hexcel does not intend to be a victim of the external challenges 2001 delivered. Mr. Berges concluded, "The impact of this radical reshaping obviously had a devastating impact on the final quarter of 2001. I trust that those who follow us will recognize that the tragedy of September gave us little choice. We cannot always control events, but we can control how we react to them." SENIOR CREDIT FACILITY AMENDMENT Yesterday, the Company's bank syndicate approved an amendment to its Senior Credit Facility. The amendment provides for, among other matters, revised financial covenants that accommodate the Company's anticipated financial performance through the year 2002 in return for the grant of additional collateral and a 100 basis point increase in the interest spread payable over LIBOR for advances under the facility. With the reduced capital requirements that results from the commercial aerospace slowdown, the Company has also agreed to a moderate reduction in the size of the revolving credit facility provided under the agreement. The Company is appreciative of the continuing support it is receiving from its Senior Credit Facility syndicate banks. This amendment will permit the Company to focus on best serving its customers during 2002 and executing its cost reduction and performance improvement plans. The Company will file a copy of the amendment as an exhibit to a Form 8-K next week. REVENUE TRENDS Consolidated revenue for the fourth quarter of 2001 of $239.1 million was 6.9% lower than 2000 fourth quarter revenue of $256.9 million. Year on year revenue for Hexcel's 5 space and defense and industrial markets grew in aggregate by $15.0 million in the quarter. Commercial aerospace revenues were marginally higher by $1.7 million compared with last year's fourth quarter results. However, the growth of these three markets could not offset the $34.5 million decline in revenues from the electronics market for the same period. Had the same U.S. dollar, British pound and Euro exchange rates applied in the fourth quarter of 2001 as in the fourth quarter of 2000, revenue for the 2001 quarter would have been $237.1 million. o COMMERCIAL AEROSPACE. Sales of composite materials and reinforcement products to Airbus, Boeing and regional aircraft producers began to decline as the quarter progressed due to the anticipated supply chain inventory correction associated with the scheduled 2002 decline in commercial aircraft build rates. Revenues for the 2001 fourth quarter were $124.2 million, 3.9% lower than 2001 third quarter revenue of $129.2 million. For the full year, Hexcel experienced 8.0% revenue growth in this market from higher aircraft build rates in 2001. o SPACE & DEFENSE. Revenues for the 2001 fourth quarter of $39.7 million were 12.5% higher than the prior quarter and 19.9% higher than the fourth quarter of 2000. Revenues for 2001 were $143.3 million, up 11.1% from 2000. o ELECTRONICS. Sales for the 2001 fourth quarter were $11.6 million, down 74.8% from the fourth quarter of 2000. The 2001 fourth quarter revenues remained depressed reflecting the continued impact of the severe industry downturn and inventory correction working through the global electronics market, as well as intense competition for the remaining low levels of customer demand. 6 o INDUSTRIAL MARKETS. Sales were $63.6 million in the 2001 fourth quarter compared to $55.2 million in the fourth quarter of 2000. The 15.2% increase in revenues year over year is evident in both the Company's reinforcement products and composite materials segments and reflects, among other things, continued strength in soft body armor, wind energy and new automotive applications. Revenues from recreational applications declined in line with the softening of the global economy. For the year, the Company's consolidated revenues were $1,009.4 million, compared with consolidated revenues on a pro forma basis of $1,036.8 million for 2000. Revenues declined 2.6% year over year reflecting the severe industry downturn and inventory correction in the electronics market, with sales to that market down $104.2 million or 57.5% year on year. Commercial aerospace revenues were up $40.1 million or 8.0% year on year. Revenues in the space & defense and industrial markets were up 11.1% and 9.8%, respectively, and reflect continuing strengths in these markets. Pro forma revenues give effect to the sale of the Bellingham business as if the transaction had occurred on January 1, 2000. GROSS MARGIN AND ADJUSTED OPERATING INCOME Gross margin for the fourth quarter of 2001 was $35.2 million, or 14.7% of sales, compared with $57.0 million, or 22.2% of sales, for the fourth quarter of 2000. Adjusted operating income for the 2001 fourth quarter was $2.8 million, or 1.2% of sales, compared to $22.5 million, or 8.8% of sales, for the 2000 fourth quarter. 