EXHIBIT NO. 2.1(b)
HEXCEL CORPORATION
0000 Xxxx Xxx Xxxxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
February 28, 1996
Strategic Alliance Agreement
Dear Sirs:
We refer to the Strategic Alliance Agreement
dated as of September 29, 1995 and amended as of
December 12, 1995 (the "Agreement"), among us and each of
you. As a result of certain ambiguities and
inconsistencies in the Agreement and the desire of the
parties to clarify such ambiguities and inconsistencies
and amend certain provisions of the Agreement, the
parties to the Agreement wish to set forth herein their
agreement with respect to such matters. Capitalized
terms used in this Letter Agreement but not defined shall
have the meanings set forth in the Agreement.
1. Danutec
Ciba will not deliver the Danutec Equity to
Hexcel at Closing. In addition, certain information with
respect to the Deferred Assets will not be available as
of the Closing Date. Accordingly, Section 2.04(e) of the
Agreement shall be amended by deleting all language in
the first sentence following the words "provided,
further" and replacing such language with the following:
"that no amounts relating to Danutec or the
Deferred Assets shall be included in any
component of Closing Working Capital of the
Transferred Business, Working Capital of the
Transferred Business on the date of the Balance
Sheet, the Ciba Closing Items and, if
applicable, any corresponding amounts on the
Balance Sheet."
In addition, Section 2.05(d) of the Agreement
shall be deleted and replaced in its entirety with the
following:
"(d) At the Danutec Closing, Hexcel shall
deliver to Ciba or its designated Subsidiary or
Subsidiaries (i) an undertaking to deliver
(A) a principal amount of Subordinated Debt
(which Subordinated Debt shall bear interest
from the date of the Danutec Closing and be
allocated in accordance with Section 1.04)
equal to the Danutec Adjusted Amount (as
defined below) and (B) a senior demand note of
Hexcel containing mutually acceptable terms in
a principal amount equal to the amount of
Danutec Closing Cash (as defined below), in
each case, within two business days after the
Danutec Statement becomes final and binding on
the parties and (ii) such other documents, in
form and substance reasonably satisfactory to
Ciba and its counsel, as Ciba and its counsel
shall reasonably request to demonstrate
satisfaction or waiver of the conditions and
compliance with the agreements set forth
herein."
At the Danutec Closing, Hexcel and Ciba shall
also enter into an agreement substantially in the form
attached hereto as Exhibit A.
New Sections 2.05(g), (h), (i) and (j) shall be
added to the Agreement as follows:
"(g) (i) Within 75 days after the Danutec
Closing Date, Ciba shall prepare and deliver to Hexcel a
statement (the "Danutec Statement"), certified by a duly
authorized signatory of Ciba, setting forth (A) the
components of Danutec Working Capital (as defined below)
immediately prior to the Danutec Closing ("Danutec
Closing Working Capital"), in no less detail than, and
determined in accordance with, U.S. GAAP applied on a
basis consistent with the balance sheet of Danutec (the
"Danutec Balance Sheet") reflected in the Balance Sheet,
(B) the amounts as of the Danutec Closing corresponding
to individual items attributable to Danutec, if any, set
forth on Schedule 2.04(a1), increases after June 30, 1995
in reserves attributable to Danutec relating to Assumed
Tax Liabilities (other than deferred Tax liabilities) for
taxable periods ending on or prior to December 31, 1994
and any other reserves attributable to Danutec, if any,
for non-operating liabilities that would represent future
cash expenses of the Transferred Business all as would be
properly reflected on the balance sheet of Danutec as of
the Danutec Closing Date prepared in accordance with U.S.
GAAP on a basis consistent with the Balance Sheet (the
"Danutec Closing Items"), (C) the amount of Taxes, if
any, attributable to Danutec paid by Ciba or its
Subsidiaries, including Danutec, prior to the Danutec
Closing that, absent the Danutec Closing, would have been
payable after the Danutec Closing ("Prepaid Danutec
Taxes") and (D) a certificate of Ciba that the Danutec
Statement has been prepared in compliance with the
requirements of this Section 2.05.
