<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 1996
REGISTRATION STATEMENT NO. 33-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BE AEROSPACE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3728 06-1209796
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
----------------
1400 CORPORATE WAY
WELLINGTON, FLORIDA 33414
(407) 791-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
AMIN J. KHOURY
CHIEF EXECUTIVE OFFICER
BE AEROSPACE, INC.
1400 CORPORATE WAY
WELLINGTON FLORIDA 33414
(407) 791-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
----------------
WITH COPIES TO:
C. DEAN DUSSEAULT
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 12110
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities registered on this form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [_]
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 7/8% Series B Senior
Subordinated Notes due
2006................. $100,000,000 100% $100,000,000 $34,483
</TABLE>
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- -------------------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
CROSS-REFERENCE SHEET
LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY
PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
-------- ------- ----------------------
<C> <S> <C>
Item 1 Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................. Facing Page of Registration
Statement; Cross-Reference
Sheet; Outside Front and
Inside Front Cover Page of
Prospectus
Item 2 Inside Front and Outside Back Cover
Pages of Prospectus.................... Inside Front and Outside
Back Cover Pages of
Prospectus
Item 3 Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information......... Summary; Risk Factors; The
Company
Item 4 Terms of the Transaction................ The Exchange Offer;
Description of New Notes;
Certain Federal Income Tax
Considerations
Item 5 Pro Forma Financial Information......... Summary Financial
Information;
Capitalization; Unaudited
Pro Forma Combined
Financial Information
Item 6 Material Contracts With the Company
Being Acquired......................... Not Applicable
Item 7 Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters.............. Plan of Distribution
Item 8 Interests of Named Experts and Counsel.. Not Applicable
Item 9 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Not Applicable
Item 10 Information with Respect to S-3
Registrants............................ Incorporation of Certain
Documents by Reference
Item 11 Incorporation of Certain Information by
Reference.............................. Incorporation of Certain
Documents by Reference
Item 12 Information With Respect to S-2 or S-3
Registrants............................ Not Applicable
Item 13 Incorporation of Certain Information by
Reference.............................. Not Applicable
Item 14 Information With Respect to Registrants
Other than S-3 or S-2 Registrants...... Not Applicable
Item 15 Information With Respect to S-3
Companies.............................. Not Applicable
Item 16 Information With Respect to S-2 or S-3
Companies.............................. Not Applicable
Item 17 Information With Respect to Companies
Other than S-2 or S-3 Companies........ Not Applicable
Item 18 Information if Proxies, Consents or
Authorizations Are to be Solicited..... Not Applicable
Item 19 Information if Proxies, Consents or
Authorizations are Not to be Solicited,
or in an Exchange Offer................ Incorporation of Certain
Documents by Reference;
Summary; The Exchange
Offer; Description of the
New Notes; Certain Federal
Income Tax Considerations
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+ REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+ SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+ OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+ BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+ THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+ SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+ UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED , 1996
OFFER TO EXCHANGE
[LOGO OF ALL OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2006
BE AEROSPACE ($100,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
APPEARS HERE]
FOR
9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2006 OF
BE AEROSPACE, INC.
------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON , 1996, UNLESS EXTENDED
------------
BE Aerospace, Inc., a Delaware corporation ("BEA"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 9 7/8% Series B
Senior Subordinated Notes due 2006, (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for each $1,000 principal amount of the
outstanding 9 7/8% Senior Subordinated Notes due February 1, 2006 (the "Old
Notes") of the Company of which $100,000,000 aggregate principal amount is
outstanding. The New Notes and the Old Notes are collectively referred to
herein as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be , 1996, unless the Exchange Offer is extended
(the "Expiration Date"). Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date, unless previously accepted for payment. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the Exchange Offer is subject to certain conditions
which may be waived by the Company and to the terms and provisions of the
Registration Rights Agreement (as defined herein). See "The Exchange Offer."
Old Notes may be tendered only in denominations of $1,000 and integral
multiples thereof. The Company has agreed to pay the expenses of the Exchange
Offer.
The New Notes will be obligations of the Company entitled to the benefits of
the Indenture (as defined herein) relating to the Old Notes. The form and terms
of the New Notes are identical in all material respects to the form and terms
of the Old Notes except that the New Notes have been registered under the
Securities Act. Following the completion of the Exchange Offer, none of the
Notes will be entitled to the benefits of the Registration Rights Agreement
relating to contingent increases in the interest rates provided for pursuant
thereto. See "The Exchange Offer."
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------
The date of this Prospectus is , 1996.
<PAGE>
The New Notes will bear interest from January 24, 1996. Holders of Old Notes
whose Old Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Old Notes accrued
from January 24, 1996 to the date of the issuance of the New Notes. Interest
on the New Notes is payable semi-annually on February 1 and August 1 of each
year, commencing August 1, 1996, accruing from January 24, 1996 at a rate of 9
7/8% per annum.
The New Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after February 1, 2001 at the redemption prices set
forth herein, together with accrued and unpaid interest, if any, to the date
of redemption. In addition, upon the occurrence of a Change of Control (as
defined), each holder of the New Notes shall have the option to require the
Company to make an offer to repurchase such holder's Notes at a redemption
price of 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption.
Proceeds from the offering of the Old Notes (the "Offering") were used by
BEA to finance its acquisition (the "Acquisition") of Burns Aerospace
Corporation ("Burns"), a subsidiary of Eagle Industries, Inc., to repay
indebtedness of BEA and to pay certain fees and expenses. See "Use of
Proceeds." In addition, contemporaneously with such Acquisition, BEA amended
its bank credit facility to provide additional liquidity. The Offering
occurred simultaneously with the Acquisition.
The New Notes are unsecured senior subordinated obligations of BEA and will
be subordinated in right of payment to all existing and future Senior
Indebtedness (as defined) of BEA, including indebtedness under its 9 3/4%
Senior Notes due 2003 (the "Senior Notes") and its Bank Credit Facility (as
defined). In addition, the New Notes will be effectively subordinated to the
obligations of BEA's subsidiaries. As of November 25, 1995, after giving pro
forma effect to the Offering, the application of the net proceeds therefrom
and the Acquisition, the aggregate outstanding amount of Senior Indebtedness
of BEA would have been approximately $162 million and the aggregate
outstanding amount of indebtedness of BEA's subsidiaries would have been
approximately $15.5 million.
Old Notes initially purchased by qualified institutional buyers, as defined
pursuant to Rule 144A under the Securities Act ("Qualified Institutional
Buyers"), were initially represented by a single, global Note in registered
form, registered in the name of a nominee of The Depository Trust Company
("DTC"), as depository and two certificates registered in the name of Merrill
Lynch & Co. The New Notes exchanged for Old Notes represented by the global
Note will be represented by a single, global New Note in registered form,
registered in the name of the nominee of DTC, unless the beneficial holders
thereof request otherwise. The global New Note will be exchangeable for New
Notes in registered form, in denomination of $1,000 and integral multiples
thereof. See "Description of the New Notes--Book-Entry Delivery and Form."
Based on no action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for resale, resold and otherwise transferred by any
holder thereof (other than (i) a broker-dealer who purchased such Old Notes
directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that the holder is acquiring the New
Notes in its ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in the
distribution of the New Notes. Holders of Old Notes wishing to accept the
Exchange Offer must represent to the Company that such conditions have been
met. In the event that the Company's belief is inaccurate, holders of New
Notes who transfer New Notes in violation of the prospectus delivery
provisions of the Securities Act and without an exemption from registration
thereunder may incur liability under the Securities Act. The Company does not
assume or indemnify holders against such liability, although the Company does
not believe any such liability should exist.
2
<PAGE>
Each broker-dealer that receives New Notes in exchange for Old Notes held
for its own account, as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, such broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by such broker-dealer in connection with resales of
New Notes received in exchange for Old Notes. The Company has agreed that, for
a period of 180 days after the Expiration Date, it will make this Prospectus
and any amendment or supplement to this Prospectus available to any such
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company believes that no registered holder of the Old Notes is an
affiliate (as such term is defined in Rule 405 under the Securities Act) of
the Company.
The Company will not receive any proceeds from the Exchange Offer, and no
underwriter is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
Prior to the Exchange Offer, there has been no public market for the Old
Notes or New Notes. If a market for the New Notes should develop, the New
Notes could trade at a discount from their principal amount. The Company does
not intend to list the New Notes on a national securities exchange or to apply
for quotation of the New Notes through the National Association of Securities
Dealers Automated Quotation System. There can be no assurance that an active
public market for the New Notes will develop.
The Company has been advised by Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Morgan Stanley & Co. Incorporated, the initial purchasers
(the "Initial Purchasers") of the Old Notes, that, following completion of the
Exchange Offer, they intend to make a market in the New Notes; however, such
entities are under no obligation to do so and any market activities with
respect to the New Notes may be discontinued at any time.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents or information filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
February 25, 1995 (the "Form 10-K") filed May 16, 1995, as amended by the
Company's Annual Report on Form 10-K/A filed July 19, 1995;
(b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 25, 1995 (the "November 10-Q") filed January 8, 1996;
(c) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 26, 1995 filed October 10, 1995 (the "August 10-Q");
(d) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended May 27, 1995 filed July 10, 1995 (the "May 10-Q");
(e) The Company's Current Report on Form 8-K dated December 14, 1995
filed December 28, 1995; and
(f) all documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act of 1934, as amended (the "Exchange Act") on
or after the date of this Prospectus and prior to the termination of the
offering made hereby.
3
<PAGE>
Any statement contained herein or in any documents incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for the purpose of this Prospectus to the extent that a subsequent
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE
UPON WRITTEN OR ORAL REQUEST FROM THOMAS P. MCCAFFREY, CHIEF FINANCIAL OFFICER
OF THE COMPANY AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES LOCATED AT 1400
CORPORATE WAY, WELLINGTON, FLORIDA 33414, TELEPHONE NUMBER (407) 791-5000. IN
ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY [5 DAYS PRIOR TO EXPIRATION DATE], 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files periodic reports, proxy statements and
other information with the Commission. Reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Suite 1400, Northwestern Atrium Center, 14th Floor, 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material can also be obtained at
prescribed rates by writing to the Commission, Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules
thereto for further information with respect to the Company and the securities
offered hereby. Statements contained herein concerning the provisions of any
documents filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance
reference is made to the copy of such document so filed. Each such statement
is qualified in its entirety by such reference.
The Indenture (as defined) provides that the Company will furnish copies of
the periodic reports required to be filed with the Commission under the
Exchange Act to the holders of the Notes. If the Company is not subject to the
periodic reporting and informational requirements of the Exchange Act, it
will, to the extent such filings are accepted by the Commission, and whether
or not the Company has a class of securities registered under the Exchange
Act, file with the Commission, and provide the Trustee and the holders of the
Notes within 15 days after such filings with, annual reports containing the
information required to be contained in Form 10-K promulgated under the
Exchange Act, quarterly reports containing the information required to be
contained in Form 10-Q promulgated under the Exchange Act and from time to
time such other information as is required to be contained in Form 8-K
promulgated under the Exchange Act. If filing such reports with the Commission
is not accepted by the Commission or prohibited by the Exchange Act, the
Company will also provide copies of such reports, at its cost, to prospective
purchasers of the Notes promptly upon written request.
4
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the related notes, appearing elsewhere in this Prospectus. As used in
the Prospectus, unless the context otherwise requires, "BE Aerospace" or "BEA"
refers to BE Aerospace, Inc., a Delaware corporation, "Burns Aerospace" or
"Burns" refers to Burns Aerospace Corporation, a Delaware corporation; as it
existed immediately prior to the Acquisition, and "the Company" refers to BEA
as it exists following the acquisition of Burns. References herein to fiscal
year end relate to a February fiscal year end for BEA (for example, fiscal 1995
refers to BEA's fiscal year ended February 25, 1995) and a December 31 fiscal
year end for Burns. The statement of operations information presented herein on
a pro forma basis gives effect to the Acquisition and the Offering, including
the application of the net proceeds therefrom as described under "Use of
Proceeds", as if they had occurred at the beginning of fiscal 1995. Market
share information presented herein does not include markets in the former
Soviet Union and will vary, sometimes significantly, from year to year.
THE COMPANY
BE Aerospace is the world's largest supplier of commercial aircraft cabin
interior products, serving virtually all major airlines with a broad line of
products including aircraft seats, galley products and structures and
individual passenger inflight entertainment systems. In addition, BEA provides
upgrade, maintenance and repair services for the interior products it supplies,
as well as for those supplied by other manufacturers. Over half of BEA's
revenues and over 65% of its operating earnings in fiscal 1995 were derived
from retrofit, refurbishment, services and sales of spare parts largely
relating to its approximate $1.8 billion installed base of currently in-service
products (valued at replacement prices), and the balance was generated from
sales of products installed on newly delivered aircraft. In fiscal 1995 and for
the nine months ended November 25, 1995, on a pro forma basis for the
Acquisition, the Company generated approximately $323 million and $244 million,
respectively, in revenues, and $55 million and $42 million, respectively, in
EBITDA (earnings before interest, taxes, depreciation and amortization) before
other expenses, and as of November 25, 1995 had a backlog of approximately $441
million (of which approximately $72 million was attributable to Burns).
BEA is the largest supplier of airline seats in the world, offering an
extensive line of first class, business class, tourist class and commuter
seats, with a market share of approximately 30% of the worldwide seating market
based on fiscal 1995 unit sales. Burns was also a leading supplier of airline
seats, generally ranking third in global market share. As a result of the
Acquisition, the Company has a combined worldwide market share of approximately
50% of the worldwide commercial airline seating industry, based on fiscal 1995
unit sales. The Company is also the world's largest supplier of galley
products, offering complete galley systems for both narrow and wide body
aircraft, including a wide selection of coffee and beverage makers, water
boilers, ovens, liquid containers and refrigeration equipment. In addition, the
Company is a leading supplier of passenger entertainment and service systems,
including passenger control systems and individual passenger inflight
entertainment systems. Recently, the Company has introduced a state-of-the-art,
fully interactive individual passenger inflight entertainment system which has
the capacity to offer numerous movies on demand, telecommunications, gaming,
Nintendo (R), Sega (R) and PC-based games, inflight shopping and, in the
future, live television, among other services.
BEA's substantial installed base provides significant ongoing revenues from
replacements, repairs and spare parts. These revenues, along with its position
as a low cost producer, enabled BEA to maintain its operating profitability
during the several-year period prior to 1994, despite one of the most serious
economic downturns ever suffered by the airline industry. During this period,
airlines sought to conserve cash by reducing or deferring scheduled cabin
interior refurbishment and upgrade programs and purchases of new aircraft.
Since early 1994, the airlines have experienced a significant turnaround in
operating results, with the domestic airline industry achieving record
operating earnings during the first nine months of 1995. The airline cabin
interior products industry business cycle, however, generally lags that of the
commercial airlines because of the airlines' practice of gradually implementing
refurbishment and replacement programs. Consequently, only in the past nine
months has BEA begun to experience growth in its backlog of seating and galley
products, representing the first time in over two years that BEA has seen
growth of new seating orders in excess of shipments.
5
<PAGE>
The Company believes that it is well positioned to continue to benefit from
the growth in airline profitability. The Company expects that the deterioration
of cabin interior product functionality and aesthetics within the commercial
airline fleets over the last several years will encourage airlines to increase
spending on refurbishments and upgrades. Furthermore, the FAA has issued new
seat safety standards for all commercial aircraft traveling within or entering
the United States, which, if implemented as scheduled, the Company believes
would require the modification or replacement by the year 2000 of a substantial
portion of the 1.6 million commercial airline seats currently in service
worldwide. In addition, the Company believes, based upon industry sources, that
the airlines are experiencing extremely high load factors, and that a
significant number of new aircraft will need to be purchased to meet projected
growth in worldwide air travel, which is expected to nearly double by 2005. The
significance of these new aircraft purchases to the Company will be enhanced by
the continuing shift to wide body aircraft, which require substantially more
seats, galleys and inflight entertainment products per aircraft than do narrow
body aircraft. (see "Business--Recent Industry Conditions").
COMPETITIVE STRENGTHS
The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:
. Leading Market Share and Significant Installed Base. Management believes
that the Company has achieved the leading global market positions in
each of its major product categories, with worldwide market shares,
based upon industry sources, of approximately 50% in aircraft seats (pro
forma for the Acquisition), 90% in coffee makers, 90% in refrigeration
equipment and 50% in ovens, in each case based on fiscal 1995 unit
sales, and 33% in individual passenger inflight entertainment systems,
determined on the basis of installed base as of October 1995. The
Company believes these market shares enable it to maintain significant
competitive advantages in serving its customers, including manufacturing
efficiencies and greater product development and marketing resources.
The Company also believes that the small size of the total potential
market in each product category, together with its large shares of such
markets, serve as a deterrent to new market entrants. For example, the
total potential annual market for coffee makers, ovens and refrigeration
equipment are each less than $25 million, with the Company's shares of
such markets ranging from 50% to 90%. Furthermore, because of economies
of scale, in part attributable to such large market shares and its
approximate $1.8 billion installed base of cabin interior equipment
(valued at replacement prices), the Company believes it is among the
lowest cost producers in the cabin interior products industry. The
Company believes that its large installed base gives it a significant
advantage over competitors in obtaining orders for retrofit and
refurbishment programs, principally because of the tendency of the
airlines to purchase equipment for such programs from the original
supplier. In addition, because of the need for compatible spare parts at
airline maintenance depots and the desire of airlines to maximize fleet
commonality, a single vendor is typically used for all aircraft of the
same type operated by a particular airline.
. Broadest Product Line in the Industry. Management believes the Company
offers more products for the cabin interiors of commercial aircraft than
any other manufacturer. With an established reputation for quality,
service and product innovation, the Company enjoys broad recognition
among the world's commercial airlines. The Company maintains a constant
dialogue with a wide array of existing and potential customers, enabling
it to become aware of emerging industry trends and needs and thereby to
play a major role in product development. The Company has continued to
expand its product line, believing that the airline industry
increasingly will seek an integrated approach to the development,
testing and sourcing of the aircraft's cabin interior. The Company
believes that it is the only supplier in the industry with the
technology, manufacturing capability and capacity and breadth of
products and services to meet these industry demands.
. Technological Leadership/New Product Development. Management believes
that the Company is a technological leader in its industry, which
contributes to its market leadership. The Company has state-of-the-art
facilities and what it believes to be the largest R&D organization in
the industry, with BEA
6
<PAGE>
employing approximately 420 engineers. The Company staffs on-site
customer engineers at major airlines and airframe manufacturers to
represent its entire product line and work closely with the customers to
develop specifications for each successive generation of products
required by the airlines. Through its on-site customer engineers, the
Company expects to be able more efficiently to design and integrate
products which address the requirements of its customers. The Company
believes that the introduction of innovative products enables it to gain
early entrant advantages and substantial market shares. An example of
such a product introduction is the Company's original individual
passenger inflight entertainment system, introduced in 1992, which
offers a selection of preprogrammed movies. The Company believes that,
in terms of shipments, it is the market leader, having sold more
individual passenger inflight entertainment systems than any of its
competitors. The next generation of this product is the Company's
recently introduced interactive individual passenger inflight
entertainment system, the Multi-Media Digital Distribution System
("MDDS"), which it believes is superior to existing operational systems
in terms of performance, reliability, weight, heat generation and
flexibility to adapt to changing technology. Other recent new product
developments include a cappuccino/espresso maker, a refrigerated quick
chill wine cooling system and a constant pressure cooking oven which the
Company believes substantially improves the appearance, aroma and taste
of airline food.
. High Growth New Business Opportunity. Airlines are increasingly
demanding individual passenger inflight entertainment systems for long-
haul flights to attract and retain customers, especially as the quality
of inflight entertainment has become a differentiating factor in
passengers' airline selection decisions. Such systems also provide the
airlines with the opportunity to increase revenues per passenger mile,
without raising ticket prices, by charging individually for the services
used. For these reasons, the Company believes that in the future,
interactive entertainment systems will be installed on essentially all
wide body, and with the advent of live broadcast inflight television,
many narrow body planes. The Company's sophisticated MDDS has the
capability to offer numerous movies on demand, telecommunications,
gaming, Nintendo (R), Sega (R) and PC-based games, inflight shopping
and, in the future, live television, among other services, although each
airline will select the package of features it considers most attractive
to offer. This system has been tested for British Airways ("British
Air") in flight simulations in excess of a thousand hours, and was first
installed on a limited basis on a British Air Boeing 747-400 in November
1995. The Company expects that, upon the successful completion of a
commercial testing period, British Air will install the MDDS in all
classes of service in approximately 80 wide body British Air planes over
the next several years. The Company expects sales of this system to
account for a significant percentage of revenues in the future. Based on
an estimated current average sale price per seat of $2,500 to $7,000 for
individual passenger inflight entertainment systems, and the world's
current wide body fleet of approximately 2,500 planes that management
believes are appropriate for installation of such systems, the total
market potential for all such systems is estimated to be between $2
billion and $6 billion.
. Proven Track Record of Integration. The Company has as one of its key
corporate objectives the continual expansion of its product lines and
market shares through strategic acquisitions within the aircraft cabin
interior products industry. BEA has purchased eight businesses over the
last seven years, for an aggregate purchase price of approximately $250
million. The Company maintains a highly disciplined approach in
evaluating acquisitions, looking for opportunities to consolidate
engineering, manufacturing and marketing activities, as well as
rationalizing product lines. Since 1989, BEA has integrated each of the
additional businesses by reducing the number of operating facilities
acquired from 14 to six and consolidating personnel at the acquired
businesses, resulting in headcount reductions of approximately 800
employees. The Company is implementing a similar integration plan
consisting of, among other things, the reduction of headcount by
approximately 300 employees. The integration plan, when fully
implemented, is expected to reduce costs by an estimated $17 million per
annum. See "Unaudited Pro Forma Combined Financial Information".
7
<PAGE>
BUSINESS STRATEGY
The Company's business strategy is to maintain its leadership position and
best serve its customers by (i) offering the broadest and most integrated
product line in the industry for both new product sales and follow-on products
and services, (ii) pursuing a worldwide marketing approach focused by airline
and encompassing the Company's entire product line, (iii) remaining the
technological leader, as well as significantly growing its installed base of
products, in the developing individual passenger inflight entertainment market,
(iv) enhancing its position in the growing upgrade, maintenance, inspection and
repair services market and (v) pursuing selective strategic acquisitions in the
commercial aircraft cabin interior products industry.
THE ACQUISITION
TERMS OF THE ACQUISITION
Pursuant to an acquisition agreement, dated December 14, 1995, among BEA,
Burns, Eagle Industries, Inc. ("Eagle") and certain affiliates of Eagle (the
"Acquisition Agreement"), BEA acquired all of the outstanding capital stock of
Burns, a subsidiary of Eagle. The purchase price for the Acquisition was $42.5
million in cash, subject to certain post-closing adjustments. The purchase
price represents a multiple of 0.4x and 5.9x of Burns' latest twelve months
sales and EBITDA before management fees and other expenses, respectively,
without taking into account the impact of $11.9 million of identified cost
savings expected to be realized in the initial year after completion of the
Acquisition. See "Unaudited Pro Forma Combined Financial Information" for the
fiscal year ended February 25, 1995.
FINANCING
The Acquisition purchase price was funded through the Offering. In connection
with the Acquisition and the Offering, BEA completed a consent solicitation
(the "Consent Solicitation") to amend certain covenants contained in the
indenture related to the Senior Notes and to obtain a waiver of one such
covenant. In addition, contemporaneously with the Offering, the Company amended
its existing bank credit facility to provide additional liquidity. The amended
bank credit facility (the "Bank Credit Facility") now totals $100 million; and
consists of a $25 million reducing revolving credit facility (the "Reducing
Revolver") and a $75 million revolving credit facility (the "Revolving
Facility"). Upon the consummation of the Acquisition and the Offering,
indebtedness in an aggregate principal amount of approximately $29 million,
including letters of credit amounting to approximately $6 million, was
outstanding under the Bank Credit Facility. The consummation of the Offering,
the Bank Credit Facility and the Acquisition occurred concurrently.
The estimated sources and uses of funds for the Acquisition as if the
Acquisition had occurred on November 25, 1995, are as follows (dollars in
thousands):
<TABLE>
<S> <C>
SOURCES
Notes offered hereby............................................ $100,000
--------
Total Sources................................................. $100,000
========
USES
Repayment of unsecured bank borrowings and a portion of existing
bank credit facility........................................... $ 49,800
Purchase Price.................................................. 42,500
Estimated Fees and Expenses(a).................................. 7,700
--------
Total Uses.................................................... $100,000
========
</TABLE>
- --------
(a) Includes estimated expenses related to the Consent Solicitation, Offering,
Bank Credit Facility and Acquisition.
8
<PAGE>
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $100 million aggregate
principal amount of Old Notes for an equal aggregate principal amount of New
Notes. The New Notes will be obligations of the Company entitled to the
benefits of the Indenture relating to the Old Notes. The form and terms of the
New Notes are the same as the form and terms of the Old Notes except that the
New Notes have been registered under the Securities Act, and hence are not
entitled to the benefits of the certain registration rights (the "Registration
Rights") granted under a certain registration rights agreement (the
"Registration Rights Agreement") relating to the contingent increases in the
interest rates provided for pursuant thereto.
The Exchange Offer................ $1,000 principal amount of New Notes will
be issued in exchange for each $1,000 prin-
cipal amount of Old Notes validly tendered
pursuant to the Exchange Offer. As of the
date hereof, $100 million in aggregate
principal amount of Old Notes are outstand-
ing. The Company will issue the New Notes
to tendering holders of Old Notes on or
promptly after the Expiration Date.
Resale of the New Notes........... Based on an interpretation by the staff of
the Commission set forth in no-action let-
ters issued to third parties, including
"Exxon Capital Holdings Corporation"
(available May 13, 1988), "Morgan Stanley &
Co. Incorporated" (available June 5, 1991),
"Mary Kay Cosmetics, Inc." (available June
5, 1991) and "Warnaco, Inc." (available Oc-
tober 11, 1991), the Company believes that
New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be of-
fered for resale, resold and otherwise
transferred by any holder thereof (other
than (i) a broker-dealer who purchased such
Old Notes directly from the Company for re-
sale pursuant to Rule 144A or any other
available exemption under the Securities
Act or (ii) a person that is an "affiliate"
of the Company within the meaning of Rule
405 under the Securities Act) without com-
pliance with the registration and prospec-
tus delivery provisions of the Securities
Act provided that the holder is acquiring
the New Notes in its ordinary course of
business and is not participating, and has
no arrangement or understanding with any
person to participate, in the distribution
of the New Notes. In the event that the
Company's belief is inaccurate, holders of
New Notes who transfer New Notes in viola-
tion of the prospectus delivery provisions
of the Securities Act and without an exemp-
tion from registration thereunder may incur
liability under the Securities Act. The
Company does not assume or indemnify hold-
ers against such liability, although the
Company does not believe that any such lia-
bility should exist.
Each broker-dealer that receives New Notes
in exchange for Old Notes held for its own
account, as a result of market-making ac-
tivities or other trading activities, must
acknowledge that it will deliver a prospec-
tus in connection
9
<PAGE>
with any resale of such New Notes. The Let-
ter of Transmittal states that by so ac-
knowledging and by delivering a prospectus,
such broker-dealer will not be deemed to
admit that it is an "underwriter" within
the meaning of the Securities Act. This
Prospectus, as it may be amended or supple-
mented from time to time, may be used by
such broker-dealer in connection with re-
sales of New Notes received in exchange for
Old Notes. The Company has agreed that, for
a period of 180 days after the date of this
Prospectus, it will make this Prospectus
and any amendment or supplement to this
Prospectus available to any such broker-
dealer for use in connection with any such
resales. See "Plan of Distribution."
The Company believes that no registered
holder of the Old Notes is an affiliate (as
such term is defined in Rule 405 of the Se-
curities Act) of the Company.
This Exchange Offer is not being made to,
nor will the Company accept surrenders for
exchange from, holders of Old Notes in any
jurisdiction in which this Exchange Offer
or the acceptance thereof would not be in
compliance with the securities or blue sky
laws of such jurisdiction.
Expiration of Exchange Offer...... 5:00 p.m., New York City time, on ,
1996, unless the Exchange Offer is extend-
ed, in which case the term "Expiration
Date" means the latest date and time to
which the Exchange Offer is extended. See
"The Exchange Offer--Expiration Date; Ex-
tensions; Amendments."
Accrued Interest on the New Notes
and the Old Notes................ The New Notes will bear interest from Janu-
ary 24, 1996. Holders of Old Notes whose
Old Notes are accepted for exchange will be
deemed to have waived the right to receive
any payment in respect of interest on such
Old Notes accrued from January 24, 1996 to
the date of the issuance of the New Notes.
Consequently, holders who exchange their
Old Notes for New Notes will receive the
same interest payment on August 1, 1996
(the first interest payment date with re-
spect to the Old Notes and the New Notes)
that they would have received had they not
accepted the Exchange Offer. See "The Ex-
change Offer--Interest on the New Notes."
Termination of the Exchange
Offer............................ The Company may terminate the Exchange Of-
fer if it determines that its ability to
proceed with the Exchange Offer could be
materially impaired due to any legal or
governmental action, any new law, statute,
rule or regulation or any interpretation of
the staff of the Commission of any existing
law, statute, rule or regulation. The Com-
pany does not expect any of the foregoing
conditions to occur, al-
10
<PAGE>
though there can be no assurance that such
conditions will not occur. Holders of Old
Notes will have certain rights against the
Company under the Registration Rights
Agreement should the Company fail to con-
summate the Exchange Offer. See "The Ex-
change Offer--Termination."
Procedures for Tendering Old
Notes............................ Each holder of Old Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a fac-
simile thereof, in accordance with the in-
structions contained herein and therein,
and mail or otherwise deliver such Letter
of Transmittal, or such facsimile, together
with the Old Notes to be exchanged and any
other required documentation to Fleet Na-
tional Bank Connecticut, N.A., as Exchange
Agent, at the address set forth herein and
therein or effect a tender of Old Notes
pursuant to the procedures for book-entry
transfer as provided for herein. See "The
Exchange Offer--Procedures for Tendering."
By executing the Letter of Transmittal,
each holder will represent to the Company
that, among other things, (i) the New Notes
acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of
business of the person receiving such New
Notes, whether or not such person is the
holder, (ii) neither the holder nor any
such other person has an arrangement or un-
derstanding with any person to participate
in the distribution of such New Notes and
(iii) neither the holder nor any such other
person is an "affiliate," as defined in
Rule 405 under the Securities Act, of the
Company.
Special Procedures for Beneficial
Holders.......................... Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender in the Ex-
change Offer should contact such registered
holder promptly and instruct such regis-
tered holder to tender on its behalf. If
such beneficial holder wishes to tender on
his own behalf, such beneficial holder
must, prior to completing and executing the
Letter of Transmittal and delivering its
Old Notes, either make appropriate arrange-
ments to register ownership of the Old
Notes in such holder's name or obtain a
properly completed bond power from the reg-
istered holder. The transfer of record own-
ership may take considerable time. See "The
Exchange Offer--Procedures for Tendering."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender
their Old Notes and whose Old Notes are not
immediately available or who cannot deliv-
ery their Old Notes (or who cannot complete
the procedure for book-entry transfer on a
timely basis) and a properly completed Let-
ter of Transmittal or any other
11
<PAGE>
documents required by the Letter of Trans-
mittal to the Exchange Agent prior to the
Expiration Date may tender their Old Notes
according to the guaranteed delivery proce-
dures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Withdrawal Rights................. Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City
time, on the business day prior to the Ex-
piration Date, unless previously accepted
for exchange. See "The Exchange Offer--
Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of New Notes............ Subject to certain conditions (as summa-
rized above in "Termination of the Exchange
Offer" and described more fully under the
"The Exchange Offer--Termination"), the
Company will accept for exchange any and
all Old Notes which are properly tendered
in the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date.
The New Notes issued pursuant to the Ex-
change Offer will be delivered promptly
following the Expiration Date. See "The Ex-
change Offer--General."
Certain Tax Consideration......... The exchange pursuant to the Exchange Offer
will generally not be a taxable event for
federal income tax purposes. See "Certain
Federal Tax Considerations."
Exchange Agent.................... Fleet National Bank Connecticut, N.A., the
Trustee under the Indenture, is serving as
exchange agent (the "Exchange Agent") in
connection with the Exchange Offer. The
address of the Exchange Agent is: Fleet Na-
tional Bank Connecticut, N.A. Corporate
Trust Operations, 777 Main Street, Lower
Level, Hartford, CT 06115, Attention:
Patricia Williams. For information with re-
spect to the Exchange Offer, the telephone
number for the Exchange Agent is (860) 986-
1271 and the facsimile number for the Ex-
change Agent is (860) 986-7908.
Use of Proceeds................... There will be no cash proceeds payable to
the Company from the issuance of the New
Notes pursuant to the Exchange Offer. The
proceeds to the Company from the sale of
the Old Notes were approximately $96.25
million, net of the Initial Purchasers'
discount and certain fees and expenses re-
lating to the offering of the Old Notes.
Such proceeds were used to pay the cash
purchase price for the Acquisition. The
balance was used to repay certain indebted-
ness of the Company and to pay fees and ex-
penses incurred in connection with the Ac-
quisition. See "Use of Proceeds."
12
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
Notes Offered..................... $100 million principal amount of 9 7/8% Se-
nior Subordinated Notes due 2006.
Maturity Date..................... February 1, 2006.
Interest Payment Dates............ February 1 and August 1 of each year, com-
mencing August 1, 1996.
Optional Redemption............... The Notes are redeemable at the option of
the Company, in whole or in part, on or af-
ter February 1, 2001, at the redemption
prices set forth herein, together with ac-
crued and unpaid interest to the date of
redemption.
Mandatory Redemption.............. None.
Change of Control................. Upon the occurrence of a Change of Control,
each holder of the Notes shall have the op-
tion to require the Company to repurchase
such holder's Notes at a redemption price
equal to 101% of the principal amount
thereof, plus accrued interest to the date
of redemption, pursuant to a Change of Con-
trol Offer to be made by the Company. See
"Description of the New Notes--Certain Def-
initions" for the definition of a Change of
Control.
Ranking........................... The Notes are unsecured senior subordinated
obligations of the Company and are subordi-
nated to all existing and future Senior In-
debtedness of the Company, including in-
debtedness under the Senior Notes and the
Bank Credit Facility. As of November 25,
1995, after giving pro forma effect to the
Offering, the application of the net pro-
ceeds therefrom and the Acquisition, the
aggregate outstanding principal amount of
Senior Indebtedness of the Company would
have been approximately $162 million. In
addition, the Notes will be effectively
subordinated to the obligations of the
Company's subsidiaries. As of November 25,
1995, after giving pro forma effect to the
Offering, the application of the net pro-
ceeds therefrom and the Acquisition, the
Company's subsidiaries would have had ap-
proximately $15.5 million of indebtedness
outstanding. Subject to certain limita-
tions, the Company and its Restricted Sub-
sidiaries may incur additional indebtedness
in the future. See "Risk Factors--Adverse
Consequences of Financial Leverage" and
"Description of the New Notes--Subordina-
tion,--Limitation on Indebtedness, and--
Limitation on Other Senior Subordinated In-
debtedness."
Certain Covenants................. The Indenture contains certain covenants,
including, without limitation, covenants
with respect to the following matters: (i)
limitation on indebtedness; (ii) limitation
on other
13
<PAGE>
senior subordinated indebtedness; (iii)
limitation on restricted payments; (iv)
limitation on issuances and sales of re-
stricted subsidiary stock; (v) limitation
on transactions with affiliates; (vi) limi-
tation on liens securing pari passu or sub-
ordinated indebtedness; (vii) limitation on
disposition of proceeds of asset sales;
(viii) limitation on guarantees of indebt-
edness by restricted subsidiaries;
(ix) limitation on dividends and other pay-
ment restrictions affecting restricted sub-
sidiaries; and (x) restrictions on mergers
and certain transfers of assets. See "De-
scription of the New Notes--Certain Cove-
nants."
Registration Rights............... In connection with the sale of the Old
Notes, the Company agreed in the Registra-
tion Rights Agreement to use its best ef-
forts to (i) file within 30 days, and cause
to become effective within 90 days, of the
date of original issue of the Old Notes,
the registration statement (the "Registra-
tion Statement") of which this Prospectus
is a part with respect to a registered of-
fer to exchange the Old Notes (the "Ex-
change Offer") for the New Notes with terms
identical in all material respects to the
Old Notes and (ii) cause the Exchange Offer
to be consummated within 120 days of the
original issue of the Old Notes.
In the event that any changes in law or the
applicable interpretations of the staff of
the Commission do not permit the Company to
effect the Exchange Offer, or if for any
other reason the Exchange Offer is not con-
summated within 120 days following the date
of the original issue of the Old Notes, or
if any holder of the Old Notes (other than
the Initial Purchasers) is not eligible to
participate in the Exchange Offer, or upon
the request of any Initial Purchaser under
certain circumstances, the Company will use
its best efforts to cause to become effec-
tive by the 120th day after the original
issue of the Old Notes a shelf registration
statement pursuant to the Securities Act
with respect to the resale of the Old Notes
(the "Shelf Registration Statement") and to
keep the Shelf Registration Statement ef-
fective until three years after the effec-
tive date thereof (or until one year after
such effective date if such Shelf Registra-
tion Statement is filed at the request of
the Initial Purchasers under certain cir-
cumstances).
In the event that either (i) the Registra-
tion Statement is not filed with the Com-
mission on or prior to the 30th calendar
day following the date of original issue of
the Old Notes, (ii) the Registration State-
ment is not declared effective on or prior
to the 90th calendar day following the date
of original issue of the Old Notes or (iii)
the Exchange Offer is not consummated or a
Shelf Registration Statement with
14
<PAGE>
respect to the Old Notes is not declared
effective on or prior to the 120th calendar
day following the date of original issue of
the Old Notes, the interest rate borne by
the Notes shall be increased by one-half of
one percent per annum following such 30-day
period in the case of clause (i) above,
following such 90-day period in the case of
clause (ii) above, or following such 120-
day period in the case of clause
(iii) above. The aggregate amount of such
increase from the original interest rate
pursuant to these provisions will in no
event exceed one-half of one percent per
annum. Upon (x) the filing of the registra-
tion statement for the Exchange Offer after
the 30-day period described in clause (i)
above, (y) the effectiveness of the Regis-
tration Statement after the 90-day period
described in clause (ii) above or (z) the
consummation of the Exchange Offer or the
effectiveness of a Shelf Registration
Statement, as the case may be, after the
120-day period described in clause (iii)
above, the interest rate borne by the Old
Notes from the date of such filing, effec-
tiveness or the day before the date of con-
summation, as the case may be, will be re-
duced to the original interest rate if the
Company is otherwise in compliance with
such requirements. See "Exchange Offer."
For further information regarding the New Notes, see "Description of the New
Notes."
Risk Factors...................... See "Risk Factors" for a discussion of cer-
tain factors which should be considered by
prospective investors in evaluating an in-
vestment in the New Notes.
15
<PAGE>
SUMMARY FINANCIAL INFORMATION
Set forth below and on the following two pages are summary pro forma
financial information for the Company and summary historical financial
information for BEA and Burns.
COMPANY UNAUDITED PRO FORMA
The unaudited pro forma financial information for the Company set forth below
has been derived from the unaudited pro forma financial information included
elsewhere in this Prospectus and gives effect to the Acquisition, the Offering
and the application of net proceeds therefrom. See "Unaudited Pro Forma
Combined Financial Information." The pro forma statement of operations data for
the nine months ended November 25, 1995 and the fiscal year ended February 25,
1995 gives effect to the Acquisition and the Offering as if they had occurred
on February 27, 1994, including the elimination of certain costs which
management estimates will be eliminated in connection with the Acquisition. The
pro forma balance sheet data gives effect to the Acquisition and the Offering
as if they had occurred on November 25, 1995. The unaudited pro forma financial
information does not necessarily represent what the Company's financial
position and results of operations would have been if the Acquisition and the
Offering had actually been completed as of the dates indicated and is not
intended to project the Company's financial position or results of operations
for any future period. The following summary financial information should be
read in conjunction with the historical financial statements of BEA and Burns
and the unaudited pro forma financial information for the Company and related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
NOVEMBER 25, 1995 FEBRUARY 25, 1995
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
UNAUDITED STATEMENT OF OPERATIONS DATA(A):
Sales..................................... $244,001 $322,841
Cost of sales............................. 165,055 221,081
Gross profit.............................. 78,946 101,760
Selling, general and administrative ex-
penses................................... 29,980 37,195
Research and development.................. 14,392 16,557
Operating earnings........................ 21,887 11,430
Interest expense, net..................... 17,524 21,989
Net earnings (loss)....................... 2,618 (6,335)
Net earnings (loss) per share............. $ 0.16 $ (0.39)
Common and common equivalent shares....... 16,111 16,075
Ratio of earnings to fixed charges(b)..... 1.2x NM(c)
UNAUDITED PRO FORMA BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital........................... $120,928
Total assets.............................. 487,322
Long term debt............................ 258,369
Stockholders' equity...................... 123,140
</TABLE>
- -------
(a) The pro forma combined statements of operations data reflect management's
estimates of net cost savings expected to be realized upon the Acquisition.
Such expected cost savings for the nine months ended November 25, 1995 and
the fiscal year ended February 25, 1995 are estimated at approximately
$13.0 million and $11.9 million, respectively. See "Unaudited Pro Forma
Combined Financial Information." No assurance can be given as to the
ultimate amount of net cost savings that will actually be realized.
(b) For purposes of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consists of interest expense,
capitalized interest, amortization of deferred debt issuance costs and that
portion of rental expense deemed representative of the interest factor.
(c) Pro forma earnings would have been insufficient to cover fixed charges by
approximately $10.6 million for the fiscal year ended February 25, 1995.
16
<PAGE>
BEA--HISTORICAL
The following table sets forth historical financial information of BEA. The
financial data as of and for the fiscal years ended February 25, 1995, February
26, 1994 and February 27, 1993 have been derived from financial statements
which have been audited by BEA's independent auditors. The financial data as of
and for the nine months ended November 25, 1995 and November 26, 1994 have been
derived from financial statements which are unaudited, but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations for such periods. Operating results for the nine months
ended November 25, 1995 and November 26, 1994 are not necessarily indicative of
results that may be expected for a full year. The following financial
information is qualified by reference to, and should be read in conjunction
with, the BEA historical financial statements, including notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED
-------------------------- ---------------------------------------
NOVEMBER 25, NOVEMBER 26, FEBRUARY 25, FEBRUARY 26, FEBRUARY 27,
1995 1994 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales............... $168,233 $170,045 $229,347 $203,364 $198,019
Cost of sales........... 113,740 114,082 154,863 136,307 137,690
-------- -------- -------- -------- --------
Gross profit............ 54,493 55,963 74,484 67,057 60,329
Operating expenses:
Selling, general and
administrative....... 25,247 23,898 31,787 28,164 21,698
Research and
development.......... 11,591 8,900 12,860 9,876 11,299
Amortization expense.. 6,910 7,627 9,954 7,599 4,551
Other expenses (a).... 4,300 23,736 23,736 -- --
-------- -------- -------- -------- --------
Operating earnings
(loss)................. 6,445 (8,198) (3,853) 21,418 22,781
Interest expense, net... 12,386 11,080 15,019 12,581 3,955
-------- -------- -------- -------- --------
Earnings (loss) before
income taxes (benefit)
and extraordinary
item................... (5,941) (19,278) (18,872) 8,837 18,826
Income taxes (benefit).. (2,198) (6,747) (6,806) 3,481 6,676
-------- -------- -------- -------- --------
Earnings (loss) before
extraordinary item..... (3,743) (12,531) (12,066) 5,356 12,150
Extraordinary item, net
of tax effect.......... -- -- -- -- (522)
-------- -------- -------- -------- --------
Net earnings (loss)..... $ (3,743) $(12,531) $(12,066) $ 5,356 $ 11,628
======== ======== ======== ======== ========
Earnings (loss) before
extraordinary item..... $ (0.23) $ (0.78) $ (0.75) $ 0.35 $ 1.03
Extraordinary item...... -- -- -- -- (.05)
-------- -------- -------- -------- --------
Net earnings (loss) per
common share........... $ (0.23) $ (0.78) $ (0.75) $ 0.35 $ 0.98
======== ======== ======== ======== ========
Common and common
equivalent shares...... 16,111 16,075 16,021 15,438 11,847
Ratio of earnings to
fixed charges(b)....... NM(c) NM(c) NM(c) 1.7x 5.7x
BALANCE SHEET DATA (END
OF PERIOD):
Working capital......... $106,758 $ 65,855 $ 76,563 $ 76,874 $133,661
Total assets............ 405,992 358,771 379,954 375,009 314,055
Long-term debt.......... 208,169 162,260 172,693 159,170 127,743
Stockholders' equity.... 123,140 124,657 125,331 133,993 107,974
</TABLE>
- --------
(a) In fiscal 1996, in anticipation of the Acquisition, BEA recorded a charge
to earnings of $4.3 million related to costs associated with the
integration and consolidation of the Company's European seating business.
In fiscal 1995, BEA charged to earnings approximately $23.7 million
primarily related to intangible assets and inventories associated with
BEA's earlier generations of passenger entertainment systems.
(b) For purposes of computing this ratio, earnings consist of earnings before
extraordinary items, income taxes and fixed charges. Fixed charges consist
of interest expense, capitalized interest, amortization of deferred debt
issuance costs and that portion of rental expense deemed representative of
the interest factor.
(c) Earnings were insufficient to cover fixed charges by approximately $5.9
million, $19.3 million and $18.9 million for the nine months ended November
25, 1995 and November 26, 1994 and the fiscal year ended February 25, 1995,
respectively.