7 Gross margins were impacted by the company-wide focus on dramatically reducing inventories ahead of 2002's anticipated fall-off in commercial aerospace revenues and by the continued depressed demand in the electronics market. Inventories declined by $32.3 million during the quarter to $131.7 million. This repositioning impacted both production efficiencies and the absorption of manufacturing costs across the Company. As in the prior quarter, the significant underutilization of capacity led to an EBITDA loss on electronics sales in the quarter. Hexcel's previously announced fixed cost reduction initiative started during the quarter, but was not yet sufficiently advanced to offset the impact of the inventory reduction. For the year, gross margin was $190.8 million, or 18.9% of sales, compared with $231.4 million, or 21.9% of sales for 2000. Performance for the year of 2001 was significantly impacted by the lower fourth quarter gross margin. Adjusted operating income for the 2001 year was $56.0 million, or 5.5% of sales, compared to $86.3 million, or 8.2% of sales, for 2000. Gross margin and adjusted operating income for 2000 included $4.5 million and $0.3 million, respectively, related to the operations of the Bellingham aircraft interiors business from January 1 to April 26, the date of its sale. RESTRUCTURING PLAN To respond to the forecasted reductions in commercial aircraft production and the continued weakness in electronics, Hexcel announced a major restructuring plan on November 7, 2001. The plan targets a 20% reduction in cash fixed overhead costs, or $60.0 million, as compared to then current spending rates and results should be visible in the Company's second quarter 2002 performance. The plan also provides for the reduction of direct manufacturing employment as customer orders decline. The cash 8 fixed cost reductions are primarily being achieved through company wide reductions of managerial, professional, indirect manufacturing and administrative employees along with organizational rationalization. The majority of the actions necessary to effect this cost reduction had been taken by the end of the quarter and the Company will complete virtually all of these actions in the first quarter of 2002. As a result, at the end of 2001, Hexcel employed 5,376 people, down almost 15% from September, and we expect to reduce that number to approximately 4,500 by the end of 2002. The fourth quarter 2001 restructuring plan has resulted in a $47.9 million charge to earnings for the Company with cash costs expected to approximate $35.0 million. Cash costs of approximately $3.0 million were incurred in the fourth quarter. The balance will be incurred over the next four quarters. The Company also incurred business consolidation expenses of $3.2 million during the quarter primarily relating to its previously announced actions to close its Gilbert (AZ) and Lancaster (OH) pre-preg manufacturing plants. The closure of the Gilbert plant was completed during the quarter ahead of schedule and it is anticipated that the Lancaster plant closure will be completed in the second quarter of 2002. IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS During the fourth quarter of 2001, Hexcel reviewed the carrying values of its long-lived assets, particularly goodwill and other intangible assets acquired in recent years. The review was undertaken in response to changes in market conditions and the Company's outlook as a result of the announced reductions in commercial airline production following the tragic events of September 11th, the unprecedented decline in demand for the Company's woven glass fabrics, and the overall weakness in the U.S. economy. These adverse changes in business conditions in recent months have led to the lowering of revenue forecasts associated with certain business segments. As a result of the review, 9 the Company determined that the goodwill and other purchased intangibles acquired from Clark Schwebel in 1998, and acquired from Fiberite in 1997 were not fully recoverable. Based upon this review, the Company recorded non-cash charges of $292.1 million and $17.0 million to impair substantial portions of the goodwill and other intangible assets acquired in these transactions, respectively. The Company has determined fair value of the impaired assets using discounted future cash flow models, market valuations and third party appraisals, where appropriate. There were no tax benefits recognized on the impairments. TAXES As previously disclosed at the time of our second quarter earnings release, in light of its business outlook at that time, Hexcel determined to increase its tax provision rate through the establishment of a non-cash valuation allowance attributable