(ii) Hexcel shall cooperate with Ciba in
connection with the preparation of the Danutec Statement
and shall, to the extent reasonably requested by Ciba,
provide Ciba and its advisors access during normal
business hours to the personnel, properties, books and
records of Hexcel and its Subsidiaries relating to
Danutec for such purpose; provided, however, that Ciba
shall have the primary responsibility and authority for
preparing the Danutec Statement.
(iii) During the thirty-day period following
Hexcel's receipt of the Danutec Statement, Hexcel and its
advisors shall be permitted to review the working papers
relating to the Danutec Statement. Ciba shall and shall
cause its advisors to cooperate with Hexcel and Hexcel's
advisors in connection with such review. The Danutec
Statement shall become final and binding upon the parties
on the thirtieth day following delivery thereof, unless
Hexcel gives written notice of its disagreement with the
Danutec Statement ("Danutec Notice of Disagreement") to
Ciba prior to such date. Any Danutec Notice of
Disagreement shall (A) specify in reasonable detail the
nature of any disagreement so asserted and (B) be
accompanied by a certificate of Hexcel that it has
complied with the covenants set forth in this
Section 2.05. If a Danutec Notice of Disagreement is
received by Ciba in a timely manner, then the Danutec
Statement (as revised in accordance with clause (I) or
(II) below) shall become final and binding upon Ciba and
Hexcel on the earlier of (I) the date Ciba and Hexcel
resolve in writing any differences they have with respect
to the matters specified in the Danutec Notice of
Disagreement or (II) the date any disputed matters are
finally resolved in writing by the Accounting Firm.
(h) During the thirty-day period following the
delivery of a Danutec Notice of Disagreement, Hexcel and
Ciba shall seek in good faith to resolve in writing any
differences which they may have with respect to the
matters specified in such Danutec Notice of Disagreement.
During such period each of Hexcel or Ciba, as the case
may be, and its advisors shall have access to the working
papers of the other party and its advisors prepared in
connection with such Danutec Notice of Disagreement. At
the end of such thirty-day period, Hexcel and Ciba shall
each submit, in the form of a written brief, any and all
matters that remain in dispute and that were properly
included in such Danutec Notice of Disagreement to the
Accounting Firm for final and binding review and
resolution. Hexcel and Ciba shall jointly request that
the arbitration be conducted in accordance with
procedures established by the Accounting Firm. Judgment
may be entered upon the determination of the Accounting
Firm in any court having jurisdiction over the party
against which such determination is to be enforced. The
cost of such review and resolution (including the fees
and expenses of the Accounting Firm and reasonable
attorneys' and accountants' fees and expenses of the
parties) pursuant to this Section 2.05 shall be borne by
Hexcel and Ciba in inverse proportion as they may prevail
on the merits of the matters resolved by the Accounting
Firm, which proportionate allocations shall also be
determined by the Accounting Firm at the time the
determination of the Accounting Firm is rendered thereon.
Except as set forth in the immediately preceding
sentence, the parties shall bear their own costs and
expenses (including attorneys' and accountants' fees and
expenses) in connection with the matters contemplated by
this Section 2.05.
(i) The principal amount of the Subordinated
Debt to be delivered in respect of the Danutec Equity
shall be $9 million, adjusted as follows (as so adjusted,
the "Danutec Adjusted Amount"):
(1) the principal amount shall be decreased or
increased, as the case may be, by an amount equal to
the amount by which the Danutec Closing Working
Capital exceeds or is less than, as the case may be,
the Danutec Working Capital reflected on the Danutec
Balance Sheet;
(2) the principal amount shall be decreased by
an amount equal to the amount of cash, cash
equivalents and marketable securities constituting a
component of Danutec Closing Working Capital
("Danutec Closing Cash");
(3) to the extent any amount of Prepaid Danutec
Taxes is not included as a Danutec Current Asset (as
defined below) in the calculation of Danutec Closing
Working Capital, the principal amount shall be
increased by an amount equal to the amount of such
Prepaid Taxes; and
(4) the principal amount shall be decreased by
the amount, if any, by which the total amount of
Danutec Closing Items exceeds $7,649,000 or shall be
increased by the amount, if any, by which $7,649,000
exceeds such amount.