17
<PAGE>
BURNS--HISTORICAL
The following table sets forth certain historical financial information of
Burns. The statement of operations data for each of the years in the three year
period ended December 31, 1994 have been derived from Burns' financial
statements which have been audited by Burns' independent auditors. The
financial data for the nine months ended September 30, 1995 and 1994 have been
derived from financial statements which are unaudited, but, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations for such periods. Operating results for the nine months
ended September 30, 1995 and 1994 are not necessarily indicative of results
that may be expected for a full year. The table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations," the financial statements of Burns and related notes and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
--------------------------- --------------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1994 1993 1992
------------- ------------- ------------ ------------ ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales............... $75,768 $69,213 $93,494 $66,902 $98,185
Cost of sales........... 62,014 56,475 75,880 55,176 83,856
------- ------- ------- ------- -------
Gross profit............ 13,754 12,738 17,614 11,726 14,329
Operating expenses:
Selling, general and
administrative....... 8,867 8,102 10,729 8,948 10,150
Management fees(a).... 2,280 3,359 3,359 1,434 1,675
Research, development
and engineering...... 1,716 1,132 1,615 1,389 1,448
Amortization expense.. 1,125 1,134 1,509 1,507 1,500
Other (income)
expenses............. 83 313 738 (231) 255
------- ------- ------- ------- -------
Operating loss.......... (317) (1,302) (336) (1,321) (699)
Interest expense,
net(b)................. 5,875 4,649 6,374 4,203 4,133
------- ------- ------- ------- -------
Loss before income taxes
(benefit) and
cumulative effect of
change in accounting
principle.............. (6,192) (5,951) (6,710) (5,524) (4,832)
Income taxes (benefit).. (1,960) (2,074) (2,200) (1,268) (730)
------- ------- ------- ------- -------
Loss before cumulative
effect of change in
accounting principle... (4,232) (3,877) (4,510) (4,256) (4,102)
Cumulative effect of
change in accounting
principle, net of tax
effect................. -- -- -- (1,897) --
------- ------- ------- ------- -------
Net loss................ $(4,232) $(3,877) $(4,510) $(6,153) $(4,102)
======= ======= ======= ======= =======
Net loss per share...... $ (4.23) $ (3.88) $ (4.51) $ (6.15) $ (4.10)
======= ======= ======= ======= =======
</TABLE>
- --------
(a) Represents management fees paid to Eagle which, on a pro forma basis, will
be eliminated and cost allocations for which no direct benefit was
received.
(b) Burns participated in its parent's cash management system under which its
cash funding requirements were met by its parent and, therefore, Burns
itself did not have any indebtedness to nonaffiliates. Interest expense
appearing on the Burns financial statements is attributable to intercompany
indebtedness.
18
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider carefully the following factors before purchasing
the Notes offered hereby.
ADVERSE CONSEQUENCES OF FINANCIAL LEVERAGE
As of November 25, 1995, after giving pro forma effect to the Offering, the
application of the net proceeds therefrom and the Acquisition, the Company
would have had approximately $262 million aggregate amount of indebtedness
outstanding, representing 68% of total capitalization. See "Use of Proceeds"
and "Capitalization."
The degree of the Company's leverage could have important consequences to
purchasers of the Notes, including: (i) limiting the Company's ability to
obtain additional financing to fund future working capital requirements,
capital expenditures, acquisitions or other general corporate requirements;
(ii) requiring a substantial portion of the Company's cash flow from
operations to be dedicated to debt service requirements, thereby reducing the
funds available for operations and further business opportunities; (iii)
requiring all of the indebtedness incurred under the Bank Credit Facility to
be repaid prior to the time any principal payments are required on the Notes;
and (iv) increasing the Company's vulnerability to adverse economic and
industry conditions. In addition, since borrowings under the Bank Credit
Facility will be at variable rates of interest, the Company will be vulnerable
to increases in interest rates. The Company may incur additional indebtedness
in the future, although its ability to do so will be restricted by the
indenture governing the Notes (the "Indenture"), the indenture governing the
Senior Notes (the "Senior Note Indenture") and the Bank Credit Facility. The
ability of the Company to make scheduled payments under its present and future
indebtedness will depend on, among other things, the future operating
performance of the Company and the Company's ability to refinance its
indebtedness when necessary. Each of these factors is to a large extent
subject to economic, financial, competitive and other factors beyond the
Company's control.
The Bank Credit Facility, the Senior Note Indenture and the Indenture
contain numerous financial and operating covenants that will limit the
discretion of the Company's management with respect to certain business
matters. These covenants will place significant restrictions on, among other
things, the ability of the Company to incur additional indebtedness, to create
liens or other encumbrances, to make certain payments and investments, and to
sell or otherwise dispose of assets and merge or consolidate with other
entities. See "Description of Certain Indebtedness" and "Description of the
Notes--Certain Covenants." The Bank Credit Facility also requires the Company
to meet certain financial ratios and tests. A failure to comply with the
obligations contained in the Bank Credit Facility, the Senior Note Indenture
or the Indenture could result in an event of default under the Bank Credit
Facility, the Senior Note Indenture or the Indenture, respectively, which
could permit acceleration of the related debt and acceleration of debt under
other instruments that may contain cross-acceleration or cross-default
provisions.
SUBORDINATION OF THE NOTES; ASSETS ENCUMBRANCES; CHANGE OF CONTROL OFFER
The Notes are subordinated in right of payment in full to all existing and
future Senior Indebtedness of the Company, which includes all indebtedness
under the Bank Credit Facility and the Senior Notes. As of November 25, 1995,
on a pro forma basis after giving effect to the Offering, the application of
the net proceeds therefrom and the Acquisition, the aggregate amount of Senior
Indebtedness of the Company would have been approximately $162 million. In
addition, following consummation of the Offering and the Acquisition,
approximately $71 million was available under the Bank Credit Facility which,
if borrowed, would be included as Senior Indebtedness. Further, the Notes will
be effectively subordinated to indebtedness of the Company's subsidiaries. As
of November 25, 1995, on a pro forma basis after giving effect to the
Offering, the application of the net proceeds therefrom and the Acquisition,
the aggregate amount of indebtedness of the Company's subsidiaries would have
been approximately $15.5 million. See "Description of Certain Indebtedness."
In the event of the liquidation, dissolution, reorganization or any similar
proceeding regarding the Company, the assets of the Company will be available
to pay obligations on the Notes only after Senior Indebtedness of the
19
<PAGE>
Company has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on all or any of the Notes. In addition, the
Company may not pay principal of, premium, if any, or interest on the Notes or
purchase, redeem or otherwise retire the Notes, if any principal, premium, if
any, or interest on any Designated Senior Indebtedness (as defined) is not
paid when due (whether at final maturity, upon scheduled installment,
acceleration or otherwise) unless such default has been cured or waived or
such Designated Senior Indebtedness has been repaid in full. In addition,
under certain circumstances, if any non-payment default exists with respect to
Designated Senior Indebtedness, the Company may not make any payments on the
Notes for a specified period of time, unless such default is cured or waived
or such Designated Senior Indebtedness has been repaid in full. See
"Description of the New Notes--Subordination."
In addition to being subordinated to all existing and future Senior
Indebtedness of the Company, the Notes are not secured by any of the Company's
assets. The obligations of the Company under the Bank Credit Facility are
secured by substantially all the Company's assets. In addition, one of the
Company's senior financing arrangements is secured by real estate in
Litchfield, Connecticut and Wellington, Florida. If the Company becomes
insolvent or is liquidated, or if payment under the Bank Credit Facility or
such other senior financing arrangement is accelerated, the lenders under the
Bank Credit Facility or such other facility, as the case may be, would be
entitled to exercise the remedies available to a secured lender under
applicable law and pursuant to such agreement. Accordingly, such lenders will
have a prior claim with respect to such assets. See "Description of Certain
Indebtedness."
Upon a Change of Control (as defined), the Company is required to offer to
purchase all outstanding Notes. The Company, in such circumstance, would also
be required to offer to purchase the Senior Notes and may be required
immediately to repay the outstanding principal of, and pay any accrued
interest on, the loans made under the Bank Credit Facility and pay any other
amounts owed by the Company thereunder. In the case of any such offer to
purchase the outstanding Notes, there can be no assurance that the Company
would be able to repay amounts outstanding under these other debt agreements
or obtain necessary consents thereunder in order to consummate such purchase.
Any such requirement to offer to purchase outstanding Notes may result in the
Company having to refinance the indebtedness outstanding under these
agreements. There can be no assurance that the Company would be able to
refinance such indebtedness or, if such refinancing were to occur, that such
refinancing would be on terms favorable to the Company. See "Description of
the New Notes."
DEPENDENCE UPON CONDITIONS IN THE AIRLINE INDUSTRY
The Company's customers are the world's commercial airlines. As a result,
the Company's business is directly dependent upon the conditions in the highly
cyclical and competitive commercial airline industry. In the late 1980's and
early 1990's the world airline industry suffered a severe downturn which
resulted in record losses and several air carriers seeking protection under
bankruptcy laws. As a consequence, during such period, airlines sought to
conserve cash by reducing or deferring scheduled cabin interior refurbishment
and upgrade programs and delaying purchases of new aircraft. This led to a
significant contraction in the commercial aircraft cabin interior products
industry, and a decline in the Company's business and profitability. The
airline industry is currently experiencing an economic turnaround, with
significantly improved results, although the levels of airline spending on
refurbishment and new aircraft purchases continue to be below the levels
experienced in the early 1980's. Due to the volatility of the airline
industry, there can be no assurance that the recent profitability of the
airline industry will continue or that the airlines will maintain or increase
expenditures on cabin interior products for refurbishments or new aircraft.
In addition, the airline industry is undergoing a process of consolidation
and significantly increased competition. Such consolidation could result in a
reduction in future aircraft orders as overlapping routes are eliminated and
airlines seek greater economies through higher aircraft utilization. Increased
airline competition may also result in airlines seeking to reduce costs by
promoting greater price competition from airline cabin interior products
manufacturers, thereby adversely affecting the Company's revenues and margins.
20
<PAGE>
COMPETITION
The Company competes with a number of established companies that have
significantly greater financial, technological and marketing resources than
the Company. Although the Company has achieved a significant share of the
market for a number of its cabin interior products, there can be no assurance
that the Company will be able to maintain this market share. The ability of
the Company to maintain its market share will depend not only on its ability
to remain the supplier of retrofit and refurbishment products and spare parts
on the commercial fleets on which its products are currently in service but
also on its success in causing its products to be selected for installation in
new aircraft, including next generation aircraft, expected to be purchased by
the airlines over the next decade, and in avoiding product obsolescence. In
addition, the market for new passenger entertainment products, including
individual seat video and inflight entertainment and cabin management systems,
has attracted competitors such as GEC PLC/Plessey Limited, Hughes Avicom,
Matsushita Electronics and Sony Transcom, each of which has significantly
greater technological capabilities and financial and marketing resources than
the Company. See "Business--Competition."
ABILITY TO INTEGRATE ACQUIRED BUSINESSES
Since 1989, BEA has acquired eight companies, thereby substantially
increasing its size. In January 1996, BEA acquired Burns, which significantly
augmented the Company's aircraft seating business. The Company also intends to
consider future acquisitions in the commercial airline cabin interior
industry, some of which could be material to the Company. The ability of the
Company to continue to achieve its goals will depend upon its ability to
effectively integrate the Burns acquisition, as well as future acquisitions,
and to achieve cost efficiencies. Although BEA has been successful in the past
in doing so, there can be no assurance that it will continue to be successful.
NEW PRODUCT INTRODUCTIONS AND TECHNOLOGICAL CHANGE
Airlines are currently taking delivery of a new generation of aircraft and
demanding increasingly sophisticated cabin interior products. As a result, the
cabin interior configurations of commercial aircraft are becoming more complex
and will require more technologically advanced and integrated products. For
example, airlines are increasingly seeking sophisticated inflight
entertainment systems, such as the interactive individual passenger inflight
entertainment system, the MDDS, recently developed by BEA, which the Company
expects will provide a significant percentage of its future revenues. The
future success of the Company will depend, to a significant extent, on its
ability to successfully manufacture and deliver on a timely basis its MDDS
product and to have such product perform at the level expected by BEA's
customers and their passengers, as well as the Company's ability to continue
to develop, profitably manufacture and deliver, on a timely basis,
technologically advanced, reliable, high-quality products which can be readily
integrated into complex cabin interior configurations. See "Business--Products
and Services."
REGULATION
The Federal Aviation Administration (the "FAA") prescribes standards and
licensing requirements for aircraft components, including virtually all
commercial airline cabin interior products, and licenses component repair
stations within the United States. Comparable agencies regulate these matters
in other countries. If the Company fails to obtain a required license for one
of its products or services or loses a license previously granted, the sale of
the subject product or service would be prohibited by law until such license
is obtained or renewed. In addition, designing new products to meet existing
FAA requirements and retrofitting installed products to comply with new FAA
requirements can be both expensive and time-consuming. See "Business--
Government Regulation."
CERTAIN LEGAL PROCEEDINGS
BEA has been advised that the U.S. Attorney's Office for the District of
Connecticut, in conjunction with the Department of Commerce and the U.S.
Customs Service, is conducting a grand jury investigation focused on
21
<PAGE>
possible non-compliance by BEA with certain statutory and regulatory
provisions relating to export licensing and controls. The investigation
relates primarily to the sale of passenger seats and related spare parts for
civilian commercial passenger aircraft to Iran Air from 1992 through mid-1995.
BEA has been advised that it is a target of the investigation; however,
neither it nor any current or former directors, officers, or employees have
been charged in connection with the investigation. The investigation is at an
early stage and, while the Company intends to defend itself vigorously, the
ultimate outcome of the investigation cannot presently be determined. An
adverse outcome could have a material adverse effect upon the operations
and/or financial condition of the Company.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES
The Notes are new securities for which there currently is no trading market
and there can be no assurance as to the liquidity of any market for the Notes
that may develop, the ability of holders of the Notes to sell their Notes, or
the prices at which holders of the Notes would be able to sell their Notes. If
such markets were to exist, the Notes could trade at prices higher or lower
than their initial purchase prices depending on many factors, including
prevailing interest rates, the Company's operating results and the market for
similar securities. Although the Initial Purchasers have informed the Company
that they currently intend to make a market in the Notes, the Initial
Purchasers are not obligated to do so, and any such market making may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Notes. The
Notes are eligible for trading in the Private Offerings, Resale and Trading
through Automatic Linkages (PORTAL) market. The Company does not intend to
apply for listing of the Notes on any securities exchange or for quotation on
the National Association of Securities Dealers Automated Quotation System.
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Old Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will remain restricted securities. Old Notes will continue to
be subject to the following restrictions on transfer: (i) Old Notes may be
resold only if registered pursuant to the Securities Act, if an exemption from
registration is available thereunder, or if neither such registration nor such
exemption is required by law, (ii) Old Notes shall bear a legend restricting
transfer in the absence of registration or an exemption therefrom and (iii) a
holder of Old Notes who desires to sell or otherwise dispose of all or any
part of its Old Notes under an exemption from registration under the
Securities Act, if requested by the Company, must deliver to the Company an
opinion of independent counsel experienced in Securities Act matters,
reasonably satisfactory in form and substance to the Company, that such
exemption is available.
22
<PAGE>
THE COMPANY
BE Aerospace is the largest supplier of commercial aircraft cabin interior
products in the world, serving virtually all major airlines with a broad line
of products including aircraft seats, galley products and structures and
individual passenger inflight entertainment systems. BEA's executive offices
are located at 1400 Corporate Center Way, Wellington, Florida 33414 and its
telephone number is (407) 791-5000.
THE ACQUISITION
TERMS OF THE ACQUISITION
The following summary of the material provisions of the Acquisition
Agreement is subject to, and is qualified in its entirety by reference to, all
of the provisions of the Acquisition Agreement, including the definitions
therein of certain terms. The Acquisition Agreement is available for
inspection as described under "Available Information."
Under the Acquisition Agreement, BEA acquired all of the outstanding capital
stock of Burns for a purchase price of $42.5 million in cash, subject to
certain post-closing adjustments. The purchase price represents a multiple of
0.4x and 5.9x of Burns' latest twelve months sales and EBITDA before
management fees and other expenses, respectively, without taking into account
the impact of approximately $11.9 million of identified cost savings expected
to be realized in the initial year after completion of the Acquisition. The
Acquisition Agreement provides for a dollar-for-dollar post-closing adjustment
of the purchase price for the Acquisition to the extent Burns' Adjusted
Capital (as defined), based upon a balance sheet prepared post-closing, is
greater or less than $40,832,000, the Adjusted Capital reflected on Burns'
balance sheet as of June 30, 1995. Any such post-closing adjustment payable by
the Company is expected to be paid from borrowings under the Company's Bank
Credit Facility or from internally generated funds.
The Acquisition Agreement contains certain customary representations,
warranties and covenants. With certain exceptions, the representations and
warranties of Eagle, Burns' sole stockholder, expire 18 months after the date
of the Closing. The Acquisition Agreement requires Eagle to indemnify BEA,
subject to certain limitations, for inaccuracies in the representations and
warranties made by Eagle in the Acquisition Agreement, for any breach by Eagle
of the Acquisition Agreement and in respect of certain taxes and environmental
liabilities.
The Acquisition Agreement also contains a non-competition agreement pursuant
to which Eagle and certain of its affiliates agree to refrain from, for a
period of five years after the Closing, owning, operating or having any
financial interest in any business or activity which is the same as or
substantially the same as that of Burns.
FINANCING
The Acquisition purchase price was funded through the Offering. In
connection with the Acquisition and the Offering, BEA completed a Consent
Solicitation to amend certain covenants contained in the indenture related to
the Senior Notes and to obtain a waiver of one such covenant. In addition,
concurrently with the Offering, the Company amended its existing bank credit
facility to provide additional liquidity. The Bank Credit Facility totals $100
million and consists of a $25 million Reducing Revolver and the $75 million
Revolving Facility. The Reducing Revolver is collateralized by all of the
issued and outstanding capital stock of Acurex Corporation, a wholly owned
subsidiary of BEA, and has a five year maturity, with the commitments of the
lenders thereunder reducing during such five year period, and the Revolving
Facility is collateralized by all of the Company's accounts receivable, all of
its inventory and substantially all of its other personal property and has a
five year maturity. The Bank Credit Facility contains customary affirmative
covenants, negative covenants and conditions of borrowing. Upon the
consummation of the Acquisition and the Offering, indebtedness in an aggregate
principal amount of approximately $29 million, including letters of credit
amounting to approximately $6 million, will be outstanding under the Bank
Credit Facility. The consummation of the Offering, the Bank
23
<PAGE>
Credit Facility and the Acquisition occurred concurrently. [Following the
consummation of the Acquisition, BEA immediately merged Burns into BEA.]
USE OF PROCEEDS
The proceeds to BEA from the sale of the Old Notes were $96,250,000, net of
Initial Purchasers' discount and certain fees and expenses relating to the
Offering. Such proceeds were used to pay the purchase price for the
Acquisition, to repay certain unsecured indebtedness of BEA and a portion of
BEA's indebtedness under its pre-Acquisition bank credit facility and to pay
fees and expenses incurred in connection with the Acquisition, the Bank Credit
Facility and the Consent Solicitation. The unsecured indebtedness repaid by
BEA accrued interest at a rate of 8 3/4% per annum as of November 25, 1995 and
amounts outstanding under BEA's pre-Acquisition bank credit agreement accrued
interest at a weighted average rate of 7.70% per annum as of November 25,
1995. See "Summary--The Acquisition--Financing" and "Description of Certain
Indebtedness."
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights. Pursuant to the
Registration Rights Agreement, the Company agreed to (i) file within 30 days,
and cause to become effective within 90 days of the date of original issue of
the Old Notes, the Registration Statement of which this Prospectus is a part
with respect to the exchange of the Old Notes for the New Notes and (ii) cause
the Exchange Offer to be consummated within 120 days of the original issue of
the Old Notes. The New Notes have terms identical in all material respects to
the terms of the Old Notes. However, in the event that any changes in law or
applicable interpretations of the staff of the Commission do not permit the
Company to effect the Exchange Offer or, if for any other reason the Exchange
Offer is not consummated within 120 days following the date of the original
issue of the Old Notes, or if any holder of the Old Notes (other than the
Initial Purchasers) is not eligible to participate in the Exchange Offer, or
upon the request of any Initial Purchaser under certain circumstances, the
Company has agreed to use its best efforts to cause to become effective by the
120th day after the original issue of the Old Notes, a Shelf Registration
Statement with respect to the resale of the Old Notes and to keep the Shelf
Registration Statement effective until three years after the effective date
thereof (or until one year after such effective date if such Shelf
Registration Statement is filed at the request of the Initial Purchasers under
certain circumstances). The Company also had agreed that in the event that
either (i) the Registration Statement is not filed with the Commission on or
prior to the 30th calendar day following the date of the original issue of the
Old Notes or (ii) the Registration Statement is not declared effective on or
prior to the 90th calendar day following the date of the original issue of the
Old Notes or (iii) the Exchange Offer is not consummated or a Shelf
Registration Statement is not declared effective on or prior to the 120th
calendar day following the original issue of the Old Notes, the interest rate
borne by the Old Notes shall be increased by one-half of one percent per annum
after such 30 day period in the case of clause (i) above or after such 90 day
period in the case of clause (ii) above or after such 120 day period in the
case of clause (iii) above. The aggregate amount of such increase from the
original interest rate pursuant to those provisions will in no event exceed
one-half of one percent per annum. Upon (x) the effectiveness of the
Registration Statement after the 90 day period in clause (ii) above or (y) the
consummation of the Exchange Offer or the effectiveness of a Shelf
Registration Statement, as the case may be, after the 120 day period outlined
in clause (iii) above, the interest rate borne by the Old Notes from the date
of such filing or effectiveness or the day before the date of consummation, as
the case may be, will be reduced to the original interest rate if the Company
is otherwise in compliance with such requirements.
In the event the Exchange Offer is consummated, the Company will not be
required to file a Shelf Registration Statement relating to the registration
of any outstanding Old Notes other than those held by persons not eligible to
participate in the Exchange Offer, and the interest rate on such Old Notes
will remain at its initial level of 9 7/8%. The Exchange Offer shall be deemed
to have been consummated upon the earlier to occur of
24
<PAGE>
(i) the Company having exchanged New Notes for all outstanding Old Notes (other
than Old Notes held by persons not eligible to participate in the Exchange
Offer) pursuant to the Exchange Offer and (ii) the Company having exchanged,
pursuant to the Exchange Offer, New Notes for all Old Notes that have been
tendered and not withdrawn on the Expiration Date. Upon consummation, holders
of Old Notes seeking liquidity in their investment would have to rely on
exemptions to registration requirements under the securities laws, including
the Securities Act. See "Risk Factors."
Upon the terms and subject to the conditions set forth in this Prospectus and
in the accompanying Letter of Transmittal, the Company will accept all Old
Notes properly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date. The Company will issue $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of outstanding Old Notes accepted in
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant
to the Exchange Offer in denominations of $1,000 and integral multiples
thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other than (i) a broker-dealer who
purchased such Old Notes directly from the Company to resell pursuant to Rule
144A or any other available exemption under the Securities Act or (ii) a person
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act provided that the holder is
acquiring the New Notes in its ordinary course of business and is not
participating, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Holders of Old Notes wishing
to accept the Exchange Offer must represent to the Company that such conditions
have been met.
Each broker-dealer that receives New Notes in exchange for Old Notes held for
its own account, as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by such broker-dealer in connection with resales of New Notes received in
exchange for Old Notes. The Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus and any amendment or
supplement to this Prospectus available to any such broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
As of the date of this Prospectus, $100 million aggregate principal amount of
the Old Notes is outstanding. In connection with the issuance of the Old Notes,
the Company arranged for the Old Notes initially purchased by Qualified
Institutional Buyers to be issued and transferable in book entry form through
the facilities of DTC, acting as depositary. The New Notes will also be
issuable and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of , 1996 (the "Record Date").
The Company shall be deemed to have accepted validly tendered Old Notes when,
as and if the Company has given oral or written notice thereof to the Exchange
Agent. See "--Exchange Agent." The Exchange Agent will act as agent for the
tendering holders of Old Notes for the purpose of receiving New Notes from the
Company and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender or the occurrence of certain other events set forth herein, certificates
for any such unaccepted Old Notes will be returned, without expenses, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of
25
<PAGE>
Old Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Fees and Expenses."
EXPIRATION DATES; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean , 1996 unless the Company, in its
sole discretion, extends the Exchange Offer, in which case the term "Expiration
Date" shall mean the latest date to which the Exchange Offer is extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the record
holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Such announcement may state that the Company is extending the Exchange
Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under "--Termination" shall have occurred and shall have been waived by
the Company (if permitted to be waived by the Company), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform
the holders of the Old Notes of such amendment.
Without limiting the manner to which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the Exchange Offer, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other than by
making a timely release to the Dow Jones New Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from January 24, 1996, payable semiannually
on February 1 and August 1 of each year commencing on August 1, 1996, at the
rate of 9 7/8% per annum. Holders of Old Notes whose Old Notes are accepted for
exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Old Notes accrued from January 24, 1996 until the
date of the issuance of the New Notes. Consequently holders who exchange their
Old Notes for New Notes will receive the same interest payment on August 1,
1996 (the first interest payment date with respect to the Old Notes and the New
Notes) that they would have received had they not accepted the Exchange Offer.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless such tender is being effected pursuant to the procedure for book-
entry transfer described below) and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account in accordance with
DTC's procedure for such transfer. Although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
the Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its addresses set forth
herein under "--Exchange Agent"
26
<PAGE>
prior to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF
DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE EXCHANGE AGENT.
The tender by a holder of Old Notes will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Old Notes and the Letters of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder' with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose Old Notes are held of record by DTC who desires to deliver
such Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
holder's name or obtain a properly completed bond power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office of correspondent in the
United States or
an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under
the Exchange Act (an "Eligible Institution") unless the Old Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanies by appropriate bond powers which authorize such person to tender
the Old Notes on behalf of the registered holder, in either case signed as the
name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted wit the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be
determined by the Company in its sold discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Company's acceptance
of which would, in the opinion of counsel for the Company, be unlawful. The
Company also reserves the absolute right to waive any irregularities or
conditions of tender as to
27
<PAGE>
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes
nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers may differ from the terms of the
Exchange Offer.
By tendering, each holder of Old Notes will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder, that neither the Holder
nor any other person has an arrangement or understanding with any person to
participate in the distribution of the New Notes and that neither the holder
nor any such other person is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act.
GUARANTEED DELIVERY PROCEDURES
Holders how wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal, or any other required documents to the Exchange Agent prior to
the Expiration Date, or if such Holder cannot complete the procedure for book-
entry transfer on a timely basis, may effect a tender if;
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, [within five business days after the Expiration Date],
the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Old Notes to be tendered in proper form for
transfer and any other documents required by the Letter of Transmittal,
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a book-
entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York
28
<PAGE>
City time, on the business day prior to the Expiration Date and prior to
acceptance for exchange thereof by the Company. Any such notice of withdrawal
must (i) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) be signed by the Depositor in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents
of transfer sufficient to permit the Trustee with respect to the Old Notes to
register the transfer of such Old Notes into the name of the Depositor
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) for such
withdrawal notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer
and no New Notes will be issued with respect thereto unless the Old Notes so
withdrawn are validly rendered. Any Old Notes which have been tendered but
which are not accepted for exchange will be returned to the holder thereof
without cost to such holder as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Old Notes
may be rendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for, any Old Notes
not therefore accepted for exchange, and may terminate or amend the Exchange
Offer as provided herein before the acceptance of such Old Notes if: (i) any
action or proceeding is instituted or threatened in any court or by or before
any governmental agency with respect to the Exchange Offer, which, in the
Company's judgment, might materially impair the Company's ability to proceed
with the Exchange Offer or (ii) any law, statute, rule or regulation is
proposed, adopted or enacted, or any existing law, statute rule or regulation
is interpreted by the staff of the Commission or court of competent
jurisdiction in a manner, which, in the Company's judgment, might materially
impair the Company's ability to proceed with the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of
the Exchange Offer, subject to the rights of such holders of tendered Old
Notes to withdraw their tendered Old Notes, or (iii) waive such termination
event with respect to the Exchange Offer and accept all properly tendered Old
Notes that have not been withdrawn. If such waiver constitutes a material
change in the Exchange Offer, the Company will disclose such change by means
of a supplement to this Prospectus that will be distributed to each registered
holder of Old Notes, and the Company will extend the Exchange Offer for a
period of five to ten business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders of the Old
Notes, if the Exchange Offer would otherwise expire during such period.
29
<PAGE>
EXCHANGE AGENT
Fleet National Bank Connecticut, N.A., the Trustee under the Indenture, has
been appointed as Exchange Agent for the Exchange Offer. Questions and
requests for assistance and requests for additional copies of this Prospectus
or of the Letter of Transmittal should be directed to the Exchange Agent
addressed as follows:
By Mail or Hand Delivery:
Fleet National Bank Connecticut, N.A.
Corporate Trust Operations
777 Main Street, Lower Level
Hartford Connecticut 06115
Attention: Patricia Williams
Facsimile Transmission:(860) 986-7908
Confirm by Telephone: (860) 986-1271
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, Letters of
Transmittal and related documents to the beneficial owners of the Old Notes
and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer, including
fees and expenses of the Exchange Agent and Trustee and accounting and legal
fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or
issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if tendered Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
holder.
30
<PAGE>
CAPITALIZATION
The following table sets forth: (i) the historical capitalization of BEA as
of November 25, 1995 and (ii) the pro forma capitalization of the Company as
of such date giving effect to the Acquisition, the Offering and the
application of the net proceeds therefrom. See "Use of Proceeds" and "The
Acquisition." The table should be read in conjunction with the "Unaudited Pro
Forma Combined Financial Information" and the financial statements and related
notes thereto of BEA included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF NOVEMBER
25, 1995
---------------------------
HISTORICAL PRO FORMA
----------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of
long-term debt................................... $ 3,730(a) $ 3,730
Long-term debt, excluding current maturities:
Bank indebtedness............................... 83,169(a) 33,369
Senior Notes.................................... 125,000 125,000
Notes offered hereby............................ -- 100,000
----------- -----------
Total long-term debt.......................... 208,169 258,369
Stockholders' equity
Preferred Stock, $.01 par value, 1,000,000
shares authorized; no shares issued and
outstanding ................................... -- --
Common Stock, $.01 par value 30,000,000 shares
authorized;
16,179,345 shares issued and outstanding....... 161 161
Additional paid-in capital...................... 120,098 120,098
Retained earnings............................... 3,671 3,671
Cumulative currency translation adjustment...... (790) (790)
----------- -----------
Total stockholders' equity...................... 123,140 123,140
----------- -----------
Total capitalization.......................... $335,039 $ 385,239
=========== ===========
</TABLE>
- --------
(a) The portion represented by bank indebtedness consists of approximately $61
million of secured indebtedness under the Company's pre-Acquisition bank
credit facility, $43 million of which was repaid with the proceeds from
the Offering, a $10 million unsecured bank borrowing which was repaid with
the proceeds from the Offering and $15.5 million of other secured
indebtedness. See "Description of Certain Indebtedness."
31
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined statements of operations and unaudited pro
forma combined balance sheet give effect to the Acquisition on a purchase
accounting basis, the Offering and the application of the net proceeds
therefrom. The pro forma combined statement of operations for the fiscal year
ended February 25, 1995 is comprised of the results of BEA for the fiscal year
ended February 25, 1995 and the results of Burns for the year ended December
31, 1994. The pro forma combined statement of operations for the nine months
ended November 25, 1995 is comprised of the results of BEA for the nine months
ended November 25, 1995 and the results of Burns for the nine months ended
September 30, 1995. The pro forma combined balance sheet as of November 25,
1995 has been prepared by combining the consolidated balance sheet of BEA as
of November 25, 1995 with the balance sheet of Burns as of September 30, 1995.
The pro forma combined statements of operations for the fiscal year ended
February 25, 1995 and the nine months ended November 25, 1995 assume that the
Acquisition and the Offering occurred on February 27, 1994. The pro forma
combined balance sheet as of November 25, 1995 assumes that the Acquisition
and the Offering occurred on November 25, 1995. The pro forma combined
statements of operations and balance sheet do not purport to represent the
results of operations or financial position of the Company had the
transactions and events assumed therein occurred on the dates specified, nor
are they necessarily indicative of the results of operations that may be
achieved in the future. Certain of the pro forma adjustments represent
estimates of costs to be incurred and cost savings expected to be realized in
connection with the Acquisition. No assurance can be given as to the amount of
costs that will actually be incurred or cost savings that will actually be
realized. The pro forma adjustments are based on management's preliminary
assumptions regarding purchase accounting adjustments. The actual allocation
of the purchase price will be adjusted to the extent that actual amounts
differ from management's estimates in accordance with FAS No. 38, "Accounting
for Preacquisition Contingencies of Purchased Enterprises."
The pro forma combined financial information is based upon certain
assumptions and adjustments described in the notes to the pro forma financial
statements. The pro forma combined financial information should be read in
conjunction with the historical financial statements, and related notes, of
BEA and Burns contained elsewhere herein.
32
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 25, 1995
------------------------------------------------------
ADJUSTED
BEA BURNS COMBINED ADJUSTMENTS PROFORMA
-------- ------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............... $229,347 $93,494 $322,841 $ -- $322,841
Cost of sales........... 154,863 75,880 230,743 (5,389)(a) 221,081
(968)(b)
(3,305)(c)
-------- ------- -------- --------
Gross profit............ 74,484 17,614 92,098 101,760
Operating expenses:
Selling, general and
administrative....... 31,787 10,729 42,516 (5,321)(a) 37,195
Management fees....... -- 3,359 3,359 (3,359)(d) 750
750 (d)
Research and develop-
ment................. 12,860 1,615 14,475 (1,223)(a) 16,557
3,305 (c)
Amortization ......... 9,954 1,509 11,463 (109)(b) 11,354
Other expenses........ 23,736 738 24,474 -- 24,474
-------- ------- -------- --------
Total operating ex-
penses................. 78,337 17,950 96,287 90,330
-------- ------- -------- --------
Operating earnings
(loss)................. (3,853) (336) (4,189) 11,430
Interest expense, net... 15,019 6,374 (e) 21,393 (6,374)(e) 21,989
6,970 (f)
-------- ------- -------- --------
Loss before income taxes
(benefit).............. (18,872) (6,710) (25,582) (10,559)
Income taxes (benefit).. (6,806) (2,200) (9,006) 4,782 (g) (4,224)
-------- ------- -------- --------
Net loss ............... $(12,066) $(4,510) $(16,576) $ (6,335)
======== ======= ======== ========
</TABLE>
- -------
(a) The Company has specifically identified cost reductions resulting from a
business integration plan which is being implemented. The business
integration plan contemplates (i) the elimination of duplicate executive,
sales and marketing, research and engineering and administrative functions
at Burns, (ii) shifting Burns' seat assembly operations to BEA's
facilities and (iii) shifting certain of BEA's seating fabrication
operations to Burns. The cost reductions presented below for cost of
sales, selling, general and administrative expenses and research and
development expenses are comprised of labor and overhead expenses that are
expected to be eliminated in conjunction with the implementation of the
business integration plan. The Company's business integration plan
provides for the events generating the cost reductions to occur in phases,
beginning in the initial year. Therefore, the pro forma expected cost
savings for the fiscal year ended February 25, 1995 reflect only a portion
of the expected ongoing annual savings. Assuming the Acquisition occurred
on February 27, 1994 and the phase-in of the business integration plan
commenced as of such date, the expected cost reductions, on a pro forma
basis, for the fiscal year ended February 25, 1995 are as follows:
<TABLE>
<S> <C>
Cost of sales.......................................... $5,389
Selling, general and administrative.................... 5,321
Research and development............................... 1,223
</TABLE>
Upon full implementation of the integration plan, the Company estimates
aggregate annualized cost of sales savings from the business integration
plan as follows:
<TABLE>
<S> <C>
Cost of sales....................................... $10,368
Selling, general and administrative................. 5,514
Research and development............................ 1,482
</TABLE>
See Note (b) to the pro forma combined balance sheet for purchase reserves
established related to the cost of the business integration plan.
(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase accounting allocation related to property, plant and
equipment and intangible assets acquired in connection with the
Acquisition and the difference between depreciation expense recorded by
Burns and that determined under the methods used by the Company. The
Company uses periods of 20 years for manufacturing facilities, five to
seven years for machinery and equipment and 20 years for intangible
assets.
(c) Reflects adjustments to reclassify certain Burns expenses in a manner
consistent with BEA's financial presentation, in which BEA classifies
certain engineering related expenditures as a component of research and
development as compared to a component of cost of sales.
(d) Reflects the elimination of management fees allocated from Eagle of $3,359
which is partially offset by the addition of $750 of incremental
associated selling, general and administrative expenses. Such incremental
expense amounts are related to legal, accounting, tax, auditing,
purchasing, human resources and management information services, which are
the portion of the allocated selling, general and administrative expenses
that are estimated
33
<PAGE>
by the Company as necessary to operate Burns as a division of the Company.
The balance of the remaining allocated selling, general and administrative
expenses that is being eliminated generally reflects indirect cost
allocations from Eagle for which no direct benefit was received.
(e) Burns participated in its parent's cash management system under which its
cash funding requirements were met by its parent and, therefore, Burns
itself did not have any indebtedness to nonaffiliates. Interest expense
appearing on the Burns Financial Statements is attributable to interest on
intercompany indebtedness.
(f) Represents the additional interest expense for the year ended February 25,
1995 that would have been incurred had the Acquisition and the Offering
taken place on February 27, 1994, offset by the elimination of
intercompany indebtedness of Burns owed to Eagle which will be forgiven
upon consummation of the Acquisition.
(g) Adjustments to reflect income tax effects assuming a combined state and
federal statutory income tax rate of 40%.
34
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NOVEMBER 25, 1995
------------------------------------------------------
ADJUSTED
PRO
BEA BURNS COMBINED ADJUSTMENTS FORMA
-------- ------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............... $168,233 $75,768 $244,001 $ -- $244,001
Cost of sales........... 113,740 62,014 175,754 (7,776)(a) 165,055
(726)(b)
(2,197)(d)
-------- ------- -------- --------
Gross profit............ 54,493 13,754 68,247 78,946
Operating expenses:
Selling, general and
administrative....... 25,247 8,867 34,114 (4,134)(a) 29,980
Management fees....... -- 2,280 2,280 (2,280)(c) 350
350 (c)
Research and develop- 11,591 1,716 13,307 14,392
ment................. (1,112)(a)
2,197 (d)
Amortization.......... 6,910 1,125 8,035 (81)(b) 7,954
Other expenses........ 4,300 83 4,383 -- 4,383
-------- ------- -------- --------
Total operating ex-
penses............. 48,048 14,071 62,119 57,059
-------- ------- -------- --------
Operating earnings...... 6,445 (317) 6,128 21,887
Interest expense, net... 12,386 5,875 (e) 18,261 (5,875)(e) 17,524
5,138 (f)
-------- ------- -------- --------
Earnings (loss) before
income taxes
(benefit).............. (5,941) (6,192) (12,133) 4,363
Income taxes (benefit).. (2,198) (1,960) (4,158) 5,903 (g) 1,745
-------- ------- -------- --------
Net earnings (loss)..... $ (3,743) $(4,232) $ (7,975) $ 2,618
======== ======= ======== ========
</TABLE>
- --------
(a) The Company has specifically identified cost reductions resulting from a
business integration plan which is being implemented. The business
integration plan contemplates (i) the elimination of duplicate executive,
sales and marketing, research and engineering and administrative functions
at Burns, (ii) shifting Burns' seat assembly operations to BEA's
facilities and (iii) shifting certain of BEA's seating fabrication
operations to Burns. The cost reductions presented below for cost of
sales, selling, general and administrative expenses and research and
development expenses are comprised of labor and overhead expenses that are
expected to be eliminated in conjunction with the implementation of the
business integration plan. Assuming the Acquisition occurred on February
27, 1994 and the phase-in of the business integration plan commenced as of
such date, the expected cost reductions, on a pro forma basis, for the
nine months ended November 25, 1995 are as follows:
<TABLE>
<S> <C>
Cost of sales.................................................... $7,776
Selling, general and administrative.............................. 4,134
Research and development......................................... 1,112
</TABLE>
Upon full implementation of the business integration plan, the Company
estimates aggregate annualized cost of sales savings from the business
integration plan as follows:
<TABLE>
<S> <C>
Cost of sales................................................... $10,368
Selling, general and administrative............................. 5,514
Research and development........................................ 1,482
</TABLE>
See Note (b) to the pro forma combined balance sheet for purchase reserves
established related to the cost of the business integration plan.
(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase accounting allocation related to property, plant and
equipment and intangible assets acquired in connection with the
Acquisition and the difference between depreciation expense recorded by
Burns and that determined under the methods used by the Company. The
Company uses periods of 20 years for manufacturing facilities, five to
seven years for machinery and equipment and 20 years for intangible
assets.
(c) Reflects the elimination of management fees allocated from Eagle of $2,280
which is partially offset by the addition of $350 of incremental
associated selling, general and administrative expenses. Such incremental
expense amounts are related to legal, accounting, tax, auditing,
purchasing, human resources and management information services, which are
the portion of the allocated selling, general and administrative expenses
that are estimated by the Company as necessary to operate Burns as a
division of the Company. The balance of the remaining allocated selling,
general and administrative expenses that is being eliminated generally
reflects indirect cost allocations from Eagle for which no direct benefit
was received.
35
<PAGE>
(d) Reflects adjustments to reclassify certain Burns expenses in a manner
consistent with BEA's financial presentation, in which BEA classifies
certain engineering related expenditures as a component of research and
development as compared to a component of cost of sales.
(e) Burns participated in its parent's cash management system under which its
cash funding requirements were met by its parent and, therefore, Burns
itself did not have any indebtedness to nonaffiliates. Interest expense
appearing on the Burns financial statements is attributable to the
intercompany indebtedness.
(f) Represents the additional interest expense for the nine months ended
November 25, 1995 that would have been incurred had the Acquisition and
the Offering taken place on February 27, 1994, offset by the elimination
of intercompany indebtedness of Burns owed to Eagle which will be forgiven
upon consummation of the Acquisition.
(g) Adjustments to reflect income tax effects assuming a combined state and
federal statutory income tax rate of 40%.
36
<PAGE>
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
BEA AS OF BURNS AS OF PRO FORMA
NOVEMBER 25, SEPTEMBER 30, COMBINED
1995 1995 ADJUSTMENTS BALANCE
------------ ------------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash .................... $ 5,348 $ 81 $ -- $ 5,429
Accounts receivable...... 44,118 1,793 15,637 (c) 61,548
Inventories.............. 103,905 16,880 -- 120,785
Deferred income taxes.... 5,945 -- -- 5,945
Other current assets..... 8,758 1,759 -- 10,517
-------- -------- --------
Total current assets... 168,074 20,513 204,224
Net property and equip-
ment..................... 66,529 18,257 (7,500)(b) 77,286
Intangibles and other as-
sets..................... 171,389 55,932 7,700 (a) 205,812
18,500 (b)
(47,709)(c)
-------- -------- --------
$405,992 $ 94,702 $487,322
======== ======== ========
LIABILITIES & STOCKHOLD-
ERS' EQUITY:
Liabilities:
Accounts payable......... $ 33,704 $ 7,564 $ -- $ 41,268
Other current liabili-
ties.................... 21,258 7,416 7,000 (b) 35,674
Income taxes payable..... 2,624 -- -- 2,624
Current portion of long-
term debt............... 3,730 -- -- 3,730
-------- -------- --------
Total current liabili-
ties.................. 61,316 14,980 83,296
Long-term bank debt....... 83,169 -- (49,800)(a) 33,369
Long-term debt (Senior
Notes and Notes offered
hereby).................. 125,000 -- 100,000 (a) 225,000
Deferred income taxes..... 10,032 -- -- 10,032
Advances from affiliate... -- 82,856 (82,856)(c) --
Other long-term liabili-
ties..................... 3,335 5,150 4,000 (b) 12,485
-------- -------- --------
Total Liabilities...... 282,852 102,986 364,182
Stockholders' equity
Preferred stock.......... -- -- -- --
Common stock............. 161 1 (1)(c) 161
Additional paid-in capi-
tal..................... 120,098 -- -- 120,098
Retained earnings (defi-
cit)..................... 3,671 (8,285) 8,285 (c) 3,671
Cumulative currency trans-
lation adjustment........ (790) -- -- (790)
-------- -------- --------
Total stockholders' eq-
uity.................. 123,140 (8,284) 123,140
-------- -------- --------
$405,992 $ 94,702 $487,322
======== ======== ========
</TABLE>
37
<PAGE>
- -------
(a) Reflects the incurrence of debt required to finance the Acquisition and
the net cash resulting from such borrowings after payment of the purchase
price and acquisition costs as follows:
<TABLE>
<S> <C>
Gross proceeds from the Offering................................. $100,000
Offering discount, consent, bank amendment and acquisition re-
lated fees...................................................... (7,700)
Repayment of unsecured bank borrowings and a portion of the ex-
isting bank credit facility..................................... (49,800)
Cost of Acquisition.............................................. (42,500)
</TABLE>
(b) The Acquisition was accounted for as a purchase pursuant to APB Opinion
No. 16, "Business Combinations." The purchase cost was allocated to the
assets and the liabilities of the Burns based on their relative fair
values. Such allocations are subject to final determination based on
valuations and other studies to be performed prior to the Closing. The
final values may differ from those set forth below.
Purchase cost:
<TABLE>
<S> <C>
Cash............................................................. $ 42,500
Purchase accounting reserves..................................... 11,000
Less estimated book value of net assets to be purchased.......... (42,500)
--------
Excess of purchase cost over book value.......................... $ 11,000
========
Allocation of excess of purchase cost over book value to assets
of the Company:
Property, plant and equipment, net............................... $ (7,500)
Other assets, primarily patents, processes, trademarks and other
intellectual properties......................................... 18,500
--------
Total............................................................ $ 11,000
========
</TABLE>
Purchase accounting reserves include the costs to implement the business
integration plan, including severance, relocation, systems conversion and
other business acquisition related costs.
(c) Eliminates advances from affiliates and Burns' intangible assets as of the
Closing and reflects the purchase of Burns' trade accounts receivable held
in trust pursuant to Eagle's existing asset securitization program.
38
<PAGE>
SELECTED FINANCIAL INFORMATION OF BEA
On February 28, 1992, BEA acquired from The Pullman Company certain assets
and liabilities of PTC Aerospace, Inc. ("PTC") and Aircraft Products Company
("APC") and changed its fiscal year-end to the last Saturday in February. On
April 2, 1992, BEA acquired the stock of Flight Equipment Engineering Limited
("FEEL"). During fiscal year 1994, BEA completed the following acquisitions:
On April 29, 1993, BEA acquired all of the stock of Royal Inventum, B.V.