to currently generated U.S. net operating losses until operations have returned to consistent profitability. The significant events that have occurred since that time including the delay in the anticipated recovery in the electronics market, anticipated reductions in future commercial aircraft production, and a general weakening of the economy have reduced expectations of future operating performance of the Company, and along with the recognition of the non-recurring charges in the fourth quarter, have lowered estimates of U.S. taxable income during the carry-forward period. Based upon these estimates, the Company has included in its tax provision a charge of $32.6 million, which represents all of its previously reported U.S. deferred tax assets. EQUITY IN LOSSES OF AFFILIATED COMPANIES AND WRITE-DOWN OF AN INVESTMENT 10 During the fourth quarter, the Company wrote down the carrying value of its equity investment in Interglas Technologies AG. Interglas Technologies has also been impacted by the unprecedented decline in the electronics industry and its share price has declined significantly. The Company has recorded a non-cash write-down of $7.8 million. There was no tax benefit recognized on the write-down. Excluding this write-down, the equity in losses of affiliated companies was $2.3 million for the fourth quarter 2001, reflecting the on-going impact of the electronics market decline on the Company's Asian reinforcement products joint venture and start-up losses associated with the engineered products ventures in China and Malaysia. The Company anticipates reporting comparable equity in losses in the first quarter of 2002. These losses by our affiliates did not affect the Company's cash flows. DEBT AND CASH FLOW The Company's total debt, net of cash, decreased by $3.3 million to $674.3 million at December 31, 2001 as compared to September 30, 2001. The decrease in net debt in the quarter reflects the benefits of a $13.1 million reduction in net working capital during the quarter. The Company will be holding a conference call at 11:00 A.M. today to discuss its fourth quarter results. The call will be available in the investor information section of Hexcel's web site (www.hexcel.com). ***** 11 Hexcel Corporation is the world's leading advanced structural materials company. It develops, manufactures and markets lightweight, high-performance reinforcement products, composite materials and engineered products for use in commercial aerospace, space and defense, electronics, and industrial applications. 12 DISCLAIMER ON FORWARD LOOKING STATEMENTS This press release contains statements that are forward looking, including statements relating to market conditions (including commercial and military aircraft build rates and demand for electronics and industrial products), sales volumes, cost reductions from its restructuring programs together with their associated improvements, manufacturing productivity, gross margin performance, EBITDA, equity in earnings of joint ventures, working capital management and that the amendment to its Senior Credit Facility will accommodate its anticipated performance in 2002. These statements are not projections or assured results. Actual results may differ materially from the results anticipated in the forward looking statements due to a variety of factors, including but not limited to, changing market conditions, increased competition, product mix, inability to achieve planned manufacturing improvements and cost reductions, and changes in currency exchange rates. Additional risk factors are described in the Company's filings with the SEC. The Company does not undertake an obligation to update its forward-looking statements to reflect future events. 13 HEXCEL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------------------------------------------- UNAUDITED -------------------------------------------------------------- QUARTER ENDED DECEMBER 31, YEAR-ENDED DECEMBER 31, (IN MILLIONS, EXCEPT PER SHARE DATA) 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------------------- Net sales $ 239.1 $ 256.9 $ 1,009.4 $ 1,055.7 Cost of sales 203.9 199.9 818.6 824.3 - -------------------------------------------------------------------------------------------------------------------- Gross margin 35.2 57.0 190.8 231.4 Selling, general and administrative expenses 27.8 29.9 120.9 123.9 Research and technology expenses 4.6 4.6 18.6 21.2 Business consolidation and restructuring expenses 51.1 6.4 58.4 10.9 Impairment of goodwill and other purchased intangibles 309.1 - 309.1 - - -------------------------------------------------------------------------------------------------------------------- Operating income (loss) (357.4) 16.1 (316.2) 75.4 Gain on sale of Bellingham aircraft interiors business - - - 