(j) The term "Danutec Working Capital" shall
mean Danutec Current Assets minus Danutec Current
Liabilities. The terms "Danutec Current Assets" and
"Danutec Current Liabilities" shall mean the current
assets and current liabilities (other than any such
assets or liabilities that are included in the adjustment
required by Section 2.05(i)(4)), respectively, of
Danutec, calculated in accordance with U.S. GAAP on a
basis consistent with the Balance Sheet; provided,
(i) Danutec Current Assets and Danutec Current
Liabilities shall not include any amounts in respect of
Excluded Tax Assets or Excluded Tax Liabilities and
(ii) for purposes of calculating Danutec Working Capital
as of the date of the Balance Sheet, cash, cash
equivalents and marketable securities shall be deemed to
be zero. The parties agree that the adjustment regarding
Danutec Working Capital contemplated by this Section 2.05
is intended to show the change in Danutec Working Capital
from the date of the Balance Sheet to the Danutec Closing
Date, and such change can only be measured if each
calculation is done in the same way, using the same
methods, at both dates. Accordingly, in the event that
the resolution of any dispute relating to the calculation
of any component of Danutec Working Capital as of any
particular date results in a change in the way that, or
the method by which, such component of Danutec Working
Capital was calculated, a corresponding change shall be
made in the way that, or the method by which, such
component of Danutec Working Capital is calculated as of
any other date."
Section 2.04(d)(vii) of the Agreement shall be
amended by deleting the figure "$83,029,000" on the last
two lines of that Section and replacing it in both
instances with "$90,678,000."
2. UK Arrangements
The definition of "Contributed Shares" shall be
deleted and replaced with the following:
""Contributed Shares" shall mean (i) all
capital stock of or other equity interests in
any Divested Subsidiary (other than CML) owned
directly or indirectly by Ciba and (ii) all
U.S. dollar denominated bearer shares of CML."
3. Salver
On the Closing Date, Hexcel and Ciba shall
enter into an indemnification agreement in the form
attached hereto as Exhibit B.
4. Closing Procedures
Hexcel and Ciba agree that the following
procedures shall apply with respect to companies that, in
accordance with their regular monthly closing procedures,
close their books on a date other than the Closing
Date: (i) for companies closing their books on
February 23, 1996, adjustments shall be made to reflect
changes in Working Capital from February 23, 1996 through
the Closing Date and (ii) for all companies that do not
close their books on the Closing Date, adjustments will
be made to reflect large identifiable items,
extraordinary items and items outside the ordinary course
between the Closing Date and the date such company's
books are closed. Following the Closing, Hexcel shall
cause any Subsidiary that closes its books after the
Closing to operate its business in the ordinary course
and take no extraordinary action (including, without
limitation, payment of any dividend or other distribution
or incurrence of debt) that would affect the calculation
of the amount of Subordinated Debt pursuant to
Section 2.04 of the Agreement until such Subsidiary
thereafter closes its books in accordance with its
regular monthly closing procedures.
5. Intercompany Loans; CML Closing Cash
The parties acknowledge and agree that the
amount of intercompany indebtedness to be transferred by
Ciba to Hexcel and its Subsidiaries pursuant to the
Agreement shall be (i) French Franc 32,000,000 in respect
of Brochier and (ii) Italian Lira 7,100,000,000 (interest
bearing) in respect of Salver and Italian
Lira 3,390,000,000 (non-interest bearing) in respect of
Salver. In addition, the parties agree that the Ciba
Composites Business' intercompany payables/receivables
shall, following the Closing, be treated as trade
payables/receivables. Notwithstanding the provisions of
Section 2.04, in place of Subordinated Debt issuable
under such Section 2.04 that is attributable to cash of
CML on the Closing Date, Hexcel shall issue to Ciba or
its designated Subsidiary concurrently with the issuance
of the Subordinated Debt pursuant to Section 2.04 a
senior demand note of Hexcel containing mutually
acceptable terms in an aggregate principal amount equal
to the amount of cash of CML on the Closing Date. Hexcel
acknowledges that Ciba currently intends to demand
payment of such senior demand note (as well as the senior
demand note referred to in paragraph 1 above) shortly
after its receipt thereof.