("Inventum"); on August 23, 1993, BEA acquired all of the stock of Nordskog
Industries ("Nordskog"); on August 26, 1993, BEA acquired all of the stock of
Acurex Corporation ("Acurex"); and on October 13, 1993, BEA acquired
substantially all of the assets of Philips Airvision ("Airvision"). Each of
BEA's acquisitions has been accounted for as a purchase, and the results of
the acquired businesses are included in BEA's historical financial data from
the date of acquisition. The financial data for the fiscal years ended
February 25, 1995, February 26, 1994 and February 27, 1993, the seven months
ended February 29, 1992 and the fiscal years ended July 28, 1991 and July 29,
1990 have been derived from financial statements which have been audited by
BEA's independent auditors. The financial data for the nine months ended
November 25, 1995 and November 26, 1994 have been derived from financial
statements which are unaudited, but, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for such
periods. Operating results for the nine months ended November 25, 1995 and
November 26, 1994 are not necessarily indicative of results that may result
for a full year. The following financial information is qualified by reference
to, and should be read in conjunction with, the financial statements,
including notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED FISCAL YEAR ENDED SEVEN MONTHS YEAR YEAR
-------------------------- --------------------------------------- ENDED ENDED ENDED
NOVEMBER 25, NOVEMBER 26, FEBRUARY 25, FEBRUARY 26, FEBRUARY 27, FEBRUARY 29, JULY 28, JULY 29,
1995 1994 1995 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------ -------- --------
(UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales............... $168,233 $170,045 $229,347 $203,364 $198,019 $12,192 $24,278 $22,944
Cost of sales........... 113,740 114,082 154,863 136,307 137,690 5,626 10,645 11,375
-------- -------- -------- -------- -------- -------- ------- -------
Gross profit............ 54,493 55,963 74,484 67,057 60,329 6,566 13,633 11,569
Operating expenses:
Selling, general and
administrative........ 25,247 23,898 31,787 28,164 21,698 4,871 (b) 3,609 3,425
Research and develop-
ment.................. 11,591 8,900 12,860 9,876 11,299 1,324 1,809 1,952
Amortization expense... 6,910 7,627 9,954 7,599 4,551 3,707 (b) 1,246 1,303
Other expenses......... 4,300(a) 23,736(a) 23,736(a) -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------- -------
Operating earnings
(loss)................. 6,445 (8,198) (3,853) 21,418 22,781 (3,336) 6,969 4,889
Interest (income) ex-
pense, net............. 12,386 11,080 15,019 12,581 3,955 (743) (211) 1,564
-------- -------- -------- -------- -------- -------- ------- -------
Earnings (loss) before
income taxes (benefit)
and extraordinary
item................... (5,941) (19,278) (18,872) 8,837 18,826 (2,593) 7,180 3,325
Income taxes (benefit).. (2,198) (6,747) (6,806) 3,481 6,676 (860) 2,478 1,012
-------- -------- -------- -------- -------- -------- ------- -------
Earnings (loss) before
extraordinary item..... (3,743) (12,531) (12,066) 5,356 12,150 (1,733) 4,702 2,313
Extraordinary item, net
of tax effect.......... -- -- -- -- (522)(c) -- -- 723
-------- -------- -------- -------- -------- -------- ------- -------
Net earnings (loss)..... $ (3,743) $(12,531) $(12,066) $5,356 $ 11,628 $ (1,733) $ 4,702 $ 1,590
======== ======== ======== ======== ======== ======== ======= =======
Net earnings (loss) per
common share:
Continuing operations.. $ (0.23) $ (0.78) $ (0.75) $ 0.35 $ 1.03 $ (0.18) $ 0.65 $ 0.43
Extraordinary item, net
of tax effect......... -- -- -- -- (0.05) -- -- (0.14)
-------- -------- -------- -------- -------- -------- ------- -------
Net earnings (loss) per
common share........... $ (0.23) $ (0.78) $ (0.75) $ 0.35 $ 0.98 $ (0.18) $ 0.65 $ 0.29
======== ======== ======== ======== ======== ======== ======= =======
Common and common
equivalent shares...... 16,111 16,075 16,021 15,438 11,847 9,604 7,248 5,425
BALANCE SHEET DATA
(END OF PERIOD):
Working capital......... $106,758 $ 65,855 $ 76,563 $ 76,874 $133,661 $ 27,367 $13,500 $ 7,361
Total assets............ 405,992 358,771 379,954 375,009 314,055 135,330 26,034 21,348
Long-term debt.......... 208,169 162,260 172,693 159,170 127,743 40,500 -- 1,627
Stockholders' equity.... 123,140 124,657 125,331 133,993 107,974 57,057 22,467 16,194
</TABLE>
- -------
(a) In fiscal 1996, in anticipation of the Acquisition, BEA recorded a charge
to earnings of $4.3 million related to costs associated with the
integration and consolidation of the Company's European seating
operations. In fiscal 1995, the Company charged to earnings $23.7 million
of expenses primarily related to intangible assets and inventories
associated with the Company's earlier generations of passenger
entertainment systems.
(b) During the seven months February 29, 1992, approximately $3.1 million of
nonrecurring expenses related to a writedown of intangible assets and $2.1
million of costs associated with the Company's acquisitions were charged
to amortization expense and selling, general and administrative expenses,
respectively.
(c) As a result of the sale of Senior Notes in 1993, the Company wrote off the
unamortized portion of certain debt issuance costs related to its prior
credit agreement.
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
BEA has become the world's leading supplier of commercial aircraft interior
products through the strategic acquisitions of seating, inflight passenger
entertainment and services systems ("PESS") and galley products businesses.
BEA's products include an extensive line of first, business, tourist class and
commuter seats, complete galley systems including coffee and beverage makers,
ovens, liquid containers and refrigeration equipment, well as a line of
inflight entertainment products including the recently introduced MDDS. BEA
markets and sells its products to its customers, the airlines, through an
integrated worldwide approach, focused by airline and encompassing BEA's
entire product line.
BEA's revenues are generally derived from two primary sources: new aircraft
deliveries and refurbishment or upgrade programs for the airlines' existing
worldwide fleets. BEA believes its large installed base of products, estimated
to be approximately $1.8 billion as of November 25, 1995 (valued at
replacement prices), gives it a significant advantage over competitors in
obtaining orders for refurbishment programs, principally due to the tendency
of the airlines to purchase equipment for such programs from the original
supplier. With the exception of spare parts sales, BEA's revenues are
generated from programs initiated by the airlines which may vary significantly
from year to year in terms of size, mix of products and length of delivery. As
a result, BEA's revenues and margins may fluctuate from period to period based
upon the size and timing of the program and the type of products sold.
Historically, BEA experienced certain trends in its two revenue drivers: as
the airlines took deliveries of large numbers of new aircraft, refurbishment
programs as a percentage of revenues declined and similarly, when new aircraft
deliveries declined, refurbishment programs tended to increase in number and
size. During the most recent airline industry recession, which ended in 1994,
the airlines significantly depleted their cash reserves and incurred record
losses. In an effort to improve their liquidity, the airlines conserved cash
by reducing or deferring cabin interior refurbishment and upgrade programs and
purchases of new aircraft. As a result, in contrast with historical
experience, BEA experienced declines in the number of both new orders and
refurbishments.
Since early 1994, the airlines have experienced a significant turnaround in
operating results, with the domestic airline industry achieving record
operating earnings during the first nine months of 1995. The airline cabin
interior products industry business cycle, however, generally lags that of the
commercial airlines because of the airlines' practice of gradually
implementing refurbishment and replacement programs. Consequently, only in the
past nine months has BEA begun to experience growth in its backlog of seating
and galley products, representing the first time in over two years BEA has
seen growth of new seating orders in excess of shipments. Management believes
that the growth in backlog, which has historically preceded growth in BEA's
revenues, is an early reflection of the airlines' need to begin refurbishing
worn fleets and their ability to do so as a result of the strengthening of the
airlines' balance sheets. The Company expects the recent backlog growth to
begin to be reflected in its operations beginning in its fiscal year
commencing February 26, 1996 as the products are delivered.
Notwithstanding the industry declines in recent years, BEA has substantially
expanded the size, scope and nature of its business as a result of a number of
acquisitions. During the fiscal year ended February 26, 1994, BEA completed
the following acquisitions: On April 29, 1993, the Company acquired, through a
Dutch holding company, all of the capital stock of Inventum, a supplier of
galley inserts including ovens, beverage makers and water boilers to airlines
located primarily in Europe and the Pacific Rim. On August 23, 1993, the
Company acquired all of the capital stock of Nordskog, an industry pioneer in
galley structures and inserts. On August 26, 1993, the Company acquired all of
the capital stock of Acurex, the leading worldwide supplier of commercial
aircraft refrigeration products. On October 13, 1993, the Company acquired
substantially all of the assets and certain of the liabilities of Airvision, a
manufacturer of inflight entertainment equipment. While the Company will
continue to be susceptible to industry-wide conditions, management believes
that the Company's significantly more diversified product line and revenue
base achieved through acquisitions has reduced its exposure to demand
fluctuations in any one product area.
40
<PAGE>
The Burns acquisition will significantly impact BEA's results of operations.
Management believes the incremental cash flow arising from Burns' existing
operations and further supplemented by the cost savings expected to be
realized upon the business combination will be substantial. BEA believes there
are significant opportunities and synergies in acquiring Burns. Burns was one
of the three leading North American suppliers of commercial aircraft passenger
seats, with a base of airline customers that is largely complementary to that
of BEA. BEA's and Burns' approximate share of the worldwide seating products
market are 30% and 20%, respectively, based on fiscal 1995 unit sales. In
addition, seat manufacturing capacity utilization at both Burns and BEA is
approximately 50%. By consolidating engineering, marketing, administration and
manufacturing operations of the two companies, BEA will be able to reduce
fixed costs, thereby enhancing its low cost position. Management believes that
the combined company also will have among the most advanced manufacturing
facilities in the commercial airline seating products industry. Following the
Acquisition, the Company will have a substantial base of prestigious airline
customers, including British Air, Cathay Pacific, Lufthansa, Singapore,
United, JAL, Southwest, KLM, Northwest, Delta and others.
BEA's business strategy is to maintain its market leadership position
through various initiatives, including new product development. Over the past
several years, new product development expenditures by BEA have increased and
have primarily consisted of costs related to the development of the MDDS, with
the balance attributable to its seating products and galley businesses. BEA
expenses its research, development and engineering costs as they are incurred,
except for costs related to the enhancement of existing products under
purchase orders from customers, which, following the completion of a working
prototype, are capitalized and included as a component of the inventories
associated with such programs. As the products are shipped, the costs are
deducted from inventories. As of November 25, 1995, approximately $40.8
million of such development costs were included in inventories and were
primarily related to the development of the MDDS. Management believes that the
majority of the engineering costs associated with the development of MDDS have
been incurred and any incremental spending necessary to complete the system
will be largely incurred by February 1996. Thereafter, Management expects its
development spending, as a percentage of sales, will return to historical
levels.
RESULTS OF OPERATIONS--NINE MONTHS ENDED NOVEMBER 25, 1995 COMPARED WITH THE
NINE MONTHS ENDED NOVEMBER 26, 1994
Sales for the nine months ended November 25, 1995 were $168,233,000 or
$1,812,000 lower than sales of $170,045,000 for the comparable period in the
prior year. Sales in the current year were negatively impacted by a 10-week
strike at Boeing, which ended December 14, 1995.
At November 25, 1995 the Company's backlog stood at $369 million, up from
$331 million at February 25, 1995. During the past nine months, for the first
time in over two years, the airlines placed orders for the Company's seating
and galley products in excess of its shipment levels, resulting in an increase
in its seating and galley products backlog. These orders, however, are not
expected to materially impact the Company's revenues until its fiscal year
commencing February 25, 1996 when they begin to be deliverable to the
airlines.
Gross profit was $54,493,000 or 32% of sales, for the nine months ended
November 25, 1995 and was $1,470,000, or 3%, lower than gross profit for the
comparable period in the prior year of $55,963,000, which represented 33% of
sales. The decrease in gross profit is the result of the lower sales volume
along with the mix of products sold during the period.
Selling, general and administrative expenses were $25,247,000, or 15% of
sales, for the nine months ended November 25, 1995. This was $1,349,000 higher
than the comparable period in the prior year of $23,898,000 or 14% of sales,
principally due to higher promotional and selling costs associated with BEA's
participation in a biannual industry trade show as well as higher medical
benefits costs incurred in the third quarter of fiscal 1996.
Research and development expenses were $11,591,000, or 7% of sales, for the
nine months ended November 25, 1995. For the comparable period in the prior
year, research and development expense was
41
<PAGE>
$8,900,000 or 5% of sales. The increase in research and development expense
during the current period is primarily related to testing for the MDDS, as
well as research and development for seating products.
Amortization expense for the nine months ended November 25, 1995 of
$6,910,000 was $717,000 less than the amount recorded in the first nine months
of fiscal 1995 as a result of the lower level of intangible assets amortized
in the current period.
Other expenses were $4,300,000 for the nine months ended November 25, 1995
and relate to costs associated with the integration and consolidation of the
Company's European seating business in conjunction with the planned
acquisition of Burns. Other expenses for the nine months ended November 24,
1994 were $23,736,000 and related primarily to a charge associated with BEA's
earlier generations of passenger entertainment systems.
Operating earnings before other expenses for the nine month period ended
November 25, 1995 declined to $10,745,000 from $15,538,000 in the comparable
period of the prior year. This decrease was largely due to lower sales, a
lower gross margin and higher levels of research and development and selling,
general and administrative expenses.
Interest expense, net was $12,386,000 for the nine months ended November 25,
1995 or $1,306,000 higher than the net interest expense of $11,080,000
recorded for the comparable period in the prior year, and was principally due
to the increase in BEA's long-term outstanding debt during the current period
to finance the increase in inventory associated with the growth in the
Company's backlog.
Income tax benefit for the nine months ended November 25, 1995 was
($2,198,000) or 37% of loss before income taxes, as compared to income tax
benefit of ($6,747,000), or 35% of loss before income taxes, in the first nine
months of fiscal 1995.
The net loss of ($3,743,000) or ($.23) per share for the nine months ended
November 25, 1995 was $8,788,000 or $.55 per share less than the loss of the
prior year, primarily as a result of higher other expenses in the prior year.
RESULTS OF OPERATIONS--YEAR ENDED FEBRUARY 25, 1995 (FISCAL 1995) COMPARED
WITH YEAR ENDED FEBRUARY 26, 1994 (FISCAL 1994)
Sales for the year ended February 25, 1995 were $229,347,000 or 13% higher
than sales of $203,364,000 in the prior year. The increase in sales was
primarily related to the results of operations of businesses acquired at the
end of the second quarter of fiscal 1994. The level of activity in the cabin
interior products industry continued to reflect the depressed conditions
within the airline industry.
At February 25, 1995, BEA's backlog stood at $331 million, up from $241
million at February 26, 1994. Substantially all of the growth in backlog was
attributable to BEA's inflight entertainment products; backlog for BEA's
seating and galley products continued to decline through fiscal 1995 as a
result of the depressed conditions present in the airline industry.
Gross profit was $74,484,000, or 32% of sales, for the year ended February
25, 1995 and was $7,427,000, or 11%, greater than the prior year's gross
profit of $67,057,000, which represented 33% of sales. The increase in gross
profit during the fiscal year ended February 25, 1995 was in large part the
result of higher revenues associated with the businesses acquired at the end
of the second quarter of fiscal 1994.
Selling, general and administrative expenses were $31,787,000, or 14% of
sales, for the year ended February 25, 1995. This was $3,623,000, or 13%,
higher than the selling, general and administrative expenses for the
comparable period in the prior year of $28,164,000 (14% of sales), principally
due to the acquisitions completed during fiscal 1995.
42
<PAGE>
Research and development expenses were $12,860,000, or 6% of sales, for the
fiscal year ended February 25, 1995. For the prior year, research and
development expenses were $9,876,000, or 5% of sales. The increase in research
and development was attributable to BEA's ongoing new product development
programs associated with its MDDS, seating and gallery products.
Amortization expense for the fiscal year ended February 25, 1995 of
$9,954,000 was $2,355,000, or 31%, higher than the amount recorded in the
prior year, and was due to the acquisitions completed during fiscal 1995.
Other expenses consisted of a charge of $23,736,000 related primarily to
intangible assets and inventories associated with BEA's earlier generations of
passenger entertainment systems. The introduction of BEA's MDDS, which BEA
expects to become the industry's standard for inflight passenger and service
entertainment, has captured the dominant market share with it receiving
contract awards from major airlines totaling more than $150 million during the
fiscal year ended February 25, 1995. The MDDS also caused major carriers to
convert programs for earlier products of BEA to the MDDS and has resulted in
two of BEA's principal competitors offering to develop for the airlines
systems similar to BEA's MDDS. These events caused the inflight entertainment
industry to re-evaluate its product offerings and, in the process, have
impaired the value of certain of its assets. As a result, BEA has written down
certain of its assets principally related to its earlier systems.
Principally due to the other expenses described above, BEA recorded a net
operating loss of ($3,853,000) for the fiscal year ended February 25, 1995, as
compared to operating earnings of $21,418,000 in the prior year. Operating
earnings for the period before the special charge mentioned above were
$19,883,000.
Net interest expense of $15,019,000 for the fiscal year ended February 25,
1995 was $2,438,000, or 19%, higher than the prior year. This increase was the
result of an increase in the amount of BEA's long-term debt outstanding, as
well as higher interest rates.
An income tax benefit of ($6,806,000) (36% of the loss before income taxes)
was recognized principally as the result of the charge described above. Income
tax expense for the fiscal year ended February 26, 1994 was $3,481,000 or 39%
of earnings before income taxes.
The net loss for fiscal 1995 was $(12,066,000) or $(.75) per share as
compared to net earnings of $5,356,000 or $.35 per share in the prior year,
principally due to the charge.
RESULTS OF OPERATIONS--YEAR ENDED FEBRUARY 26, 1994 (FISCAL 1994) COMPARED
WITH YEAR ENDED FEBRUARY 27, 1993 (FISCAL 1993)
Sales for the fiscal year ended February 26, 1994 were $203,364,000 or 3%
higher than sales of $198,019,000 for the prior year. Decreases in sales of
seating and galley products were more than offset by revenues from the
acquisitions completed during fiscal 1994. The sales performance during fiscal
1994 reflected the steep decline in new aircraft shipments to the airlines
generally, the delays by the airlines in placing orders associated with BEA's
refurbishment, retrofit and spares programs and the timing of scheduled
shipments within its backlog.
At February 26, 1994, BEA's backlog stood at $241 million, which was up from
$191 million at February 27, 1993, but reflects a decline of approximately $11
million from the prior quarter. This reversal in backlog growth and actual
decrease versus the backlog level at November 27, 1993 reflected the airline
environment in which programs were deferred by the airlines due to their
financial status.
Gross profit was $67,057,000, or 33% of sales, for fiscal 1994 and was
$6,728,000, or 11%, higher than the prior year's gross profit of $60,329,000,
which represented 30% of sales. The increase in gross profit during fiscal
1994 was due principally to revenue mix and lower manufacturing costs
associated with certain products.
43
<PAGE>
Selling, general and administrative expenses were $28,164,000, or 14% of
sales, for fiscal 1994. This was $6,466,000, or 30%, higher than selling,
general and administrative expenses for the prior year of $21,698,000 (11% of
sales), principally due to the acquisitions completed during fiscal 1994.
Research and development expenses were $9,876,000, or 5% of sales, for
fiscal 1994. Research and development expenses were $11,299,000, or 6% of
sales, for the prior year. The change in spending between the years is
reflective of the status of BEA's various research and development programs.
Amortization expense for fiscal 1994 of $7,599,000 was $3,048,000, or 67%,
higher than the amount recorded in fiscal 1993. The increase in amortization
expense was due to higher levels of intangible assets resulting from the
acquisitions completed during fiscal 1994.
Operating earnings for the fiscal year ended February 24, 1994 were
$21,418,000 or $1,363,000 less than the prior year.
Net interest expense of $12,581,000 for fiscal 1994 was $8,626,000, or 218%,
higher than net interest expense of $3,955,000 recorded for the prior year,
and was due to the increase in BEA's long-term debt outstanding during fiscal
1994, principally related to the issuance of the Senior Notes. The proceeds
from the sale of BEA's Senior Notes that had not been deployed in its business
were invested in interest-bearing cash equivalents during fiscal 1994 at an
average rate of approximately 3%. Interest income related to these cash
equivalents during fiscal 1994 was $1,506,000.
Income tax expense for fiscal 1994 was $3,481,000, or 39% of earnings before
income taxes, as compared to a tax rate of 35% for fiscal 1993. The increase
in the effective tax rate during 1994 increase was due principally to the
nondeductible portion of amortization expense associated with the acquisitions
completed by BEA during fiscal 1994.
Net earnings were $5,356,000 or $.35 per share for fiscal 1994 as compared
to $11,628,000 or $.98 per share in the prior year. The decrease in earnings
per share reflects the impact of lower net earnings, as well as a 30% increase
in the number of common and common equivalent shares from year to year.
BURNS' RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED
WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1994
Net sales for the nine months ended September 30, 1995 were $75,768,000 or
10% higher than net sales of $69,213,000 for the comparable period in the
prior year. The increase was primarily attributable to the introduction of new
business class and tourist class seating programs. In addition, Burns
commenced delivery in 1995 under a contract from a major international airline
to supply a large retrofit program utilizing the new business class product.
Gross profit was $13,754,000, or 18% of net sales, for the nine months ended
September 30, 1995 and was $1,016,000, or 8%, higher than gross profit for the
comparable period in the prior year of $12,738,000 which represented 18% of
net sales. The increase in gross profit was the result of higher net sales,
partially offset by launch costs associated with the introduction of new
business class and tourist class seating programs during 1995.
Operating income before management fees decreased by $94,000 to $1,963,000,
from $2,057,000 in the 1994 period, due to the increased sales volume being
offset by additional development costs for the new convertible seating and the
new tourist class seat.
Management fees to affiliate were $2,280,000 for the nine months ended
September 30, 1995 or $1,079,000 less than the $3,359,000 charged to Burns in
the 1994 period.
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Net interest expense was $5,875,000 for the nine months ended September 30,
1995, or $1,226,000 higher than the net interest expense of $4,649,000
recorded for the comparable period in the prior year. Interest expense of
Burns was attributable to intercompany indebtedness. The increase was due to
higher average balances due to affiliates and higher average interest rates.
Income tax benefit for the nine months ended September 30, 1995 was
($1,960,000), or 32% of loss before income taxes, as compared to income tax
benefit of ($2,074,000), or 35% of loss before income taxes for the comparable
period in 1994.
Burns' net loss of ($4,232,000) for the nine months ended September 30, 1995
was $355,000 greater than the net loss of ($3,877,000) in the comparable
period in 1994, primarily as a result of the increase in net interest expense,
offset in part by the decrease in management fees to affiliate.
BURNS' RESULTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR
ENDED DECEMBER 31, 1993
Net sales for the year ended December 31, 1994 were $93,494,000 or 40%
higher than net sales of $66,902,000 in the prior year. The increase was
primarily attributable to the introduction of a convertible seat which permits
conversion of airline seats between tourist and business classes.
Gross profit was $17,614,00, or 19% of net sales, for 1994 and was
$5,888,000, or 50%, higher than gross profit for 1993 of $11,726,000, which
represented 18% of net sales. The increase in gross profit is the result of
higher net sales based on the number of units shipped.
Operating income before management fees increased by $2,910,000 to
$3,023,000, from $113,000 in 1993, due to the increased gross profit,
partially offset by increased selling, general and administrative expenses and
a litigation-related charge of approximately $850,000.
Management fees to affiliate were $3,359,000 in fiscal 1994, or 134% higher
than $1,434,000 in fiscal 1993. The management fees have been charged to Burns
by its parent on an annual basis in the third quarter of every year.
Net interest expense of $6,374,000 for the year ended December 31, 1994 was
$2,171,000, or 52%, higher than the prior year. The increase was due to higher
weighted average interest rates, partially offset by lower average balances
due to affiliates.
Income tax benefit for fiscal 1994 was ($2,200,000), or 33% of loss before
income taxes, as compared to income tax benefit of ($1,268,000), or 23% of
loss before income taxes for fiscal 1993.
Burns' net loss of ($4,510,000) for fiscal 1994 was $1,643,000 better than
the net loss of ($6,153,000) in fiscal 1993, primarily as a result of
increased gross profit and the non-recurrence of the changes in accounting
principles in 1993 (as described below), partially offset by the increase in
management fees and net interest expense.
BURNS' RESULTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1993, COMPARED WITH YEAR
ENDED DECEMBER 31, 1992
Net sales for the year ended December 31, 1993 were $66,902,000 or 32% lower
than net sales of $98,185,000 in the prior year. The decrease was primarily
attributable to a steep decline in new aircraft deliveries as well as the
conclusion of a major fleet retrofit program involving tourist class seats
that started in 1991. Tourist class seat and cabin maintenance and upgrade
services decreased $21,000,000 and $4,100,000, respectively.
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Gross profit was $11,726,000, or 18% of net sales, for 1993 and was
$2,603,000, or 18%, lower than gross profit for 1992 of $14,329,000, which
represented 15% of net sales. The decrease in gross profit is the result of
lower net sales along with additional product launch costs incurred during the
period.
Operating income before management fees decreased by $863,000 to $113,000,
from $976,000 in 1992, due to the decreased gross profit, partially offset by
decreased selling, general and administrative expenses.
Management fees to affiliate were $1,434,000 in fiscal 1993, or 14% lower
than $1,675,000 in fiscal 1992.
Net interest expense of $4,203,000 for the year ended December 31, 1993 was
$70,000, or 2%, higher than the prior year.
Income tax benefit for fiscal 1993 was ($1,268,000), or 23% of loss before
income taxes, as compared to income tax benefit of ($730,000), or 15% of loss
before income taxes for fiscal 1992. The 1992 period benefitted from the
utilization of net operating losses arising in prior periods.
Effective January 1, 1993, Burns adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
resulted in a decrease in net deferred tax assets of $1,800,000 and a
corresponding charge of $1,800,000. In addition, effective December 31, 1993,
Burns adopted Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits," resulting in an increase in long-term
liabilities of $97,000 and a corresponding charge of $97,000.
Burns' net loss of ($6,153,000) for fiscal 1993 was $2,051,000 greater than
the net loss of ($4,102,000) in fiscal 1992, primarily as a result of the
change in accounting principles described above.
LIQUIDITY AND CAPITAL RESOURCES
BEA's primary requirements for working capital have been directly related to
its accounts receivable and inventory levels, costs associated with the design
and development of the MDDS and other products and scheduled interest payments
on its indebtedness. BEA's working capital was $106,758,000 as of November 25,
1995 compared to $76,563,000 as of February 25, 1995.
In October 1993, BEA obtained credit facilities aggregating $85,000,000. The
credit facilities are comprised of two revolving lines of credit, initially
aggregating $40,000,000 and $45,000,000. The $40,000,000 revolving line of
credit is collateralized by the stock of a wholly owned subsidiary and may be
borrowed and repaid in $1,000,000 increments and has decreasing availability
through November 1998. The $45,000,000 revolving line of credit may be
borrowed in $1,000,000 increments, is subject to borrowing base calculations
set forth in the credit facility agreement, is collateralized by substantially
all BEA's assets and is due and payable in full in November 1998. The credit
facilities bear interest at prime plus .50% or, at BEA's option, LIBOR plus
1.75%, in each case, subject to BEA's credit rating. As of November 25, 1995,
the availability under the $40,000,000 revolving line of credit had been
reduced to $28,000,000, resulting in a total credit facility aggregating
$73,000,000, of which $61,000,000 was outstanding. Contemporaneously with the
Offering the Company's existing credit facilities were replaced with the Bank
Credit Facility described below.
The Company's liquidity requirements consist primarily of working capital
needs and scheduled payments of interest on its indebtedness. As a result of
the Acquisition, the Company will have significantly increased cash
requirements for debt service.
Contemporaneously with the Offering the Company amended its existing credit
facilities by increasing the aggregate principal amount that may be borrowed
thereunder to $100,000,000 (the "Bank Credit Facility"). The Bank Credit
Facility consists of the $25,000,000 Reducing Revolver and the $75,000,000
Revolving Facility. The Reducing Revolver is collateralized by all of the
issued and outstanding capital stock of Acurex and has a five year maturity,
with the commitments of the lenders thereunder reducing during such five year
period, and the Revolving Facility is collateralized by all of the Company's
accounts receivable, all of its inventory and
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substantially all of its other personal property and has a five year maturity.
The Bank Credit Facility contains customary affirmative covenants, negative
covenants and conditions of borrowing. At November 25, 1995, the Company also
had a $10,000,000 unsecured borrowing facility which was repaid in connection
with the execution of the Bank Credit Facility. The net proceeds of the
Offering were used in part to repay all the unsecured indebtedness of BEA and
a portion of the borrowings outstanding under existing credit facilities. See
"Use of Proceeds". Borrowings under the Bank Credit Facility were used to
refinance the remaining borrowings under BEA's pre-Acquisition credit
facilities. Upon the consummation of the Acquisition and the Offering
indebtedness in an aggregate principal amount of approximately $29,000,000,
including letters of credit amounting to approximately $6,000,000, will be
outstanding under the Bank Credit Facility. See "Description of Certain
Indebtedness."
The Company expects that its capital expenditures for the fourth quarter of
fiscal 1996 will be approximately $4,000,000. These capital expenditures will
relate principally to maintenance of operations and development of new product
applications. During the next two fiscal years, the Company expects that
annual capital expenditures will be approximately $14,000,000 per year.
The Company believes that cash flow from operations and availability under
the Bank Credit Facility provide adequate funds for its working capital needs,
planned capital expenditures and debt services obligations through the term of
the Bank Credit Facility. The Company believes that it will be able to
refinance the Bank Credit Facility prior to its termination, although there
can be no assurance that it will be able to do so. The Company's ability to
fund its operations and make planned capital expenditures, to make scheduled
payments and to refinance its indebtedness depends on its future operating
performance and cash flow, which, in turn, are subject to prevailing economic
conditions and to financial, business and other factors, some of which are
beyond its control.
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BUSINESS
INDUSTRY OVERVIEW
The commercial aircraft cabin interior products industry encompasses a broad
range of products and services, including not only aircraft seating products,
passenger entertainment and service systems, and food and beverage preparation
and storage systems, but also lavatories, lighting systems, evacuation
equipment and overhead bins. Management estimates that the industry had annual
sales in excess of one billion dollars during fiscal 1995.
Historically, revenues in the cabin interior products industry have been
derived from five sources: (i) new installation programs in which airlines
purchase new equipment to outfit a newly delivered aircraft; (ii) retrofit
programs in which airlines purchase new components to overhaul completely the
interiors of aircraft already in service; (iii) refurbishment programs in
which airlines purchase components and services to improve the appearance and
functionality of certain cabin interior equipment; (iv) spare parts; and (v)
technology upgrades. The retrofit and refurbishment cycles for commercial
aircraft cabin interior products differ by product category. Aircraft seating
typically has a refurbishment cycle of one to two years and a retrofit cycle
of seven to eight years, although in recent years these periods have tended to
be extended. See "--Recent Industry Conditions." Galley structures and
products are periodically upgraded or repaired, and require a continual flow
of spare parts, but may be retrofitted only once or twice during the life of
the aircraft.
The various product categories currently manufactured by the Company
include:
. AIRCRAFT SEATS. This is the largest single product category in the
industry and includes first class, business class, tourist class and
commuter seats. Prices range from $750 to $10,000 per seat. Management
estimates that the aggregate size of the worldwide aircraft seat market
(including spare parts) during fiscal 1995, which still reflected
depressed economic conditions stemming from the recent airline industry
downturn, was in excess of $400 million, and has ranged as high as
approximately $510 million in the past five years. Approximately 14
companies worldwide, including the Company, supply aircraft seats,
although the Company and three other competitors share approximately 90%
of the market.
. PASSENGER ENTERTAINMENT AND SERVICE SYSTEMS. This product category
includes individual seat video systems, overhead video projection
systems, audio distribution systems, passenger control units ("PCUs") and
related wiring and harness assemblies and sophisticated interactive
telecommunications and entertainment systems. Individual passenger
inflight entertainment systems currently range in price from
approximately $2,500 to $7,000 per seat. Prices for PCUs range from
$18,000 to $115,000 per aircraft. Management estimates that the aggregate
size of the worldwide PESS market was approximately $210 million during
fiscal 1995. Industry sources expect the PESS market to increase
substantially in the near term as individual passenger entertainment
systems become common inflight entertainment equipment in first, business
and tourist classes on wide body, and with the advent of live broadcast
inflight television, many narrow body aircraft. PESS products are
currently supplied by approximately five companies worldwide, including
the Company.
. GALLEY PRODUCTS. This product category includes complete galley systems
for both narrow and wide body aircraft, including a wide selection of
coffee and beverage makers, water boilers, ovens, liquid containers, air
chillers, wine coolers and other refrigeration equipment and other galley
components. Prices for coffee makers and ovens range from $3,000 to
$10,000. Prices for aircraft refrigeration products range from $13,000 to
$28,000. Prices for complete aircraft galley systems range from $120,000
for narrow body aircraft to $1,000,000 for wide body aircraft. Management
estimates that the aggregate size of the worldwide galley equipment
market during fiscal 1995 was in excess of $240 million and has ranged as
high as approximately $300 million during the past five years. Sales of
galley products tend to correlate closely with deliveries of new aircraft
to the airlines. Approximately 38 companies worldwide, including BEA,
supply galley equipment to the airline industry.
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RECENT INDUSTRY CONDITIONS
The Company's principal customers are the world's commercial airlines. The
airlines, particularly the U.S. carriers, incurred record losses during the
three-year period ended December 31, 1993. The losses incurred during the
downturn seriously impaired airline balance sheets and negatively influenced
airline purchasing decisions with respect to both new aircraft and
refurbishment programs. The domestic airlines in large part returned to
profitable operations during calendar 1994 and have started to restore their
balance sheets since then through cash generated from operations and debt and
equity placements. Further, in the first calendar quarter of 1995 the airframe
manufacturers began receiving a significant increase in new aircraft orders.
Among those factors expected to affect the cabin interior products industry
are the following:
. Large Existing Installed Base. According to the Current Market Outlook
published by the Boeing Commercial Airplane Group in 1995 (the "Boeing
Report"), the world commercial passenger aircraft fleet, as of the end of
1994, consisted of 10,629 aircraft, including 3,087 aircraft with fewer
than 120 seats, 5,207 aircraft with between 120 and 240 seats and 2,335
aircraft with more than 240 seats. Based on such fleet numbers,
management estimates that the total worldwide installed base of
commercial aircraft cabin interior products, valued at replacement
prices, was approximately $6.7 billion at the end of 1994. This existing
installed base will generate continued retrofit, refurbishment and spare
parts revenue, particularly in light of the deterioration of existing
interior cabin functionality and aesthetics resulting from the airlines'
deferral of refurbishment programs in recent years.
. Expanding Worldwide Fleet. Worldwide air traffic has grown in every year
since 1946 (except in 1990) and, according to the Boeing Report, is
projected to grow at a compounded average rate of approximately five
percent per year through 2014, increasing annual revenue passenger miles
from approximately 1.3 trillion in 1993 to approximately 3.8 trillion by
2014. The Company believes, based upon industry sources, that the
airlines are already experiencing extremely high load factors, and that a
significant number of new aircraft will need to be purchased to meet this
projected growth in air travel. According to the Boeing Report, the
worldwide fleet of commercial passenger aircraft is consequently
projected to expand from approximately 10,600 at the end of 1994 to
approximately 14,600 by the end of 2004. According to Airbus Industrie
Global Market Forecast published in March 1995 (the "Airbus Industrie
Report"), the worldwide installed seat base is expected to increase from
approximately 1.6 million passenger seats at the end of 1994 to
approximately 4.0 million passenger seats at the end of 2014. The
expanding worldwide fleet will generate additional revenues from new
installation programs, and the increase in the size of the installed base
will generate additional and continual retrofit, refurbishment and spare
parts revenue.
. Wide Body Aircraft Orders. Orders for wide body, long-haul aircraft
constitute an increasing share of total new airframe orders. The Airbus
Industrie Report estimates that approximately 7,300 new wide body
aircraft will be introduced into the world commercial aircraft fleet
between 1994 and 2014, increasing the wide body portion of the worldwide
aircraft fleet from 28% in 1994 to an estimated 46% by 2014. Wide body
aircraft currently carry up to three times the number of seats as narrow
body aircraft, and because of multiple classes of service, including
large first class and business class configurations, the Company's
average revenue per seat on wide body aircraft is also higher. Aircraft
crews on wide body aircraft may make and serve between 300 and 900 meals
and may brew and serve more than 2,000 cups of coffee on a single flight.
As a result, wide body aircraft may require as much as seven times the
dollar value of cabin interior products as narrow body aircraft, as well
as products which are technically more sophisticated and typically more
expensive. Further, individual passsenger inflight entertainment systems
are installed principally on wide body aircraft. Airlines are
increasingly demanding such systems for long-haul flights to attract and
retain customers, especially as the quality of inflight entertainment has
become a differentiating factor in passengers' airline selection
decisions. Such systems also provide the airlines with the opportunity to
increase revenues per passenger mile, without raising ticket prices, by
charging individually for services used. For these reasons, Management
believes that in the future, interactive entertainment systems will be
installed on essentially all wide body, and, with the advent of live
broadcast inflight television, many narrow body planes covering all
classes of service (first, business and tourist).
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. New Product Development. The commercial aircraft cabin interior products
industry is engaged in intensive development and marketing efforts for a
number of new products, including convertible seats, interactive
individual passenger entertainment systems, advanced telecommunications
equipment and new galley equipment. Interactive video technology provides
a passenger with a wide range of computer capabilities, which are
designed to accept information generated by the passenger and communicate
such information to the cabin crew for assisting passengers and crew with
food service selection, the purchase of duty-free goods, information in
connection with the arrival time, connecting flights, gate and other
passenger information, as well as facilitate effective on-board inventory
control and provide individual entertainment. New cabin interior products
will generate new installation and retrofit revenues as well as service
revenues from equipment maintenance, inspection and repair.
. Growing Upgrade, Maintenance, Inspection and Repair Service
Markets. Historically, the airlines have relied on their airframe and
engine mechanics to repair or replace cabin interior products that have
become damaged or otherwise non-functional. As cabin interior product
configurations have become increasingly sophisticated and the airline
industry increasingly competitive, the airlines have begun to outsource
such services in order to increase productivity and reduce costs and
overhead. Outsourced services include product upgrades (such as the
installation of a telecommunications module or individual passenger
entertainment unit in an aircraft seat not originally designed to
accommodate such equipment), cabin interior product maintenance and
inspection, as well as other repair services.
COMPETITIVE STRENGTHS AND BUSINESS STRATEGY
The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:
. Leading Market Share and Significant Installed Base. Management believes
that the Company has achieved the leading global market positions in
each of its major product categories, with market shares, based upon
industry sources, of approximately 50% in aircraft seats (pro forma for
the Acquisition), 90% in coffee makers, 90% in refrigeration equipment
and 50% in ovens, in each case based on fiscal 1995 unit sales, and 33%
in individual passenger inflight entertainment systems, determined on
the basis of installed base as of October 1995. The Company believes
these market shares enable it to maintain significant competitive
advantages in serving its customers, including manufacturing
efficiencies and greater product development and marketing resources.
The Company also believes that the small size of the total potential
market in each product category, together with its large shares of such
markets serve as a deterrent to new market entrants. For example, the
total potential annual market for coffee makers, ovens and refrigeration
equipment are each less than $25 million, with the Company's shares of
such markets ranging from 50% to 90%. Furthermore, because of economies
of scale, in part attributable to such large market shares and its
approximate $1.8 billion installed base of cabin interior equipment
(valued at replacement prices), the Company believes it is among the
lowest cost producers in the cabin interior products industry. The
Company believes that its large installed base gives it a significant
advantage over competitors in obtaining orders for retrofit and
refurbishment programs, principally because of the tendency of the
airlines to purchase equipment for such programs from the original
supplier. In addition, because of the need for compatible spare parts at
airline maintenance depots and the desire of airlines to maximize fleet
commonality, a single vendor is typically used for all aircraft of the
same type operated by a particular airline.
. Broadest Product Line in the Industry. Management believes the Company
offers more products for the cabin interiors of commercial aircraft than
any other manufacturer. With an established reputation for quality,
service and product innovation, the Company enjoys broad recognition
among the world's commercial airlines. The Company maintains a constant
dialogue with a wide array of existing and potential customers, enabling
it to become aware of emerging industry trends and needs and thereby to
play a major role in product development. The Company has continued to
expand its product line, believing that the airline industry
increasingly will seek an integrated approach to the development,
testing and sourcing of the aircraft's cabin interior. The Company
believes that it is the only supplier
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in the industry with the technology, manufacturing capability and
capacity and breadth of products and services to meet these industry
demands.
. Technological Leadership/New Product Development. Management believes
that the Company is a technological leader in its industry, which
contributes to its market leadership. The Company has state-of-the-art
facilities and what it believes to be the largest R&D organization in
the industry, with BEA employing approximately 420 engineers. The
Company staffs on-site customer engineers at major airlines and airframe
manufacturers to represent its entire product line and work closely with
the customers to develop specifications for each successive generation
of products required by the airlines. Through its on-site customer
engineers, the Company expects to be able more efficiently to design and
integrate products which address the requirements of its customers. The
Company believes that the introduction of innovative products enables it
to gain early entrant advantages and substantial market shares. An
example of such a product introduction is the Company's original
individual passenger inflight entertainment system, introduced in 1992,
which offers a selection of preprogrammed movies. The Company believes
that, in terms of shipments, it is the market leader, having sold more
individual passenger inflight entertainment systems than any of its
competitors. The next generation of this product is the Company's
recently introduced interactive individual passenger inflight
entertainment system, the MDDS, which it believes is superior to
existing operational systems in terms of performance, reliability,
weight, heat generation, and flexibility to adapt to changing
technology. Other recent new product developments include a
cappuccino/espresso maker, a refrigerated quick chill wine cooling
system and a constant pressure cooking oven which the Company believes
substantially improves the appearance, aroma and taste of airline food.
. High Growth New Business Opportunity. Airlines are increasingly
demanding individual passenger inflight entertainment systems for long-
haul flights to attract and retain customers, especially as the quality
of inflight entertainment has become a differentiating factor in
passengers' airline selection decisions. Such systems also provide the
airlines with the opportunity to increase revenues per passenger mile,
without raising ticket prices, by charging individually for the services
used. For these reasons, the Company believes that in the future,
interactive entertainment systems will be installed on essentially all
wide body, and with the advent of live broadcast inflight television,
many narrow body planes. The Company's sophisticated MDDS has the
capability to offer numerous movies on demand, telecommunications,
gaming, Nintendo (R), Sega (R) and PC-based games, inflight shopping
and, in the future, live television, among other services, although each
airline will select the package of features it considers most attractive
to offer. This system has been tested for British Air in flight
simulations in excess of a thousand hours, and was first installed on a
limited basis on a British Air Boeing 747-400 in November 1995. The
Company expects that, upon the successful completion of a commercial
testing period, British Air will install the MDDS in all classes of
service in approximately 80 wide body British Air planes over the next
several years. The Company expects sales of this system to account for a
significant percentage of revenues in the future. Based on an estimated
current average sale price per seat of $2,500 to $7,000 for individual
passenger inflight entertainment systems, and the world's current wide
body fleet of approximately 2,500 planes that management believes are
appropriate for installation of such systems, the total market potential
for all such systems is estimated to be between $2 billion and $6
billion.
. Proven Track Record of Integration. The Company has as one of its key
corporate objectives the continual expansion of its product lines and
market shares through strategic acquisitions within the aircraft cabin
interior products industry. BEA has purchased eight businesses over the
last seven years, for an aggregate purchase price of approximately $250
million. The Company maintains a highly disciplined approach in
evaluating acquisitions, looking for opportunities to consolidate
engineering, manufacturing and marketing activities, as well as
rationalizing product lines. Since 1989, BEA has integrated each of the
additional businesses by reducing the number of operating facilities
acquired from 14 to six and consolidating personnel at the acquired
businesses, resulting in headcount reductions of approximately 800
employees. Upon the acquisition of Burns, the Company is implementing a
similar integration plan consisting of, among other things, the
reduction of headcount by approximately
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300 employees. The integration plan, when fully implemented, is expected
to reduce costs by an estimated $17 million per annum. See "Unaudited
Pro Forma Combined Financial Information".
The Company's business strategy is to maintain its leadership position and
best serve its airline customers by (i) offering the broadest and most
integrated product line in the industry for both new product sales and follow-
on products and services; (ii) pursuing a worldwide marketing approach focused
by airline and encompassing the Company's entire product line; (iii) remaining
the technological leader, as well as significantly growing its installed base
of products in the developing inflight individual passenger entertainment
market; (iv) enhancing its position in the growing upgrade, maintenance,
inspection and repair services market; and (v) pursuing selective strategic
acquisitions in the commercial aircraft cabin interior products industry.
PRODUCTS AND SERVICES
BE Aerospace is the largest supplier of commercial aircraft cabin interior
products in the world, serving virtually all major airlines with a broad line
of products including aircraft seats, galley products and structures and
individual passenger inflight entertainment systems. In addition, BEA provides
upgrade, maintenance and repair services for the interior products it
supplies, as well as for those supplied by other manufacturers. Over half of
BEA's revenues and over 65% of its operating earnings in fiscal 1995 were
derived from repair and refurbishment and sales of spare parts largely
relating to its approximate $1.8 billion installed base of currently in-
service products (valued at replacement prices), and the balance from sales of
products to be installed on newly delivered aircraft.
Seating Products
The Company is the world's leading supplier of aircraft seats, offering a
wide selection of first class, business class, tourist class and commuter
seats. A typical seat sold by the Company includes the seat frame, cushions,
armrests and tray table, together with a variety of optional features such as
inflight entertainment systems, oxygen masks and telephones. Management
estimates that the Company has an aggregate installed base of aircraft seats,
valued at replacement prices, of approximately $938 million comprised of more
than 670,000 seats, of which $343 million and 245,000 seats are attributable
to Burns.
. TOURIST CLASS. The Company is the leading supplier of tourist class seats
in both the U.S. and worldwide markets. BEA has designed tourist class
seats which incorporate features not previously utilized in that class,
such as top-mounted passenger control units, footrests and improved
oxygen systems.
. FIRST AND BUSINESS CLASSES. First class and business class seats are
generally larger, heavier and more complicated in design, and are
substantially more expensive than other types of aircraft seats. The
Company's first class seats and certain of its business class seats are
equipped with an articulating bottom cushion suspension system,
sophisticated hydraulic leg-rests and large tables.