68.3 Interest expense 15.2 17.1 64.8 68.7 - -------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes (372.6) (1.0) (381.0) 75.0 Provision for (benefit from) income taxes 31.5 (0.4) 40.5 26.3 - -------------------------------------------------------------------------------------------------------------------- Income (loss) before equity in earnings (404.1) (0.6) (421.5) 48.7 Equity in earnings (losses) in affiliate companies and a write-down of an investment (10.1) 1.6 (9.5) 5.5 - -------------------------------------------------------------------------------------------------------------------- Income (loss) before extraordinary item (414.2) 1.0 (431.0) 54.2 Extraordinary gain (loss) on early retirement of debt 0.4 - (2.7) - -------------------------------------------------------------------------------------------------------------------- Net income (loss) $ (413.8) $ 1.0 $ (433.7) $ 54.2 - -------------------------------------------------------------------------------------------------------------------- Net income (loss) per share: Basic: Income (loss) before extraordinary item $ (10.89) $ 0.03 $ (11.47) $ 1.47 Extraordinary gain (loss) on early retirement of Debt 0.01 - (0.07) - - -------------------------------------------------------------------------------------------------------------------- Net income (loss) $ (10.88) $ 0.03 $ (11.54) $ 1.47 - -------------------------------------------------------------------------------------------------------------------- Diluted: Income (loss) before extraordinary item $ (10.89) $ 0.03 $ (11.47) $ 1.32 Extraordinary gain (loss) on early retirement of Debt 0.01 - (0.07) - - -------------------------------------------------------------------------------------------------------------------- Net income (loss) $ (10.88) $ 0.03 $ (11.54) $ 1.32 - -------------------------------------------------------------------------------------------------------------------- Diluted income (loss) before extraordinary item, excluding goodwill amortization $ (10.84) $ 0.08 $ (11.25) $ 1.51 Weighted average shares: (a) Basic 38.0 37.0 37.6 36.8 Diluted 38.0 38.1 37.6 45.7 - --------------------------------------------------------------------------------------------------------------------
(a) The Company's convertible subordinated notes, due 2003, and its convertible subordinated debentures, due 2011, were excluded from the 2001 and fourth quarter 2000 computations of net income (loss) per diluted share, as they were antidilutive. In addition, stock options were excluded from the 2001 computations due to their anti-dilutive impact. 14 THE FOLLOWING SCHEDULE OF PRO FORMA AND ADJUSTED AMOUNTS IS NOT BASED ON GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED STATES, BUT IS PROVIDED TO EXPLAIN THE IMPACT OF CERTAIN ITEMS AND TO PROVIDE A MEASURE OF HEXCEL'S OPERATING PERFORMANCE IN A WAY THAT IS COMMONLY USED BY INVESTORS AND FINANCIAL ANALYSTS TO ANALYZE AND COMPARE COMPANIES. THIS SCHEDULE MAY NOT BE COMPARABLE TO SIMILARLY TITLED FINANCIAL MEASURES OF OTHER COMPANIES, DOES NOT REPRESENT ALTERNATIVE MEASURES OF HEXCEL'S CASH FLOWS OR OPERATING INCOME, AND SHOULD NOT BE CONSIDERED IN ISOLATION OR AS SUBSTITUTES FOR MEASURES OF PERFORMANCE PRESENTED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. HEXCEL CORPORATION AND SUBSIDIARIES SCHEDULE OF PRO FORMA AND ADJUSTED AMOUNTS
- ------------------------------------------------------------------------------------------------------------------------ UNAUDITED -------------------------------------------------------------- QUARTER ENDED DECEMBER 31, YEAR-ENDED DECEMBER 31, (IN MILLIONS, EXCEPT PER SHARE DATA) 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------ Net sales (AS REPORTED ON GAAP BASIS) $ 239.1 $ 256.9 $ 1,009.4 $ 1055.7 Bellingham aircraft interiors business net sales - - - (18.9) - ------------------------------------------------------------------------------------------------------------------------ PRO FORMA NET SALES $ 239.1 $ 256.9 $ 1,009.4 $ 1036.8 - ------------------------------------------------------------------------------------------------------------------------ Net income (loss) (AS REPORTED ON GAAP BASIS) $ (413.8) $ 1.0 $ (433.7) $ 54.2 Business consolidation and restructuring expenses 51.1 6.4 58.4 10.9 Impairment of goodwill and other purchased intangibles 309.1 - 309.1 - Compensation expenses associated with the former CEO's retirement - - 4.7 - Gain on sale of Bellingham aircraft interiors business - - - (68.3) Interest expense 15.2 17.1 64.8 68.7 Provision for (benefit from) income taxes 31.5 (0.4) 40.5 26.3 Depreciation & amortization 17.1 14.6 63.2 58.7 Equity in (earnings) losses in affiliated companies and a write-down of an investment 10.1 (1.6) 9.5 (5.5) Extraordinary (gain) loss on