6. Deferred Assets
Hexcel acknowledges that the Distributors (as
defined in the Distribution Agreement dated the Closing
Date) will not close their books on the Closing Date and
agrees with Ciba and CGC that, as a result,
Section 2.04(d)(iv) of the Agreement shall be deleted and
replaced with the following:
"(iv) the principal amount shall be
decreased by the net book value of the Deferred
Assets that are set forth on the Balance Sheet
plus $457,000."
In addition, the words "Closing Date" in
clause (E) of the first sentence of Section 2.04(a)(i)
shall be deleted and replaced with the words "date of the
Balance Sheet."
7. Third Party Consents
Notwithstanding anything in any other document
to the contrary, as between the parties hereto the
principles set forth in the Agreement and the Ancillary
Agreements as to the allocation of particular assets
among Acquired Assets and Excluded Assets and particular
liabilities among Assumed Liabilities and Excluded
Liabilities shall, pursuant to their terms, govern and
supersede any and all inconsistent provisions contained
in any and all consents (and/or assignment and assumption
agreements entered into at the request of a third party)
obtained by Ciba or Hexcel in connection with the
transactions contemplated by the Agreement and the
Ancillary Agreements. In addition, certain consents to
assignment of agreements of the Transferred Business
obtained from third parties oblige Ciba or its
Subsidiaries to guarantee performance or payment under
such agreements or do not contain releases of Ciba as a
primary or other obligor under such agreements. Hexcel
agrees that any amounts payable by Ciba or any of its
Subsidiaries under such agreements, solely to the extent such
amounts constitute Assumed Liabilities, shall be subject
to indemnification pursuant to Section 7.02 of the
Agreement, regardless of whether Ciba or such Subsidiary
is primarily liable or otherwise. Ciba agrees that any
amounts payable by Hexcel or any of its Subsidiaries
under such agreements, solely to the extent such amounts
constitute Excluded Liabilities, shall be subject to
indemnification pursuant to Section 7.01 of the
Agreement, regardless of whether Hexcel or such
Subsidiary is primarily liable or otherwise.
8. Security Arrangements
Within 45 days after the Closing, Hexcel shall
enter into the ancillary agreements in form and substance
satisfactory to the Department of Defense and reasonably
satisfactory to Ciba as provided in the Special Security
Agreement to be dated as of March 15, 1996, by and among
Ciba, CGC, Hexcel and Hexcel Pottsville Corporation,
including without limitation the Implementation
Procedures, the Administrative Agreement and the other
documents referred to therein.
9. Global Materials Supply Agreement
The parties acknowledge that they may not agree
upon mutually acceptable terms of a Global Materials
Supply Agreement prior to the Closing as contemplated by
Section 4.12 of the Agreement. The parties agree to
negotiate in good faith, agree upon such mutually
acceptable terms and execute an agreement in
substantially the form attached hereto as Exhibit C
within 30 days after the Closing. The parties agree that
the initial interest rate on the Subordinated Debt has
been fixed at 7.5% per annum rather than the 9% rate set
forth in Exhibit B to the Agreement. In the event the
parties fail to execute and deliver such agreement within
such period, the parties shall amend the Indenture to
provide that the Subordinated Debt shall initially bear
interest at a rate per annum of 9%, which rate shall be
effective retroactively to the Closing Date.
10. Miscellaneous
The provisions of this Letter Agreement shall
be governed by and construed in accordance with the laws
of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of
conflicts of law. Except as expressly set forth herein,
the Agreement shall remain in full force and effect in
accordance with its terms.
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to
us, whereupon this letter and your acceptance shall
represent a binding agreement among Hexcel, Ciba and CGC.
Very truly yours,
HEXCEL CORPORATION
by /s/ XXXXXXX X. XXXXXXX
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
The foregoing is hereby confirmed
and accepted as of the date first
above written.
CIBA-GEIGY LIMITED
by /s/ XXXX M.D. XXXXXXXXX
Name: Xxxx M.D. Xxxxxxxxx
Title: Head of Regional Finance and Control
by /s/ XXXXX XXXXXX
Name: Xxxxx Xxxxxx
Title: Senior Division Counsel
CIBA-GEIGY CORPORATION
by /s/ XXXXXXX XXXXXXX
Name: Xxxxxxx Xxxxxxx
Title: Vice President, Finance and Information Services