. CONVERTIBLE SEATS. The Company has developed two types of seats which can
be converted from a tourist class triple-row seat to a business class
double-row seat with minimal conversion complexity. Convertible seats
allow airline customers to optimize the ratio of business class to
tourist class seats for a given aircraft configuration.
. COMMUTER SEATS. The Company is the leading supplier of commuter seats in
both the U.S. and worldwide markets. The Company's Silhouette(TM)
Composite commuter seats are similar to commercial jet seats in comfort
and performance but are lightweight and require minimal maintenance.
. SPARES. Aircraft seats are exposed to significant stress in the course of
normal passenger activity, and certain seat parts are particularly
susceptible to damage from continued use. As a result, a significant
market exists for spare parts.
52
<PAGE>
Passenger Entertainment and Service Systems
The Company is a significant supplier of PESS products, having the leading
share of the market for PCUs and related wiring and harness assemblies. In
addition, it has developed products aimed at other portions of the PESS
market, including individual seat video systems, advanced multiplexer and
hard-wired distribution systems and other products. Management estimates that
the Company has the largest installed base of PESS products in the world,
which, valued at replacement prices, is approximately $215 million.
. INDIVIDUAL PASSENGER ENTERTAINMENT. The Company offers both its
sophisticated MDDS and its original BE 2000 video system. Management
believes that its MDDS has significant advantages over competitive
systems in terms of performance, reliability, weight, heat generation and
flexibility to adapt to changing technology. This system was first
installed on a limited basis on a British Air Boeing 747-400 in November
1995.
. PCUS, WIRING AND HARNESS ASSEMBLIES. The Company's PCU product line is
the broadest in the industry, including over 300 different designs which
are functionally similar but differ widely due to the style preferences
and technical requirements of the various airlines. Wiring and harness
assemblies (which stabilize installed wiring) are sold as a package with
PCUs and vary as widely as PCU types.
. DISTRIBUTION SYSTEMS. The Company has manufactured hard-wired audio
(since 1963) and video distribution systems (since 1992) and is currently
the principal supplier of such systems to the airline industry. The
Company also offers frequency division multiplex distribution systems
which deliver substantially improved audio performance compared to
competitors' multiplex systems.
Galley Structures and Inserts
The Company is a leading supplier of galley products, offering complete
galley systems for both narrow and wide body aircraft, as well as a wide
selection of coffee and beverage makers, water boilers, ovens, liquid
containers, refrigeration equipment and other galley components. Management
estimates that the Company has an aggregate installed base of galley
structures and inserts, valued at replacement prices, of approximately $983
million.
. GALLEY STRUCTURES. Galley structures are generally custom designed to
accommodate the unique product specifications and features required by a
particular carrier. Galley structures require intensive design and
engineering work and are among the most sophisticated and expensive of
the aircraft's cabin interior products. The Company provides a variety of
galley structures, closets and class dividers, emphasizing sophisticated
and higher value-added galleys for wide body aircraft.
. COFFEE MAKERS. The Company is the leading supplier of aircraft coffee
makers, with equipment currently installed in virtually every type of
aircraft for almost every major airline. The Company manufactures a broad
line of coffee makers, coffee warmers and water boilers including the
Flash Brew Coffee Maker, with the capability to brew 54 ounces of coffee
in one minute, a Combi(TM) unit which will brew coffee or boil water for
tea while utilizing 25% less electrical power than traditional 5,000-watt
water boilers, and a newly introduced cappuccino/espresso maker.
. OVENS. The Company is a significant supplier of a broad line of
specialized ovens, including high-heat efficiency ovens, high-heat
convection ovens, and warming ovens. The Company's newest offering, the
DS-2000 Steam Oven represents a new method of preparing food inflight by
maintaining constant temperature and moisture in the food. It addresses
the airlines' needs to provide a wider range of foods than can be
prepared by convection ovens.
. REFRIGERATION EQUIPMENT. The Company is the worldwide industry leader in
the design, manufacture, and supply of commercial aircraft refrigeration
equipment. The Company recently introduced a self-contained wine and
beverage chiller, the first unit specifically designed to rapidly chill
wine and beverages on board an aircraft.
53
<PAGE>
Upgrade, Maintenance, Inspection and Repair Services
The Company is an active participant in the growing upgrade, maintenance,
inspection and repair services market. Management believes that the Company's
broad and integrated product line and close relationships with its airline
customers position the Company to become a leading service provider in this
market. The Company believes that this market offers a significant opportunity
for growth. Most participants in this market are small, and management
believes that the Company is the only major product manufacturer in the
industry currently participating in this market.
. UPGRADE. The Company provides a variety of upgrade services for cabin
interior products. For example, the Company has begun to install
individual passenger video and telecommunications modules in seat backs
and center consoles which were otherwise not originally designed for such
products. The Company has this capability regardless of whether it
manufactures the product or whether the product is produced by others.
. MAINTENANCE, INSPECTION AND REPAIR. These services are provided at
selected airports on an overnight or between scheduled flights basis, or
at seven service centers maintained by the Company. The Company has been
engaged by several airlines to remove entire sets of aircraft seats, wash
and repair them and reinstall the seats within a one-week period. In
addition, the Company offers maintenance and repair services which may be
provided on an overnight basis when an aircraft is not flying or at the
airport gate in the period between an aircraft's scheduled flights.
During this process, cabin interior products are checked by Company
employees for damage and functionality and are repaired or replaced with
available spares. Frequently, the spare part is a Company product, even
if the original part was supplied by another manufacturer.
RESEARCH AND DEVELOPMENT
The Company works closely with commercial airlines to improve existing
products and identify customers' emerging needs. BEA's expenditures in
research and development totaled $11,591,000 (unaudited), $12,860,000,
$9,876,000 and $11,299,000 for the nine months ended November 25, 1995 and the
fiscal years ended February 25, 1995, February 26, 1994 and February 27, 1993,
respectively. Burns' expenditures for research and development during the nine
months ended September 30, 1995 and its past three fiscal years were $421,000
(unaudited), $326,000, $300,000 and $196,000, respectively. BEA employs
approximately 420 professionals in the engineering and product development
areas. The Company believes that it has the largest engineering organization
in the cabin interior products industry, with not only electrical and
mechanical design skills but also substantial expertise in materials
composition and custom cabin interior layout design.
MARKETING AND CUSTOMERS
The Company markets and sells its products directly to virtually all of the
world's major airlines. BEA has a sales and marketing organization of 163
persons, along with 19 independent sales representatives, while Burns has 15
sales and marketing personnel and 12 independent sales representatives and
distributors. BEA sales to non-US airlines were $83,610,000 (unaudited),
$114,511,000, $85,239,000 and $91,541,000 for the nine months ended November
25, 1995 and the fiscal years ended February 25, 1995, February 26, 1994 and
February 27, 1993, or approximately 50%, 50%, 42% and 46%, respectively, of
net sales during such periods. Sales by Burns to non-US airlines were
$45,721,000 (unaudited), $53,799,000, $25,360,000 and $40,202,000 for the nine
months ended September 30, 1995 and the years ended December 31, 1994, 1993
and 1992 or 60%, 58%, 38% and 41%, respectively, of net sales during such
periods.
Airlines select suppliers of cabin interior products primarily on the basis
of custom design capabilities, product quality and performance, prompt
delivery, after-sales service and price. BEA believes that its large installed
base, its timely responsiveness in connection with the custom design,
manufacture, delivery and after-sales service of its products and its broad
product line and stringent customer and regulatory requirements all present
barriers to entry for potential new competitors in the cabin interior products
market.
54
<PAGE>
The Company believes that its integrated worldwide marketing approach,
focused by airline and encompassing the Company's entire product line, is
preferred by airlines. Led by a BEA senior executive, teams representing each
product line serve designated airlines which together account for
approximately 60% of the purchases of products manufactured by BEA. These
airline customer teams have developed customer specific strategies to meet
each airlines' product and service needs. The Company also staffs "on-site"
customer engineers at major airlines and airframe manufacturers to represent
its entire product line and work closely with the customers to develop
specifications for each successive generation of products required by the
airlines. These engineers help customers integrate the wide range of cabin
interior products and assist in obtaining the applicable regulatory
certification for each particular product or cabin configuration. Through its
on-site customer engineers, the Company expects to be able more efficiently to
design and integrate products which address the requirements of its customers,
and thereby gain market share. The Company provides program management
services, integrating all on-board cabin interior equipment and systems,
including installation and FAA certification, allowing airlines to
substantially reduce costs. The Company believes that it is one of the only
suppliers in the commercial aircraft cabin interior products industry with the
size, resources, breadth of product line and global product support capability
to operate in this manner.
No customer accounted for more than 10% of BEA's revenues in the nine months
ended November 25, 1995 or during the fiscal years ended February 25, 1995 or
February 26, 1994. During the year ended February 27, 1993, sales to one
customer were $21,185,000, accounting for approximately 11% of BEA's total
revenues, and no other customer accounted for more than 10% of such revenues.
For the nine months ended September 30, 1995 and the year ended December 31,
1994, sales by Burns to one customer were $26.0 million and $33.7 million,
respectively, accounting for approximately 34% and 36% of total sales for such
periods. No customer accounted for more than 10% of Burns' revenues for the
years ended December 31, 1993 and 1992. Because of differing schedules of
various airlines for purchases of new aircraft and for retrofit and
refurbishment of existing aircraft, that portion of the Company's revenues
attributable to particular airlines varies from year to year.
BACKLOG
Management estimates that BEA's backlog at November 25, 1995 was
approximately $369 million, approximately 41% of which management believes to
be deliverable in fiscal 1997, compared with a backlog of $331 million on
February 25, 1995. Burns management estimates that Burns' backlog at November
30, 1995 was approximately $72 million, approximately 56% of which is believed
to be deliverable in 1996, compared with a backlog of $72 million on December
31, 1994.
CUSTOMER SERVICE
The Company believes that it provides the highest level of customer service
available in the commercial aircraft cabin interior products industry and that
such service is a critical factor in the Company's success. The key elements
of such service include (i) rapid response to requests for engineering
designs, price quotes and technical specifications; (ii) flexibility with
respect to customized features; (iii) on-time delivery;
(iv) immediate availability of spare parts for a broad range of products; and
(v) prompt attention to customer problems, including on-site customer
training. Customer service is particularly important to airlines due to the
high cost to the airlines of late delivery, malfunctions and other problems.
WARRANTY AND PRODUCT LIABILITY
The Company warrants its products, or specific components thereof, for
periods ranging from one to seven years, depending upon product type and
component. The Company generally establishes reserves for product warranty
expense on the basis of the ratio of warranty costs incurred by the product
over the warranty period to sales of the product over the warranty period.
Actual warranty costs reduce the warranty reserve as they are incurred.
Management periodically reviews the adequacy of accrued product warranty
reserves. Revisions of accrued product warranty reserves are recognized in the
period in which such revisions are determined.
55
<PAGE>
In addition, due to the nature of the Company's products, the Company
currently carries product liability insurance. The Company believes that its
insurance is generally sufficient to cover product liability claims.
COMPETITION
The commercial aircraft cabin interior products market is relatively
fragmented with a number of competitors in each of the individual product
categories. Due to the global nature of the commercial airline industry,
competition in product categories comes from both US and foreign
manufacturers. However, as aircraft cabin interiors have become increasingly
sophisticated and technically complex, airlines have demanded higher levels of
engineering support and customer service than many smaller cabin interior
products suppliers can provide. At the same time, airlines have recognized
that cabin interior product suppliers must be able to integrate a wide range
of products, including sophisticated electronic components, particularly in
wide body aircraft. Management believes that these increasing demands of
airlines upon their suppliers will result in a number of suppliers leaving the
cabin interior products industry and a consolidation of those suppliers which
remain. The Company has participated in this consolidation through strategic
acquisitions and internal growth and intends to continue to participate in the
consolidation.
The Company's principal competitors for seating products include Group
Zodiac S.A., Keiper Recaro GmbH, and a number of other producers in the
European community and Japan. The Company's principal competitors for PESS
products are Matsushita Electronics ("MAS") and Hughes Avicom ("Hughes") as to
PCUs, and MAS, Hughes and GEC PLC/Plessey Limited as to individual seat video
systems. The Company's primary competitors for galley systems are JAMCO
Limited, and Buderus Sell GmbH (a subsidiary of Metallgesellschaft A.G.). See
"Risk Factors--Competition."
MANUFACTURING AND RAW MATERIALS
The Company's manufacturing operations consist of both the in-house
manufacturing of component parts and subassemblies and the assembly of Company
specified and designed component parts which are purchased from outside
vendors. The Company maintains state-of-the-art facilities, and management has
an on-going strategic manufacturing improvement plan utilizing focused
factories and cellular production technologies in which each of the product
lines is manufactured in a dedicated factory. Management expects that
continuous improvement from implementation of this plan for each of its
product lines will occur over the next several years and should lower
production costs, cycle times and inventory requirements and at the same time
improve product quality and customer response.
GOVERNMENT REGULATION
The FAA prescribes standards and licensing requirements for aircraft
components, and licenses component repair stations within the United States.
Comparable agencies regulate such matters in other countries. The Company
holds several FAA component certificates and performs component repairs at a
number of its US facilities under FAA repair station licenses. The Company
also holds an approval issued by the UK Civil Aviation Authority to design,
manufacture, inspect and test aircraft seating products in Leighton Buzzard,
England and in Kilkeel, Northern Ireland and the necessary approvals to
design, manufacture, inspect, test and repair its galley products in
Nieuwegein, The Netherlands and to inspect test and repair products at its six
service centers throughout the world.
In March 1992, the FAA adopted Technical Standard Order C127 which requires
that all seats on certain new generation commercial aircraft installed after
such date be certified to meet a number of new safety requirements, including
an ability to withstand a 16G force. Management understands that the FAA plans
to adopt in the near future additional regulations which will require that
within the next five years all seats, including those on existing older
commercial aircraft which are subject to the FAA's jurisdiction, will have to
comply with similar seat safety requirements. The Company has developed a
number of seat models which meet these new seat safety regulations.
56
<PAGE>
PATENTS
BEA and Burns currently hold 31 and 24 United States patents, respectively,
and 81 and 8 foreign patents, respectively, covering a variety of products.
However, the Company believes that the termination, expiration or infringement
of one or more of such patents would not have a material adverse effect on the
business or prospects of the Company.
LEGAL PROCEEDINGS
BEA has been advised that the U.S. Attorney's Office for the District of
Connecticut, in conjunction with the Department of Commerce and the U.S.
Customs Service, is conducting a grand jury investigation focused on possible
non-compliance by BEA with certain statutory and regulatory provisions
relating to export licensing and controls. The investigation relates primarily
to the sale of passenger seats and related spare parts for civilian commercial
passenger aircraft to Iran Air from 1992 through mid-1995. BEA has been
advised that it is a target of the investigation; however, neither it nor any
current or former directors, officers, or employees have been charged in
connection with the investigation. The investigation is at an early stage and,
while the Company intends to defend itself vigorously, the ultimate outcome of
the investigation cannot presently be determined. An adverse outcome could
have a material adverse effect upon the operations and/or financial condition
of the Company.
EMPLOYEES
As of November 1995, BEA had approximately 1,992 employees, while Burns
employed an estimated 779 persons. Approximately 65% and 81% of BEA and Burns
employees, respectively, are engaged in manufacturing, 17% and 10% in
engineering, research and development, respectively, and 17% and 9% in sales,
marketing, product support and general administration, respectively. None of
the Company's employees is represented by a union with the exception of 60
employees at its Netherlands facility and approximately 58% of the employees
of Burns. BEA and Burns consider their employee relations to be good.
57
<PAGE>
PROPERTY
As of January 15, 1996, BEA had fifteen principal facilities, where it
leased or owned an aggregate of approximately 799,100 square feet of space,
while Burns had two principal facilities, where it leased or owned an
aggregate of approximately 353,700 square feet of space. The following table
describes the principal facilities and indicates the location, function and
approximate size of each:
<TABLE>
<CAPTION>
FACILITY SIZE
LOCATION PRODUCTS AND FUNCTION (SQ. FEET) OWNERSHIP
-------- --------------------- ------------- ---------
<C> <S> <C> <C>
BEA
---
CORPORATE
Wellington, Florida Corporate headquarters, finance, marketing
sales, service division headquarters 17,700 Owned
SEATING PRODUCTS
Litchfield, Connecticut Manufacturing, service, research and
development, sales support, finance and
warehousing; seating products division
headquarters 147,700 Owned
Leighton Buzzard, England Manufacturing, service, research and
development, sales support, finance and
warehousing 114,000 Owned(a)
Kilkeel, Northern Ireland Manufacturing, service, research and
development, sales support, finance and
warehousing 64,500 (b)
GALLEY PRODUCTS
Anaheim, California Manufacturing, service, research and
development, sales support, finance and
warehousing 57,100 Leased
Delray Beach, Florida Manufacturing, service, research and
development, sales support, finance and
warehousing; galley products division
headquarters 52,000 Owned
Jacksonville, Florida Manufacturing, service, engineering, and
warehousing 75,000 Owned
Nieuwegein, The Netherlands Manufacturing, service, research and
development, sales support, finance and
warehousing 39,000 Leased
PESS PRODUCTS
Irvine, California Manufacturing, service, research and
development, sales support, finance and
warehousing; in-flight entertainment
division headquarters 106,700 Leased
Longwood, Florida Manufacturing and service 30,000 Leased
SERVICES
Garden Grove, California Upgrade, maintenance, inspection and repair 46,300 Leased
Burnsville, Minnesota Upgrade, maintenance, inspection and repair 7,200 Leased
Linden, New Jersey Upgrade, maintenance, inspection and repair 5,800 Leased
Redmond, Washington Upgrade, maintenance, inspection and repair 2,100 Leased
Chesham, England Upgrade, maintenance, inspection and repair 34,000 Owned(a)
BURNS
-----
Winston-Salem, North Carolina Corporate headquarters, finance, marketing,
sales and manufacturing 264,800 Owned
Inglewood, California Manufacturing and service, sales support,
finance, and warehousing 88,900 Leased
</TABLE>
- --------
(a) BEA's owned properties in England were mortgaged to Barclays Bank PLC to
collateralize credit facilities of FEEL in an aggregate amount of up to
approximately (Pounds)7.2 million.
(b) Approximately 38,500 square feet of the Kilkeel, Northern Ireland
facilities are owned with the balance leased.
58
<PAGE>
MANAGEMENT
The following table sets forth information regarding the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Amin J. Khoury 56 Chairman of the Board and Chief Executive Officer
Robert J. Khoury 53 President, Chief Operating Officer and Director
Marco C. Lanza 39 Executive Vice President, Marketing and Product
Development
Thomas P. McCaffrey 41 Vice President, Chief Financial Officer and
Assistant Secretary
Edmund J. Moriarty 51 Vice President, General Counsel and Secretary
Jeffrey P. Holtzman 40 Treasurer and Assistant Secretary
G. Bernard Jewell 53 President, Services Division
E. Ernest Schwartz 59 President, Galley Products Division
Arthur H. Lipton 57 President, Inflight Entertainment Division
Jim C. Cowart 43 Director+
Richard G. Hamermesh 47 Director*+
Brian H. Rowe 64 Director
Hansjoerg Wyss 60 Director*
</TABLE>
- --------
* Member, Audit Committee.
+ Member, Stock Option and Compensation Committee.
The Company's Restated Certificate of Incorporation provides that the Board
of Directors is classified into three classes, as nearly as equal in number as
possible, so that each director (after a transitional period) will serve for
three years, with one class of directors being elected each year. The Board is
currently comprised of two Class I Directors (Brian H. Rowe and Jim C.
Cowart), two Class II Directors (Robert J. Khoury and Hansjoerg Wyss) and two
Class III Directors (Amin J. Khoury and Richard G. Hamermesh). The terms of
the Class I, Class II and Class III Directors expire upon the election and
qualification of successor directors at annual meetings of stockholders held
following the end of fiscal years 1998, 1996 and 1997, respectively. The non-
management directors receive compensation of $2,500 per calendar quarter. The
executive officers of the Company are elected annually by the Board of
Directors following the annual meeting of stockholders and serve at the
discretion of the Board of Directors.
Amin J. Khoury has been Chairman of the Board and Chief Executive Officer of
the Company since July 1987. Since 1986, Mr. Khoury has also been the Managing
Director of The K.A.D. Companies, Inc., an investment, venture capital and
consulting firm ("K.A.D."). Mr. Khoury is currently the Chairman of the Board
of Directors of Applied Extrusion Technologies, Inc., a manufacturer of
oriented polypropylene films used in consumer products labeling and packaging
applications, and a member of the Board of Directors of Brooks Automation,
Inc., the leading manufacturer in the U.S. of vacuum central wafer handling
systems for semiconductor manufacturing and Aurora, Inc., a leading provider
of components and service to computer service organizations. Mr. Khoury is
employed by the Company pursuant to a ten-year Employment Agreement dated as
of January 1, 1992, under which Mr. Khoury serves as the Company's Chairman
and Chief Executive Officer. Mr. Khoury is the brother of Robert J. Khoury.
Robert J. Khoury has been a Director and the President and Chief Operating
Officer of the Company since July 1987. From 1986 to 1987, Mr. Khoury was Vice
President of The K.A.D. Companies, Inc. The Company has entered into a six-
year Employment Agreement dated as of March 1, 1992 with Mr. Khoury in which
he agrees to serve as President and Chief Operating Officer of the Company.
Mr. Khoury is the brother of Amin J. Khoury.
Marco C. Lanza has been the Executive Vice President, Marketing and Product
Development since January 1994. From March 1992 through January 1994, Mr.
Lanza was President of the Inflight Entertainment Division of the Company.
From 1987 through February 1992, Mr. Lanza was Vice President, Marketing and
Product
59
<PAGE>
Development, of the Company. The Company has entered into a five-year
Employment Agreement dated as of March 1, 1992 with Mr. Lanza.
Thomas P. McCaffrey has been Vice President and Chief Financial Officer
since May 1993. From August 1989 through May 1993, Mr. McCaffrey was an Audit
Director with Deloitte & Touche LLP, and from 1976 through 1989 served in
several capacities, including Audit Partner, with Coleman & Grant. The Company
has entered into a three-year Employment Agreement dated May 1, 1993 with Mr.
McCaffrey in which he agrees to serve as Chief Financial Officer of the
Company.
Edmund J. Moriarty has been Vice President, General Counsel and Secretary
since November 16, 1995. From 1991 to 1995, Mr. Moriarty served as Vice
President and General Counsel to Rollins, Inc., a national service company.
From 1982 through 1991, Mr. Moriarty served as Vice President and General
Counsel to Old Ben Coal Company, a wholly owned coal subsidiary of The
Standard Oil Company.
Jeffrey P. Holtzman has been Treasurer since September 1993. From June 1986
to July 1993, Mr. Holtzman served in several capacities at FPL Group, Inc.,
including Assistant Treasurer and Manager of Financial Planning. Mr. Holtzman
previously worked for Mellon Bank, Gulf Oil and Arthur Young & Company.
G. Bernard Jewell has been President of the Company's Services division
since January 1994. From April 1992 through January 1994, Mr. Jewell was Group
Vice President, Marketing and Product Development of the Company. From 1988 to
1992, Mr. Jewell was President of Burns Aerospace, Inc., a manufacturer of
commercial aircraft cabin interior products.
E. Ernest Schwartz has been President of the Galley Products Division of the
Company since March 1992. From 1986 through February 1992, Mr. Schwartz was
President of Aircraft Products Company, which was acquired by the Company in
1992.
Arthur H. Lipton has been the President of the Inflight Entertainment
Division since July, 1995. From 1990-1995 Mr. Lipton was the Senior Vice
President and General Manager of the Wyse Technology Display Division. Prior
to that he was with the Xerox Corporation for 20 years with his last position
being Vice President and General Manager of their Imaging Business Unit.
Jim C. Cowart has been a Director of the Company since November 1989. Since
January 1993, Mr. Cowart has been the Chairman of the Board of Directors and
Chief Executive Officer of Aurora Electronics, Inc. Since January 1992, Mr.
Cowart has also been a Director of Aurora Management, Inc., a private capital
firm retained by the Company for strategic planning, competitive analysis,
financial relations and other services. From 1987 until 1991, Mr. Cowart was a
general partner of Capital Resource Partners, a private capital investment
manager. From 1982 to 1987, Mr. Cowart was a Senior Vice President of
Investment Banking at Shearson Lehman Brothers and was the President of
Shearson Venture Capital, Inc.
Richard G. Hamermesh has been a Director of the Company since July 1987.
Since August 1987, Dr. Hamermesh has been the Managing Partner of the Center
for Executive Development, an independent management consulting company, and
from December 1986 to August 1987, Dr. Hamermesh was an independent
consultant. Prior to such time, Dr. Hamermesh was on the faculty at the
Harvard Business School. Dr. Hamermesh is also a Director of Applied Extrusion
Technologies, Inc.
Brian H. Rowe has been a Director of the Company since July 1995. Mr. Rowe
is currently Chairman Emeritus of GE Aircraft Engines, a principal business
unit of the General Electric Company, where he also served as Chairman of the
Board from September, 1993 through December, 1994 and as President from 1990
through 1993. From March, 1994 to November, 1995 Mr. Rowe served as a Director
of Astrostructures Hamble Limited, a manufacturer of military and civil
aircraft components. Since March, 1995, Mr. Rowe has also been a Director of
Atlas Air Inc., an air cargo carrier. Since January, 1980 Mr. Rowe has been a
Director of Fifth Third Bank, an Ohio banking corporation. Since December,
1995, Mr. Rowe has also been a Director of Steward &
60
<PAGE>
Stevenson Services, Inc., a custom packager of engine systems, and Textron
Inc., a manufacturer of mechanical devices for aircraft and other
applications.
Hansjoerg Wyss has been a Director of the Company since October 1989. Since
1977, Mr. Wyss has been a Director and the President and Chief Executive
Officer of Synthes (U.S.A.) and Synthes (Canada), Ltd., manufacturers and
distributors of orthopedic implants and instruments. Mr. Wyss is also a
Director of Applied Extrusion Technologies, Inc.
CERTAIN TRANSACTIONS AND PROCEEDINGS
In 1990, the Company adopted a policy whereby any transactions between the
Company and its officers, directors, principal stockholders or other
affiliates will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties on an arm's-length basis, and such
transactions will be approved by a majority of the Company's independent and
disinterested directors.
The Company has entered into a Supply Agreement dated April 17, 1990 with
Applied Extrusion Technologies, Inc., a Delaware corporation ("AET"), pursuant
to which the Company has agreed to purchase from AET its requirements of
injection-molded plastic parts for use in the manufacture of passenger control
units and other products for installation in commercial aircraft for the
period ending March 31, 1998. Under that agreement, AET has agreed to use its
best efforts at all times to maintain available and in good working order a
sufficient number and variety of injection molding machines to satisfy the
Company's orders as received and to use its best efforts to initiate
production within three days of receipt of an order or, in emergency
situations, on the day on which the order is received. The price to be paid by
the Company to AET for products purchased under the Supply Agreement is an
amount which results in a 33 1/3% gross margin to AET, after including in
AET's standard cost for such products, all direct and indirect costs of labor,
materials, equipment and overhead. Purchases by the Company under this
agreement during the nine months ended November 25, 1995, were approximately
$1,041,000. Mr. Amin J. Khoury is a director of AET and serves as its
Chairman. Messrs. Richard G. Hamermesh and Hansjoerg Wyss, directors of BEA,
are also directors of AET.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and notes thereto set forth certain information with
respect to the beneficial ownership of the Company's Common Stock as of
December 1, 1995 by (i) each person who is known to the Company to
beneficially own more than 5% of the outstanding shares of Common Stock of the
Company; (ii) each of the chief executive officer and the four other most
highly paid executive officers of the Company in fiscal 1995 (collectively,
the "Named Executive Officers") and each director of the Company; and (iii)
all Named Executive Officers and directors of the Company as a group. Except
as otherwise indicated, each of the stockholders named below has sole voting
and investment power with respect to the shares of Common Stock beneficially
owned:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
------------------------
NUMBER PERCENT OF
OF OUTSTANDING
NAMES SHARES SHARES(A)
----- --------- -----------
<S> <C> <C>
Wellington Management Company....................... 1,875,800 11.6
75 State Street
Boston, MA 02109
State of Wisconsin Investment Board................. 1,585,000 9.8
P.O. Box 7842
Madison, WI 53707
Sanford C. Bernstein & Co........................... 1,434,000 8.8
1 State Street Plaza
New York, NY 10004
Dimensional Fund Advisors........................... 915,300 5.6
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Columbia Management Company......................... 881,200 5.4
1300 Southwest 6th Street
Portland, OR 97207
Amin J. Khoury+*.................................... 782,961(b) 4.6
Marco C. Lanza+..................................... 197,086(c) 1.2
Hansjorg Wyss*...................................... 188,609(d) 1.1
Jim C. Cowart*...................................... 173,000(e) **
Robert J. Khoury+*.................................. 158,084(f) **
Richard G. Hamermesh*............................... 61,001(g) **
Thomas P. McCaffrey+................................ 51,137(h) **
E. Ernest Schwartz+................................. 43,500(i) **
Brian H. Rowe*...................................... -0- --
All Directors and Named Executive Officers as a
group (10 persons)................................. 1,665,378(j) 9.2
</TABLE>
- --------
+ Named Executive Officer
* Director of the Company
** Less than 1 percent
(a) The number of shares of Common Stock deemed outstanding includes: (i)
16,238,322 shares of Common Stock outstanding as of December 1, 1995; and
(ii) shares of Common Stock subject to outstanding stock options which are
exercisable by the named individual or group in the next sixty days
(commencing December 1, 1995).
(b) Represents shares issuable upon the exercise of stock options exercisable
in the next sixty days and shares owned through the Company 401(k) plan.
(c) Includes 152,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan. Excludes options to purchase 47,500 shares of Common Stock
which are not exercisable in the next sixty days.
(d) Includes 47,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 7,500
shares of Common Stock which are not exercisable in the next sixty days.
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<PAGE>
(e) Includes 20,000 shares acquired by a profit sharing plan in which Mr.
Cowart has a fifty percent interest and 150,000 shares issuable upon the
exercise of stock options exercisable in the next sixty days. Excludes
options to purchase 15,000 shares of Common Stock which are not
exercisable in the next sixty days.
(f) Includes 157,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan. Excludes options to purchase 42,500 shares of Common Stock
which are not exercisable in the next sixty days.
(g) Includes 2,000 shares held in trusts for the benefit of Mr. Hamermesh's
two children, of which trust Mr. Hamermesh and his wife are trustees and
in which shares Mr. Hamermesh disclaims all beneficial interest. Also
includes 47,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 17,500
shares of Common Stock which are not exercisable in the next sixty days.
(h) Includes 47,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 22,500
shares of Common Stock which are not exercisable in the next sixty days.
(i) Includes 42,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 7,500
shares of Common Stock which are not exercisable in the next sixty days.
(j) Includes 1,427,800 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 137,500
shares of Common Stock which are not exercisable in the next sixty days.
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DESCRIPTION OF THE NEW NOTES
The Old Notes were issued and the New Notes will be issued under an
indenture to be dated as of January 24, 1996 (the "Indenture") between the
Company, as issuer, and Fleet National Bank of Connecticut, N.A., as trustee
(the "Trustee"), a copy of the form of which will be made available to
prospective purchasers of the Notes upon request. Upon the issuance of the New
Notes, the Indenture will be subject to and governed by the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The following summary of
the material provisions of the Indenture does not purport to be complete and
is subject to, and qualified in its entirety by, reference to the provisions
of the Indenture, including the definitions of certain terms contained therein
and those terms made part of the Indenture by reference to the Trust Indenture
Act.
GENERAL
The New Notes will be unsecured, senior subordinated obligations of the
Company limited to $100,000,000 aggregate principal amount. The New Notes will
be issued solely in exchange for an equal principal amount of Old Notes
pursuant to the Exchange Offer. The form and terms of the New Notes will be
identical in all material respects to the form and terms of the Old Notes
except that: (i) the New Notes will have been registered under the Securities
Act (ii) the Registration Rights and contingent interest reset provisions
applicable to the Old Notes are not applicable to the New Notes. The New Notes
will be issued only in registered form without coupons, in denominations of
$1,000 and integral multiples thereof. (Section 302) Principal of, premium, if
any, and interest on the Notes will be payable, and the Notes will be
transferable (subject to compliance with transfer restrictions imposed by
applicable securities laws for so long as the Notes are not registered for
resale under the Securities Act), at the corporate trust office or agency of
the Trustee in The City of New York maintained for such purposes at 14 Wall
Street, New York, New York 10005. (Sections 301 and 305) In addition, interest
may be paid, at the option of the Company, by check mailed to the Person
entitled thereto as shown on the Note Register. (Section 309) No service
charge will be made for any transfer, exchange or redemption of Notes, except
in certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith. (Section 305)
MATURITY, INTEREST AND PRINCIPAL PAYMENTS
The Notes will mature on February 1, 2006. Except as otherwise described
below, each Note will bear interest at the applicable rate set forth on the
cover page hereof from January 24, 1996 or from the most recent interest
payment date to which interest has been paid, payable in cash semiannually in
arrears on February 1 and August 1 of each year, commencing August 1, 1996, to
the Person in whose name the Note (or any predecessor Note) is registered in
the Note Register at the close of business on the January 15 or July 15 next
preceding such interest payment date.
As discussed under "Exchange Offer," pursuant to the Registration Rights
Agreement, the Company has agreed for the benefit of the holders of the Old
Notes, at the Company's cost, either (i) to effect a registered Exchange Offer
under the Securities Act to exchange the Old Notes for Exchange Notes, which
will have terms identical in all material respects to the Old Notes (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions) or (ii) in the event that any changes in law or applicable
interpretations of the staff of the Commission do not permit the Company to
effect the Exchange Offer, or if for any other reason the Exchange Offer is
not consummated within 120 days following the date of the original issue of
the Old Notes, or if any holder of the Old Notes (other than the Initial
Purchasers) is not eligible to participate in the Exchange Offer, or upon the
request of any Initial Purchaser in certain circumstances, to register the Old
Notes for resale under the Securities Act through a Shelf Registration
Statement. In the event that either (a) the Registration Statement is not
filed with the Commission on or prior to the 30th calendar day following the
date of original issue of the Old Notes, (b) the Registration Statement has
not been declared effective on or prior to the 90th calendar day following the
date of original issue of the Old Notes or (c) the Exchange Offer is not
consummated or a Shelf Registration Statement is not declared effective on or
prior to the 120th calendar day following the date of original issue of the
Old Notes, the interest rate borne by the Old Notes shall be increased by one-
half of
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one percent per annum following such 30-day period in the case of (a) above,
following such 90-day period in the case of clause (b) above or following such
120-day period in the case of clause (c) above. The aggregate amount of such
increase from the original interest rate pursuant to these provisions will in
no event exceed one-half of one percent per annum. Upon (x) the filing of the
Registration Statement after the 30-day period described in clause (a) above,
(y) the effectiveness of the Registration Statement after the 90-day period
described in clause (b) above or (z) the consummation of the Exchange Offer or
the effectiveness of a Shelf Registration Statement, as the case may be, after
the 120-day period described in clause (c) above, the interest rate borne by
the Notes from the date of such filing, effectiveness or consummation, as the
case may be, will be reduced to the original interest if the Company is
otherwise in compliance with this paragraph. See "Exchange Offer."
Notes that remain outstanding after the consummation of the Exchange Offer
and New Notes issued in connection with the Exchange Offer will be treated as
a single class of securities under the Indenture.
SUBORDINATION
The payment of the principal of, premium, if any, interest on and all other
amounts owing in respect of, the Notes will be subordinated, as set forth in
the Indenture, in right of payment to the prior payment in full in cash or
cash equivalents of all Senior Indebtedness; provided, however, that the Notes
shall rank equal with, or prior to, all existing and future unsecured
indebtedness of the Company that is subordinated to any Senior Indebtedness.
(Section 1301)
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relating to the Company or to its creditors, as such,
or its assets, or any liquidation, dissolution or other winding-up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or any assignment for the benefit of creditors or
any other marshalling of assets or liabilities of the Company (except in
connection with the consolidation or merger of the Company or its liquidation
or dissolution following the conveyance, transfer or lease of its properties
and assets substantially as an entirety upon the terms and conditions
described under "Merger, Consolidation and Sale of Assets, etc." below), the
holders of Senior Indebtedness will first be entitled to receive payment in
full in cash or cash equivalents of all amounts due on or in respect of all
Senior Indebtedness, or provision shall be made for such payment in cash or
cash equivalents, before the holders of the Notes will be entitled to receive
any payment or distribution of any kind or character (other than any payment
or distribution in the form of equity securities or subordinated securities of
the Company or any successor obligor provided for by a plan of reorganization
or readjustment that, in the case of any such subordinated securities, are
subordinated in right of payment to all Senior Indebtedness that may at the
time be outstanding to at least the same extent as the Notes are so
subordinated (such equity securities or subordinated securities hereinafter
being "Permitted Junior Securities")) on account of principal of (or premium,
if any) or interest on the Notes; and any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities
(other than a payment or distribution in the form of Permitted Junior
Securities) by set-off or otherwise, to which the holders or the Trustee would
be entitled but for the provisions of the Indenture shall be paid by the
liquidating trustee or agent or other person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness to the extent necessary
to make payment in full in cash or cash equivalents of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness. (Section 1302)
No payment (other than any payments made pursuant to the provisions
described under "--Defeasance or Covenant Defeasance of Indenture" from monies
or U.S. Government Obligations previously deposited with the Trustee) or
distribution of any assets of the Company of any kind or character, whether in
cash, property or securities (other than Permitted Junior Securities), may be
made by or on behalf of the Company on account of principal of (or premium, if
any) or interest on the Notes or on account of the purchase, redemption or
other acquisition of Notes upon the occurrence of any default in payment of
Designated Senior Indebtedness
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(a "Payment Default") until such Payment Default shall have been cured or
waived in writing or shall have ceased to exist or such Designated Senior
Indebtedness shall have been discharged or paid in full in cash or cash
equivalents. (Section 1303(a))
No payment (other than any payments made pursuant to the provisions
described under "--Defeasance or Covenant Defeasance of Indenture" from monies
or U.S. Government Obligations previously deposited with the Trustee) or
distribution of any assets of the Company of any kind or character, whether in
cash, property or securities (other than Permitted Junior Securities), may be
made by or on behalf of the Company on account of principal (or premium, if
any) or interest on the Notes or on account of the purchase, redemption or
other acquisition of Notes for the period specified below (a "Payment Blockage
Period") upon the occurrence of any default or event of default with respect
to any Designated Senior Indebtedness other than any Payment Default pursuant
to which the maturity thereof may be accelerated (a '"Non-payment Default")
and after the receipt by the Trustee of written notice thereof from the Agent
Bank or any other representative of a holder of Designated Senior
Indebtedness. (Section 1303(b))
The Payment Blockage Period will commence upon the date of receipt by the
Trustee of written notice from the Agent Bank or such other representative of
the Designated Senior Indebtedness in respect of which the Non-payment Default
exists and shall end on the earliest of (i) 179 days thereafter (provided any
Designated Senior Indebtedness as to which notice was given shall not
theretofore have been accelerated), (ii) the date on which such Non-payment
Default is cured, waived or ceased to exist or such Designated Senior
Indebtedness is discharged or paid in full in cash or cash equivalents or
(iii) such Payment Blockage Period shall have been terminated by written
notice to the Company or the Trustee from the Agent Bank or such other
representative initiating such Payment Blockage Period, after which the
Company will resume making any and all required payments in respect of the
Notes, including any missed payments. In any event, not more than one Payment
Blockage Period may be commenced during any period of 365 consecutive days. No
event of default with respect to Designated Senior Indebtedness that existed
or was continuing on the date of the commencement of any Payment Blockage
Period will be, or can be made, the basis for the commencement of a subsequent
Payment Blockage Period, unless such default has been cured or waived for a
period of not less than 90 consecutive days subsequent to the commencement of
such initial Payment Blockage Period (it being acknowledged that any breach of
any financial covenant for a period commencing after the date of commencement
of such Payment Blockage Period which would give rise to a Non-payment Default
pursuant to any provision under which a Non-payment Default previously existed
or was continuing shall constitute a new Non-payment Default for this
purpose).
Failure by the Company to make any required payment in respect of the Notes
when due or within any applicable grace period, whether or not occurring
during a Payment Blockage Period, would result in an Event of Default and,
thereafter, holders of the Notes would have the right to accelerate the
maturity thereof. See "--Events of Default."
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency of the Company, creditors of the Company who are
holders of Senior Indebtedness may recover more, ratably, than the holders of
the Notes, and assets which would otherwise be available to pay obligations in
respect of the Notes will be available only after all Senior Indebtedness has
been paid in full in cash or cash equivalents, at which time there may not be
sufficient assets remaining to pay any amounts due on any or all of the Notes.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on (including interest accruing after the filing of a petition by or against
the Company under any bankruptcy laws) and all other amounts due on or in
connection with any Indebtedness of the Company, whether outstanding on the
date of the Indenture or thereafter created, incurred or assumed, unless, in
the case of any particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the Notes.
Without limiting the generality of the foregoing, "Senior Indebtedness" shall
include the principal of (and premium, if any, on) and interest (including
interest accruing after the occurrence of an event of default or after the
filing of a petition by or against the Company under any
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bankruptcy law) on all Indebtedness, and all other amounts and obligations of
every nature of the Company from time to time owed under, the Bank Credit
Agreement and the Senior Notes. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) Indebtedness evidenced by the Notes, (ii)
Indebtedness of the Company that is expressly subordinated in right of payment
to any Indebtedness of the Company, (iii) Indebtedness of the Company that by
operation of law is subordinate to any general unsecured obligations of the
Company, (iv) that portion of any Indebtedness of the Company that at the time
of incurrence is incurred in violation of any covenant of the Indenture, (v)
any liability for federal, state or local taxes or other taxes, owed or owing
by the Company, (vi) trade accounts payable owed or owing by the Company,
(vii) Indebtedness of the Company to any Subsidiary or any other Affiliate of
the Company, (viii) Redeemable Capital Stock of the Company and (ix)
Indebtedness which when incurred and without respect to any election under
Section 1111(b) of Title 11 of the United States Code is without recourse to
the Company or any Subsidiary.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under the
Bank Credit Agreement and the Senior Notes and (ii), following the full
repayment of indebtedness under the Bank Credit Agreement and the termination
of the commitments thereunder, any other Senior Indebtedness which, at the
time of determination, has an aggregate principal amount outstanding of at
least $17 million and is specifically designated in the instrument evidencing
such Senior Indebtedness as "Designated Senior Indebtedness" by the Company.
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after February 1, 2001, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest to the redemption date, if redeemed
during the 12-month period beginning on February 1 of the years indicated
below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001.......................................................... 104.94%
2002.......................................................... 102.47%
2003 and thereafter........................................... 100.00%
</TABLE>
In addition, as described below, (a) upon the occurrence of a Change of
Control, the Company is obligated to make an offer to purchase all outstanding
Notes at a redemption price of 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase and (b) upon certain sales
or other dispositions of assets, the Company may be obligated to make offers
to purchase Notes with a portion of the Net Cash Proceeds of such sales or
other dispositions at a redemption price of 100% of the principal amount
thereof plus accrued and unpaid interest to the date of purchase. See "Certain
Covenants--Change of Control" and "--Limitation on Disposition of Proceeds of
Asset Sales." (Section 1101)
Selection and Notice. In the event that less than all of the Notes are to be
redeemed at any time, selection of such Notes for redemption will be made by
the Trustee on a pro rata basis, by lot or by such method as the Trustee shall
deem fair and appropriate; provided, however, that no Note of a principal
amount of $1,000 or less shall be redeemed in part. Notice of redemption shall
be mailed by first-class mail at least 30 but not more than 60 days before the
redemption date to each holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption and accepted for payment. (Sections 1104, 1105, 1107 and 1108)
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CERTAIN COVENANTS
The Indenture will contain, among others, the covenants described below.
Limitation on Indebtedness. (a) The Indenture will provide that the Company
will not create, incur, issue, assume, guarantee or in any manner become
directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Indebtedness (including any Acquired
Indebtedness), other than Permitted Indebtedness, unless (x) the Company's
Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters
immediately preceding the incurrence of such Indebtedness, taken as one period
(and after giving pro forma effect to: (i) the incurrence of such Indebtedness
and (if applicable) the application of the net proceeds therefrom, including
to refinance other Indebtedness, as if such Indebtedness was incurred and the
application of such proceeds occurred at the beginning of such four-quarter
period; (ii) the incurrence, repayment or retirement of any other Indebtedness
by the Company or its Restricted Subsidiaries since the first day of such
four-quarter period as if such Indebtedness was incurred, repaid or retired at
the beginning of such four-quarter period; and (iii) notwithstanding clause
(d) of the definition of Consolidated Adjusted Net Income, the acquisition
(whether by purchase, merger or otherwise) or disposition (whether by sale,
merger or otherwise) of any company, entity or business acquired or disposed
of by the Company or its Restricted Subsidiaries, as the case may be, since
the first day of such four-quarter period, as if such acquisition or
disposition occurred at the beginning of such four-quarter period, reflecting,
in the case of such an acquisition, any amount attributable to operating
expense that will be eliminated or cost reduction that will be realized (in
each case, net of any operating expense or other cost increase) in connection
with such acquisition, as determined in good faith by the chief financial
officer of the Company in accordance with GAAP and the rules, regulations and
guidelines of the Commission, as if such elimination of operating expense or
the realization of such cost reduction were achieved at the beginning of such
four-quarter period), would have been at least equal to 2.0 to 1 and (y) if
such Indebtedness is Subordinated Indebtedness, such Indebtedness shall have
an Average Life longer than the Average Life of the Notes and a final Stated
Maturity of principal later than the final Stated Maturity of principal of the
Notes.