early retirement of debt (0.4) - 2.7 - Other - - - (0.1) - ------------------------------------------------------------------------------------------------------------------------ ADJUSTED EBITDA $ 19.9 $ 37.1 $ 119.2 $ 144.9 - ------------------------------------------------------------------------------------------------------------------------ Bellingham aircraft interiors business: Net sales - - - (18.9) Cost of sales - - - 14.4 Operating expense - - - 4.3 Interest expense - - - 3.1 Benefit from income taxes and other - - - (3.8) - ------------------------------------------------------------------------------------------------------------------------ PRO FORMA ADJUSTED EBITDA $ 19.9 $ 37.1 $ 119.2 $ 144.0 - ------------------------------------------------------------------------------------------------------------------------ Operating income (loss) (AS REPORTED ON GAAP BASIS) $ (357.4) $ 16.1 $ (316.2) $ 75.4 Business consolidation and restructuring expenses 51.1 6.4 58.4 10.9 Impairment of goodwill and other purchased intangibles 309.1 - 309.1 - Compensation expenses associated with the former CEO's retirement - - 4.7 - - ------------------------------------------------------------------------------------------------------------------------ ADJUSTED OPERATING INCOME $ 2.8 $ 22.5 $ 56.0 $ 86.3 - ------------------------------------------------------------------------------------------------------------------------
15 HEXCEL CORPORATION AND SUBSIDIARIES ACTUAL AND PRO FORMA NET SALES TO THIRD-PARTY CUSTOMERS BY PRODUCT GROUP AND MARKET SEGMENT
- -------------------------------------------------------------------------------------------------------------------- UNAUDITED ------------------------------------------------------------------------- COMMERCIAL SPACE & (IN MILLIONS) AEROSPACE DEFENSE ELECTRONICS INDUSTRIAL TOTAL - -------------------------------------------------------------------------------------------------------------------- FOURTH QUARTER 2001 NET SALES Reinforcement products $ 13.4 $ 4.3 $ 11.6 $ 34.0 $ 63.3 Composite materials 81.9 31.8 - 29.6 143.3 Engineered products 28.9 3.6 - - 32.5 - -------------------------------------------------------------------------------------------------------------------- Total $ 124.2 $ 39.7 $ 11.6 $ 63.6 $ 239.1 52% 16% 5% 27% 100% - -------------------------------------------------------------------------------------------------------------------- THIRD QUARTER 2001 NET SALES Reinforcement products $ 15.9 $ 3.3 $ 14.2 $ 29.5 $ 62.9 Composite materials(1) 87.2 28.4 - 32.4 148.0 Engineered products 26.1 3.6 - - 29.7 - -------------------------------------------------------------------------------------------------------------------- Total $ 129.2 $ 35.3 $ 14.2 $ 61.9 $ 240.6 54% 14% 6% 26% 100% - -------------------------------------------------------------------------------------------------------------------- FOURTH QUARTER 2000 NET SALES Reinforcement products $ 13.6 $ 3.4 $ 46.1 $ 26.0 $ 89.1 Composite materials(1) 84.0 27.2 - 29.2 140.4 Engineered products 24.9 2.5 - - 27.4 - -------------------------------------------------------------------------------------------------------------------- Total $ 122.5 $ 33.1 $ 46.1 $ 55.2 $ 256.9 48% 13% 18% 21% 100% - -------------------------------------------------------------------------------------------------------------------- 2001 NET SALES Reinforcement products $ 63.6 $ 16.2 $ 77.0 $ 120.0 $ 276.8 Composite materials 365.0 112.5 - 130.2 607.7 Engineered products 110.3 14.6 - - 124.9 - -------------------------------------------------------------------------------------------------------------------- Total $ 538.9 $ 143.3 $ 77.0 $ 250.2 $ 1,009.4 53% 14% 8% 25% 100% - -------------------------------------------------------------------------------------------------------------------- 2000 PRO FORMA NET SALES Reinforcement products $ 60.6 $ 13.6 $ 181.2 $ 103.8 $ 359.2 Composite materials(1) 336.8 106.2 - 124.0 567.0 Engineered products 101.4 9.2 - - 110.6 - -------------------------------------------------------------------------------------------------------------------- Total $ 498.8 $ 129.0 $ 181.2 $ 227.8 $ 1,036.8 48% 12% 18% 22% 100% - --------------------------------------------------------------------------------------------------------------------
(1) Market allocations for composite materials have been restated for comparative purposes to conform to the 2001 presentation of materials to end markets. 16 HEXCEL CORPORATION AND SUBSIDIARIES ACTUAL AND PRO FORMA SEGMENT DATA
- -------------------------------------------------------------------------------------------------------------------- UNAUDITED ------------------------------------------------------------------------------ REINFORCEMENT COMPOSITE ENGINEERED CORPORATE (IN MILLIONS) PRODUCTS MATERIALS PRODUCTS & OTHER(1) TOTAL - -------------------------------------------------------------------------------------------------------------------- FOURTH QUARTER 2001 - -------------------------------------------------------------------------------------------------------------------- Net sales to external customers $ 63.3 $ 143.3 $ 32.5 $ - $ 239.1 Intersegment sales 20.0 1.8 - - 21.8 - -------------------------------------------------------------------------------------------------------------------- Total sales 83.3 145.1 32.5 - 260.9 Adjusted operating income (loss) (0.5) 9.8 0.3 (6.8) 2.8 Depreciation and amortization 10.6 5.3 0.7 0.5 17.1 Business consolidation and restructuring expenses 16.0 20.5 5.7 8.9 51.1 Capital expenditures 2.3 5.1 0.3 0.2 7.9 - -------------------------------------------------------------------------------------------------------------------- THIRD QUARTER 2001 - -------------------------------------------------------------------------------------------------------------------- Net sales to external customers $ 62.9 $ 148.0 29.7 $ - $ 240.6 Intersegment sales 26.7 2.0 - - 28.7 - -------------------------------------------------------------------------------------------------------------------- Total sales 89.6 150.0 29.7 - 269.3 Adjusted operating income (loss) 1.6 17.1 0.6 (7.7) 11.6 Depreciation and amortization 8.9 5.2 0.8 0.5 15.4 Business consolidation expenses 3.1 0.8 - 0.5 4.4 Capital expenditures 4.3 4.5 0.1 0.1 9.0 - -------------------------------------------------------------------------------------------------------------------- FOURTH QUARTER 2000 - -------------------------------------------------------------------------------------------------------------------- Net sales to external customers $ 89.1 $ 140.4 $ 27.4 $ - $ 256.9 Intersegment sales 24.3 1.7 - - 26.0 - -------------------------------------------------------------------------------------------------------------------- Total sales 113.4 142.1 27.4 - 282.9 Adjusted operating income (loss) 11.6 16.3 1.1 (6.5) 22.5 Depreciation and amortization 8.6 4.5 0.7 0.8 14.6 Business consolidation expenses 0.6 5.7 0.1 - 6.4 Capital expenditures 7.1 9.5 0.2 0.6 17.4 - -------------------------------------------------------------------------------------------------------------------- 2001 - -------------------------------------------------------------------------------------------------------------------- Net sales to external customers $ 276.8 $ 607.7 $ 124.9 $ - $ 1,009.4 Intersegment sales 104.7 7.9 - - 112.6 - -------------------------------------------------------------------------------------------------------------------- Total sales 381.5 615.6 124.9 - 1,122.0 Adjusted operating income (loss) 14.9 69.8 2.4 (31.1) 56.0 Depreciation and amortization 37.8 20.3 3.0 2.1 63.2 Business consolidation and restructuring expenses 19.3 24.0 5.7 9.4 58.4 Capital expenditures 19.3 17.9 0.6 1.0 38.8 - -------------------------------------------------------------------------------------------------------------------- PRO FORMA 2000 - -------------------------------------------------------------------------------------------------------------------- Net sales to external customers $ 359.2 $ 567.0 $ 110.6 $ - $ 1,036.8 Intersegment sales 97.5 7.1 - - 104.6 - -------------------------------------------------------------------------------------------------------------------- Total sales 456.7 574.1 110.6 - 1,141.4 Adjusted operating income (loss) 46.2 68.5 5.5 (34.2) 86.0 Depreciation and amortization 34.1 18.5 2.8 2.6 58.0 Business consolidation expenses (1.4) 10.9 1.4 - 10.9 Capital expenditures 15.6 21.2 1.1 1.7 39.6 - --------------------------------------------------------------------------------------------------------------------
(1) The Company does not allocate corporate expenses to its business segments. 17 HEXCEL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------------------- UNAUDITED -------------------------------------------- December 31, December 31, (IN MILLIONS, EXCEPT PER SHARE DATA) 2001 2000 - --------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 11.6 $ 5.1 Accounts receivable, net 140.5 150.3 Inventories 131.7 155.4 Prepaid expenses and other assets 4.4 15.2 - --------------------------------------------------------------------------------------------------------------------- Total current assets 288.2 326.0 Property, plant and equipment 621.7 615.3 Less accumulated depreciation (287.8) (255.6) - --------------------------------------------------------------------------------------------------------------------- Net property, plant and equipment 333.9 359.7 Goodwill and other purchased intangibles, net of accumulated amortization 72.4 391.7 Investments