(b) The Company will not permit any Restricted Subsidiary to incur any
Indebtedness (including any Acquired Indebtedness), other than Permitted
Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed Charge
Coverage Ratio for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness, taken as one period (and after giving pro
forma effect to the matters referred to in clauses (i), (ii) and (iii) in the
parenthetical in paragraph (a) of the "Limitation on Indebtedness" covenant),
would have been at least equal to 3.0 to 1, and (y) any Restricted Subsidiary
which incurs any Indebtedness pursuant to clause (x) of this paragraph (b)
shall Guarantee the Notes in compliance with clause (i) of paragraph (b) and
clauses (i)(A), (ii) and (iii) of paragraph (a) of the "Limitation on
Guarantees of Indebtedness by Restricted Subsidiaries" covenant. (Section
1010)
Limitation on Other Senior Subordinated Indebtedness. The Indenture will
provide that the Company will not, and will not permit any Restricted
Subsidiary to, incur, create, assume, guarantee or in any other manner become
directly or indirectly liable with respect to or responsible for, or permit to
remain outstanding, any Indebtedness, other than the Notes, that is
subordinate or junior in right of payment to any Senior Indebtedness unless
such Indebtedness is also pari passu with, or subordinate in right of payment
to, the Notes pursuant to subordination provisions substantially similar to
those contained in the Indenture. (Section 1019)
Limitation on Restricted Payments. (a) The Indenture will provide that the
Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, take the following actions:
(i) declare or pay any dividend on, or make any distribution to holders
of, any shares of the Company's Capital Stock (other than dividends or
distributions payable in shares of its Capital Stock or in options,
warrants or other rights to purchase such Capital Stock, but excluding
dividends or distributions payable in Redeemable Capital Stock or in
options, warrants or other rights to purchase Redeemable Capital Stock),
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any options, warrants or other rights to
acquire such Capital Stock,
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(iii) make any principal payment on or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to a scheduled principal
payment, scheduled sinking fund payment or maturity, any Pari Passu
Indebtedness or Subordinated Indebtedness,
(iv) make any Investment (other than any Permitted Investment) in any
Person, or
(v) incur any guarantee of Indebtedness of any Affiliate, including any
Unrestricted Subsidiary (other than with respect to (a) guarantees of
Indebtedness of any wholly-owned Restricted Subsidiary by the Company or
(b) guarantees of Indebtedness of the Company by any Restricted
Subsidiary),
(such payments or other actions described in (but not excluded from) clauses
(i) through (v) are collectively referred to as "Restricted Payments"), unless
at the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by
the Board of Directors of the Company, whose determination shall be conclusive
and evidenced by a Board Resolution), (1) no Default or Event of Default shall
have occurred and be continuing, (2) the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Indebtedness" covenant, and (3) the aggregate amount of all
Restricted Payments declared or made after the date of the Indenture shall not
exceed the sum of (A) 50% of the aggregate cumulative Consolidated Adjusted
Net Income of the Company accrued on a cumulative basis during the period
beginning on the first day after the date of the Indenture and ending on the
last day of the Company's last fiscal quarter ending prior to the date of such
proposed Restricted Payment (or, if such aggregate cumulative Consolidated
Adjusted Net Income shall be a loss, minus 100% of such loss), plus (B) the
aggregate net cash proceeds received after the date of the Indenture by the
Company from the issuance or sale (other than to any Restricted Subsidiary) of
shares of Capital Stock of the Company (other than Redeemable Capital Stock)
or warrants, options or rights to purchase such shares of Capital Stock of the
Company, plus (C) the aggregate net cash proceeds received after the date of
the Indenture by the Company from the issuance or sale (other than to any
Restricted Subsidiary) of debt securities that have been converted into or
exchanged for Capital Stock of the Company (other than Redeemable Capital
Stock) to the extent such debt securities were originally sold for cash,
together with the aggregate cash received by the Company at the time of such
conversion or exchange, plus (D) to the extent not otherwise included in the
Company's Consolidated Adjusted Net Income, the net reduction in Investments
in Unrestricted Subsidiaries resulting from the payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other transfers
of assets, in each case to the Company or a Restricted Subsidiary after the
date of the Indenture from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary (valued
in each case as provided in the definition of Investment), not to exceed in
the case of any Unrestricted Subsidiary the total amount of Investments (other
than Permitted Investments), after the date of the Indenture in such
Unrestricted Subsidiary by the Company and its Restricted Subsidiaries, plus
(E) $10 million.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take the following actions so long as (with respect to
clauses (ii), (iii), (iv), (v) and (vi) below) no Default or Event of Default
shall have occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such declaration complied
with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of, a substantially concurrent issuance and
sale (other than to a Restricted Subsidiary) of shares of Capital Stock
(other than Redeemable Capital Stock) of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness (other than
Redeemable Capital Stock) in exchange for or out of the net cash proceeds
of a substantially concurrent issuance and sale (other than to a Restricted
Subsidiary) of shares of Capital Stock (other than Redeemable Capital
Stock) of the Company;
(iv) the repurchase of any Subordinated Indebtedness of the Company at a
purchase price not greater than 101% of the principal amount of such
Subordinated Indebtedness in the event of a Change of Control
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<PAGE>
pursuant to a provision similar to the "Change of Control" covenant;
provided that prior to such repurchase the Company has made the Change of
Control Offer as provided in such covenant with respect to the Notes and
has repurchased all Notes validly tendered for payment in connection with
such Change of Control Offer;
(v) the purchase, redemption or other acquisition or retirement for value
of Subordinated Indebtedness (other than Redeemable Capital Stock) in
exchange for, or out of the net cash proceeds of a substantially concurrent
incurrence (other than to a Restricted Subsidiary) of, Indebtedness of the
Company so long as (A) the principal amount of such new Indebtedness does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) of the Indebtedness being so purchased,
redeemed, acquired or retired, plus the amount of any premium required to
be paid in connection with such refinancing pursuant to the terms of the
Subordinated Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, (B) such new Indebtedness is subordinated
to the Notes to the same extent as the Notes are subordinated to Senior
Indebtedness and (C) such new Indebtedness has an Average Life longer than
the Average Life of the Notes and a final Stated Maturity of principal
later than the final Stated Maturity of principal of the Notes; and
(vi) the purchase, redemption or other acquisition or retirement for
value of shares of Common Stock of the Company issued pursuant to non-
qualified options granted under stock option plans of the Company, in order
to pay withholding taxes due as a result of income recognized upon the
exercise of such options; provided that (1) the Company is required, by the
terms of such plans, to effect such purchase, redemption or other
acquisition or retirement for value of such shares and (2) the aggregate
consideration paid by the Company for such shares so purchased, redeemed or
otherwise acquired or retired for value does not exceed $2 million during
any fiscal year of the Company.
The actions described in clauses (i), (ii), (iii), (iv) and (vi) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a) (provided that any dividend paid pursuant to clause (i) of this paragraph
(b) shall reduce the amount that would otherwise be available under clause (3)
of paragraph (a) when declared, but not also when subsequently paid pursuant
to such clause (i)) and the actions described in clause (v) of this paragraph
(b) shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph (b) and shall not reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a).
(c) In computing Consolidated Adjusted Net Income of the Company under
clause (3)(A) of paragraph (a) above, (1) the Company shall use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (2) the
Company shall be permitted to rely in good faith on the financial statements
and other financial data derived from the books and records of the Company
that are available on the date of determination. If the Company makes a
Restricted Payment which, at the time of the making of such Restricted Payment
would in the good faith determination of the Company be permitted under the
requirements of the Indenture, such Restricted Payment shall be deemed to have
been made in compliance with the Indenture notwithstanding any subsequent
adjustments made in good faith to the Company's financial statements affecting
Consolidated Adjusted Net Income of the Company for any period. (Section 1011)
Limitation on Issuances and Sales of Restricted Subsidiary Stock. The
Indenture will provide that the Company (i) will not permit any Restricted
Subsidiary to issue any Capital Stock (other than to the Company or a wholly-
owned Restricted Subsidiary) and (ii) will not permit any Person (other than
the Company or a wholly-owned Restricted Subsidiary) to own any Capital Stock
of any Restricted Subsidiary; provided, however, that this covenant shall not
prohibit (1) the issuance and sale of all, but not less than all, of the
issued and outstanding
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Capital Stock of any Restricted Subsidiary owned by the Company or any of its
Restricted Subsidiaries in compliance with the other provisions of the
Indenture, or (2) the ownership by directors of director's qualifying shares
or the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law. (Section 1012)
Limitation on Transactions with Affiliates. The Indenture will provide that
the Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction with, or
for the benefit of, any Affiliate of the Company or any beneficial owner of 5%
or more of any class of the Company's Capital Stock at any time outstanding
("Interested Persons"), unless (i) such transaction is among the Company and
wholly-owned Restricted Subsidiaries or (ii) (A) such transaction is on terms
that are no less favorable to the Company, or such Restricted Subsidiary, as
the case may be, than those which could have been obtained in an arm's length
transaction with third parties who are not Interested Persons and (B) such
transaction has been approved by the Board of Directors (including a majority
of the Disinterested Directors); provided, however, that this covenant will
not restrict (1) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted Subsidiary
who are not employees of the Company or any Restricted Subsidiary and (2) the
performance of the Company's obligations under the AET Contract. (Section
1013)
Limitation on Liens Securing Pari Passu Indebtedness or Subordinated
Indebtedness. (a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) securing Pari Passu Indebtedness
or Subordinated Indebtedness of the Company on or with respect to any of its
property or assets, including any shares of stock or indebtedness of any
Restricted Subsidiary, whether owned at the date of the Indenture or
thereafter acquired, or any income, profits or proceeds therefrom, or assign
or otherwise convey any right to receive income thereon, unless (x) in the
case of any Lien securing Pari Passu Indebtedness of the Company, the Notes
are secured by a Lien on such property, assets or proceeds that is senior in
priority to or pari passu with such Lien and (y) in the case of any Lien
securing Subordinated Indebtedness of the Company, the Notes are secured by a
Lien on such property, assets or proceeds that is senior in priority to such
Lien.
(b) The Company will not permit any Restricted Subsidiary to, directly or
indirectly, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) securing Indebtedness of such Restricted Subsidiary that is
pari passu or subordinate in right of payment to the Guarantee of such
Subsidiary, on or with respect to any of such Restricted Subsidiary's
properties or assets, including any shares of stock or Indebtedness of any
Subsidiary of such Restricted Subsidiary, whether owned at the date of the
Indenture or thereafter acquired, or any income, profits or proceeds
therefrom, or assign or otherwise convey any right to receive income thereon,
unless (x) in the case of any Lien securing Indebtedness of the Restricted
Subsidiary that is pari passu in right of payment to the Guarantee of such
Restricted Subsidiary, such Guarantee is secured by a Lien on such property,
assets or proceeds that is senior in priority to or pari passu with such Lien
and (y) in the case of any Lien securing Indebtedness of the Restricted
Subsidiary that is subordinate in right of payment to the Guarantee of such
Restricted Subsidiary, such Guarantee is secured by a Lien on such property,
assets or proceeds that is senior in priority to such Lien. (Section 1014)
Change of Control. Upon the occurrence of a Change of Control, the Company
shall be obligated to make an offer to purchase all of the then outstanding
Notes (a "Change of Control Offer"), and shall purchase, on a business day
(the "Change of Control Purchase Date") not more than 70 nor less than 60 days
following the Change of Control, all of the then outstanding Notes validly
tendered pursuant to such Change in Control Offer, at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the Change of
Control Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the Change of Control, mail to each Noteholder
and the Banks notice of the Change of Control Offer, which notice
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shall govern the terms of the Change of Control Offer and shall state, among
other things, the procedures that Noteholders must follow to accept the Change
of Control Offer.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by Noteholders
seeking to accept the Change of Control Offer. The Bank Credit Agreement
prohibits the purchase of the Notes by the Company prior to full repayment of
indebtedness under the Bank Credit Agreement and the termination of the
commitments thereunder and, upon a Change of Control, all amounts outstanding
under the Bank Credit Agreement may become due and payable. In addition, under
the terms of the indenture governing the Senior Notes, the repurchase of the
Notes by the Company would constitute a restricted payment that may be
prohibited at the time of a Change of Control. There can be no assurance that
in the event of a Change of Control the Company will be able to obtain the
necessary consents from the lenders under the Bank Credit Agreement, or, if
necessary, from the holders of the Senior Notes, to consummate a Change of
Control Offer. The failure of the Company to make or consummate the Change of
Control Offer or pay the Change of Control Purchase Price when due would
result in an Event of Default and would give the Trustee and the holders of
the Notes the rights described under "--Events of Default."
One of the events which constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law
of the Indenture) to represent a specific quantitative test. As a consequence,
in the event holders of the Notes elect to require the Company to purchase the
Notes and the Company elects to contest such election, there can be no
assurance as to how a court interpreting New York law would interpret the
phrase.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to purchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined
as a Change of Control. See "--Certain Definitions" for the definition of
"Change of Control."
The Company will comply with Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and
the Company is required to purchase Notes as described above. (Section 1015)
Limitation on Disposition of Proceeds of Asset Sales. (a) The Indenture will
provide that the Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not
less than the Fair Market Value of the assets sold (as determined by the Board
of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or Cash Equivalents; provided that the Company
and its Restricted Subsidiaries may engage in Asset Sales for consideration
not in the form of cash or Cash Equivalents in amounts in excess of that
permitted in this clause (ii), so long as (x) such excess consideration is in
the form of Fully Traded Common Stock, (y) the aggregate Fair Market Value of
such Fully Traded Common Stock received by the Company and its Restricted
Subsidiaries (measured as of the date of receipt) from all Asset Sales in
reliance on this proviso since the date of the Indenture that has not been
converted into cash or Cash Equivalents does not exceed $10 million and (z)
any Fully Traded Common stock that is converted into cash or Cash Equivalents
shall be applied as provided in paragraphs (b) and (c) of this "Limitation on
Disposition of Proceeds of Asset Sales" covenant.
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(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may use the Net Cash Proceeds thereof, within 12 months after such
Asset Sale, to (i) repay or prepay any then outstanding Senior Indebtedness of
the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or
enter into a legally binding agreement to invest) in properties and assets to
replace the properties and assets that were the subject of the Asset Sale or
in properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, existing on the Closing Date or
in businesses reasonably related thereto. If any such legally binding
agreement to invest such Net Cash Proceeds is terminated, then the Company
may, within 90 days of such termination or within 12 months of such Asset
Sale, whichever is later, invest such Net Cash Proceeds as provided in clauses
(i) or (ii) (without regard to the parenthetical contained in such clause
(ii)) above. The amount of such Net Cash Proceeds not so used as set forth
above in this paragraph (b) constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million, the
Company shall, within 15 business days, make an offer to purchase (an "Excess
Proceeds Offer") from all holders of Notes, on a pro rata basis, in accordance
with the procedures set forth below, the maximum principal amount (expressed
as a multiple of $1,000) of Notes that may be purchased with the Excess
Proceeds. The offer price as to each Note shall be payable in cash in an
amount equal to 100% of the principal amount of such Note plus accrued and
unpaid interest, if any, to the date such Excess Proceeds Offer is
consummated. To the extent that the aggregate principal amount of Notes
tendered pursuant to an Excess Proceeds Offer is less than the Excess
Proceeds, the Company may use such deficiency for general corporate purposes.
If the aggregate principal amount of Notes validly tendered and not withdrawn
by holders thereof exceeds the Excess Proceeds, Notes to be purchased will be
selected on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset to zero. (Section 1016)
Limitation on Guarantees of Indebtedness by Restricted Subsidiaries. (a) The
Indenture will provide that the Company will not permit any Restricted
Subsidiary to guarantee the payment of any Indebtedness of the Company or any
Indebtedness of any other Restricted Subsidiary unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to
the Indenture providing for a Guarantee of payment of the Notes by such
Restricted Subsidiary except that (A) if the Notes are subordinated in right
of payment to such Indebtedness, the Guarantee under the supplemental
indenture shall be subordinated to such Restricted Subsidiary's guarantee with
respect to such Indebtedness substantially to the same extent as the Notes are
subordinated to such Indebtedness under the Indenture and (B) if such
Indebtedness is by its express terms subordinated in right of payment to the
Notes, any such guarantee of such Restricted Subsidiary with respect to such
Indebtedness shall be subordinated in right of payment to such Restricted
Subsidiary's Guarantee with respect to the Notes substantially to the same
extent as such Indebtedness is subordinated to the Notes; (ii) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Restricted Subsidiary as
a result of any payment by such Restricted Subsidiary under its Guarantee;
(iii) such Restricted Subsidiary shall appoint CT Corporation in New York City
as its agent for the service of process; and (iv) such Restricted Subsidiary
shall deliver to the Trustee an Opinion of Counsel to the effect that (A) such
appointment of CT Corporation is valid, (B) such Guarantee of the Notes has
been duly executed and authorized and (C) such Guarantee of the Notes
constitutes a valid, binding and enforceable obligation of such Restricted
Subsidiary, except insofar as enforcement thereof may be limited by
bankruptcy, insolvency or similar laws (including, without limitation, all
laws relating to fraudulent transfers) and except insofar as enforcement
thereof is subject to general principles of equity; provided that this
paragraph (a) shall not be applicable to any Guarantee of any Restricted
Subsidiary that (x) existed at the time such Person became a Restricted
Subsidiary of the Company and (y) was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of the Company.
(b) Notwithstanding the foregoing and the other provisions of the Indenture,
any Guarantee by a Restricted Subsidiary of the Notes shall provide by its
terms that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the
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Company's Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary (which sale, exchange or transfer is not prohibited by
the Indenture) or (ii) the release or discharge of the Guarantee which
resulted in the creation of such Guarantee, except a discharge or release by
or as a result of payment under such Guarantee. (Section 1017)
Limitation on Dividends and other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture will provide that the Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company to (a)
pay dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock or any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary of the Company, (c) make loans or advances to the
Company or any other Restricted Subsidiary of the Company, (d) transfer any of
its properties or assets to the Company or any other Restricted Subsidiary of
the Company or (e) guarantee any Indebtedness of the Company or any other
Restricted Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) customary
non-assignment provisions of any lease governing a leasehold interest of the
Company or any Restricted Subsidiary of the Company, (iii) any agreement or
other instrument of a Person acquired by the Company or any Restricted
Subsidiary of the Company in existence at the time of such acquisition (but
not created in contemplation thereof), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired, (iv)
any agreement in existence on the Closing Date (to the extent of any
encumbrances or restrictions in existence thereunder on the Closing Date) and
(v) any agreement providing for the incurrence of Indebtedness of Restricted
Subsidiaries pursuant to either clause (x) of paragraph (b) of the "Limitation
on Indebtedness" covenant or clause (vii) of the definition of Permitted
Subsidiary Indebtedness; provided that any Restricted Subsidiary that becomes
subject to any such encumbrances or restrictions pursuant to this clause (v)
shall Guarantee the Notes in compliance with the provisions of clause (i) of
paragraph (b) and clauses (A)(i), (ii) and (iii) of paragraph (a) of the
"Limitation on Guarantees of Indebtedness by Restricted Subsidiaries"
covenant. (Section 1018)
Reports. The Indenture will require that the Company file on a timely basis
with the Commission, to the extent such filings are accepted by the Commission
and whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that
the Company would be required to file if it were subject to Section 13 or 15
of the Exchange Act. The Company will also be required (a) to file with the
Trustee, and provide to each holder of Notes, without cost to such holder,
copies of such reports and documents within 15 days after the date on which
the Company files such reports and documents with the Commission or the date
on which the Company would be required to file such reports and documents if
the Company were so required and (b) if filing such reports and documents with
the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at the Company's cost copies of such reports and
documents to any prospective holder of Notes promptly upon written request.
(Section 1009)
MERGER, CONSOLIDATION AND SALE OF ASSETS, ETC.
The Company will not, in any transaction or series of transactions, merge or
consolidate with or into, or sell, assign, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets as an
entirety to, any Person or Persons, and the Company will not permit any
Restricted Subsidiary to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, transfer, lease or other disposition of
all or substantially all of the properties and assets of the Company and its
Restricted Subsidiaries on a consolidated basis to any other Person or
Persons, unless at the time and after giving effect thereto (i) either (A) if
the transaction or transactions is a merger or consolidation, the Company
shall be the surviving Person of such merger or consolidation, or (B) the
Person formed by such consolidation or into which the Company or such
Restricted Subsidiary is merged or to which the properties and assets of the
Company or such Restricted Subsidiary, as the case may be, substantially as an
entirety, are sold, assigned, transferred, leased or otherwise disposed of
(any such surviving Person or transferee Person being the
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"Surviving Entity") shall be a corporation organized and existing under the
laws of the United States of America, any state thereof or the District of
Columbia and shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and the Indenture, and, in each
case, the Indenture shall remain in full force and effect; (ii) immediately
before and immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing and the Company or the Surviving
Entity, as the case may be, after giving effect to such transaction or series
of transactions on a pro forma basis, could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation
on Indebtedness" covenant; and (iii) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, the Consolidated
Net Worth of the Company or the Surviving Entity, as the case may be, is at
least equal to the Consolidated Net Worth of the Company immediately before
such transaction or series of transactions. (Section 801)
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in the form and substance reasonably satisfactory
to the Trustee, an Officers' Certificate stating that such consolidation,
merger, transfer, lease or other disposition and the supplemental indenture in
respect thereto comply with the requirements under the Indenture and an
Opinion of Counsel stating that the requirements of clause (i) of the
preceding paragraph have been complied with.
Upon any consolidation or merger or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties
and assets of the Company in accordance with the immediately preceding
paragraphs in which the Company is not the continuing obligor under the
Indenture, the Surviving Entity shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with
the same effect as if such successor had been named as the Company therein.
When a successor assumes all the obligations of its predecessor under the
Indenture or the Notes, the predecessor shall be released from those
obligations; provided that in the case of a transfer by lease, the predecessor
shall not be released from the payment of principal and interest on the Notes.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, when
due and payable, on any of the Notes; or
(ii) default in the payment of an installment of interest on any of the
Notes, when due and payable, for 30 days; or
(iii) default in the performance or breach of the provisions of the
"Merger, Consolidation and Sale of Assets" section of the Indenture, the
failure to make or consummate a Change of Control Offer in accordance with
the provisions of the "Change of Control" covenant or the failure to make
or consummate an Excess Proceeds Offer in accordance with the provisions of
the "Limitation on Disposition of Proceeds of Asset Sales" covenant; or
(iv) the Company or any Guarantor shall fail to perform or observe any
other term, covenant or agreement contained in the Notes, any Guarantee or
the Indenture (other than a default specified in (i), (ii) or (iii) above)
for a period of 30 days after written notice of such failure requiring the
Company to remedy the same shall have been given (x) to the Company by the
Trustee or (y) to the Company and the Trustee by the holders of 25% in
aggregate principal amount of the Notes then outstanding; or
(v) default or defaults under one or more mortgages, bonds, debentures or
other evidences of Indebtedness under which the Company or any Significant
Subsidiary then has outstanding Indebtedness in excess of $5 million,
individually or in the aggregate, and either (a) such Indebtedness is
already due and
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payable in full or (b) such default or defaults have resulted in the
acceleration of the maturity of such Indebtedness; or
(vi) one or more final judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5 million, either individually or in the
aggregate, shall be entered against the Company or any of its Significant
Subsidiaries or any of their respective properties and shall not be
discharged or fully bonded and there shall have been a period of 60 days
after the date on which any period for appeal has expired and during which
a stay of enforcement of such judgment, order or decree shall not be in
effect; or
(vii) (A) any holder of at least $5 million in aggregate principal amount
of secured Indebtedness of the Company or of any Significant Subsidiary as
to which a default has occurred and is continuing shall commence judicial
proceedings (which proceedings shall remain unstayed for 5 Business Days)
to foreclose upon assets of the Company or any Significant Subsidiary
having an aggregate Fair Market Value, individually or in the aggregate, in
excess of $5 million or shall have exercised any right under applicable law
or applicable security documents to take ownership of any such assets in
lieu of foreclosure or (B) any action described in the foregoing clause (A)
shall result in any court of competent jurisdiction issuing any order for
the seizure of such assets; or
(viii) any Guarantee ceases to be in full force and effect or is declared
null and void or any Guarantor denies that it has any further liability
under any Guarantee, or gives notice to such effect (other than by reason
of the termination of the Indenture or the release of any such Guarantee in
accordance with the Indenture) and such condition shall have continued for
a period of 30 days after written notice of such failure requiring the
Guarantor and the Company to remedy the same shall have been given (x) to
the Company by the Trustee or (y) to the Company and the Trustee by the
holders of 25% in aggregate principal amount of the Notes then outstanding;
or
(ix) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
(Section 501)
If an Event of Default (other than as specified in clause (ix) above) shall
occur and be continuing, the Trustee, by notice to the Company, or the holders
of at least 25% in aggregate principal amount of the Notes then outstanding,
by notice to the Trustee and the Company, may declare the principal of,
premium, if any, and accrued interest on all of the outstanding Notes due and
payable immediately, upon which declaration all amounts payable in respect of
the Notes shall be immediately due and payable, provided, however, that, for
so long as the Bank Credit Agreement is in effect, such declaration shall not
become effective until the earlier of (i) five Business Days following
delivery of notice to the Agent Bank of the intention to accelerate the Notes
or (ii) the acceleration of any Indebtedness under the Bank Credit Agreement.
If an Event of Default specified in clause (ix) above occurs and is
continuing, then the principal of, premium, if any, and accrued interest on
all of the outstanding Notes shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any holder of Notes. (Section 502)
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may
rescind such declaration if (a) the Company has paid or deposited with the
Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, (ii) all overdue interest
on all Notes, (iii) the principal of and premium, if any, on any Notes which
have become due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Notes, and (iv) to the extent that
payment of such interest is lawful, interest upon overdue interest at the rate
borne by the Notes which has become due otherwise than by such declaration of
acceleration; (b) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction; and (c) all Events of Default,
other than the nonpayment of principal of, premium, if any, and interest on
the Notes that has become due solely by such declaration of acceleration, have
been cured or waived. (Section 502)
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The holders of not less than a majority in aggregate principal amount of the
outstanding Notes may on behalf of the holders of all the Notes waive any past
defaults under the Indenture, except a default in the payment of the principal
of, premium, if any, or interest on any Note, or in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each Note outstanding. (Section 513)
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 15 days after receipt of such
notice and the Trustee, within such 15-day period, has not received directions
inconsistent with such written request by holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations do not apply,
however, to a suit instituted by a holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note. (Section 507)
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person
would exercise under the circumstances in the conduct of such person's own
affairs. Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Noteholders unless such holders shall have offered to the Trustee reasonable
security or indemnity. Subject to certain provisions concerning the rights of
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee under the Indenture.
(Sections 512 and 602)
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee shall mail to each holder of the Notes notice of the
Default or Event of Default within 5 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of,
premium, if any, or interest on any Notes, the Trustee may withhold the notice
to the holders of such Notes if a committee of its Trust Officers in good
faith determines that withholding the notice is in the interest of the
Noteholders. (Section 601)
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company and the Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within ten
days of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations of
the Company and the Guarantors with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payment in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency
for payments in respect of the Notes, (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and (iv) the defeasance provisions of the
Indenture. In addition, the Company may, at its option and at any time, elect
to terminate the obligations of the Company and any Guarantor with respect to
certain covenants that are set forth in the Indenture, some of which are
described under "Certain Covenants" above, and any omission to comply with
such obligations shall not constitute a Default or an Event of Default with
respect to the Notes ("covenant defeasance"). The Company is permitted to
exercise defeasance or covenant defeasance only with the consent of the Banks.
(Sections 1202 and 1203)
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In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest on the outstanding Notes to redemption or maturity; (ii) the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such defeasance or covenant defeasance had not occurred (in the case of
defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit; (iv) such defeasance or covenant defeasance shall
not cause the Trustee to have a conflicting interest with respect to any
securities of the Company or any Guarantor; (v) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a
default under, any material agreement or instrument to which the Company or
any Guarantor is a party or by which it is bound; (vi) the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and (vii) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel
satisfactory to the Trustee, which, taken together, state that all conditions
precedent under the Indenture to either defeasance or covenant defeasance, as
the case may be, have been complied with. (Section 1204)
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes
not theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (ii) the Company has paid all other sums payable under the Indenture by
the Company; and (iii) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel satisfactory to the Trustee, which,
taken together, state that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with. (Section 401)
AMENDMENTS AND WAIVERS
From time to time, the Company and the Trustee may, without the consent of
the Noteholders, amend, waive or supplement the Indenture or the Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act of 1939, or making any change that
does not adversely affect the rights of any Noteholder; provided, however,
that the Company has delivered to the Trustee an Opinion of Counsel stating
that such change does not adversely affect the rights of any Noteholder. Other
amendments and modifications of the Indenture or the Notes may be made by the
Company and the Trustee with the consent of the holders of not less than a
majority of the aggregate principal amount of the outstanding Notes; provided,
however, that no such modification or amendment may, without the consent of
the holder of each outstanding Note affected thereby, (i) reduce the principal
amount of, extend the fixed maturity of or alter the redemption provisions of,
the Notes, (ii) change the currency in which any Notes or any premium or the
interest thereon is payable, (iii) reduce the
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percentage in principal amount of outstanding Notes that must consent to an
amendment, supplement or waiver or consent to take any action under the
Indenture or the Notes, (iv) modify the "Limitation on Other Senior
Subordinated Indebtedness" covenant or any of the provisions in the Indenture
relating to the subordination of the Notes in a manner adverse to the holders;
(v) impair the right to institute suit for the enforcement of any payment on
or with respect to the Notes, (vi) waive a default in payment with respect to
the Notes, (vii) alter the Company's obligation to purchase the Notes in
accordance with the Indenture or waive any default in the performance thereof,
(viii) reduce or change the rate or time for payment of interest on the Notes,
or (ix) release any Guarantor from any of its obligations under its Guarantee
or the Indenture other than in accordance with the terms of the Indenture.
(Sections 901 and 902) The ability of the Company to amend the Indenture will
be restricted by the terms of the Bank Credit Agreement.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent Person would exercise under the circumstances in the
conduct of such Person's own affairs. (Section 602)
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received
by it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined) it must eliminate such conflict
or resign.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of New
York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a subsidiary of any other Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a subsidiary).
"AET" means Applied Extrusion Technologies, Inc., a Delaware corporation.
"AET Contract" means the supply contract between the Company and AET, dated
April 17, 1990 and expiring March 31, 1998, as in effect on the date of the
Indenture.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person and, in the case of the
Company and its Restricted Subsidiaries, also means AET and The K.A.D.
Companies, Inc.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary or any Restricted Subsidiary shall be merged with or
into the Company or any Restricted Subsidiary or (b) the acquisition by the
Company or any Restricted Subsidiary of the assets of any Person which
constitute all or substantially all of the assets of such Person or any
division or line of business of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition to any Person other than the Company or a wholly-owned Restricted
Subsidiary, in one or a series of related transactions, of (a) any
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Capital Stock of any Restricted Subsidiary held by the Company or any
Restricted Subsidiary; (b) all or substantially all of the properties and
assets of any division or line of business of the Company or any Restricted
Subsidiary; or (c) any other properties or assets of the Company or any
Restricted Subsidiary other than in the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include any sale,
issuance, conveyance, transfer, lease or other disposition of properties or
assets (i) that is governed by the provisions of the Indenture governing
"Merger, Consolidation and Sale of Assets," (ii) to an Unrestricted
Subsidiary, if permitted under the "Limitation on Restricted Payments"
covenant or (iii) having a Fair Market Value of less than $250,000.
"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products
of (i) the number of years from such date to the date or dates of each
successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness multiplied by (ii) the amount
of each such principal payment by (b) the sum of all such principal payments.
"Bank Credit Agreement" means the Credit Agreement dated as of October 29,
1993, amended and restated as of May 18, 1994, between the Company and the
Banks as in effect on the date hereof and as such Agreement may be amended,
restated, supplemented, replaced, substituted or otherwise modified from time
to time.
"Banks" means the banks and other financial institutions from time to time
that are lenders under the Bank Credit Agreement.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of the Indenture,
the amount of such obligation at any date shall be the capitalized amount
thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity of
180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States of America is pledged in
support thereof); (ii) certificates of deposit or acceptances with a maturity
of 180 days or less of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; and (iii) commercial paper with a
maturity of 180 days or less issued by a corporation that is not an Affiliate
of the Company and is organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by S&P or at least
P-1 by Moody's.
"Change of Control" means the occurrence of any of the following events: (a)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed
to have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 40% of the total
Voting Stock of the Company; (b) the Company consolidates with, or merges with
or into, another Person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any Person, or
any Person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (i) the outstanding Voting Stock of the
Company is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (2)
cash, securities and other property in an amount which could be paid by the
Company as a Restricted Payment under the Indenture and (ii) immediately after
such transaction no "person"
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or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act) is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 40% of the total Voting Stock of
the surviving or transferee corporation; (c) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the stockholders
of the Company was approved by a vote of 66 2/3% of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then
in office; or (d) any final order, judgment or decree of a court of competent
jurisdiction shall be entered against the Company decreeing the dissolution or
liquidation of the Company.
"Closing Date" means the date of the closing of the offering of the Notes.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or nonvoting) of, such Person's common stock,
whether outstanding at the Closing Date or issued after the Closing Date, and
includes, without limitation, all series and classes of such common stock.
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and its Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted by excluding (a) net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to asset dispositions, (c) the net income (or
net loss) of any Person (other than the Company or a Restricted Subsidiary),
including Unrestricted Subsidiaries, in which the Company or any of its
Restricted Subsidiaries has an ownership interest, except to the extent of the
amount of dividends or other distributions actually paid to the Company or its
Restricted Subsidiaries in cash by such other Person during such period, (d)
net income (or net loss) of any Person combined with the Company or any of its
Restricted Subsidiaries on a "pooling of interests" basis attributable to any
period prior to the date of combination, (e) the net income of any Restricted
Subsidiary to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that net income is not
at the date of determination permitted, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders and (f) income resulting from transfers of
assets received by the Company or any Restricted Subsidiary from an
Unrestricted Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Adjusted Net Income,
Consolidated Interest Expense, Consolidated Tax Expense and Consolidated Non-
cash Charges, in each case, for such period, of such Person and its
subsidiaries on a consolidated basis, all determined in accordance with GAAP,
to (b) the sum of such Consolidated Interest Expense for such period; provided
that (i) in making such computation, the Consolidated Interest Expense of such
Person attributable to interest on any Indebtedness computed on a pro forma
basis and bearing a floating interest rate shall be computed as if the rate in
effect on the date of computation had been the applicable rate for the entire
period, (ii) in making such computation, the Consolidated Interest Expense of
such Person attributable to interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period, and
(iii) notwithstanding clauses (i) and (ii) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Rate Protection Obligations, shall be deemed
to have accrued at the rate per annum resulting after giving effect to the
operation of such agreements. If such Person or any of its subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the above
clause shall give effect to
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the incurrence of such guaranteed Indebtedness as if such Person or such
subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Income Tax Expense" means, with respect to any Person for any
period, the provision for federal, state, local and foreign income taxes of
such Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (i) the interest expense of such
Person and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest
portion of any deferred payment obligation, (d) all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and (e) all accrued interest, (ii) the interest component
of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Subsidiaries during such period as determined
on a consolidated basis in accordance with GAAP and (iii) the aggregate
dividends paid or accrued on Preferred Stock of such Person or its
Subsidiaries, to the extent such Preferred Stock is owned by Persons other
than such Person and its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person at any date, the
consolidated stockholders' equity of such Person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock or treasury
stock of such Person and its Subsidiaries, as determined in accordance with
GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Subsidiaries reducing Consolidated Adjusted Net Income
of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series of
transactions in respect of which the Board of Directors is required to deliver
a resolution of the Board of Directors under the Indenture, a member of the
Board of Directors who does not have any material direct or indirect financial
interest in or with respect to such transaction or series of transactions.
"Eligible Inventories" as of any date means the consolidated inventories of
the Company and its Restricted Subsidiaries (net of any reserve) on the basis
of the method of accounting (either last in/first out or first in/first out)
used by the Company in the preparation of its financial statements included in
the latest Form 10-K filed by the Company under the Securities Act, as shown
on a consolidated balance sheet of the Company and its Restricted
Subsidiaries, all in accordance with GAAP.
"Eligible Receivables" as of any date means the consolidated accounts
receivables (net of any reserve) of the Company and its Restricted
Subsidiaries that are not more than 60 days past their due date and that were
entered into on normal payment terms as shown on a consolidated balance sheet
of the Company and its Restricted Subsidiaries, all in accordance with GAAP.
"Event of Default" has the meaning set forth under "Events of Default"
herein.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction.
"FEEL" means Flight Equipment and Engineering Limited, an English
corporation.
"Fully Traded Common Stock" means Common Stock issued by any corporation if
(A) such Common Stock is listed on either The New York Stock Exchange, The
American Stock Exchange, The London Stock
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Exchange or the Nasdaq National Market; provided that such Common Stock is
freely tradeable under the Securities Act (or, in the case of The London Stock
Exchange, any applicable law, rule or regulation) upon issuance; and (B) such
Common Stock does not constitute more than 15% of the issued and outstanding
Common Stock of such corporation held by Persons other than 10% holders of
such Common Stock and Affiliates and insiders of such corporation.
"GAAP" means generally accepted accounting principles, consistently applied,
that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as may be approved by a
significant segment of the accounting profession of the United States of
America, which are applicable as of the Closing Date.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of any Indebtedness of the Company incurred
by any Restricted Subsidiary pursuant to (1) paragraph (a) of the "Limitation
on Guarantees of Indebtedness by Restricted Subsidiaries" covenant, (2) clause
(v) of the "Limitation on Dividends and other Payment Restrictions Affecting
Restricted Subsidiaries" covenant, (3) clause (y) of paragraph (b) of the
"Limitation on Indebtedness" covenant, or (4) clause (ii) of the definition of
Permitted Investment. When used as a verb, "Guarantee" shall have a
corresponding meaning.
"Guarantor" means any Restricted Subsidiary which incurs a Guarantee.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of
such Person in connection with any letters of credit, bankers' acceptance or
other similar credit transaction and in connection with any agreement to
purchase, redeem, exchange, convert or otherwise acquire for value any Capital
Stock of such Person, or any warrants, rights or options to acquire such
Capital Stock, now or hereafter outstanding, if, and to the extent, any of the
foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (b) all obligations of such Person evidenced
by bonds, notes, debentures or other similar instruments, if, and to the
extent, any of the foregoing would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, (c) all indebtedness of such
Person created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade accounts payable arising in the ordinary course of business, (d) all
Capitalized Lease Obligations of such Person, (e) all Indebtedness referred to
in the preceding clauses of other Persons and all dividends of other Persons,
the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or
become liable for the payment of such Indebtedness (the amount of such
obligation being deemed to be the lesser of the value of such property or
asset or the amount of the obligation so secured), (f) all guarantees by such
Person of Indebtedness referred to in this definition, (g) all Redeemable
Capital Stock of such Person valued at the greater of its voluntary or
involuntary maximum fixed repurchase price plus accrued dividends, (h) all
obligations of such Person under or in respect of currency exchange contracts
and Interest Rate Protection Obligations and (i) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of
such Person of the types referred to in clauses (a) through (h) above. For
purposes hereof, the "maximum fixed repurchase price" of any
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Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such
price is based upon, or measured by, the fair market value of such Redeemable
Capital Stock, such fair market value shall be determined in good faith by the
board of directors of the issuer of such Redeemable Capital Stock.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
Person calculated by applying a fixed or a floating rate of interest on the
same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person. In addition, the
Fair Market Value of the net assets of any Restricted Subsidiary of the
Company at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary shall be deemed to be an "Investment" made by the
Company in such Unrestricted Subsidiary at such time. "Investments" shall
exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any
property of any kind. A Person shall be deemed to own subject to a Lien any
property which such Person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Maturity" means, with respect to any Note, the date on which any principal
of such Note becomes due and payable as therein or herein provided, whether at
the Stated Maturity with respect to such principal or by declaration of
acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary), net of (i)
brokerage commissions and other fees and expenses (including fees and expenses
of legal counsel and investment banks) related to such Asset Sale, (ii)
provisions for all taxes payable as a result of such Asset Sale, (iii) amounts
required to be paid to any Person (other than the Company or any Restricted
Subsidiary) owning a beneficial interest in the assets subject to the Asset
Sale and (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with GAAP consistently applied against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an Officers' Certificate
delivered to the Trustee.
"Pari Passu Indebtedness" means Indebtedness of the Company which is pari
passu with the Notes.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company under the Bank Credit Agreement in an
aggregate principal amount at any one time outstanding not to exceed the
greater of (i) the commitment under the Bank Credit
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Agreement on the date of the Indenture and (ii) the sum of 80% of the
aggregate amount of Eligible Receivables and 50% of the aggregate amount of
Eligible Inventory, measured as of the most recent fiscal quarter preceding
the time such Indebtedness is incurred;
(ii) Indebtedness of the Company under the Notes;
(iii) Indebtedness of the Company outstanding on the date of the
Indenture (other than Indebtedness incurred pursuant to clause (i) of this
definition);
(iv) obligations of the Company pursuant to Interest Rate Protection
Obligations, which obligations do not exceed the aggregate principal amount
of the Indebtedness covered by such Interest Rate Protection Obligations
and obligations under currency exchange contracts entered into in the
ordinary course of business;
(v) Indebtedness of the Company to any wholly-owned Restricted
Subsidiaries;
(vi) Indebtedness of the Company consisting of guarantees, indemnities or
obligations in respect of purchase price adjustments in connection with the
acquisition or disposition of assets, including, without limitation, shares
of Capital Stock of Restricted Subsidiaries;
(vii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by the
Company of any Indebtedness of the Company incurred pursuant to clauses
(ii) and (iii) of this definition, including any successive refinancings by
the Company, so long as (A) any such new Indebtedness shall be in a
principal amount that does not exceed the principal amount (or, if such
Indebtedness being refinanced provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination)
so refinanced plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Indebtedness
refinanced or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing, plus the amount of
expenses of the Company incurred in connection with such refinancing, (B)
in the case of any refinancing of Pari Passu Indebtedness or Subordinated
Indebtedness, such new Indebtedness is made pari passu with or subordinate
to the Notes at least to the same extent as the Indebtedness being
refinanced and (C) such new Indebtedness has an Average Life longer than
the Average Life of the Notes and a final Stated Maturity later than the
final Stated Maturity of the Notes; and
(viii) Indebtedness in an aggregate principal amount not in excess of $30
million at any one time outstanding, less the amount of Permitted
Subsidiary Indebtedness then outstanding pursuant to clause (vii) of the
definition thereof.
"Permitted Investments" means any of the following: (i) Investments in Cash
Equivalents; (ii) Investments in the Company or wholly-owned Restricted
Subsidiaries; provided that if the Company shall make any Investment in FEEL
in excess of $1 million, FEEL shall Guarantee the Notes in compliance with
paragraph (b) and clauses (i) (A) and (ii) of paragraph (a) of the "Limitation
on Guarantees of Indebtedness by Restricted Subsidiaries" covenant; (iii)
Investments in an amount not to exceed $15 million at any one time
outstanding; or (iv) Investments by the Company or any Restricted Subsidiary
of the Company in another Person, if as a result of such Investment (A) such
other Person becomes a wholly-owned Restricted Subsidiary or (B) such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a wholly-owned Restricted
Subsidiary.
"Permitted Liens" means the following types of Liens:
(a) Liens on any property or assets of a Restricted Subsidiary granted in
favor of the Company or any Restricted Subsidiary;
(b) Liens securing the Notes;
(c) Liens securing the Guarantees;
(d) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the Company or any Restricted Subsidiary;
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provided that any such Lien does not extend to any property or assets of
the Company or any Restricted Subsidiary other than the assets acquired in
connection with the incurrence of such Acquired Indebtedness; and
(e) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (a) through (d); provided that any
such extension, renewal or replacement shall be no more restrictive in any
material respect that the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets.
"Permitted Subsidiary Indebtedness" means any of the following:
(i) Indebtedness of any Restricted Subsidiary outstanding on the date of
the Indenture;
(ii) obligations of any Restricted Subsidiary pursuant to Interest Rate
Protection Obligations, which obligations do not exceed the aggregate
principal amount of the Indebtedness covered by such Interest Rate
Protection Obligations;
(iii) Indebtedness of any Restricted Subsidiary to any wholly owned
Restricted Subsidiary of the Company or to the Company;
(iv) Indebtedness of any Restricted Subsidiary consisting of guaranties,
indemnities or obligations in respect of purchase price adjustments in
connection with the acquisition or disposition of assets, including,
without limitation, shares of Capital Stock of Restricted Subsidiaries;
(v) any renewals, extensions, substitutions, refinancings or replacements
(each, for purposes of this clause, a "refinancing") by any Restricted
Subsidiary of any Indebtedness of such Restricted Subsidiary incurred
pursuant to clause (i) of this definition, including any successive
refinancings by such Restricted Subsidiary, so long as any such new
Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
by such Restricted Subsidiary as necessary to accomplish such refinancing,
plus the amount of expenses of such Restricted Subsidiary incurred in
connection with such refinancing and such new Indebtedness has an Average
Life longer than the Average Life of the Notes and a final Stated Maturity
later than the final Stated Maturity of the Notes;
(vi) Indebtedness (as defined in clauses (e) and (f) of the definition of
Indebtedness) to the Noteholders incurred pursuant to provisions of the
Indenture;
(vii) Indebtedness in an amount not to exceed $30 million at any one time
outstanding, less the amount of Permitted Indebtedness then outstanding
pursuant to clause (viii) of the definition thereof; and
(viii) Guarantees of Indebtedness of the Company permitted under the
"Limitation on Guarantees of Indebtedness by Restricted Subsidiaries"
covenant.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding, or issued
after the Closing Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time prior to such final Stated Maturity, or is convertible
into or exchangeable for debt securities at any time prior to such final
Stated Maturity.
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"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"S&P" means Standard and Poor's Corporation and its successors.
"Senior Notes" means the 9 3/4% Senior Notes due 2003 of the Company issued
under the Senior Notes Indenture.
"Significant Subsidiary" of the Company means any Restricted Subsidiary of
the Company that is a "significant subsidiary" as defined in Rule 1.02(v) of
Regulation S-X under the Securities Act, and in any event shall include any
Guarantor.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is
due and payable, and, when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of
interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) a corporation a majority
of whose Voting Stock is at the time, directly or indirectly, owned by such
Person, by one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person
performing similar functions). Unless specifically provided to the contrary
herein, Unrestricted Subsidiaries shall not be included in the definition of
Subsidiaries for any purpose of the Indenture (other than for the purposes of
the definition of "Unrestricted Subsidiary" herein).
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company which at
the time of determination shall be an Unrestricted Subsidiary (as designated
by the Board of Directors of the Company, as provided below) and (2) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns, or holds any Lien on, any
property of the Company or any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated; provided that either (x) the
Subsidiary to be designated has total assets of $1,000 or less at the time of
its designation or (y) immediately after giving effect to such designation,
the Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the "Limitation on Indebtedness" covenant. The Board
of Directors may designate any Unrestricted Subsidiary to be a Subsidiary;
provided that immediately after giving effect to such designation, the Company
could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the "Limitation on Indebtedness" covenant.
"Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees
of any Person (irrespective of whether or not, at the time, stock of any other
class or classes shall have, or might have, voting power by reason of the
happening of any contingency).
"wholly owned" with respect to any Subsidiary, means any Subsidiary of any
Person of which at least 99% of the outstanding Capital Stock is owned by such
Person or another wholly-owned Subsidiary of such Person. For purposes of this
definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
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BOOK-ENTRY DELIVERY AND FORM
The certificates representing the New Notes will be issued in fully
registered form, without coupons. Except as described in the next paragraph,
the New Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York ("DTC"), and registered in the name of Cede & Co.,
as DTC's nominee in the form of a global Note certificate (the "Global
Certificate") or will remain in the custody of the Trustee pursuant to a FAST
Balance Certificate Agreement between DTC and the Trustee.
Old Notes originally purchased by or transferred to (i) institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) who are not "qualified institutional buyers" (as defined
in Rule 144A under the Securities Act ("QIBS"), (ii) except as described
below, persons outside the United States pursuant to sales in accordance with
Regulation S under the Securities Act or (iii) any other Persons who are not
QIBs (collectively, "Non-Global Purchasers") will be issued in registered form
without coupons (the '"Certificated Notes"). Upon the transfer to a QIB of
Certificated Notes initially issued to a Non-Global Purchaser, such
Certificated Notes will be exchanged for an interest in the Global Certificate
or in the New Notes in the custody of the Trustee representing the principal
amount of notes being transferred.
Old Notes originally purchased by persons outside the United States pursuant
to sales in accordance with Regulations S under the Securities Act were
represented upon issuance by a temporary global Note certificate (the
"Temporary Certificate") which is not exchangeable for Certificated Notes
until the expiration of the "40-day restricted period" within the meaning of
Rule 903(c)(3) of Regulation S under the Securities Act. The Temporary
Certificate is registered in the name of, and held by, a temporary certificate
holder until the expiration of such 40-day period, at which time the Temporary
Certificate will be delivered to the Trustee in exchange for Certificated
Notes registered in the names requested by such temporary certificate holder.
In addition, until the expiration of such 40-day period, transfers of interest
in the Temporary Certificate can only be effected through such temporary
certificate holder in accordance with the requirements set forth in "Notices
to Investors."
DESCRIPTION OF CERTAIN INDEBTEDNESS
Prior to the Acquisition, the Company had bank credit facilities that
aggregated $85 million. Concurrently with the Offering, BEA amended its
existing credit facilities by increasing the aggregate principal amount that
may be borrowed thereunder to $100 million. The Bank Credit Facility, which
became effective concurrently with the closing of the Offering, consists of
the $25 million Reducing Revolver and the $75 million Revolving Facility. The
Reducing Revolver is collateralized by all of the issued and outstanding
capital stock of Acurex and has a five year maturity with the commitments of
the lenders thereunder reducing during such five year period and the Revolving
Facility is collateralized by all of the Company's accounts receivable, all of
its inventory and substantially all of its other personal property and has a
five year maturity. In addition, the Bank Credit Facility contains customary
affirmative covenants, negative covenants and conditions of borrowing. The
Company also repaid a $10 million unsecured borrowing as described below. On
the date of final maturity of the Reducing Revolver and the Revolving
Facility, all remaining amounts then outstanding under the Bank Credit
Facility were required to be repaid. The Bank Credit Facility became effective
upon the closing of the Offering and the Acquisition. Upon the consummation of
the Acquisition and the Offering, indebtedness in an aggregate principal
amount of approximately $29 million, including letters of credit amounting to
approximately $6 million, were outstanding under the Bank Credit Facility. The
credit facilities bear interest at prime plus .50% or, at BEA's option, LIBOR
plus 1.75%, in each case, subject to BEA's credit rating.
The Company also has outstanding the $125 million of Senior Notes, which are
senior unsecured obligations of the Company ranking equally with future senior
unsecured obligations of the Company. The interest on the Senior Notes is
payable semiannually in arrears on March 1 and September 1 of each year. The
Senior Notes are redeemable at the option of the Company, in whole or in part,
on or after March 1, 1998 at predetermined redemption prices, together with
accrued and unpaid interest to the date of redemption. In addition, upon a
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Change of Control, the Company is obligated to make an offer to purchase all
outstanding Senior Notes at a redemption price of 101% of the principal amount
thereof, plus accrued and unpaid interest to the date of purchase. Similarly,
upon the sale or disposition of certain assets, the Company may be obligated
to make offers to purchase the Senior Notes with a portion of the cash
proceeds from such sale or disposition at a redemption price of 100% of the
principal amount thereof, plus accrued and unpaid interest to date of
purchase.
BEA is also party to a Term Loan Agreement with Nationsbank of Florida
pursuant to which it entered into two separate term loans in the amounts of
(a) $1.5 million for the purposes of providing long-term financing for a
dynamic test facility at its Litchfield, CT site (the "Litchfield Term Loan")
and (b) $2.5 million for the purpose of providing long-term financing for its
corporate headquarters located in Wellington, FL (the "Wellington Term Loan").
The Litchfield Term Loan and the Wellington Term Loan bear interest at the
prime rate plus one percent (1%) or the LIBOR rate plus 2.25%, or both. The
principal amount of the Litchfield Term Loan is to be repaid in twenty-four
equal installments of $62,500 each, payable quarterly on the last day of
February, May, August and November, with the last such installment due in
November 2001. The Litchfield Term Loan is secured primarily by a mortgage
covering the real estate at the Litchfield site and any improvements thereto.
The principal amount of the Wellington Term Loan is to be repaid in twenty-
four equal installments of $31,250 each, payable quarterly on the last day of
February, May, August and November, with a final principal installment of
$1.75 million due on the last business day in December 2001. The Wellington
Term Loan is secured primarily by a mortgage covering the real estate at the
Wellington site and any improvements thereto.
During fiscal 1994, FEEL, a subsidiary of BEA, entered into revolving lines
of credit and a term loan agreement aggregating $13 million (the "FEEL Credit
Agreement"). The FEEL Credit Agreement is collateralized by substantially all
of the assets of FEEL. Aggregate borrowings outstanding under the FEEL Credit
Agreement were approximately $11.5 million as of November 25, 1995.
Inventum, another subsidiary of BEA, has a revolving line of credit
agreement for approximately $1 million (the "Inventum Credit Agreement"). The
Inventum Credit Agreement is collateralized by substantially all of the assets
of Inventum. There were no borrowings outstanding under the Inventum Credit
Agreement as of November 25, 1995.
CERTAIN FEDERAL TAX CONSIDERATIONS
The following is a general discussion of the principal United States federal
income tax consequences applicable to the exchange of Old Notes for New Notes,
and the ownership and disposition of New Notes, by United States Holders (as
defined below) who exchange Old Notes for New Notes pursuant to the Exchange
Offer, as well as the principal United States federal income and estate tax
consequences of the ownership of New Notes by Foreign Holders (as defined
below) who acquire New Notes pursuant to the Exchange Offer. This discussion
is based on the Internal Revenue Code of 1986, as amended (the "Code"),
existing and proposed Treasury regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as in effect or
proposed on the date hereof and all of which are subject to change at any
time, possibly with retroactive effect, and to different interpretations. In
particular, the discussion is based in part on certain proposed regulations
issued in December 1992 concerning the tax treatment of exchanges and
modifications of debt instruments (the "1992 Proposed Regulations"). The 1992
Proposed Regulations are proposed to be effective for debt instruments issued
more than 30 days after such regulations are issued as final regulations.
Until issued as final (or temporary) regulations, such regulations are not
binding on the Internal Revenue Service ("IRS") and could be withdrawn,
replaced or modified at any time, possibly with retroactive effect. This
discussion does not address the tax consequences to subsequent purchasers of
New Notes or to persons who purchased Old Notes from an initial holder at a
price other than the face amount of such Note, and is limited to holders that
hold the New Notes as capital assets, within the meaning of section 1221 of
the Code. This discussion also does not address the tax consequences to
nonresident aliens or foreign corporations that are subject to United States
federal income tax on a net basis on income realized with respect to a New
Note because such income is effectively connected with the conduct of a U.S.
trade or business. Such holders are generally taxed in a similar manner to
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United States Holders; however, certain special rules apply. Moreover, this
discussion is for general information only, and does not address all of the tax
consequences that may be relevant to particular purchasers in light of their
personal circumstances, or to certain types of purchasers (such as certain
financial institutions, insurance companies, tax-exempt entities, dealers in
securities or persons who have hedged a risk of owning New Notes).
HOLDERS EXCHANGING OLD NOTES FOR NEW NOTES ARE URGED TO CONSULT THEIR TAX
ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF OLD
NOTES FOR NEW NOTES AND THE CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF
NEW NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX LAWS OR ANY STATE,
LOCAL OR FOREIGN TAX LAWS, AS WELL AS WITH RESPECT TO THE POSSIBLE EFFECTS OF
ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE TAX LAWS OR INTERPRETATIONS
THEREOF.
UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of an Old Note
or a New Note, as appropriate, that is, for United States federal income tax
purposes, (a) a citizen or resident of the United States, (b) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof or (c) an estate or trust
the income of which is subject to United States federal income taxation
regardless of source.
Exchange of Old Notes for New Notes
The exchange by a United States Holder of an Old Note for a New Note will not
constitute a taxable exchange of the Old Note if the economic terms of the New
Note (including the interest rate) are identical to the economic terms of the
Old Note. Under the 1992 Proposed Regulations, even if the interest rate on the
New Note were not equal to the interest rate on the Old Note as a result of an
increase in the interest rate of the Old Note prior to the exchange as
described under "The Exchange Offer," the exchange of the Old Note for the New
Note would not be treated as a taxable exchange, as such change in interest
rate would occur pursuant to the original terms of the Old Note. Accordingly,
in the absence of any change in law or the modification or withdrawal of the
1992 Proposed Regulations, the Company intends to take the position that in the
circumstances described in the preceding sentence, the exchange of an Old Note
for a New Note pursuant to the Exchange Offer will not constitute a taxable
exchange of the Old Note.
Assuming the exchange of an Old Note for a New Note pursuant to the Exchange
Offer is not treated as a taxable exchange for federal income tax purposes, the
New Note received by a United States Holder would be treated as a continuation
of the Old Note in the hands of such holder. As a result, there should be no
federal income tax consequences to United States Holders exchanging Old Notes
for New Notes pursuant to the Exchange Offer, and a United States Holder should
have the same adjusted basis and holding period in the New Notes immediately
after the exchange as it had in the Old Notes immediately before the exchange.
Payment of Interest on New Notes
Interest paid or payable on a New Note will be taxable to a United States
Holder as ordinary interest income, generally as received or accrued, in
accordance with such holder's method of accounting for federal income tax
purposes.
Sale, Exchange or Retirement of New Notes
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a New Note, a United States Holder will generally recognize
taxable gain or loss equal to the difference between the sum of cash plus the
fair market value of all other property received on such disposition (except to
the extent such cash or property
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is attributable to accrued but unpaid interest, which will be taxable as
ordinary income) and such holder's adjusted tax basis in the New Note. A United
States Holder's adjusted tax basis in a New Note generally will equal the cost
to such holder of the Old Note exchanged for such New Note, reduced by any
principal payments received by such holder on the New Note.
Gain or loss recognized on the disposition of a New Note generally will be
capital gain or loss and will be long-term capital gain or loss if, at the time
of such disposition, the United States Holder's holding period for the New Note
(which would include such holder's holding period in the Old Note exchanged
therefor) is more than one year.
Backup Withholding and Information Reporting
"Backup" withholding and information reporting requirements apply to certain
payments of principal, premium, if any, and interest on a New Note, and to
payments of the proceeds of the sale or redemption of New Notes before
maturity, to certain non-corporate United States holders. The Company, its
agent, a broker, the Trustee or any paying agent, as the case may be, will be
required to withhold from any payment that is subject to backup withholding a
tax equal to 31% of such payment if a United States Holder fails to furnish its
taxpayer identification number (social security or employer identification
number), to certify that such number is correct, to certify that such holder is
not subject to backup withholding, or to otherwise comply with the applicable
requirements of the backup withholding rules. Any amounts withheld under the
backup withholding rules from a payment to a United States Holder will be
allowed as a credit against such holder's United States federal income tax
liability, and may entitle the holder to a refund, provided that the required
information is furnished to the IRS.
UNITED STATES TAXATION OF FOREIGN HOLDERS OF NEW NOTES
Payment of Interest on New Notes
In general, payments of interest received by any holder that is not a United
States Holder (a "Foreign Holder") will not be subject to a United States
federal withholding tax, provided that (a)(i) the holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (ii) the holder is not a
controlled foreign corporation that is related to the Company actually or
constructively through stock ownership and (iii) either (x) the beneficial
owner of the New Note, under penalties of perjury, provides the Company or its
agent with the beneficial owner's name and address and certifies that it is not
a United States Holder on IRS Form W-8 (or a suitable substitute form) or (y) a
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"financial institution") holds the New Note and certifies to the Company or its
agent under penalties of perjury that such a Form W-8 (or a suitable
substitute) has been received by it from the beneficial owner or qualifying
intermediary and furnishes the Company a copy thereof or (b) the Foreign Holder
is entitled to the benefits of an income tax treaty under which the interest on
the New Notes is exempt from United States withholding tax and the Foreign
Holder or such Holder's agent provides a properly executed IRS Form 1001
claiming the exemption. Payments of interest not exempt from U.S. federal
withholding tax as described above will be subject to such withholding tax at a
rate of 30% (subject to reduction under an applicable income tax treaty).
Sale, Exchange or Retirement of New Notes
A Foreign Holder generally will not be subject to United States federal
income tax (and generally no tax will be withheld) with respect to gain
realized on the sale, exchange, redemption, retirement at maturity or other
disposition of New Notes, unless the Foreign Holder is an individual who is
present in the United States for a period or periods aggregating 183 or more
days in the taxable year of the disposition and certain other conditions are
met.
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Backup Withholding and Information Reporting
Under current Treasury regulations, backup withholding and information
reporting on IRS Form 1099 do not apply to payments made by the Company or a
paying agent to Foreign Holders if the certification described under "United
States Taxation of Foreign Holders of New Notes--Payment of Interest on New
Notes" is received, provided that the payor does not have actual knowledge
that the holder is a United States Holder. If any payments of principal and
interest are made to the beneficial owner of a New Note by or through the
foreign office of a foreign custodian, foreign nominee or other foreign agent
of such beneficial owner, or if the foreign office of a foreign "broker" (as
defined in applicable United States Treasury Department regulations) pays the
proceeds of the sale of a New Note or a coupon to the seller thereof, backup
withholding and information reporting will not apply. Information reporting
requirements (but not backup withholding) will apply, however, to payments by
a foreign office of a broker that is a United States person, that derives 50%
or more of its gross income for certain periods from the conduct of a trade or
business in the United States, or that is a "controlled foreign corporation"
(generally, a foreign corporation controlled by certain United States
shareholders) with respect to the United States, unless the broker has
documentary evidence in its records that the holder is a Foreign Holder and
certain other conditions are met, or the holder otherwise establishes an
exemption. Payment by a United States office of a broker is subject to both
backup withholding at a rate of 31% and information reporting unless the
holder certifies under penalties of perjury that it is a Foreign Holder, or
otherwise establishes an exemption. A Foreign Holder may obtain a refund of,
or a credit against such holder's U.S. federal income tax liability for, any
amounts withheld under the backup withholding rules, provided the required
information is furnished to the IRS.
In addition, in certain circumstances interest on a New Note owned by a
Foreign Holder will be required to be reported annually on IRS Form 1042S, in
which case such form will be filed with the IRS and furnished to the Foreign
Holder.
The foregoing description of the procedures for withholding tax on interest
payments and associated backup withholding and information reporting rules are
currently being reviewed by the IRS and are expected to be the subject of new
proposed regulations. The expected proposed regulations may propose changes to
the treatment for Foreign Holders described above.
Federal Estate Taxes
Subject to applicable estate tax treaty provisions, New Notes held at the
time of death (or theretofore transferred subject to certain retained rights
or powers) by an individual who at the time of death is a Foreign Holder will
not be included in such holder's gross estate for United States federal estate
tax purposes provided that the individual does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 180 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resales. In
addition, the Company agreed that it would not for a period of 120 days from
the date of the Offering Memorandum (the "Offering Memorandum") distributed in
connection with the sale of the Old Notes, directly or indirectly offer, sell,
grant any options to purchase or otherwise dispose of any debt securities
other than in connection with this Exchange Offer.
92
<PAGE>
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
New Notes offered hereby will be passed upon for the Company by Ropes & Gray,
Boston, Massachusetts.
EXPERTS
The financial statements of BEA included in this Prospectus and the related
financial statement schedule included elsewhere in the Registration Statement
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein and elsewhere in the Registration Statement, and
are included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The audited financial statements of Burns Aerospace as of December 31, 1994
and December 31, 1993, and for each of the three years in the period ended
December 31, 1994, appended hereto as part of this Prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as set forth
in their report dated November 27, 1995, which report is also appended hereto.
93
<PAGE>
BE AEROSPACE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BE AEROSPACE, INC.
NINE MONTHS ENDED NOVEMBER 25, 1995 AND NOVEMBER 26, 1994
Consolidated Balance Sheet, November 25, 1995 (Unaudited) .............. F-2
Consolidated Statements of Operations for the Nine Months Ended November
25, 1995 and November 26, 1994 (Unaudited)............................. F-3
Consolidated Statements of Cash Flows for the Nine Months Ended November
25, 1995 and November 26, 1994 (Unaudited)............................. F-4
Notes to Consolidated Financial Statements for the Nine Months Ended
November 25, 1995 and November 26, 1994 (Unaudited).................... F-5
FISCAL YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27,
1993
Independent Auditors' Report............................................ F-7
Consolidated Balance Sheets, February 25, 1995 and February 26, 1994.... F-8
Consolidated Statements of Operations for the Years Ended February 25,
1995, February 26, 1994 and February 27, 1993.......................... F-9
Consolidated Statements of Stockholders' Equity for the Years Ended
February 25, 1995, February 26, 1994 and February 27, 1993............. F-10
Consolidated Statements of Cash Flows for the Years Ended February 25,
1995, February 26, 1994 and February 27, 1993.......................... F-11
Notes to Consolidated Financial Statements for the Years Ended February
25, 1995, February 26, 1994 and February 27, 1993...................... F-12
BURNS AEROSPACE CORPORATION
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
Balance Sheets, September 30, 1995 and September 30, 1994 (Unaudited)... F-26
Statements of Income for the Nine Months Ended September 30, 1995 and
September 30, 1994 (Unaudited)......................................... F-27
Statements of Cash Flows for the Nine Months Ended September 30, 1995
and September 30, 1994 (Unaudited)..................................... F-28
Notes to Financial Statements for the Nine Months Ended September 30,
1995 and September 30, 1994 (Unaudited)................................ F-29
FISCAL YEARS ENDED DECEMBER 31, 1994, DECEMBER 31, 1993 AND DECEMBER 31,
1992
Report of Independent Public Accountants................................ F-30
Balance Sheets, December 31, 1994 and December 31, 1993................. F-31
Statements of Income for the Years Ended December 31, 1994, December 31,
1993 and December 31, 1992............................................. F-32
Statements of Stockholders' Equity for the Years Ended December 31,
1994, December 31, 1993 and December 31, 1992.......................... F-33
Statements of Cash Flows for the Years Ended December 31, 1994, December
31, 1993 and December 31, 1992......................................... F-34
Notes to Financial Statements for the Years Ended December 31, 1994,
December 31, 1993 and December 31, 1992................................ F-35
</TABLE>
F-1
<PAGE>
BE AEROSPACE, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOVEMBER 25,
ASSETS 1995
------ ------------
(UNAUDITED)
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 5,348
Accounts receivables--trade, less allowance for doubtful
accounts of
$3,980 (November 25, 1995) and $4,034 (February 25, 1995)...... 44,118
Inventories, net................................................ 103,905
Deferred income taxes........................................... 5,945
Other current assets............................................ 8,758
--------
Total current assets........................................ 168,074
PROPERTY AND EQUIPMENT, net..................................... 66,529
INTANGIBLES AND OTHER ASSETS, net............................... 171,389
--------
$405,992
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................ $ 33,704
Accrued expenses................................................ 21,258
Income taxes payable............................................ 2,624
Current portion of long-term debt............................... 3,730
--------
Total current liabilities................................... 61,316
LONG-TERM DEBT LESS CURRENT PORTION............................... 208,169
DEFERRED INCOME TAXES............................................. 10,032
OTHER LIABILITIES................................................. 3,335
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares authorized; no
shares outstanding.............................................
Common stock, $.01 par value; 30,000,000 shares authorized;
16,238,322 (November 25, 1995) and 16,095,790 (February 25,
1995) issued................................................... 161
Additional paid-in capital...................................... 120,098
Retained earnings............................................... 3,671
Cumulative foreign exchange translation adjustment.............. (790)
--------
Total stockholders' equity.................................. 123,140
--------
$405,992
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 25, NOVEMBER 26,
1995 1994
------------ ------------
<S> <C> <C>
NET SALES............................................. $168,233 $170,045
COST OF SALES......................................... 113,740 114,082
-------- --------
GROSS PROFIT.......................................... 54,493 55,963
OPERATING EXPENSES:
Selling, general and administrative................. 25,247 23,898
Research and development............................ 11,591 8,900
Amortization expense................................ 6,910 7,627
Other expenses (Note 2)............................. 4,300 23,736
-------- --------
Total operating expenses........................... 48,048 64,161
-------- --------
OPERATING EARNINGS (LOSS) 6,445 (8,198)
INTEREST EXPENSE, net................................. 12,386 11,080
-------- --------
LOSS BEFORE INCOME TAX BENEFIT........................ (5,941) (19,278)
INCOME TAX BENEFIT.................................... (2,198) (6,747)
-------- --------
NET LOSS.............................................. $ (3,743) $(12,531)
======== ========
NET LOSS PER COMMON SHARE............................. $ (.23) $ (.78)
-------- --------
COMMON AND COMMON EQUIVALENT SHARES................... 16,111 16,075
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
NOVEMBER 25, NOVEMBER 26,
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (3,743) $(12,531)
Adjustments to reconcile net loss to net cash flows
provided by operating activities:
Depreciation and amortization.......................... 14,003 11,584
Change in intangible assets............................ -- 10,130
Deferred income taxes.................................. (94) (6,645)
Non cash employee benefit plan contributions........... 1,062 668
Changes in operating assets and liabilities:
Accounts receivable................................... 3,541 6,294
Inventories........................................... (32,722) (4,627)
Income tax refunds receivable......................... -- 1,934
Other current assets.................................. 72 (979)
Accounts payable...................................... (1,495) 229
Income taxes payable.................................. 1,058 673
Other liabilities..................................... (4,518) (3,963)
-------- --------
Net cash flows provided by (used in) operating
activities.......................................... (22,980) 2,767
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (13,654) (9,960)
Change in other assets, net............................. (2,586) (5,350)
-------- --------
Net cash flows used in investing activities............ (16,240) (15,310)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving lines of credit.......... 36,310 3,108
-------- --------
Effect of exchange rate changes on cash flows............ (61) 160
-------- --------
Net decrease in cash and cash equivalents................ (2,971) (9,275)
Cash and cash equivalents, beginning of period........... 8,319 13,738
-------- --------
Cash and cash equivalents, end of period................. $ 5,348 $ 4,463
-------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for interest.................... $ 15,355 $ 14,335
Cash paid during period for income taxes, net........... 104 950
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 25, 1995 AND NOVEMBER 26, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1. BASIS OF PRESENTATION:
The information set forth in these consolidated financial statements as of
November 25, 1995 and for the nine-month periods ended November 25, 1995 and
November 26, 1994 is unaudited and may be subject to normal year-end
adjustments. In the opinion of management, the unaudited consolidated
financial statements reflect all adjustments, consisting only of normal
recurring adjustments necessary to present fairly the financial position of BE
Aerospace, Inc. (the "Company" or "BEA") for the periods indicated. Results of
operations for the interim period ended November 25, 1995 are not necessarily
indicative of the results of operations for the full fiscal year. For further
information, including information with regard to conditions in the airline
industry and their possible impact on the Company, please refer to the
Company's annual report on Form 10-K for the fiscal year ended February 25,
1995, as amended.
The accompanying consolidated financial statements consolidate all of the
Company's subsidiaries. All significant intercompany transactions have been
eliminated. Certain amounts in the prior years' Consolidated Financial
Statements have been reclassified to conform to the current fiscal year's
presentation.
Certain information normally included in footnote disclosures to the annual
consolidated financial statements has been condensed or omitted in accordance
with the rules and regulations of the Securities and Exchange Commission.
NOTE 2. OTHER EXPENSES
Other expenses for the nine months ended November 25, 1995 relate to costs
associated with the integration and consolidation of the Company's European
seating business and in anticipation of the planned acquisition of Burns
Aerospace Corporation (Note 4). Other expenses for the nine months ended
November 26, 1994 relate to intangible assets and inventories associated with
the Company's earlier generations of passenger entertainment systems, which
were impaired as a result of the introduction of the Company's recently
introduced interactive individual seat video system, MDDS.
NOTE 3. CONTINGENCIES
BEA has been advised that the U.S. Attorney's Office for the District of
Connecticut, in conjunction with the Department of Commerce and the U.S.
Customs Service, is conducting a grand jury investigation focused on possible
non-compliance by BEA with certain statutory and regulatory provisions
relating to export licensing and controls. The investigation relates primarily
to the sale of passenger seats and related spare parts for civilian commercial
passenger aircraft to Iran Air from 1992 through mid-1995. BEA has been
advised it is a target of the investigation; however, neither it nor any
current or former directors, officers, or employees have been charged in
connection with the investigation. The investigation is at an early stage and,
while the Company intends to defend itself vigorously, the ultimate outcome of
the investigation cannot presently be determined. An adverse outcome could
have a material adverse effect upon the operations and/or financial condition
of the Company.
NOTE 4. SUBSEQUENT EVENT
On December 14, 1995, the Company signed a definitive agreement to acquire
Burns Aerospace Corporation for a cash purchase price of $42,500, subject to
certain adjustments, all in cash. The acquisition of Burns will be funded with
a portion of the proceeds of the Offering. Completion of the acquisition is
subject
F-5
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NINE MONTHS ENDED NOVEMBER 25, 1995 AND NOVEMBER 26, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
to a number of conditions, including completion of due diligence and obtaining
satisfactory financing. In conjunction with the planned Burns acquisition, the
Company is amending its existing credit facilities by increasing the aggregate
principal amount thereunder to $100,000. The amended credit facility is
expected to be subject to customary affirmative covenants, negative covenants
and conditions of borrowing, will be collateralized by substantially all of
the Company's personal property and will have a five-year maturity. The
amended credit facility will become effective upon the closing of the Offering
and the acquisition of Burns.
NOTE 5. NEW ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board Issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation." The Company has determined that it will not change to the fair
value method and will continue to use Accounting Principle Board Opinion No.
25 for measurement and recognition of employee stock based transactions.
F-6
<PAGE>
BE AEROSPACE, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
BE Aerospace, Inc.
Wellington, Florida
We have audited the accompanying consolidated balance sheets of BE
Aerospace, Inc. and subsidiaries as of February 25, 1995 and February 26,
1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended February
25, 1995. Our audits also included the financial statement schedule on page F-
25. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of BE Aerospace, Inc. and
subsidiaries as of February 25, 1995 and February 26, 1994, and the results of
their operations and their cash flows for each of the three years in the
period ended February 25, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
Deloitte & Touche LLP
Costa Mesa, California
April 21, 1995
F-7
<PAGE>
BE AEROSPACE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FEBRUARY 25, FEBRUARY 26,
ASSETS 1995 1994
------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 8,319 $ 13,738
Accounts receivable--trade, less allowance for
doubtful accounts of $4,034 (1995) and $2,208
(1994)............................................ 48,915 57,090
Inventories, net................................... 71,347 53,390
Deferred income taxes.............................. 6,502 5,462
Income tax refund receivable....................... 1,019 1,934
Other current assets............................... 6,415 4,746
-------- --------
Total current assets........................... 142,517 136,360
PROPERTY AND EQUIPMENT, net........................ 60,304 52,684
INTANGIBLES AND OTHER ASSETS, net.................. 177,133 185,965
-------- --------
$379,954 $375,009
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable................................... $ 35,164 $ 27,999
Accrued liabilities................................ 26,123 27,677
Current portion of long-term debt.................. 4,667 3,810
-------- --------
Total current liabilities...................... 65,954 59,486
-------- --------
LONG-TERM DEBT..................................... 172,693 159,170
DEFERRED INCOME TAXES.............................. 11,212 17,773
OTHER LIABILITIES.................................. 4,764 4,587
COMMITMENTS AND CONTINGENCIES (Note 9).............
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding.................
Common stock, $.01 par value; 30,000,000 shares
authorized; 16,095,790 (1995) and 15,985,454
(1994) shares issued.............................. 160 159
Additional paid-in capital......................... 119,209 118,357
Retained earnings.................................. 7,418 19,484
Cumulative foreign exchange translation
adjustment........................................ (1,456) (4,007)
-------- --------
Total stockholders' equity..................... 125,331 133,993
-------- --------
$379,954 $375,009
======== ========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------
FEBRUARY 25, FEBRUARY 26, FEBRUARY 27,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES.............................. $ 229,347 $203,364 $198,019
COST OF SALES.......................... 154,863 136,307 137,690
--------- -------- --------
GROSS PROFIT........................... 74,484 67,057 60,329
OPERATING EXPENSES:
Selling, general and administrative.. 31,787 28,164 21,698
Research and development............. 12,860 9,876 11,299
Amortization of intangible assets.... 9,954 7,599 4,551
Other expenses....................... 23,736
--------- -------- --------
Total operating expenses............. 78,337 45,639 37,548
--------- -------- --------
OPERATING EARNINGS (LOSS).............. (3,853) 21,418 22,781
INTEREST EXPENSE, net.................. 15,019 12,581 3,955
--------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES
(BENEFIT) AND EXTRAORDINARY ITEM...... (18,872) 8,837 18,826
INCOME TAXES (BENEFIT)................. (6,806) 3,481 6,676
--------- -------- --------
EARNINGS (LOSS) BEFORE EXTRAORDINARY
ITEM.................................. (12,066) 5,356 12,150
EXTRAORDINARY ITEM--Loss on
extinguishment of debt, net of tax
benefit of $282....................... (522)
--------- -------- --------
NET EARNINGS (LOSS).................... $ (12,066) $ 5,356 $ 11,628
========= ======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Earnings (loss) before extraordinary
item................................ $ (0.75) $ 0.35 $ 1.03
Extraordinary item................... (0.05)
--------- -------- --------
Net earnings (loss).................. $ (0.75) $ 0.35 $ 0.98
========= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE>
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CURRENCY TOTAL
-------------- PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT EQUITY
------ ------ ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 29,
1992................... 10,535 $105 $ 54,452 $ 2,500 $ -- $ 57,057
Issuance of common
stock.................. 3,631 36 40,321 40,357
Exercise of stock
options................ 473 5 2,438 2,443
Tax benefit from
exercise of
nonstatutory stock
options................ 1,244 1,244
Common stock
repurchased............ (33) (299) (299)
Net earnings............ 11,628 11,628
Foreign currency
translation
adjustment............. (4,456) (4,456)
------ ---- -------- -------- ------- --------
BALANCE, FEBRUARY 27,
1993................... 14,606 146 98,156 14,128 (4,456) 107,974
Issuance of common
stock.................. 1,272 12 19,080 19,092
Exercise of stock
options................ 107 1 963 964
Tax benefit from
exercise of non-
statutory stock
options................ 158 158
Net earnings............ 5,356 5,356
Foreign currency
translation
adjustment............. 449 449
------ ---- -------- -------- ------- --------
BALANCE, FEBRUARY 26,
1994................... 15,985 159 118,357 19,484 (4,007) 133,993
Sale of stock under
employee stock purchase
plan................... 15 132 132
Employee benefit plan
matching contribution.. 96 1 720 721
Net loss................ (12,066) (12,066)
Foreign currency
translation
adjustment............. 2,551 2,551
------ ---- -------- -------- ------- --------
BALANCE, FEBRUARY 25,
1995................... 16,096 $160 $119,209 $ 7,418 $(1,456) $125,331
====== ==== ======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE>
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------
FEBRUARY 25, FEBRUARY 26, FEBRUARY 27,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)...................... $ (12,066) $ 5,356 $11,628
Adjustments to reconcile net earnings
(loss) to net cash flows provided by
operating activities:
Depreciation and amortization........... 16,146 13,115 7,986
Change in intangible assets............. 8,588
Deferred income taxes................... (6,764) 1,657 1,499
Non cash employee benefit plan
contributions.......................... 721
Loss on extinguishment of debt.......... 804
Changes in operating assets and
liabilities, net of effects from
acquisitions:
Accounts receivable..................... 6,226 (3,188) (11,655)
Inventories............................. (16,863) (4,153) 1,981
Income tax refunds receivable........... 915 (1,934) 797
Other current assets.................... (1,500) (2,047) (100)
Accounts payable........................ 7,295 6,056 (333)
Other liabilities....................... (642) (9,071) (7,202)
--------- -------- -------
Net cash flows provided by operating
activities............................. 2,056 5,791 5,405
--------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and
equipment............................... (12,172) (11,002) (7,343)
Change in other assets................... (8,610) (5,077) (5,839)
Change in other liabilities..............
Acquisitions............................. (107,506) (18,300)
--------- -------- -------
Net cash flows used for investing
activities............................. (20,782) (123,585) (31,482)
--------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving lines of
credit.................................. 9,080 15,505
Proceeds from issuance of stock, net of
repurchases............................. 132 964 40,061
Principal payments on long-term debt..... (13,514) (32,001)
Proceeds from long-term debt............. 3,873 130,010 10,000
--------- -------- -------
Net cash flow provided by financing
activities............................. 13,085 117,460 33,565
--------- -------- -------
Effect of exchange rate changes on cash
flows................................... 222 (198) (373)
--------- -------- -------
Net (decrease) increase in cash and cash
equivalents............................. (5,419) (532) 7,115
Cash and cash equivalents, beginning of
year.................................... 13,738 14,270 7,155
--------- -------- -------
Cash and cash equivalents, end of year... $ 8,319 $ 13,738 $14,270
--------- -------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid (received) during year for:
Interest................................ $ 16,664 $ 7,524 $ 3,819
Income taxes--net....................... (1,096) 2,918 4,879
SCHEDULE OF NONCASH TRANSACTIONS:
Tax benefit upon exercise of nonstatutory
stock options........................... 158 1,244
Liabilities assumed and accrued
acquisition costs incurred in connection
with the acquisitions................... 19,954 20,186
Liabilities incurred in connection with
purchase of land and buildings.......... 4,000 4,932
Common stock issued in connection with
the acquisitions........................ 19,100 2,440
Issuance of Senior Notes (Note 7)........ 124,019
Debt issue costs......................... 1,409 4,125
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation--
BE Aerospace, Inc. (the "Company") designs, manufactures, sells and services
a broad line of commercial aircraft cabin interior products consisting of a
broad range of aircraft seating products, passenger entertainment and service
systems, and galley products, including structures as well as all food and
beverage storage and preparation equipment.
As described in Note 2, the Company has completed several business
combinations, all accounted for using purchase accounting. On February 28,
1992, the Company acquired from the Pullman Company all of the assets and
certain of the liabilities of PTC Aerospace, Inc. (PTC) and Aircraft Products
Company (APC) (collectively, the Business Unit). Following the acquisition of
the Business Unit, the Company changed its name to BE Aerospace, Inc. On April
2, 1992, the Company, through its Dutch holding company, acquired all of the
outstanding stock of Flight Engineering and Equipment Limited (FEEL) and
substantially all of the operating assets of JFB Engineering Limited (JFB),
both English corporations. On April 30, 1993, the Company acquired all of the
outstanding stock of Royal Inventum B.V., a Dutch corporation (Inventum). On
August 26, 1993, the Company acquired all of the outstanding stock of Acurex
Corporation, a California corporation (Acurex) and, on August 23, 1993, the
Company acquired all of the outstanding stock of Nordskog Industries, Inc., a
California corporation (Nordskog). On October 13, 1993, the Company acquired
substantially all of the assets and certain of the liabilities of Philips
Airvision of Valencia, California (Airvision), a division of Philips
Electronics Corporation, North America Corporation.
Consolidation--
The accompanying financial statements consolidate the accounts of BE
Aerospace, Inc. and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
Income Taxes--
In accordance with Statement of Financial Accounting Standards (SFAS) No.
109, the Company provides deferred income taxes for temporary differences
between amounts of assets and liabilities recognized for financial reporting
purposes and such amounts recognized for income tax purposes.
Warranty Costs--
Estimated costs related to product warranties are accrued at the time
products are sold.
Revenue Recognition--
Sales of assembled products, equipment or services are recorded on the date
of shipment or, if required, upon acceptance by the customer. The Company
sells its products primarily to airlines worldwide, including occasional sales
collateralized by letters of credit in countries where customary payment terms
exceed one year. The Company performs ongoing credit evaluations of its
customers and maintains reserves for potential credit losses. Actual losses
have been within management's expectations.
Cash Equivalents--
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
F-12
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Intangible Assets--
The Company amortizes intangible assets using the straight-line method based
on the estimated economic lives of the assets, which range from 7-30 years.
The Company periodically evaluates the carrying value of the intangible assets
versus the cash benefit expected to be realized and adjusts for any impairment
of value. As discussed in Note 15, the Company introduced a new product to the
inflight entertainment industry, causing the industry in general to re-
evaluate its product offerings and, in the process, impairing the value of
certain assets, including certain earlier Company technology. Accordingly,
certain intangible assets related to these product offerings were written down
to their estimated realizable value.
Research and Development--
Research and development expenditures are expensed as incurred.
Earnings (Loss) per Common Share--
Earnings (loss) per common share amounts are computed using the weighted--
average number of common and common equivalent (where not antidilutive) shares
outstanding during each period. The number of weighted average shares of
common stock outstanding amounted to 16,021,000, 15,438,000 and 11,847,000,
for the years ended February 25, 1995, February 26, 1994 and February 27, 1993
respectively.
Foreign Currency Translation--
In accordance with the provisions of SFAS No. 52, "Foreign Currency
Translation," the assets and liabilities located outside the United States are
generally translated into U.S. dollars at the rates of exchange in effect at
the balance sheet dates. Income and expense items are translated at the
average exchange rates prevailing during the period. Gains and losses
resulting from foreign currency transactions are recognized currently in
income, and those resulting from translation of financial statements are
accumulated as a separate component of stockholders' equity.
2. ACQUISITIONS
The Company completed a number of acquisitions during the year ended
February 26, 1994 (1994 Acquisitions) and the year ended February 27, 1993
(1993 Acquisitions) which are described below. Funds for the 1994 Acquisitions
were obtained from proceeds of the long-term debt issuance described in Note
7. Funds for the 1993 Acquisitions were obtained from the proceeds from the
issuance of additional common stock and long-term debt.
1994 ACQUISITIONS
Inventum--On April 30, 1993, the Company acquired all of the capital stock
of Inventum which designs, manufactures, sells and services galley inserts
such as ovens, beverage makers, and water boilers to commercial airlines
located primarily in Europe and the Pacific Rim. The aggregate acquisition
cost of $39,964 includes the payment of $33,095 to the seller, the assumption
of approximately $3,614 of liabilities, plus related acquisition costs and
certain purchase accounting reserves.
Acurex--On August 26, 1993, the Company acquired all of the outstanding
capital stock of Acurex which designs, manufactures, sells and services
aircraft refrigeration appliances such as chillers, refrigeration units and
wine chillers to commercial airlines worldwide. The aggregate acquisition cost
of $70,454 includes the payment
F-13
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
of $45,000 to the seller, the assumption of approximately $2,507 of
liabilities, the issuance of 1,272,728 shares of the Company's common stock to
the sellers, valued at $15.00 per share, plus related acquisition costs and
certain purchase accounting reserves.
Nordskog--On August 23, 1993, the Company acquired all of the outstanding
capital stock of Nordskog which designs, manufactures, sells and services
aircraft galley structures and inserts to commercial airlines worldwide. The
aggregate acquisition cost of $25,402 includes a cash payment of $17,158 to
the seller, the assumption of approximately $2,374 of liabilities, plus
related acquisition costs and certain purchase accounting reserves.
Airvision--On October 13, 1993, the Company acquired substantially all of
the assets and certain of the liabilities of Airvision which designs,
manufactures, sells and services in-seat video products, including interactive
video for commercial airlines worldwide. The aggregate acquisition cost of
$16,601 includes the payment of $12,253 to the seller, the assumption of
approximately $1,640 of liabilities, plus related acquisition costs and
certain purchase accounting reserves.
The aggregate purchase price for the 1994 Acquisitions has been allocated to
the net assets acquired based on appraisals and management's estimates as
follows:
<TABLE>
<S> <C>
Cash and cash equivalents.......................................... $ 4,403
Receivables........................................................ 14,403
Inventories........................................................ 21,392
Property and equipment............................................. 5,424
Intangible and other assets........................................ 106,799
--------
$152,421
========
</TABLE>
1993 ACQUISITIONS
In April 1992, the Company acquired all of the outstanding capital stock of
FEEL for approximately $12,600 cash, 100,000 shares of the Company's common
stock at a per share price of $13.50 and the assumption of approximately
$18,086 of liabilities. FEEL designs, manufactures, sells and services custom-
designed seating for commercial aircraft. In addition, in April 1992, through
FEEL, the Company acquired substantially all of the operating assets of JFB
for approximately $5,700 cash, 64,000 shares of the Company's common stock at
a per share price of $13.50 and the assumption of approximately $2,100 of
certain liabilities. JFB's principal line of business is the manufacture of
custom-engineered components for FEEL. The Company also acquired an option to
purchase the land and buildings used by FEEL and JFB for approximately
$10,000. This option was exercised on March 2, 1993.
3. INVENTORIES
Inventories are valued at the lower of cost or market using the weighted
average cost method. Inventories consist of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Raw materials................................................ $23,675 $34,973
Work-in-process.............................................. 39,131 13,365
Finished goods............................................... 8,541 5,052
------- -------
$71,347 $53,390
======= =======
</TABLE>
F-14
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, and depreciated and amortized
generally on the straight-line method over their estimated useful lives of
three to 20 years (term of lease as to leasehold improvements). Property and
equipment consist of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Land, buildings and improvements........................... $31,920 $22,902
Machinery.................................................. 29,743 18,850
Tooling.................................................... 10,324 9,349
Furniture and equipment.................................... 7,075 6,656
Construction in progress................................... 4,880
------- -------
79,062 62,637
Less accumulated depreciation and amortization............. (18,758) (9,953)
------- -------
$60,304 $52,684
======= =======
</TABLE>
5. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
STRAIGHT-LINE
AMORTIZATION
PERIOD (YEARS) 1995 1994
-------------- -------- --------
<S> <C> <C> <C>
Covenants not-to-compete................ 14 $ 9,198 $ 10,174
Product technology, production plans and
drawings............................... 7-20 56,774 58,897
Replacement parts annuity............... 20 26,042 24,075
Product approvals and technical manu-
als.................................... 20 13,909 19,218
Goodwill................................ 30 68,651 68,382
Debt issue costs........................ 10 5,662 5,535
Trademarks and patents.................. 20 9,114 8,387
Other................................... 9,482 4,692
-------- --------
198,832 199,360
Less accumulated amortization........... (21,699) (13,395)
-------- --------
$177,133 $185,965
======== ========
</TABLE>
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accrued product warranties.................................. $ 2,969 $ 2,578
Accrued salaries, vacation and related benefits............. 5,502 2,667
Accrued acquisition expenses................................ 2,507 6,647
Accrued interest............................................ 6,694 6,368
Accrued income taxes........................................ 1,642
Other accrued liabilities................................... 6,809 9,417
------- -------
$26,123 $27,677
======= =======
</TABLE>
F-15
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Senior notes............................................. $124,215 $124,117
Revolving lines of credit................................ 36,000 15,000
Term loan................................................ 16,577 12,000
Other long-term debt..................................... 568 11,863
-------- --------
177,360 162,980
Less current portion of long-term debt................... (4,667) (3,810)
-------- --------
$172,693 $159,170
======== ========
</TABLE>
In October 1993, the Company obtained new credit facilities with a group of
banks, initially aggregating $85,000, consisting of a $40,000 term loan and a
$45,000 revolving line of credit (the "1993 Credit Facilities"). In April
1994, the term loan was converted to a revolving line of credit. As of
February 25, 1995, the 1993 Credit Facilities consist of two revolving lines
of credit (the "Series A Revolver" and "Series B Revolver"). The Series B
Revolver may be borrowed and repaid in $1,000 increments and has decreasing
availability with the remaining balances due November 1998. At February 25,
1995 the maximum borrowings available under the Series B Revolver were
$32,500. The Series A Revolver may be borrowed in $1,000 increments and is
subject to borrowing base calculations set forth in the credit facilities
agreement. At February 25, 1995, the maximum borrowings available under the
Series A revolver were $45,000. The 1993 Credit Facilities bear interest at
prime (as defined) plus 1/2% or LIBOR plus 1 3/4%, at the option of the
Company. This rate is subject to change in the event of a change in the
Company's credit rating by Moody's Investor Services or Standard & Poor's.
The Series B Revolver is collateralized by the stock of Acurex. The Series A
Revolver is collateralized by substantially all of the Company's assets and is
all due and payable in November 1998. The terms of the 1993 Credit Facilities
include a number of financial and other restrictive covenants. The Company was
in compliance with all loan covenants as of February 25, 1995. The 1993 Credit
Facilities also collateralized outstanding letters of credit aggregating
$2,969 as of February 25, 1995.
On February 24, 1993, the Company sold $125,000 of 9 3/4% Senior Notes (the
"Senior Notes"), which were priced to yield 9 7/8%. The Company received the
proceeds from the Senior Notes on March 3, 1993 and utilized $32,545 thereof
to repay the outstanding balance of the Company's then outstanding bank
obligations. The unamortized portion of the associated debt issue costs of
approximately $804 was written off and reflected as an extraordinary item, net
of tax effects of $282, in the accompanying statement of operations for the
year ended February 27, 1993.