in affiliated companies 56.9 72.1 Other assets 42.7 61.9 - --------------------------------------------------------------------------------------------------------------------- Total assets $ 794.1 $ 1,211.4 - --------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities of capital lease obligations $ 17.4 $ 22.1 Accounts payable 58.6 69.4 Accrued liabilities 136.4 106.4 - --------------------------------------------------------------------------------------------------------------------- Total current liabilities 212.4 197.9 Long-term notes payable and capital lease obligations 668.5 651.5 Other non-current liabilities 45.8 46.3 - --------------------------------------------------------------------------------------------------------------------- Total liabilities 926.7 895.7 Stockholders' equity: Preferred stock, no par value, 20.0 shares of stock authorized, no shares issued or outstanding in 2001 and 2000 - - Common stock, $0.01 par value, 100.0 shares of stock authorized, shares issued and outstanding of 39.4 in 2001 and 38.0 in 2000 0.4 0.4 Additional paid-in capital 287.7 280.7 Retained earnings (accumulated deficit) (367.9) 65.8 Accumulated other comprehensive loss (39.7) (20.0) - --------------------------------------------------------------------------------------------------------------------- (119.5) 326.9 Less - Treasury stock, at cost, 1.2 shares in 2001 and 0.9 shares in (13.1) (11.2) 2000 - --------------------------------------------------------------------------------------------------------------------- Total stockholders' equity (132.6) 315.7 - --------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 794.1 $ 1,211.4 - --------------------------------------------------------------------------------------------------------------------- Total debt, net of cash $ 674.3 $ 668.5 - ---------------------------------------------------------------------------------------------------------------------
18 HEXCEL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------ UNAUDITED ---------------------------------------------------------- QUARTER ENDED DECEMBER 31, YEAR-ENDED DECEMBER 31, (IN MILLIONS) 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (413.8) $ 1.0 $ (433.7) $ 54.2 Reconciliation to net cash provided by operating activities: Depreciation and amortization 17.1 14.6 63.2 58.7 Deferred income taxes 30.5 (3.2) 27.6 8.6 Business consolidation and restructuring expenses 51.1 6.4 58.4 10.9 Business consolidation and restructuring payments (6.6) (3.6) (12.0) (11.8) Impairment of goodwill and other purchased intangibles 309.1 - 309.1 - Equity in (earnings) losses in affiliated companies and a write-down of an investment 10.1 (1.6) 9.5 (5.5) Extraordinary loss on early retirement of debt - - 0.7 - Gain on sale of Bellingham aircraft interiors business - - - (68.3) Gain on curtailment of pension plan - (5.1) - (5.1) Working capital changes and other 13.1 11.7 12.2 (8.7) - ------------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 10.6 20.2 35.0 33.0 - ------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (7.9) (17.4) (38.8) (39.6) Proceeds from sale of Bellingham aircraft interiors - - - 113.3 business Proceeds from sale of other assets - - - 3.4 Investments in affiliated companies - (2.3) 0.8 (8.3) Other - - (0.3) - - ------------------------------------------------------------------------------------------------------------------------ Net cash provided by (used for) investing activities (7.9) (19.7) (38.3) 68.8 - ------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Borrowings (repayments) from credit facilities, net (2.0) (1.1) 24.6 29.5 Repayments of long-term debt and capital lease (5.9) (7.3) (12.1) (126.0) obligations, net Debt issuance costs - - (3.5) (0.9) Activity under stock plans and other - 0.2 (0.4) 2.4 - ------------------------------------------------------------------------------------------------------------------------ Net cash provided by (used for) financing activities (7.9) (8.2) 8.6 (95.0) - ------------------------------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash and cash equivalents 0.3 (1.0) 1.2 (1.9) - ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents (4.9) (8.7) 6.5 4.9 Cash and cash equivalents at beginning of period 16.5 13.8 5.1 0.2 - ------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period $ 11.6 5.1 $ 11.6 $ 5.1 - ------------------------------------------------------------------------------------------------------------------------ SUPPLEMENTAL DATA: Cash interest paid $ 6.0 $ 7.1 $ 62.0 $ 63.3 Cash taxes paid $ 8.3 $ 5.4 $ 20.4 $ 11.5 - ------------------------------------------------------------------------------------------------------------------------
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