The Senior Notes are senior unsecured obligations of the Company, ranking
equally with any future senior obligations of the Company and mature on March
1, 2003. Interest on the Senior Notes is payable semi-annually in arrears on
March 1 and September 1 of each year. The Senior Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after March 1,
1998 at predetermined redemption prices, together with accrued and unpaid
interest through the date of redemption. Upon a change of control (as
defined), each holder of the Senior Notes may require the Company to
repurchase such holder's Senior Notes at 101% of the
F-16
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
principal amount thereof, plus accrued and unpaid interest to the date of such
purchase. The Senior Notes contain certain restrictive covenants, all of which
were met by the Company as of February 25, 1995, including limitations on
future indebtedness, restricted payments, transactions with affiliates, liens,
dividends, mergers and transfers of assets.
Terms of the Senior Notes provide that, among other things, the payment of
cash dividends on Common Stock is limited to a cumulative amount that equals
fifty percent of the Company's consolidated adjusted net income since the date
of the Senior Notes' issuance, plus the sum of $10,000 and other equity
adjustments (as defined therein). The payment of cash dividends may only be
made if the Company is not in default under the terms of the Indenture. The
1993 Credit Facilities also contain restrictions on the cumulative amount of
dividends that may be paid. As of February 25, 1995, cash dividends of $1,339
could have been declared by the Company.
During fiscal 1994, the Company entered into revolving line of credit and
term loan agreements aggregating $13,300 (the FEEL Credit Agreement). The FEEL
Credit Agreement is collateralized by substantially all of the assets of FEEL.
Borrowings may be made under the line of credit provided FEEL is in compliance
with certain covenants, all of which were met by FEEL as of February 25, 1995.
Aggregate borrowings outstanding under the FEEL Credit Agreement were
approximately $12,041 as of February 25, 1995. Such borrowings will be repaid
in pounds sterling.
During fiscal 1994, the Company also entered into a revolving line of credit
agreement for approximately $1,000 (the Inventum Credit Agreement). The
Inventum Credit Agreement is collateralized by substantially all of the assets
of Inventum. Borrowings may be made under the line of credit provided Inventum
is in compliance with certain covenants, all of which were met by Inventum as
of February 25, 1995. There were no borrowings outstanding under the Inventum
Credit Agreement as of February 25, 1995.
During fiscal 1995, the Company entered into term loan agreements
aggregating $4,000 which are collateralized by two of the Company's recently
constructed properties. These term loans bear interest at prime (as defined)
plus 1/2% or LIBOR plus 1 3/4%, at the option of the Company and contain
certain restrictive covenants, all of which were met by the Company as of
February 25, 1995.
Maturities of long-term debt are as follows:
Fiscal year ending February:
<TABLE>
<S> <C>
1996................................................................ $ 4,667
1997................................................................ 2,083
1998................................................................ 37,508
1999................................................................ 1,508
2000................................................................ 1,508
Thereafter.......................................................... 130,086
--------
$177,360
========
</TABLE>
F-17
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Current:
Federal............................................. $ (786) $1,408 $2,856
State............................................... 105 139 948
Foreign............................................. 639 277 1,373
------- ------ ------
(42) 1,824 5,177
------- ------ ------
Deferred:
Federal............................................. (5,146) 155 1,145
State............................................... (904) 266 67
Foreign............................................. (714) 1,236 287
------- ------ ------
(6,764) 1,657 1,499
------- ------ ------
$(6,806) $3,481 $6,676
======= ====== ======
</TABLE>
The difference between income tax expense (benefit) and the amount computed
by applying the statutory U.S. federal income tax rate then in effect consists
of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Statutory U.S. federal income tax expense
(benefit)....................................... $(6,605) $3,093 $6,400
State income taxes, net.......................... (519) 264 670
Goodwill amortization............................ 708 290 10
Research and development credit.................. (600) (100)
Foreign Sales Corporation tax benefit............ (353) (281) (715)
Other, net....................................... 563 115 411
------- ------ ------
$(6,806) $3,481 $6,676
======= ====== ======
</TABLE>
The tax effects of temporary differences and carryforwards that give rise to
the Company's deferred income tax assets and liabilities consist of the
following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Bad debt reserves....................................... $ 1,415 $ 538
Inventory reserves...................................... 2,396 1,027
Inventory costs capitalized for tax purposes............ 815 794
Warranty reserves....................................... 663 918
Acquisition reserves.................................... 855 1,731
Accrued vacation........................................ 699 578
Other................................................... (341) (124)
-------- --------
Net current deferred income tax assets.................. $ 6,502 $ 5,462
======== ========
Depreciation............................................ $ (1,904) $ (1,841)
Intangible assets....................................... (15,164) (16,906)
Net operating loss carryforward......................... 3,708
Research credit carryforward............................ 600
Other................................................... 1,548 974
-------- --------
Net noncurrent deferred income tax liabilities.......... $(11,212) $(17,773)
======== ========
</TABLE>
F-18
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
As of February 25, 1995, the Company had $9,135 of federal operating loss
carryforwards which expire in 2010, federal research credit carryforwards of
$600 which expire in 2010, and alternative minimum tax credit carryforwards of
$269 which have no expiration date.
The Company has not provided for any residual U.S. income taxes on the
approximately $5,406 of earnings from its foreign subsidiaries because such
earnings are intended to be indefinitely reinvested. Such residual U.S. income
taxes, if provided for, would be immaterial.
9. COMMITMENTS AND CONTINGENCIES
Leases--
The Company leases certain of its office, manufacturing and service
facilities under operating leases which expire at various times through August
2003. Rent expense for fiscal 1995, 1994 and 1993 was approximately $2,276,
$2,091 and $2,372, respectively. Future payments under leases with terms
currently greater than one year are as follows:
<TABLE>
<S> <C>
Year ending February:
1996................................................................. $ 3,697
1997................................................................. 2,694
1998................................................................. 1,499
1999................................................................. 643
2000................................................................. 485
Thereafter........................................................... 1,797
-------
$10,815
=======
</TABLE>
Contingencies--
The Company is a defendant in various legal actions arising in the normal
course of business, the outcome of which, in the opinion of management,
neither individually nor in the aggregate are likely to result in a material
adverse effect to the Company's financial position.
Employment Agreements--
The Company has employment and compensation agreements with two key officers
of the Company. One of the agreements provides for an officer to earn a
minimum of $360, adjusted annually for changes in the consumer price index (as
defined) per year through 2001, as well as a deferred compensation benefit
equal to the aggregate annual compensation earned through termination and
payable thereafter. Such deferred compensation will be payable in equal
monthly installments over the same number of years it was earned.
The other agreement provides for an officer to receive annual minimum
compensation of $200, and an incentive bonus not to exceed 100% of the
officer's then-current salary through 1998. In addition, if the officer
terminates his employment on or after August 1997, the Company is obligated to
pay the officer annually, as deferred compensation, an amount equal to 50% of
the officer's annual salary (as defined) for a period of ten years from the
date of termination.
The Company has other employment agreements with certain key members of
management that provide for aggregate minimum annual base compensation of
$540, expiring on various dates through 1998.
F-19
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Supply Agreement--
The Company has entered into a supply agreement with Applied Extrusion
Technologies, Inc. ("AET"), a related party by way of common management. Under
this agreement, the Company has agreed to purchase its requirements for
certain component parts through April 1998 at a price that results in a 33
1/3% gross margin to AET. The Company's purchases under this contract for the
years ended February 25, 1995, February 26, 1994 and February 27, 1993, were
$984, $1,040 and $1,245, respectively.
10. PROFIT-SHARING PLAN
In August 1988, the Company established a non-qualified contributory profit-
sharing plan. Effective August 1, 1989, this plan was amended to incorporate a
401(k) Plan which permits the Company to match a portion of employee
contributions and to make profit-sharing contributions to all participants (as
defined). Commencing in 1995, the Company's 401(k) Plan was amended to permit
the Company's matching contribution to be made in common stock of the Company.
The Company recognized expenses of $757, $585, and $1,216 related to this plan
for the years ended February 25, 1995, February 26, 1994 and February 27,
1993, respectively.
11. STOCKHOLDERS' EQUITY
In December 1992, the Company successfully completed a public offering of
3,000,000 shares of its common stock at $12.00 per share and, in January 1993,
the underwriters for that offering exercised their overallotment option by
purchasing an additional 450,000 shares of the Company's common stock. The net
proceeds to the Company, after deducting various offering expenses, were
$38,116. The Company used $26,650 of these proceeds to prepay a portion of its
long-term debt (Note 7). Had the sale of stock and repayment of long-term debt
occurred at the beginning of fiscal 1993, weighted average shares outstanding,
net earnings per share before extraordinary item and net earnings per share
would have been 13,671,000, $0.95 and $0.91, respectively.
Stock Option Plans--
The Company has various stock option plans, including the 1989 Stock Option
Plan, the 1991 Directors Stock Option Plan and the 1992 Share Option Scheme
(collectively the "Option Plans"), under which shares of the Company's common
stock may be granted to key employees and directors of the Company. The Option
Plans provide for granting key employees options to purchase the Company's
common stock. Options are granted at the discretion of the compensation and
stock option committee of the Board of Directors, and the option term cannot
exceed ten years. Options granted generally vest at the rate of 25% per year
from the date of grant and are exercisable to the extent vested.
During fiscal 1993, the Board of Directors approved the granting of options
outside of the qualified stock option plans to the Company's chairman and
chief executive officer, principals of Aurora Management, Inc. (Aurora) (Note
13), one of the members of the Board of Directors, and a former board member,
covering 775,000, 200,000, 100,000 and 110,000 shares, respectively. These
options were granted at an exercise price of $12.25, $12.25, $12.25 and $12.50
per share, respectively, which were the fair market values as of the grant
date.
In April 1993, the compensation and stock option committee of the Board of
Directors reviewed the exercise prices of the options then outstanding,
current market conditions, as well as other factors, and deemed it appropriate
to re-price 1,365,500 options with exercise prices ranging from $12.00 to
$14.00 per share to $8.75 per share, which was the fair market value as of
that date.
F-20
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth options granted, cancelled, forfeited and
outstanding:
<TABLE>
<CAPTION>
FEBRUARY 25, 1995 FEBRUARY 26, 1994 FEBRUARY 27, 1993
----------------------- ----------------------- ------------------------
OPTION PRICE OPTION PRICE OPTION PRICE
OPTIONS PER SHARE OPTIONS PER SHARE OPTIONS PER SHARE
--------- ------------ --------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning
of period.............. 2,493,162 $ .81-$13.00 2,215,112 $ .81-$14.00 1,116,612 $ .81-$13.00
Options granted........ 484,500 $7.44-$ 8.75 404,500 $8.75-$11.75 1,594,000 $11.75-$14.00
Options exercised...... (375) $ .81 (106,450) $8.75-$ 9.50 (473,250) $ .81-$ 9.50
Options forfeited...... (106,000) $8.25-$11.75 (20,000) $8.75-$12.25 (22,250) $ 9.50-$12.25
--------- --------- ---------
Outstanding, end of
period................. 2,871,287 $ .81-$13.00 2,493,162 $ .81-$13.00 2,215,112 $ .81-$14.00
========= ========= =========
</TABLE>
12. EMPLOYEE STOCK PURCHASE PLAN
The Company established a qualified Employee Stock Purchase Plan during
fiscal 1995, the terms of which allow for qualified employees (as defined) to
participate in the purchase of designated shares of the Company's common stock
at a price equal to the lower of 85% of the closing price at the beginning or
end of each semi-annual stock purchase period. The Company issued 15,065
shares of stock during fiscal 1995 pursuant to this plan at an average price
per share of $7.01.
13. RELATED PARTY TRANSACTIONS
Aurora, a private capital firm, has provided assistance to the Company in
developing its acquisition program, the acquisitions of the Business Unit,
FEEL and AFL, Inventum, Nordskog and Acurex as well as in its 1992 equity
offering, strategic planning, competitive analysis and financial relations.
During fiscal 1993 and 1994, the Company had an arrangement with Aurora under
which Aurora was entitled to receive reimbursement for its reasonable expenses
and to receive a monthly retainer of $20 which was credited against any fees
earned for services rendered related to certain transactions, including $100
for each acquisition consummated in fiscal 1994. This arrangement was
terminated effective July 1993. Aurora earned approximately $300 during the
year ended February 26, 1994 related to the 1994 Acquisitions as well as
approximately $400 for other services during the year ended February 27, 1993
related to the FEEL and AFL acquisitions, the 1992 equity offering and 1993
debenture offering. The Company also granted to Aurora's principals, as
consideration for services to the Company in connection with certain
financings, options to purchase an aggregate of 200,000 shares of the
Company's common stock at a price equal to fair market value at the date of
grant. A member of the Company's Board of Directors is a part owner of Aurora.
Chemical Venture Partners (CVP) also provided assistance to the Company in
identifying and negotiating the acquisition of the Business Unit. As
compensation, during fiscal 1993, the Company issued 17,138 shares of its
common stock to CVP. A former member of the Company's Board of Directors was a
principal in CVP.
14. EXPORT SALES AND MAJOR CUSTOMERS
Export sales from the United States to customers in foreign countries
amounted to approximately $61,645 $44,058, and $65,680 in fiscal 1995, 1994,
and 1993, respectively. Total sales to all customers in foreign countries
amounted to approximately $114,511, $85,239 and $91,541 in fiscal 1995, 1994
and 1993, respectively. Major customers (i.e., customers representing more
than 10% of total sales) change from year to year depending on the level of
refurbishment activity and/or the level of new aircraft purchases by such
customers. Sales to one major customer were approximately $21,185 in fiscal
1993 (there were no major customers in fiscal 1995 and 1994).
F-21
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. OTHER EXPENSES
Other expenses consisted of a charge related primarily to intangible assets
and inventories associated with the Company's passenger entertainment systems.
The introduction of the Company's MDDS interactive video system, which the
Company expects to become the industry's standard for inflight passenger and
service entertainment, has captured the dominant market share with contract
awards from the major airlines totaling more than $150,000 during the past
nine months. The MDDS system also has recently caused major carriers to
convert programs for earlier products to the Company's MDDS system and has
caused two of the Company's principal competitors to offer to develop for the
airlines systems similar to the Company's MDDS system. These events have
caused the inflight entertainment industry to re-evaluate its product
offerings and, in the process, have impaired the value of certain of its
assets. As a result, the Company has written down certain of its assets,
including certain customer-specific inventories and other assets.
16. FOREIGN OPERATIONS
Geographic Area--
The Company operated principally in two geographic areas, the United States
and Europe during the years ended February 25, 1995, February 26, 1994 and
February 27, 1993. There were no significant transfers between geographic
areas during the period. Identifiable assets are those assets of the Company
that are identified with the operations in each geographic area.
The following table presents operating results for the years ended February
25, 1995, February 26, 1994 and February 27, 1993 and identifiable assets as
of February 25, 1995, February 26, 1994 and February 27, 1993 by geographic
area.
<TABLE>
<CAPTION>
1995 UNITED STATES EUROPE CONSOLIDATED
- ---- ------------- ------- ------------
<S> <C> <C> <C>
Sales to unaffiliated customers........... $170,542 $58,805 $229,347
Gross profit.............................. 56,296 18,188 74,484
Selling, general and administrative and
amortization expenses.................... 32,183 9,558 41,741
Research and development.................. 9,834 3,026 12,860
Other expenses............................ 23,736 23,736
Interest expense, net..................... 11,835 3,184 15,019
Loss before income taxes.................. (18,578) (294) (18,872)
Identifiable assets....................... 279,402 100,552 379,954
<CAPTION>
1994 UNITED STATES EUROPE CONSOLIDATED
- ---- ------------- ------- ------------
<S> <C> <C> <C>
Sales to unaffiliated customers........... $156,638 $46,726 $203,364
Gross profit.............................. 51,401 15,656 67,057
Selling, general and administrative and
amortization expenses.................... 27,288 8,475 35,763
Research and development.................. 7,783 2,093 9,876
Interest expense, net..................... 11,424 1,157 12,581
Earnings before income taxes.............. 4,814 4,023 8,837
Identifiable assets....................... 280,827 94,182 375,009
</TABLE>
F-22
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1993 UNITED STATES EUROPE CONSOLIDATED
- ---- ------------- ------- ------------
<S> <C> <C> <C>
Sales to unaffiliated customers............ $159,865 $38,154 $198,019
Gross profit............................... 50,365 9,964 60,329
Selling, general and administrativeand am-
ortization expenses....................... 23,446 2,803 26,249
Research and development................... 9,381 1,918 11,299
Interest expense, net...................... 3,662 293 3,955
Earnings before income taxes and
extraordinary item........................ 13,876 4,950 18,826
Identifiable assets........................ 269,051 45,004 314,055
</TABLE>
17. FAIR VALUE INFORMATION
The following disclosure of the estimated fair value of financial
instruments at February 25, 1995 and February 26, 1994 is made in accordance
with the requirements of SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments." The estimated fair value amounts have been determined
by the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts.
The carrying amounts of cash and cash equivalents, accounts receivable--
trade, and accounts payable are a reasonable estimate of their fair values.
Except for the Company's Senior Notes, which have a carrying value and fair
value of $124,215 and $120,938, respectively, at February 25, 1995, the
carrying amount of long-term debt approximates fair value because the
obligations either bear interest at floating rates or compare favorably with
fixed rate obligations that would be available to the Company.
The fair value information presented herein is based on pertinent
information available to management as of February 25, 1995. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these consolidated financial statements since that
date, and current estimates of fair value may differ significantly from the
amounts presented herein.
18. SELECTED QUARTERLY DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 1995 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 25, 1995
--------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales..................................... $57,567 $55,197 $57,281 $59,302
Gross profit.................................. 18,887 18,408 18,668 18,521
Net earnings (loss)........................... 1,074 964 (14,569) 465
Net earnings (loss) per common share.......... .07 .06 (.90) .03
</TABLE>
F-23
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Summarized quarterly financial data for fiscal 1994 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 26, 1994
-------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales....................................... $47,803 $45,103 $50,696 $59,762
Gross profit.................................... 14,795 14,787 17,445 20,030
Net earnings.................................... 1,569 1,689 565 1,533
Net earnings per common share................... .11 .11 .03 .10
</TABLE>
F-24
<PAGE>
BE AEROSPACE, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND FEBRUARY 27, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE BALANCE
AT BEGINNING AT END
OF YEAR EXPENSES OTHER DEDUCTIONS OF YEAR
------------ -------- ------ ---------- -------
<S> <C> <C> <C> <C> <C>
DEDUCTED FROM ASSETS:
Allowance for doubtful ac-
counts:
1995..................... $2,208 $3,119 $1,293 $ 4,034
1994..................... 1,304 774 $ 650 (1) 520 2,208
1993..................... 879 296 364 (2) 235 1,304
Reserve for obsolete in-
ventories:
1995..................... $7,557 $2,787 $2,754 (1) $2,434 $10,664
1994..................... 2,885 1,880 4,452 (1) 1,660 7,557
1993..................... 3,100 3,108 257 (2) 3,580 2,885
INCLUDED IN LIABILITIES:
Accrued product warran-
ties:
1995..................... $2,388 $2,544 $ 666 (1) $2,629 $ 2,969
1994..................... 1,856 1,926 (184) 1,210 2,388
1993..................... 2,297 1,147 203 (2) 1,791 1,856
</TABLE>
- --------
(1) 1994 acquisitions
(2) FEEL acquisition
F-25
<PAGE>
BURNS AEROSPACE CORPORATION
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS
------
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash ............................................. $ 81 $ 51
Accounts receivable, net ......................... 1,793 --
Inventories, net ................................. 16,880 13,291
Other current assets ............................. 1,759 3,397
------- -------
Total current assets ......................... 20,513 16,739
Property, plant and equipment, net ................. 18,257 19,455
Goodwill ........................................... 52,108 53,230
Other assets ....................................... 3,824 3,261
------- -------
Total assets ................................. $94,702 $92,685
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Accounts payable ................................. $ 7,564 $ 8,003
Accrued liabilities .............................. 7,416 9,579
------- -------
Total current liabilities .................... 14,980 17,582
Advances from affiliate ............................ 82,856 74,602
Other long-term liabilities ........................ 5,150 4,553
------- -------
Total liabilities ............................ 102,986 96,737
------- -------
Stockholder's equity:
Common stock par value $1.00 per share, 1,000
shares authorized, issued and outstanding........ 1 1
Retained deficit ................................. (8,285) (4,053)
------- -------
Total stockholder's equity ................... (8,284) (4,052)
------- -------
Total liabilities and stockholder's equity.. $94,702 $92,685
======= =======
</TABLE>
The accompanying notes to financial statementsare an integral part of these
statements.
F-26
<PAGE>
BURNS AEROSPACE CORPORATION
CONDENSED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1995 1994
-------- --------
<S> <C> <C>
Net sales.................................................. $ 75,768 $ 69,213
Cost of sales.............................................. 62,014 56,475
-------- --------
Gross earnings........................................... 13,754 12,738
Selling, general and administrative expenses............... 8,867 8,102
Research, development and engineering ..................... 1,716 1,132
Amortization expense....................................... 1,125 1,134
Other expenses, net........................................ 83 313
-------- --------
Operating income before management fees.................. 1,963 2,057
Management fees to affiliate............................... 2,280 3,359
-------- --------
Operating loss............................................. (317) (1,302)
Interest expense, net...................................... 5,875 4,649
-------- --------
Loss before income taxes................................... (6,192) (5,951)
Income tax benefit......................................... (1,960) (2,074)
-------- --------
Net loss................................................... $ (4,232) $ (3,877)
======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-27
<PAGE>
BURNS AEROSPACE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1994
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (4,232) $ (3,877)
Adjustments to reconcile net loss to net cash flow from
operating activities:
Depreciation and Amortization.............................. 2,973 2,835
Deferred income taxes provision (benefit).................. 507 (886)
Proceeds from sale of accounts receivable.................. -- 7,227
Cash effects of:
Changes in other working capital balances and other long-
term liabilities......................................... (6,256) 9,909
-------- ---------
Net cash flows from (used in) operating activities......... (7,008) 15,208
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital contribution........................................ -- 4,031
Capital expenditures........................................ (642) (627)
Other....................................................... (574) (320)
-------- ---------
Net cash from (used in) investing activities............... (1,216) 3,084
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances from (payments to) affiliate .................. 8,254 (17,014)
-------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS.......................... 30 1,278
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............... 51 78
-------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD..................... $ 81 $ 1,356
======== =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-28
<PAGE>
BURNS AEROSPACE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited Condensed Financial Statements of Burns Aerospace
Corporation (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for a complete set of financial statements. In
the opinion of management, all adjustments considered necessary, consisting
only of normal recurring adjustments are included for fair presentation.
Operating results for the nine months ended September 30, 1995 are not
necessarily indicative of results that may be expected for the full year. The
unaudited Condensed Financial Statements for the nine months ended September
30, 1995 and 1994 should be read in conjunction with the audited Financial
Statements of the Company for the year ended December 31, 1994.
NOTE 2. INVENTORIES
Inventory consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
Raw materials and supplies...................... $10,736 $ 8,670
Work in process................................. 6,074 4,551
Finished goods.................................. 70 70
------- -------
$16,880 $13,291
======= =======
</TABLE>
NOTE 3. SUBSEQUENT EVENT
Eagle Industries, Inc., the Company's parent, is currently pursuing the sale
of the Company. There can be no assurance that the sale will be consummated.
F-29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Eagle Industries, Inc.:
We have audited the accompanying balance sheets of Burns Aerospace
Corporation as of December 31, 1994 and 1993, and the related statements of
income, stockholder's equity and cash flows for each of the three years in the
period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Burns Aerospace
Corporation as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles.
As explained in Note 1 to the financial statements, effective January 1,
1993, the Company adopted the requirements of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". As explained in
Note 1 to the financial statements, effective December 31, 1993, the Company
adopted the requirements of Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits".
Arthur Andersen LLP
Chicago, Illinois,
November 27, 1995
F-30
<PAGE>
BURNS AEROSPACE CORPORATION
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS DECEMBER 31,
------ -----------------
1994 1993
------- --------
<S> <C> <C>
Current assets:
Cash ..................................................... $ 51 $ 78
Accounts receivable, net ................................. -- 9,381
Inventories, net ......................................... 13,291 14,440
Other current assets ..................................... 3,397 3,181
------- --------
Total current assets ................................. 16,739 27,080
Property, plant and equipment, net ......................... 19,455 20,727
Goodwill ................................................... 53,230 54,736
Other assets ............................................... 3,261 533
------- --------
Total assets ......................................... $92,685 $103,076
======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current liabilities:
Accounts payable ......................................... $ 8,003 $ 3,661
Accrued liabilities ...................................... 9,579 4,372
------- --------
Total current liabilities ............................ 17,582 8,033
Advances from affiliate .................................... 74,602 92,592
Other long-term liabilities ................................ 4,553 6,024
------- --------
Total liabilities .................................... 96,737 106,649
------- --------
Stockholder's Equity:
Common stock par value $1.00 per share, 1,000 shares
authorized, issued and outstanding at December 31, 1994
and 10,000 shares authorized, 5,000 shares issued and
outstanding
at December 31, 1993 .................................... 1 5
Paid-in capital .......................................... -- 13,311
Retained deficit ......................................... (4,053) (16,889)
------- --------
Total stockholder's equity ........................... (4,052) (3,573)
------- --------
Total liabilities and stockholder's equity ......... $92,685 $103,076
======= ========
</TABLE>
The accompanying notes to financial statementsare an integral part of these
statements.
F-31
<PAGE>
BURNS AEROSPACE CORPORATION
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net sales...................................... $93,494 $66,902 $98,185
Cost of sales.................................. 75,880 55,176 83,856
------- ------- -------
Gross earnings............................... 17,614 11,726 14,329
Selling, general and administrative expenses... 10,729 8,948 10,150
Research, development and engineering.......... 1,615 1,389 1,448
Amortization................................... 1,509 1,507 1,500
Other (income) expenses, net................... 738 (231) 255
------- ------- -------
Operating income before management fees...... 3,023 113 976
Management fees to affiliate................... 3,359 1,434 1,675
------- ------- -------
Operating loss............................... (336) (1,321) (699)
Net interest expense........................... 6,374 4,203 4,133
------- ------- -------
Loss before income taxes....................... (6,710) (5,524) (4,832)
Income tax benefit............................. (2,200) (1,268) (730)
------- ------- -------
Loss before cumulative effect of change in
accounting principles......................... (4,510) (4,256) (4,102)
Cumulative effect of change in accounting
principles.................................... -- (1,897) --
------- ------- -------
Net loss....................................... $(4,510) $(6,153) $(4,102)
======= ======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-32
<PAGE>
BURNS AEROSPACE CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
------ ------- --------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991......................... $ 5 $13,311 $ (6,634)
Net loss............................................ -- -- (4,102)
--- ------- --------
BALANCE AT DECEMBER 31, 1992......................... 5 13,311 (10,736)
Net loss............................................ -- -- (6,153)
--- ------- --------
BALANCE AT DECEMBER 31, 1993......................... 5 13,311 (16,889)
Net loss............................................ -- -- (4,510)
Recapitalization.................................... (4) (13,311) 17,346
--- ------- --------
BALANCE AT DECEMBER 31, 1994......................... $ 1 $ -- $ (4,053)
=== ======= ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-33
<PAGE>
BURNS AEROSPACE CORPORATION
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................. $(4,510) $(6,153) $(4,102)
Adjustments to reconcile net income to net cash flow
from operating activities:
Depreciation and amortization....................... 3,800 3,733 3,262
Deferred income tax provision (benefit)............. (864) 493 (1,013)
Cumulative effect of change in accounting
principles......................................... -- 1,897 --
Proceeds from sale of accounts receivable........... 7,227 -- --
Cash effects of:
Decrease in accounts receivable..................... 2,154 4,269 850
Decrease in inventories............................. 1,149 1,038 2,386
(Increase) decrease in other current assets......... (428) 1,127 (243)
Increase (decrease) in accounts payable, accrued
liabilities and other long-term assets............. 6,153 (2,658) (2,402)
------- ------- -------
Net cash from (used in) operating activities........ 14,681 3,746 (1,262)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital contribution................................. 4,031 -- --
Capital expenditures................................. (696) (446) (1,299)
Other................................................ (53) (70) (646)
------- ------- -------
Net cash from (used in) investing activities........ 3,282 (516) (1,945)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances from (payments to) affiliate ........... (17,990) (3,198) 3,158
------- ------- -------
CHANGE IN CASH AND CASH EQUIVALENTS................... (27) 32 (49)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........ 78 46 95
------- ------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............. $ 51 $ 78 $ 46
------- ------- -------
------- ------- -------
NET CASH PAID (RECEIVED) DURING THE PERIOD FOR:
Interest to affiliate................................ $ 6,374 $ 4,203 $ 4,133
Income taxes to (from) affiliate..................... $(1,336) $(1,761) $ 272
</TABLE>
The accompany notes to financial statements are an integral part of these
statements.
F-34
<PAGE>
BURNS AEROSPACE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--
Burns Aerospace Corporation (the "Company") is an indirect wholly-owned
subsidiary of Eagle Industries, Inc. ("Eagle").
Inventories--
Inventories are stated at the lower of cost or market. Cost includes raw
materials, labor and manufacturing overhead. The last-in, first-out ("LIFO")
method of inventory valuation is used for 77% and 66% of inventory at December
31, 1994 and 1993, respectively. The first-in first-out ("FIFO") method of
inventory valuation is used for the remaining inventory.
Property, Plant and Equipment--
Property, plant and equipment is stated at cost. The straight-line method is
used to provide for depreciation over the estimated useful lives of the
assets.
Goodwill--
Goodwill is amortized on a straight-line basis over forty years. Accumulated
amortization was $7.9 million and $6.4 million at December 31, 1994 and 1993,
respectively.
The recoverability of unamortized goodwill is based on operating income and
cash flow. Whenever current operating income is not sufficient to recover
current amortization of goodwill or when events and circumstances indicate
that future operating income and cash flow may be negatively affected, the
recoverability is evaluated based upon the estimated future operating income
and undiscounted cash flow during the remaining period of goodwill
amortization.
Contract Accounting--
Contracts are accounted for under program accounting whereby sales are
recognized as products are shipped and cost of sales are estimated as the
average cost of the units to be produced under a contract. Changes in
estimates in costs and profits are recognized in the period in which they are
determinable using the cumulative catch-up method of accounting. Any
anticipated losses on contracts are charged to operations as soon as they are
determinable. Inventoriable costs include tooling and engineering costs
directly attributable or allocable to a sold contract. Expenditures related to
research, development and certain engineering costs associated with new
programs are expensed as incurred. Research and development expenses were
$326,000, $300,000 and $196,000 for the years ended December 31, 1994, 1993
and 1992, respectively.
Postemployment Benefits--
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS
No. 112") effective December 31, 1993. By adopting this standard, the Company
increased its other long-term liabilities by $97,000 and recorded a
corresponding pretax charge of $97,000 reflected as a "Cumulative effect of
change in accounting principle".
Income Taxes--
The Company is included in Eagle's consolidated U.S. federal income tax
return. Under the terms of a tax sharing arrangement with Eagle, the Company
computes and pays to Eagle its liability for U.S. federal income taxes as if
the Company filed a separate U.S. federal income tax return. The Company files
separate state income tax returns.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109") effective
January 1, 1993 which resulted in a decrease in the net deferred tax assets of
$1.8 million and a corresponding charge of $1.8 million, reflected as a
F-35
<PAGE>
BURNS AEROSPACE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
"Cumulative effect of change in accounting principle". This new standard
changed the Company's method of accounting for income taxes from the deferred
method required under APB No. 11 to the asset and liability method. If it is
more likely than not that some portion or all of a deferred tax asset will not
be realized, a valuation allowance is recognized.
2. EMPLOYEE RETIREMENT AND BENEFIT PLANS
The Company maintains defined contribution plans for hourly employees
covered by collective bargaining agreements, hourly employees not covered by
collective bargaining agreements and salaried employees. Employer
contributions to these plans were $1,036,000, $746,000 and $988,000 for the
years ended December 31, 1994, 1993 and 1992, respectively. Company
contributions to the plan for hourly employees covered by a collective
bargaining agreement are determined as a percentage of the participants' base
compensation and vest over a period of seven years. Company contributions to
the plan for hourly employees not covered by a collective bargaining agreement
are based on a percentage of the employees' contributions and earnings and
vest over a period of seven years. Company contributions to an Eagle sponsored
plan for salaried employees are determined as a percentage of employee
contributions and are fully vested at all times.
3. INCOME TAXES
The Company's Financial Statements reflect the following deferred tax assets
and liabilities:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993 1992
------ ------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Inventory reserves...................................... $1,036 $1,614 $1,591
Receivables reserves.................................... 462 426 630
Insurance reserves...................................... 434 533 674
Other................................................... 867 606 583
------ ------ ------
$2,799 $3,179 $3,478
====== ====== ======
Deferred tax liabilities:
Property, plant and equipment basis difference.......... $4,144 $5,388 $5,194
====== ====== ======
</TABLE>
F-36
<PAGE>
BURNS AEROSPACE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
3. INCOME TAXES--(CONTINUED)
The components of loss before income taxes and the components of the
provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------
1994 1993 1992
------- -------------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Loss before income taxes....................... $ 6,710 $ 5,524 $4,832
======= ======= ======
Provision (benefit) for income taxes:
Current:
U.S. federal................................. $(1,372) $(1,798) $ 247
U.S. state................................... 36 37 36
------- ------- ------
(1,336) (1,761) 283
------- ------- ------
Deferred:
U.S. federal.................................. (450) 510 (837)
U.S. state.................................... (414) (17) (176)
------- ------- ------
(864) 493 (1,013)
------- ------- ------
Total......................................... $(2,200) $(1,268) $ (730)
======= ======= ======
</TABLE>
Reconciliation of income taxes computed at the U.S. federal statutory rate
to the consolidated benefit for income taxes:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1994 1993 1992
------- -------------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. federal statutory rate.................. 35% 35% 34%
======= ======= =======
Income taxes at U.S. federal statutory rate.. $(2,349) $(1,933) $(1,643)
U.S. state income taxes, net of U.S. federal
tax benefit................................. (246) 13 (100)
Nondeductible amortization................... 528 527 510
NOL utilization.............................. -- -- 570
Other........................................ (133) 125 (67)
------- ------- -------
Benefit for income taxes.................... $(2,200) $(1,268) $ (730)
======= ======= =======
Effective income tax rate................... 32.8% 23.0% 15.1%
======= ======= =======
</TABLE>
F-37
<PAGE>
BURNS AEROSPACE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
4. BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Inventories:
Raw materials and supplies.......................... $ 8,670 $ 6,896
Work in process..................................... 4,551 7,222
Finished goods...................................... 70 322
----------- -----------
Total.............................................. $ 13,291 $ 14,440
=========== ===========
Other current assets:
Deferred taxes...................................... $ 2,688 $ 2,900
Non-trade receivables............................... 843 23
Other............................................... (134) 258
----------- -----------
Total.............................................. $ 3,397 $ 3,181
=========== ===========
Property, plant and equipment:
Land................................................ $ 2,070 $ 2,070
Buildings........................................... 10,765 10,702
Machinery and equipment............................. 16,275 15,311
Construction in progress............................ 220 228
Less accumulated depreciation....................... (9,875) (7,584)
----------- -----------
Total.............................................. $ 19,455 $ 20,727
=========== ===========
Accrued liabilities:
Wages and benefits.................................. $ 3,494 $ 1,370
Insurance reserves.................................. 1,026 784
Reserve for preference claims....................... 600 600
Customer cancellation reserve....................... -- 600
Warranty............................................ 986 286
Other............................................... 3,473 732
----------- -----------
Total.............................................. $9,579 $ 4,372
=========== ===========
</TABLE>
5. RELATED PARTY TRANSACTIONS
Accounts Receivable--
In January 1994, Eagle entered into an asset securitization program (the
"Securitization") whereby it sells certain of its accounts receivable on a
limited recourse and continuous basis, including those of the Company. Under
this program, the Company sells accounts receivable to Eagle daily for a
purchase price payable in cash. As a result of the Securitization, the Company
sold all of its accounts receivable to Eagle. The proceeds from the sale of
the receivables reduced advances from affiliate.
F-38
<PAGE>
BURNS AEROSPACE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
5. RELATED PARTY TRANSACTIONS--(CONTINUED)
Advances from Affiliate--
Eagle makes advances to the Company for general corporate purposes. Eagle
provides centralized treasury functions and financing for the Company
including funding of their U.S. cash needs for processing of accounts payable
items. Fluctuations in the balance of advances from affiliate are primarily a
function of daily cash activity associated with net disbursements for payments
of invoices offset by the sale of accounts receivable and prior to January
1994, receipts from customer payments. In addition, payments made to Eagle for
allocations of corporate expenses and payments in accordance with a tax
sharing agreement are included in advances from affiliate.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------
1994 1993 1992
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average amounts outstanding....................... $77,890 $95,802 $87,995
Maximum amounts outstanding....................... 92,016 99,337 92,019
Weighted average interest rate.................... 8.2% 4.4% 4.7%
======= ======= =======
</TABLE>
Recapitalization--
In January 1994, Eagle completed a refinancing (the "Refinancing") of
substantially all of its outstanding debt and entered into a credit facility
with a group of banks. The credit facility is secured by substantially all of
the property, plant and equipment, inventory and certain receivables of Eagle,
including those of the Company. In connection with the Refinancing, the
Company was recapitalized, resulting in changes to the components of
stockholder's equity.
Management Fees to Affiliate--
Eagle provides strategic direction, financial management and other corporate
administrative services to the Company. The management fees are charged to the
Company on an annual basis. Management believes that the allocation method is
reasonable. Management fees were $3,359,000, $1,434,000 and $1,675,000 in
1994, 1993 and 1992, respectively.
Insurance--
The Company participates in an Eagle sponsored self-insurance program which
includes coverage for medical, workers' compensation, product liability, auto
and general liability insurance for which the Company incurred charges of
$682,000, $848,000 and $894,000 in 1994, 1993 and 1992, respectively, for
medical insurance and $1,166,000, $710,000 and $612,000 in 1994, 1993 and
1992, respectively, for workers' compensation, product liability, auto and
general liability insurance. The Company has recorded insurance reserves of
$1,436,000 and $1,601,000 at December 31, 1994 and 1993, respectively.
6. COMMITMENTS AND CONTINGENCIES
The Company conducts manufacturing operations at various leased facilities
and also leases warehouses, office space, computers and office equipment. Most
of the realty leases contain renewal options and escalation clauses. Total
rent expense, including related real estate taxes, amounted to $1,681,000,
$2,064,000 and $1,920,000 for the years ended December 31, 1994, 1993 and
1992, respectively.
F-39
<PAGE>
BURNS AEROSPACE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
6. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Future minimum lease payments required as of December 31, 1994 (Dollars in
thousands):
<TABLE>
<S> <C>
1995................................................ $ 796
1996................................................ 762
1997................................................ 244
1998 and thereafter................................. --
-------
$ 1,802
=======
</TABLE>
The Company is involved in several lawsuits and environmental matters
arising in the ordinary course of business. However, it is the opinion of the
Company's management, based upon the advice of legal counsel, that these
lawsuits are either without merit, are covered by insurance, or are adequately
reserved for in the Financial Statements, and that the ultimate disposition of
pending litigation will not be material in relation to the Company's financial
position and results of operations.
7. BUSINESS SEGMENT INFORMATION
The Company's current operations are in one industry segment, manufacturing
and distribution of commercial airline seating for the commercial aviation
market. The business is influenced primarily by worldwide capital spending in
the aviation industry.
The Company's revenues, operating income and identifiable assets are
predominantly related to its U.S. operations and no other geographic area
accounts for more than 10% of revenue, operating income or total assets. Sales
to one customer accounted for 36% of total sales for the year ended December
31, 1994. No customer accounted for more than 10% of total sales for the years
ended December 31, 1993 and 1992. Sales to foreign carriers represented 58%,
38% and 41% of total sales for the years ended December 31, 1994, 1993 and
1992, respectively.
8. SUBSEQUENT EVENT
Eagle is currently pursuing the sale of the Company. There can be no
assurance that the sale will be consummated.
F-40
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND
THE ACCOMPANYING LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COM-
PANY OR THE EXCHANGE AGENT. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER
OF TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL, OR A SOLICITA-
TION OF AN OFFER TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TO-
GETHER, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by Reference.......................... 3
Available Information.................................................... 4
Summary.................................................................. 5
Risk Factors............................................................. 19
The Company.............................................................. 23
The Acquisition.......................................................... 23
Use of Proceeds.......................................................... 24
The Exchange Offer....................................................... 24
Capitalization........................................................... 31
Unaudited Pro Forma Combined Financial Information....................... 32
Selected Financial Information of BEA.................................... 39
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 40
Business................................................................. 48
Management............................................................... 59
Certain Transactions and Proceedings..................................... 61
Security Ownership of Certain Beneficial Owners and Management........... 62
Description of the New Notes............................................. 64
Description of Certain Indebtedness...................................... 88
Certain Federal Tax Considerations....................................... 89
Plan of Distribution..................................................... 92
Legal Matters............................................................ 93
Independent Auditors..................................................... 93
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$100,000,000
EXCHANGE OFFER
BE AEROSPACE, INC.
[LOGO OF BE AEROSPACE APPEARS HERE]
9 7/8% SENIOR SUBORDINATED NOTES DUE 2006
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal or investigative (other than an action by
or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses actually and
reasonably incurred in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery
or such other court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL (relating to unlawful payment of dividends and unlawful stock
purchase and redemption) or (iv) for any transaction from which the director
derived an improper personal benefit.
The Registrant's Restated Certificate of Incorporation (the "Certificate")
provides that the Company's Directors shall not be liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director except to the extent that exculpation from liabilities is not
permitted under the DGCL as in effect at the time such liability is
determined. The Registrant's Certificate further provides that the Registrant
shall indemnify its directors and officers to the fullest extent permitted by
the DGCL.
The directors and officers of the Company are covered under directors' and
officers' liability insurance policies maintained by the Company.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or to be filed by amendment:
<TABLE>
<CAPTION>
PAGE NUMBER IN SEQUENTIAL
NUMBERING SYSTEM WHERE
EXHIBITS MAY BE LOCATED
-------------------------
<C> <S> <C>
1.1 Purchase Agreement dated January 19, 1996 by
and among the Registrant, Merrill Lynch & Co.
and Morgan Stanley & Co. Incorporated
4.1. Indenture dated January 24, 1996 for
Registrant's issue of 9 7/8% Senior
Subordinated Notes due 2006 between the
Registrant and Fleet National Bank
Connecticut, N.A., as trustee
4.2. First Supplemental Indenture to Indenture
dated March 3, 1993 for the Registrant's
issue of 9 3/4% Senior Notes due 2003 between
the Registrant and United States Trust
Company of New York, as trustee
4.3. Form of Note for the Registrant's 9 7/8%
Senior Subordinated Notes (included in
Exhibit 4.1)
5.1 Opinion of Ropes & Gray (to be filed by
amendment)
10.1 Receivables Sales Agreement dated January 24,
1996 among the Registrant and First Trust of
Illinois, N.A. (to be filed by amendment)
10.2 Escrow Agreement dated January 24, 1996 among
the Registrant, Eagle Industrial Products
Corporation and First Trust of Illinois,
N.A., as escrow agent
10.3 Amendment No. 2 to Amended and Restated
Credit Agreement dated as of January 19, 1996
among the Registrant, the banks named therein
and The Chase Manhattan Bank, N.A. as
Administrative Agent
23.1 Consent of Deloitte & Touche
23.2 Consent of Arthur Anderson LLP
23.3 Consent of Ropes & Gray (included in Exhibit
5.1)
24 Power of Attorney (included on signature
page)
25 Statement of Eligibility of Fleet National
Bank of Connecticut, N.A., Trustee (to be
filed by amendment)
</TABLE>
The following exhibits previously have been filed with the Commission under
the Securities Act of 1933 and/or the Securities Exchange Act of 1934 and are
incorporated by reference herein, (i) the Registrant's Registration Statement
on Form S-1, as amended (No. 33-33689), filed with the Commission on March 7,
1990 (referred to below as "33-33689"); (ii) the Registrant's Registration
Statement on Form S-1, as amended (No. 33-43147), filed with the Commission on
October 3, 1991 (referred to below as "33-43147"); (iii) the Registrant's
Registration Statement on Form S-1, as amended (No. 33-54146), filed with the
Commission on November 3, 1992 (referred to below as "33-54146"); (iv) the
Registrant's Registration Statement on Form S-3, as amended (No. 33-57798)
filed with the Commission on February 2, 1993 (referred to below as "33-
57798"); (v) the Registrant's Registration Statement on Form S-2 (No. 33-
66490) filed with the Commission on July 23, 1993 (referred to below as "33-
66490"); (vi) the Registrant's Registration Statement on Form S-8 (No. 33-
48119), filed with the Commission on May 26, 1992 (referred to below as "33-
48119"); (vii) the Registrant's Registration Statement on Form S-8 (No. 33-
72194), filed with the Commission on November 29, 1993 (referred to below as
"33-72194"); (viii) the Registrant's Registration Statement on Form S-8 (No.
33-82894), filed with the Commission on August 16, 1994 (referred to below as
"33-82894"); (ix) the Registrant's Current Report on Form 8-K dated March 5,
1992, filed with the Commission on March 6, 1992 (referred to below as "March
8-K"); (x) the Registrant's Current Report on Form 8-K dated April 16, 1992,
filed with the Commission on April 17, 1992 (referred to below as "April 8-
K"); (xi) the Registrant's Current Report on Form 8-K dated
II-2
<PAGE>
August 23, 1993, filed with the Commission on September 7, 1994 (referred to
below as "August 8-K"); (xii) the Registrant's Annual Report on Form 10-K for
the Fiscal year ended July 28, 1991, filed with the Commission on September 23,
1991 (referred to below as "1991 10-K"); (xiii) the Registrant's Report on Form
10-K for the seven-month transition period ended February 29, 1992, filed with
the Commission on May 27, 1992 (referred to below as "1992 10-K"); (xiv) the
Registrant's Report on Form 10-K, as amended, for the fiscal year ended
February 27, 1993, filed with the Commission on May 13, 1993 (referred to below
as "1993 10-K"); (xv) the Registrant's Report on Form 10-K, as amended, for the
fiscal year ended February 26, 1994, filed with the Commission on May 23, 1994
(referred to below as "1994 10-K"); (xvi) the Registrant's Report on Form 10-K
for the fiscal year ended February 25, 1995 filed with the Commission on May
16, 1995 (referred to below as the "1995 10-K"); and (xvii) Registrant's
Current Report on Form 8-K dated December 14, 1995, filed with the Commission
on December 28, 1995 (referred to below as "December 8-K");
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<C> <S> <C>
Exhibit 2. Plan of acquisition, reorganization,
arrangement, liquidation or succession
2.1 Asset Purchase agreement dated as of July 31, 10.6 1991 10-K
1991 between the Registrant and Trans Video
Systems, Inc.
2.2 Agreement of Purchase and Sale dated January 15, 2 March 8-K
1992 among The Pullman Company, PTC Aerospace,
Inc., Aircraft Products Company and the
Registrant
2.3 Flight Equipment and Engineering Limited 2.1 April 8-K
("FEEL") Stock Purchase Agreement among FEEL
Holdings Limited, Dr. Ling Kal K'ung, Mr. John
Frederick Branham ("Mr. Branham"), Mr. John
Tcheng and the Registrant dated April 2, 1992
2.4 Asset Purchase Agreement among JFB Engineering 2.2 April 8-K
Company Limited, Mr. Branham, FEEL and the
Registrant dated April 3, 1992
2.5 Agreement among Boustead Industries Limited, 10.26 1993 10-K
FEEL, Boustead PLC and the Registrant relating
to the sale and purchase of the entire issued
share capital of Fort Hill Aircraft Holdings
Limited dated February 8, 1993
2.6 Acquisition Agreement among the Registrant, 10.28 1993 10-K
Inventum and B.V. Industrieele Maatschappij
dated as of April 29, 1993
2.7 Acquisition Agreement dated as of July 26, 1993 2.1 August 8-K
among the Registrant, Nordskog Industries, Inc.
and Elinor T. Nordskog, individually and as
Trustee
Exhibit 3. Articles of Incorporation and By-laws
3.1 Amended and Restated Certificate of
Incorporation 3.1 33-33689
3.2 Certificate of Amendment of the Restated
Certificate of Incorporation 3 33-54146
3.3 Certificate of Ownership and Merger Merging 3.3 1992 10-K
BEANC Corporation into the Registrant
3.4 Amended and Restated By-Laws 3.2 March 8-K
Exhibit 4. Instruments defining the rights of security
holders, including debentures
4.1 Specimen Common Stock Certificate 4 33-33689
4.2 Form of Note for the Registrant's issue of 9 3/4 4.1 33-57798
Senior Notes
4.3 Indenture dated March 3, 1993 between U.S. Trust 4.2 33-57798
Company of New York, as trustee, and the
Registrant relating to the Registrant's 9 3/4%
Senior Notes
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<C> <S> <C>
Exhibit 10(i) Material Contracts
10.1 Supply Agreement dated as of 10.7 33-33689
April 17, 1990 between the
Registrant and Applied
Extrusion Technologies, Inc.
10.2 Amended and Restated Credit 10.33 1994 10-K
Agreement dated as of May 18,
1994 among the Registrant, the
banks named therein and The
Chase Manhattan Bank, N.A. as
agent
10.3 Term Loan Agreement, as 10.32 1995 10-K
amended, dated as of December
20, 1994 between the Registrant
and NationsBank of Florida,
N.A.
10.4 Amendment No. 1 to Amended and 10.33 1995 10-K
Restated Credit Agreement dated
as of May 18, 1994 among the
Registrant, the banks named
therein and The Chase Manhattan
Bank, N.A., as agent
Exhibit 10(ii) Leases
10.5 Lease dated May 15, 1992 10.1 33-54146
between McDonnell Douglas
Realty Company, as lessor, and
the Registrant, as lessee,
relating to the Irvine,
California property
10.6 Lease dated September 1, 1992 10.2 33-54146
relating to the Wellington,
Florida property
10.7 Chesham, England Lease dated 10.13(a) 1992 10-K
October 1, 1973 between
Drawheath Limited and The
Peninsular and Oriental Steam
Navigation Company (assigned in
February 1985)
10.8 Kilkeel, Northern Ireland Lease 10.27 1993 10-K
dated April, 1984 between The
Department of Economic
Development and Aircraft
Furnishing International
Limited.
10.9 Utrecht, The Netherlands Lease 10.29 1993 10-K
dated December 15, 1988 between
the Pension Fund Foundation for
Food Supply Commodity Boards
and Inventum
10.10 Utrecht, The Netherlands Lease 10.30 1993 10-K
dated January 31, 1992 between
G.W. van de Grift Onroerend
Goed B.V. and Inventum
10.11 Lease dated October 25, 1993 10.32 1994 10-K
relating to the property in
Longwood, Florida.
Exhibit 10(iii) Executive Compensation Plans
and Arrangements
10.12 Amended and Restated 1989 Stock 28.1 33-48119
Option Plan
10.13 Directors' 1991 Stock Option 28.2 33-48119
Plan
10.14 1990 Stock Option Agreement 28.3 33-48119
with Richard G. Hamermesh
10.15 1990 Stock Option Agreement 28.5 33-48119
with Jim C. Cowart
10.16 1990 Stock Option Agreement 28.6 33-48119
with Joseph O'Donnell
10.17 1990 Stock Option Agreement 28.8 33-48119
with Hansjorg Wyss
10.18 1991 Stock Option Agreement 28.9 33-48119
with Amin J. Khoury
10.19 1991 Stock Option Agreement 28.10 33-48119
with Jim C. Cowart
10.20 1992 Stock Option Agreement 28.11 33-48119
with Amin J. Khoury
10.21 1992 Stock Option Agreement 28.12 33-48119
with Jim C. Cowart
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<C> <S> <C> <C>
10.22 1992 Stock Option Agreement with 28.13 33-48119
Paul W. Marshall
10.23 1992 Stock Option Agreement with 28.14 33-48119
David Lahar
10.24 United Kingdom 1992 Employee Share 10.4 33-54146
Option Scheme
10.25 1994 Employee Stock Purchase Plan 99 33-82894
10.26 Employment Agreement dated as of 10.12(a) 1992 10-K
January 1, 1992 between the
Registrant and Amin J. Khoury
10.27 Employment Agreement dated as of 10.12(b) 1992 10-K
March 1, 1992 between the
Registrant and Robert J. Khoury
10.28 Employment Agreement dated as of 10.12(c) 1992 10-K
March 1, 1992 between the
Registrant and Marco Lanza
10.29 Employment Agreement dated as of 10.12(d)
March 1, 1992 between the
Registrant and E. Ernest Schwartz 1992 10-K
10.30 Employment Agreement dated as of 10.12(e)
April 1, 1992 between the
Registrant and G. Bernard Jewell 1992 10-K
10.31 Employment Agreement dated as of
May 1, 1994 between the Registrant
and Thomas P. McCaffrey 10.34 1994 10-K
10.32 Employment Agreement dated as of 10.35 1995 10-K
November 16, 1994 between the
Registrant and Paul A.S. Markland
10.33 Acquisition Agreement dated 1 December 8-K
December 14, 1995 among the
Registrant, Eagle Industries,
Inc., Eagle Industrial Products
Corporation and Great American
Management and Investment, Inc.
Exhibit 21. Subsidiaries of the Registrant 21 1993 10-K
</TABLE>
(b) The following Financial Statement Schedules of the Registrant for the
Three Years Ended February 25, 1995 are included in this Registration
Statement:
Schedule II -- Valuation and Qualifying Accounts of BE Aerospace, Inc.
for the nine months ended November 25, 1995 and the three years ended
February 25, 1995. All other schedules are either inapplicable or the
information is included in the BE Aerospace, Inc. Consolidated
Financial Statements and, therefore, have been omitted.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore,
II-5
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by any such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether or not such indemnification is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication to such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOSTON AND THE
COMMONWEALTH OF MASSACHUSETTS, ON THE 25TH DAY OF JANUARY, 1996.
BE Aerospace, Inc.
By: /s/ Amin J. Khoury
---------------------------------
AMIN J. KHOURY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 25TH DAY OF JANUARY, 1996. EACH PERSON WHOSE
SIGNATURE APPEARS BELOW HEREBY AUTHORIZES AMIN J. KHOURY, THOMAS P. MCCAFFREY
AND C. DEAN DUSSEAULT AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, TO
EXECUTE IN THE NAME AND ON BEHALF OF SUCH PERSON ANY AMENDMENT OR ANY POST-
EFFECTIVE AMENDMENT TO THIS REGISTRATION STATEMENT AND TO FILE THE SAME, WITH
ANY EXHIBITS THERETO AND OTHER DOCUMENTS IN CONNECTION THEREWITH, MAKING SUCH
CHANGES IN THIS REGISTRATION STATEMENT AS THE REGISTRANT DEEMS APPROPRIATE,
AND APPOINTS EACH OF AMIN J. KHOURY, THOMAS P. MCCAFFREY AND C. DEAN DUSSEAULT
AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, ATTORNEY-IN-FACT TO SIGN
ANY AMENDMENT AND ANY POST-EFFECTIVE AMENDMENT TO THIS REGISTRATION STATEMENT
AND TO FILE THE SAME, WITH ANY EXHIBITS THERETO AND OTHER DOCUMENTS IN
CONNECTION THEREWITH.
SIGNATURE TITLE
--------- -----
/s/ Amin J. Khoury Chairman of the
- ------------------------------------- Board of Directors
AMIN J. KHOURY and Chief Executive
Officer (principal
executive officer)
/s/ Robert J. Khoury President, Director
- ------------------------------------- and Chief Operating
ROBERT J. KHOURY Officer
/s/ Thomas P. McCaffrey Vice President,
- ------------------------------------- Chief Financial
THOMAS P. MCCAFFREY Officer and
Assistant Secretary
(principal
financial and
accounting officer)
/s/ Jim C. Cowart Director
- -------------------------------------
JIM C. COWART
/s/ Richard G. Hamermesh Director
- -------------------------------------
RICHARD G. HAMERMESH
/s/ Brian H. Rowe Director
- -------------------------------------
BRIAN H. ROWE
/s/ Hansjoerg Wyss Director
- -------------------------------------
HANSJOERG WYSS
II-7
<PAGE>
<TABLE>
<CAPTION>
PAGE NUMBER IN SEQUENTIAL
EXHIBIT NUMBERING SYSTEM WHERE
NO. EXHIBIT INDEX EXHIBITS MAY BE LOCATED
------- ------------- -------------------------
<C> <S> <C>
1.1 Purchase Agreement dated January 19, 1996
by and among the Registrant, Merrill Lynch
& Co. and Morgan Stanley & Co.
Incorporated
4.1. Indenture dated January 24, 1996 for
Registrant's issue of 9 7/8% Senior
Subordinated Notes due 2006 between the
Registrant and Fleet National Bank
Connecticut, N.A., as trustee.
4.2. First Supplemental Indenture to Indenture
dated March 3, 1993 for the Registrant's
issue of 9 3/4% Senior Notes due 2003
between the Registrant and United States
Trust Company of New York, as trustee.
10.2 Escrow Agreement dated January 24, 1996
among the Registrant, Eagle Industrial
Products Corporation and First Trust of
Illinois, N.A., as escrow agent.
10.3 Amendment No. 2 to Amended and Restated
Credit Agreement dated as of January 19,
1996 among the Registrant, the banks named
therein and The Chase Manhattan Bank, N.A.
as Administrative Agent.
23.1 Consent of Deloitte & Touche
23.2 Consent of Arthur Anderson LLP
24 Power of Attorney (included on signature
page)
</TABLE>
<PAGE>
================================================================================
BE AEROSPACE, INC.
(a Delaware corporation)
$100,000,000
9 7/8% Senior Subordinated Notes due 2006
PURCHASE AGREEMENT
------------------
Dated: January 19, 1996
================================================================================
<PAGE>
BE AEROSPACE, INC.
(a Delaware corporation)
$100,000,000
9 7/8% Senior Subordinated Notes due 2006
PURCHASE AGREEMENT
------------------
January 19, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1201
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
BE Aerospace, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to each of Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley & Co. Incorporated (each an "Initial Purchaser" and together the
"Initial Purchasers") $100,000,000 aggregate principal amount of its 9 7/8%
Senior Subordinated Notes due 2006 (the "Securities"). The Securities are to be
issued pursuant to an indenture to be dated as of January 24, 1996 (the
"Indenture") between the Company and Fleet National Bank of Connecticut, as
trustee (the "Trustee"). The Securities and the Indenture are more fully
described in the Offering Memorandum (as hereinafter defined). Capitalized terms
used herein and not otherwise defined herein have the respective meanings
specified in the Offering Memorandum.
The Securities will be offered and sold to you without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance on an
exemption therefrom. The Company has prepared a preliminary offering
memorandum, dated
<PAGE>
2
December 27, 1995 (such preliminary offering memorandum being hereinafter
referred to as the "Preliminary Offering Memorandum"), and is preparing a final
offering memorandum, dated January 19, 1996 (such final offering memorandum, in
the form first furnished to the Initial Purchasers for use in connection with
the offering of the Securities, being hereinafter referred to as the "Offering
Memorandum"), each setting forth information regarding the Company and the
Securities. The Company hereby confirms that it has authorized the use of the
Preliminary Offering Memorandum and the Offering Memorandum in connection with
the offering and resale of the Securities.
The Company understands that you propose to make an offering of the
Securities on the terms set forth in the Offering Memorandum, as soon as you
deem advisable after this Agreement has been executed and delivered, (i) to
persons in the United States whom you reasonably believe to be qualified
institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A
under the 1933 Act, as such rule may be amended from time to time ("Rule 144A"),
in transactions under Rule 144A, (ii) to a limited number of other institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under
Regulation D ("Regulation D") of the 1933 Act ("Accredited Investors")) in
exempt private sales under the 1933 Act and/or (iii) to non-U.S. persons outside
the United States to whom you reasonably believe offers and sales of the
Securities may be made in reliance upon Regulation S ("Regulation S") under the
1933 Act.
The holders of Securities will be entitled to the benefits of a
Registration Rights Agreement, in substantially the form attached hereto as
Exhibit A with such changes as shall be agreed to by the parties hereto (the
"Registration Rights Agreement"), pursuant to which the Company will file a
registration statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") registering the Securities or the
Exchange Securities referred to in the Registration Rights Agreement under the
1933 Act.
It is understood and agreed that (a) the Company has obtained the consent
of the holders of its 9-3/4% Senior Notes due 2003 (the "Senior Notes") to
execute and has executed a First Supplemental Indenture dated as of January 5,
1996 (the "Supplemental Indenture") effecting certain amendments to, and a
waiver of a provision of, the Indenture dated as of March 3, 1993 (the "Senior
Note Indenture") between the Company and United States Trust Company of New
York, as trustee (the "Senior Note Trustee"), as more fully described in the
Company's consent solicitation statement relating thereto dated December 15,
1995 (the "Consent Solicitation Statement") and (b) prior to or concurrently
with the Closing Time (as defined in Section 2(b)), (i) the Company will enter
into a second amended and restated credit agreement (the "Amended Bank Credit
Agreement") with the lenders party thereto (the "Lenders") and The Chase
Manhattan Bank (National Association) ("Chase"), as administrative agent for the
Lenders (the "Agent"), which will consist of a $100 revolving credit facility
and will amend and restate the Amended and Restated Credit Agreement dated as of
May 18, 1994 among the Company, the lenders party thereto, and
<PAGE>
3
Chase, as agent for such lenders, and (ii) the Company will acquire with a
portion of the net proceeds from the sale of the Securities all of the
outstanding shares of Burns Aerospace Corporation, a Delaware corporation
("Burns") and a wholly owned indirect subsidiary of Eagle Industries, Inc., a
Delaware corporation ("Eagle"), pursuant to the Acquisition Agreement dated
December 14, 1995 (the "Acquisition Agreement") between the Company and Eagle
(the "Acquisition"). For purposes of this Agreement, at the Closing Time the
term "Company" shall mean the Company as it would exist immediately following
the Acquisition.
Section 1. Representations and Warranties. (a) The Company represents
------------------------------
and warrants to and agrees with the Initial Purchasers as of the date hereof and
as of the Closing Time as follows:
(i) As of their respective dates and as of the Closing Time, none of
the Preliminary Offering Memorandum, the Offering Memorandum or any
amendment or supplement thereto will include an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; except that this representation and warranty
does not apply to statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by the
Initial Purchasers expressly for use in the Preliminary Offering
Memorandum, the Offering Memorandum or any amendment or supplement thereto.
(ii) Except for the Senior Notes, there are no debt securities of the
Company registered under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), or listed on a national securities exchange or quoted in
a U.S. automated inter-dealer quotation system. The Company has been
advised that the Securities have been designated PORTAL securities in
accordance with the rules and regulations of the National Association of
Securities Dealers, Inc. ("NASD").
(iii) None of the Company or any affiliate of the Company (as defined
in Rule 501(b) under the 1933 Act) has directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the 1933 Act) by or for the Company
that are of the same or similar class as the Securities (other than with
respect to the Exchange Securities) in a manner that would require the
registration of the Securities under the 1933 Act.
(iv) None of the Company or any affiliate of the Company or any
person acting on their behalf has (A) engaged, in connection with the
offering of the Securities, in any form of general solicitation or general
advertising (as those terms are used within the meaning of Regulation D);
(B) solicited offers for, or offered or sold, such Securities by means of
any form of general solicitation or general
<PAGE>
4
advertising (as those terms are used in Regulation D under the 1933 Act) or
in any manner involving a public offering within the meaning of Section
4(2) of the 1933 Act; or (C) engaged in any directed selling efforts (as
defined in Rule 902 of the 1933 Act) in the United States in connection
with the Securities being offered and sold pursuant to Regulation S.
(v) Each of Deloitte & Touche L.L.P. and Arthur Andersen LLP, which
are reporting upon the audited financial statements and related notes
included in the Offering Memorandum, is an independent public accountant
with respect to the Company and Burns, respectively, in accordance with the
provisions of the 1933 Act and the rules and regulations of the Commission
thereunder.
(vi) The financial statements included in the Offering Memorandum
(excluding the pro forma financial data) present fairly (a) the financial
position of (1) the Company and its subsidiaries on a consolidated basis
and (2) Burns, in each case, as of the dates indicated and (b) the results
of operations and cash flows of (1) the Company and its subsidiaries on a
consolidated basis and (2) Burns, in each case, for the periods specified,
subject, in the case of unaudited financial statements of the Company or
Burns, to normal year-end adjustments which shall not be materially adverse
to the condition (financial or otherwise), earnings, business affairs or
business prospects of either the Company and its subsidiaries, considered
as one enterprise, or Burns, as the case may be. Such financial statements
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved.
The financial statement schedules, if any, included in the Offering
Memorandum present fairly the information required to be stated therein.
The selected financial data included in the Offering Memorandum present
fairly the information shown therein and have been compiled on a basis
consistent with that of the audited consolidated financial statements
included in the Offering Memorandum. The pro forma financial statements
and other pro forma financial information included in the Offering
Memorandum present fairly the information shown therein, have been prepared
in accordance with the Commission's rules and guidelines with respect to
pro forma financial statements, have been properly compiled on the pro
forma bases described therein and, in the opinion of the Company, the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
or circumstances referred to therein.
(vii) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware with corporate
power and authority under such laws to own, lease and operate its
properties and conduct its business as described in the Offering
Memorandum; and the Company is duly qualified to transact business as a
foreign corporation and is in good standing in each
<PAGE>
5
other jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification necessary,
except to the extent that the failure to so qualify or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, considered as one enterprise.
(viii) The Company's only subsidiaries (either direct or indirect)
are: BEA Aerospace International Ltd., a company incorporated under the
laws of Barbados ("BEA International"), Flight Equipment Engineering
Limited, a company incorporated under the Companies Act (United Kingdom)
("FEEL"), BE Aerospace (U.K) Limited, a company incorporated under the
Companies Act (United Kingdom) ("BEA UK"), Fort Hill Aircraft Holdings
Limited, a company incorporated under the Companies Act (United Kingdom)
("Fort Hill"), AFI Holdings Limited, a company incorporated under the
Companies Act (United Kingdom) ("AFI"), Aircraft Furnishing Limited, a
company incorporated under the Companies Act (United Kingdom) ("AFL"), BE
Aerospace (Services) Limited, a company incorporated under the Companies
Act (United Kingdom), BE Aerospace (U.S.A.), Inc., a Delaware corporation
("BEA USA"), BE Aerospace (Netherlands) B.V., a company incorporated under
the laws of the Netherlands ("BEA Netherlands"), Royal Inventum, B.V., a
company incorporated under the laws of the Netherlands ("Royal Inventum"),
Nordskog Industries, Inc., a California corporation ("Nordskog"), Acurex
Corporation, a Delaware corporation ("Acurex"), BE Aerospace (France)
S.A.R.L., a company incorporated under the laws of France ("BEA France")
and, at the Closing Time, Burns (each individually, a "Subsidiary" and
collectively, the "Subsidiaries"). The Company has no significant
subsidiaries (as defined in Rule 1.02 of the Commission's Regulation S-X),
other than Acurex, FEEL and Royal Inventum and, at the Closing Time, Burns.
AFI, Fort Hill and Nordskog are inactive subsidiaries with no significant
assets and are not engaged in any active trade or business. Each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with
corporate power and authority under such laws to own, lease and operate its
properties and conduct its business; and each Subsidiary is duly qualified
to transact business as a foreign corporation and is in good standing in
each other jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification necessary,
except to the extent that the failure to so qualify or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, considered as one enterprise. All of the outstanding shares
of capital stock of each Subsidiary have been duly authorized and validly
issued or created and are fully paid and non-assessable and, other than in
the case of BEA France, five shares owned by Marc Leveille, a French
national and director of BEA France, and five shares owned by The K.A.D.
Companies, Inc., an investment, venture capital and consulting firm owned
by Amin J. Khoury, the Chief Executive Officer of the Company, are owned by
the Company, directly or through one or more Subsidiaries,
<PAGE>
6
free and clear of any pledge, lien, security interest, charge, claim,
equity or encumbrance of any kind, except that (1) 65% of the issued and
outstanding Ordinary Shares of FEEL are pledged to the Agent under the
Amended Bank Credit Agreement, (2) 65% of the issued and outstanding
capital stock of BEA Netherlands is pledged to the Agent under the Amended
Bank Credit Agreement, (3) the outstanding capital stock of each of BEA USA
and Acurex is pledged to the Agent under the Amended Bank Credit Agreement
and (4) the outstanding capital stock of each of CNC and BEA UK is charged
to Barclays Bank PLC pursuant to a debenture over the assets of FEEL dated
November 19, 1992. The Company does not, directly or indirectly, own any
equity or long term debt securities of any corporation, firm, partnership,
joint venture or other entity, other than the stock of its Subsidiaries, a
note from Acurex in the principal amount of $6,950,000, a note from FEEL in
the principal amount of (Pounds)69,541 and a note from BEA Netherlands in
the principal amount of Dfls. 49,385,000.
(ix) The Company had, at the date indicated in the Offering
Memorandum, a duly authorized, issued and outstanding capitalization as set
forth in the Offering Memorandum under the caption "Capitalization".
(x) All of the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable; and none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive rights of any stockholder
of the Company. There are no outstanding options to purchase, or any rights
or warrants to subscribe for, or any securities or obligations convertible
into, or any contracts or commitments to issue or sell, any shares of
Common Stock of the Company, any shares of capital stock of any subsidiary,
or any such warrants, convertible securities or obligations, except as set
forth in the Offering Memorandum.
(xi) This Agreement has been duly authorized, executed and delivered
by the Company.
(xii) The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding agreement
of the Company, enforceable against the Company in accordance with its
terms except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
creditors' rights generally, (y) the availability of equitable remedies may
be limited by equitable principles of general applicability and (z) any
rights to indemnity and contribution may be limited by federal and state
securities laws and public policy considerations.
<PAGE>
7
(xiii) The Indenture has been duly authorized by the Company, will be
substantially in the form heretofore delivered to you and, when duly
executed and delivered by the Company and the Trustee, will constitute a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law);
and the Indenture conforms to the description thereof in the Offering
Memorandum.
(xiv) The Securities have been duly authorized by the Company. When
executed, authenticated, issued and delivered in the manner provided for in
the Indenture and sold and paid for as provided in this Agreement, the
Securities will constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except as enforcement thereof may
be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity
or at law); and the Securities conform to the description thereof in the
Offering Memorandum.
(xv) The Amended Bank Credit Agreement has been duly authorized by
the Company and, when executed and delivered by the Company and the other
parties thereto in accordance with the terms thereof, will constitute a
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization or other similar laws
affecting enforcement of creditors' rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law); and the description of each of the
Supplemental Indenture and the Amended Bank Credit Agreement contained in
the Offering Memorandum fairly presents the information disclosed in all
material respects.
(xvi) Since the respective dates as of which information is given in
the Offering Memorandum, except as otherwise stated therein or contemplated
thereby, there has not been (A) any material adverse change in the
condition (financial or otherwise), earnings, business affairs or business
prospects of the Company and its subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business, (B)
any transaction entered into by the Company or any subsidiary, other than
in the ordinary course of business, that is material to the
<PAGE>
8
Company and its subsidiaries, considered as one enterprise, or (C) any
dividend or distribution of any kind declared, paid or made by the Company
on its capital stock.
(xvii) Neither the Company nor any Subsidiary is in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which it is a party or by
which it may be bound or to which any of its properties may be subject,
except for such defaults that would not have a material adverse effect on
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as one
enterprise. The execution and delivery by the Company of this Agreement,
the Registration Rights Agreement, the Indenture, the Supplemental
Indenture, the Amended Bank Credit Agreement and the Acquisition Agreement,
the issuance, sale and delivery of the Securities by the Company, the
closing of the Acquisition and the financing thereof, the consummation by
the Company of the transactions contemplated in this Agreement, the
Offering Memorandum and the Consent Solicitation Statement and the
compliance by the Company with the terms of this Agreement, the
Registration Rights Agreement, the Indenture, the Supplemental Indenture,
the Amended Bank Credit Agreement and the Acquisition Agreement have been
duly authorized by all necessary corporate action on the part of the
Company and do not and will not result in any violation of the charter or
by-laws of the Company or any Subsidiary, and do not and will not conflict
with, or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any Subsidiary under, (A) any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which the
Company or any Subsidiary is a party or by which they may be bound or to
which any of their respective properties may be subject (except for
consensual liens created pursuant to the Amended Bank Credit Agreement) or
(B) any existing applicable law, rule, regulation, judgment, order or
decree of any government, governmental instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any Subsidiary or any
of their respective properties.
(xviii) No authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or foreign
(other than under the 1933 Act and the rules and regulations thereunder
with respect to the Registration Rights Agreement and the transactions
contemplated thereunder and the securities or "blue sky" laws of the
various states) is required for the valid authorization, issuance, sale and
delivery of the Securities, for the execution, delivery or performance by
the Company of this Agreement, the Registration Rights Agreement, the
Indenture, the Supplemental Indenture, the Amended Bank Credit Agreement
and the Acquisition Agreement or for the consummation by the Company of the
transactions contemplated
<PAGE>
9
in this Agreement, the Offering Memorandum and the Consent Solicitation
Statement, except such of the foregoing as will be obtained prior to the
Closing Time.
(xix) Except as disclosed in the Offering Memorandum, there is no
action, suit or proceeding before or by any government, governmental
instrumentality or court, domestic or foreign, now pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any Subsidiary or any of their respective officers, in their capacity as
such, that could result in any material adverse change in the condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company and its subsidiaries, considered as one enterprise, or that
could materially and adversely affect the properties or assets of the
Company and its subsidiaries, considered as one enterprise, or that could
adversely affect the consummation of the transactions contemplated in this
Agreement, the Offering Memorandum, the Consent Solicitation Statement or
that seeks to enjoin, invalidate or obtain any award or damages in respect
of the Acquisition or the financing thereof; the aggregate of all pending
legal or governmental proceedings that are not described in the Offering
Memorandum to which the Company or any Subsidiary is a party or which
affect any of their respective properties, including ordinary routine
litigation incidental to the business of the Company or any Subsidiary,
would not have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company
and its subsidiaries, considered as one enterprise.
(xx) There are no contracts or documents of a character that would
be required to be described in the Offering Memorandum, if it were a
prospectus filed as part of a registration statement on Form S-1 under the
1933 Act, that are not described as would be so required. All such
contracts to which the Company or any Subsidiary is party have been duly
authorized, executed and delivered by the Company or such Subsidiary,
constitute valid and binding agreements of the Company or such Subsidiary
and are enforceable against the Company or such Subsidiary in accordance
with the terms thereof, except as enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(xxi) The Company and the Subsidiaries each has good and marketable
title to all properties and assets described in the Offering Memorandum as
owned by it, free and clear of all liens, charges, encumbrances or
restrictions, except such as (A) are described in the Offering Memorandum
or (B) are neither material in amount nor materially significant in
relation to the business of the Company and its
<PAGE>
10
subsidiaries, considered as one enterprise; all of the leases and subleases
material to the business of the Company and its subsidiaries, considered as
one enterprise, and under which the Company or any Subsidiary holds
properties described in the Offering Memorandum, are in full force and
effect, and neither the Company nor any Subsidiary has received any notice
of any material claim of any sort that has been asserted by anyone adverse
to the rights of the Company or any Subsidiary under any of the leases or
subleases mentioned above, or affecting or questioning the rights of such
corporation to the continued possession of the leased or subleased premises
under any such lease or sublease.
(xxii) The Company and the Subsidiaries each owns, possesses or has
obtained all material governmental licenses, permits, certificates,
consents, orders, approvals and other authorizations, including, without
limitation, any licenses, permits, certificates, consents, orders,
approvals and other authorizations required to be obtained from the Federal
Aviation Administration, necessary to own or lease, as the case may be, and
to operate its properties and to carry on its business as presently
conducted, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to revocation or modification of any such
licenses, permits, certificates, consents, orders, approvals or
authorizations.
(xxiii) The Company and the Subsidiaries each owns or possesses
adequate patents, patent licenses, trademarks, service marks and trade
names necessary to carry on its business as presently conducted, and
neither the Company nor any Subsidiary has received any notice of
infringement of or conflict with asserted rights of others with respect to
any patents, patent licenses, trademarks, service marks or trade names that
in the aggregate, if the subject of an unfavorable decision, ruling or
finding, could materially adversely affect the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company
and its subsidiaries, considered as one enterprise.
(xxiv) To the best knowledge of the Company, no labor problem exists
with its employees or with the employees of any Subsidiary or is imminent
that could adversely affect the Company and its subsidiaries, considered as
one enterprise, and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its or any Subsidiary's
principal suppliers, contractors or customers that could be expected to
materially adversely affect the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise.
(xxv) Neither the Company nor any Subsidiary has taken or will take,
directly or indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the price
of the Securities.
<PAGE>
11
(xxvi) Assuming (A) the accuracy of the representations and
warranties of the Initial Purchasers in Section 2 hereof and (B) the due
performance by the Initial Purchasers of the covenants and agreements set
forth in Section 2 hereof, it is not necessary in connection with the
offer, sale and delivery of the Securities to the Initial Purchasers under,
or in connection with the initial resale of such Securities by the Initial
Purchasers in accordance with, this Agreement to register the Securities
under the 1933 Act or to qualify any indenture in respect of the Securities
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
(xxvii) None of the Company or any affiliate (as such term is defined
in Rule 501(b) of Regulation D) of the Company or any person acting on
behalf thereof has engaged in any directed selling efforts (as such term is
defined in Regulation S) with respect to any Securities offered and sold in
reliance on Rule 903 of Regulation S, and the Company and such affiliates
and such other persons acting on behalf thereof have complied with the
offering restrictions requirement of Regulation S with respect to the
Securities.
(xxviii) The Company has complied with all applicable provisions of
Florida H.B. 1771, codified as Section 517.057 of the Florida Statutes and
all regulations promulgated thereunder relating to issuers doing business
in Cuba.
(xxix) The Company is, and immediately after the Closing Time (after
giving effect to the Acquisition as described in the Offering Memorandum)
will be, Solvent. As used herein, the term "Solvent" means, with respect
to the Company on a particular date, that on such date (A) the fair market
value of the assets of the Company is greater than the total amount of
liabilities (including contingent liabilities) of the Company, (B) the
present fair salable value of the assets of the Company is greater than the
amount that will be required to pay the probable liabilities of the Company
on its debts as they become absolute and matured, (C) the Company is able
to realize upon its assets and pay its debts and other liabilities,
including contingent obligations, as they mature and (D) the Company does
not have an unreasonably small capital.
(xxx) On or prior to the Expiration Date (as defined in the Consent
Solicitation Statement), the Company or the Depositary (as defined in the
Consent Solicitation Statement) has received, in accordance with the
procedures, terms and conditions set forth in the Consent Solicitation
Statement, the valid and unrevoked consent of the registered holders of not
less than a majority in principal amount of the Outstanding (as defined in
the Existing Indenture) Senior Notes to the execution of the Supplemental
Indenture. The Company has duly authorized, executed and delivered the
Supplemental Indenture and, at the Closing Time, the Supplemental Indenture
will be in full force and effect and will constitute a valid and binding
obligation of the
<PAGE>
12
Company, enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization or other similar laws affecting enforcement of creditors'
rights generally or by general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
(xxxi) The representations and warranties of the Company set forth
in the Amended Bank Credit Agreement are true and correct on the date
hereof in all material respects, except to the extent any such
representation or warranty was expressly made as of any other date, in
which case such representation and warranty was true and correct in all
material respects at such date.
(xxxii) The representations and warranties of the Company set forth
in the Acquisition Agreement are true and correct on the date hereof,
except to the extent any such representation or warranty was expressly made
as of any other date, in which case such representation and warranty was
true and correct at such date.
(xxxiii) The Acquisition Agreement is in full force and effect, and
the Company has performed all of its obligations thereunder required to be
performed on or prior to the date hereof.
(xxxiv) No part of the proceeds of the sale of the Securities will be
used for any purpose that violates the provisions of any of Regulation G,
T, U or X of the Board of Governors of the Federal Reserve System or any
other regulation of such Board of Governors.
(xxxv) All United States federal income tax returns of the Company
and the Subsidiaries required by law to be filed have been filed and all
United States federal income taxes which are due and payable have been
paid, except assessments against which appeals have been or will be
promptly taken and as to which adequate reserves have been provided. The
United States federal income tax returns of the Company through the period
ended July 28, 1991 have been settled and no assessment in connection
therewith has been made against the Company. The Company and the
Subsidiaries each has filed all other tax returns that are required to have
been filed by it pursuant to applicable foreign, state, local or other law
except insofar as the failure to file such returns would not have a
material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise, and has paid all taxes due
pursuant to such returns or pursuant to any assessment received by the
Company and the Subsidiaries, except for such taxes, if any, as are being
contested in good faith and as to which adequate reserves have been
provided. The charges, accruals and
<PAGE>
13
reserves on the books of the Company in respect of any income and
corporation tax liability for any years not finally determined are adequate
to meet any assessments or re-assessments for additional income tax for any
years not finally determined, except to the extent of any inadequacy that
would not have a material adverse effect on the condition (financial or
otherwise), earnings, business affairs or business prospects of the Company
and its subsidiaries, considered as one enterprise.
(xxxvi) The Company and the Subsidiaries each maintains a system of
internal accounting controls sufficient to provide reasonable assurances
that (A) transactions are executed in accordance with management's general
or specific authorization; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company
and its subsidiaries have not made, and, to the knowledge of the Company,
no employee or agent of the Company or any subsidiary has made, any payment
of the Company's funds or any subsidiary's funds or received or retained
any funds in violation of any applicable law, regulation or rule or that
would be required to be disclosed in the Offering Memorandum.
(xxxvii) Except for John F. Branham pursuant to an Agreement relating
to the sale and purchase of the business and undertaking of JFB Engineering
Company Limited by and between Mr. John F. Branham, JFB Engineering Company
Limited, FEEL and the Company dated April 3, 1992, there are no holders of
securities of the Company who have the right to require the Company to
register securities held by them under the 1933 Act and such registration
rights of British Airways and Mr. Branham will not be triggered by the
transactions contemplated by this Agreement, the Registration Rights
Agreement, the Supplemental Indenture, the Amended Bank Credit Agreement or
the Acquisition Agreement.
(xxxviii) No material event of default exists under any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which the Company or any Subsidiary is a party or to which
the Company or any Subsidiary is subject.
(xxxix) The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended (the "1940 Act").
<PAGE>
14
(xl) Except as disclosed in the Offering Memorandum and except as
would not individually or in the aggregate have a material adverse effect
on the condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered as one
enterprise, (A) the Company and the Subsidiaries are each in compliance
with all applicable Environmental Laws, (B) the Company and the
Subsidiaries have all permits, authorizations and approvals required under
any applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened Environmental Claims
against the Company or any of the Subsidiaries, and (D) there are no
circumstances with respect to any property or operations of the Company or
any Subsidiary that could reasonably be anticipated to form the basis of an
Environmental Claim against the Company or any Subsidiary.
For purposes of this Agreement, the following terms shall have the
following meanings: "Environmental Law" means any United States (or other
applicable jurisdiction's) federal, state, local or municipal statute, law,
rule, regulation, ordinance, code, policy or rule of common law and any
judicial or administrative interpretation thereof including any judicial
or administrative order, consent decree or judgment, relating to the
environment, health, safety or any chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority. "Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations or proceedings
relating in any way to any Environmental Law.
(b) Any certificate signed by any officer of the Company or any
Subsidiary and delivered to the Initial Purchasers or to counsel for the Initial
Purchasers shall be deemed a representation and warranty by the Company to the
Initial Purchasers as to the matters covered thereby.
Section 2. Purchase, Sale and Resale of the Securities; Closing;
-----------------------------------------------------
Representations and Warranties of the Initial Purchasers. (a) On the basis of
- --------------------------------------------------------
the representations and warranties herein contained, and subject to the terms
and conditions herein set forth, the Company agrees to sell to each of you,
severally and not jointly, and each of you severally agrees to purchase from the
Company, at a purchase price of 97.25% of the principal amount thereof, the
principal amount of the Securities set forth opposite your name on Schedule I.
(b) Payment of the purchase price for, and delivery of, the Securities
shall be made at the offices of Shearman & Sterling, 599 Lexington Avenue, New
York, New York 10022, or at such other place as shall be agreed upon by the
Company and you, at 10:00 A.M., New York time, on January 24, 1996 or at such
other time not more than ten
<PAGE>
15
full business days thereafter as you and the Company shall determine (such date
and time of payment and delivery being herein called the "Closing Time"). The
Securities shall be in such denominations and registered in such names as you
may request in writing at least two business days before the Closing Time. The
Securities, which may be in temporary form, will be made available in New York
City for examination and packaging by you not later than 10:00 A.M. on the last
business day prior to the Closing Time.
(c) At the Closing Time, payment shall be made to the Company in the
aggregate amount of $97,250,000 in immediately available funds payable to the
order of the Company against delivery of the Securities to you and the Company
shall promptly reimburse you for your costs in obtaining immediately available
funds.
(d) You have advised the Company that you propose to offer the
Securities for sale, upon the terms and conditions set forth in this Agreement
and in the Offering Memorandum. You hereby represent and warrant to the Company
that you are a Qualified Institutional Buyer as defined in Rule 144A and an
"Accredited Investor" as defined in Rule 501 of Regulation D. You agree with
the Company that you (i) will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general advertising
or in any manner involving a public offering within the meaning of Section 4(2)
of the 1993 Act, or, with respect to Securities sold in reliance on Regulation
S, by means of any directed selling efforts (as defined in Rule 902 of
Regulation S) in the United States and (ii) will solicit offers for the
Securities only from, and will offer, sell or deliver the Securities, as part of
its initial offering, only to (A) persons in the United States whom you
reasonably believe to be Qualified Institutional Buyers or, if any such person
is buying for one or more institutional accounts for which such person is acting
as fiduciary or agent, only when such person has represented to you that each
such account is a Qualified Institutional Buyer to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A, and, in each
case, in a transaction under Rule 144A, (B) other institutional investors that
you reasonably believe to be Accredited Investors or, if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to you that each such
account is an Accredited Investor, and (C) non-U.S. persons outside the United
States to whom you reasonably believe offers and sales of the Securities may be
made in reliance upon Regulation S, in transactions meeting the requirements of
Regulation S under the Securities Act; provided that, with respect to clause
--------
(B), each such transfer of Securities is effected by the delivery to such
purchaser of Securities in definitive form and registered in its name (or its
nominee's name) on the books maintained by the Trustee.
Section 3. Certain Covenants of the Company. The Company covenants
--------------------------------
with you as follows:
<PAGE>
16
(a) The Company will not at any time make any amendment or supplement
to the Offering Memorandum of which you shall not have previously been
advised and furnished a copy or to which you or your counsel shall
reasonably object.
(b) The Company will promptly deliver to you, without charge, during
the period from the date hereof to the date of the completion of the
distribution of the Securities by you, such number of copies of the
Offering Memorandum, as it may then be amended or supplemented, or the
Preliminary Offering Memorandum, as it may then be amended or supplemented,
as you may reasonably request.
(c) If, at any time prior to completion of the distribution of the
Securities by you, any event shall occur or condition exist as a result of
which it is necessary, in the opinion of your counsel or counsel for the
Company, to amend or supplement the Offering Memorandum in order that the
Offering Memorandum will not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading or if, in the opinion of your
counsel or counsel for the Company, it is necessary to amend or supplement
the Offering Memorandum to comply with applicable law, the Company, at its
own expense, will promptly prepare such amendment or supplement as may be
necessary so that the statements in the Offering Memorandum as so amended
or supplemented will not, in the light of the circumstances existing at the
time it is delivered to a purchaser, be misleading or so that such Offering
Memorandum as so amended or supplemented will comply with applicable law,
as the case may be, and furnish you such number of copies as you may
reasonably request.
(d) The Company will endeavor, in cooperation with you, to qualify the
Securities for offering and sale under the applicable securities laws of
such states and other jurisdictions as you may designate and to maintain
such qualifications in effect for a period of not less than a year from the
date of the Offering Memorandum; provided, however, that the Company shall
-------- -------
not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. The Company will file such statements and
reports as may be required by the laws of each jurisdiction in which the
Securities have been qualified as above provided. The Company will also
supply you with such information as is necessary for the determination of
the legality of the Securities for investment under the laws of such
jurisdictions as you may request.
(e) Except following the effectiveness of the Registration Statement,
neither the Company nor any of its affiliates (as such term is defined in
Rule 501(b) of
<PAGE>
17
Regulation D) will solicit any offer to buy or offer to sell the Securities
by means of any form of general solicitation or general advertising (within
the meaning of Rule 502(C) of Regulation D) or in any manner involving a
public offering within the meaning of Section 4(2) of the 1933 Act.
(f) Neither the Company nor any of its affiliates (as such term is
defined in Rule 501(b) of the 1933 Act) will offer, sell or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
1933 Act) the offering of which security could be integrated with the sale
of the Securities in a manner that would require the registration of any of
the Securities under the 1933 Act.
(g) The Company will not be or become an open-end investment company,
unit investment trust or face-amount certificate company that is or is
required to be registered under the 1940 Act, and will not be or become a
closed-end investment company required to be registered, but not
registered, thereunder.
(h) During the period from the Closing Time to the earlier of (i)
three years after the Closing Time or (ii) the date of effectiveness of the
Registration Statement, the Company will not, and will not permit any of
its affiliates (as such term is defined in Rule 144 under the 1933 Act) to,
resell any of the Securities that have been reacquired thereby, except for
Securities purchased by the Company or any of its affiliates and resold in
a transaction registered under the 1933 Act.
(i) The Company will, so long as the Securities are outstanding and
are "restricted securities" within the meaning of Rule 144(a)(3) under the
1933 Act, either (i) file reports and other information with the Commission
under Section 13 or Section 15(d) of the 1934 Act, or (ii) in the event the
Company is not subject to Section 13 or Section 15(d) of the 1934 Act,
furnish to holders of the Securities and prospective purchasers of the
Securities designated by such holders, upon request of such holders or such
prospective purchasers, the information required to be delivered pursuant
to Rule 144A(d)(4) under the 1933 Act to permit compliance with Rule 144A
in connection with resale of the Securities. For a period of five years
after the Closing Time, the Company will make available to you upon request
copies of all such reports and information, together with such other
documents, reports and information as shall be furnished by the Company to
the holders of the Securities issued by it.
(j) If requested by you, the Company will use its best efforts in
cooperation with you to permit the Securities sold in transactions
described in Section 2(d)(ii)(A) hereof to be eligible for clearance and
settlement through The Depository Trust Company.
<PAGE>
18
(k) Each Security will bear the following legend until such legend
shall no longer be necessary or advisable because such Security is no
longer subject to the restrictions on transfer described therein:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (A)(1), (2),
(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR
<PAGE>
19
TRANSFER (i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM AND (ii) IN EACH OF THE
FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
(l) The Company will apply the net proceeds that it receives from the
offer and sale of the Securities issued by it in the manner set forth with
respect to it in the Offering Memorandum under the heading "Use of
Proceeds."
(m) Except following the effectiveness of the Registration Statement,
none of the Company, any affiliates (as such term is defined in Rule 501(b)
of Regulation D) or any person acting on behalf thereof (other than you)
will engage in any directed selling efforts (as such term is defined under
Regulation S) in the United States with respect to the Securities, and each
of the Company, such affiliate and such other person acting on behalf
thereof will comply with the offering restrictions requirement of
Regulation S.
(n) Prior to the Closing Time, the Company will not issue any press
release or other communications directly or indirectly or hold any press
conference with respect to the Company, the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company, without your prior written consent, unless in the judgment of the
Company and its counsel, and after notification to you, such press release
or communication is required by law.
(o) The Company has complied and will comply with all applicable
provisions of Florida H.B. 1771, codified as Section 517.075, and all
regulations promulgated thereunder relating to issuers doing business in
Cuba.
(p) For a period of 120 days from the date of the Offering Memorandum,
the Company will not, without your prior written consent, directly or
indirectly, offer, sell, grant any option to purchase or otherwise dispose
of any debt securities of the Company, other than the Exchange Securities
referred to in the Registration Rights Agreement.
Section 4. Payment of Expenses. Whether or not any sale of the
-------------------
Securities is consummated, the Company will pay and bear all costs and expenses
incident to the performance of its obligations under this Agreement, including
(a) the preparation and printing of the Preliminary Offering Memorandum, the
Offering Memorandum and any amendments or supplements thereto, and the cost of
furnishing copies thereof to the Initial
<PAGE>
20
Purchasers, (b) the preparation, reproduction and distribution of the
Securities, this Agreement, the Registration Rights Agreement, the Indenture and
any "blue sky" or legal investment memoranda, (c) the delivery of the Securities
to the Initial Purchasers, (d) the fees and disbursements of the Company's
counsel and accountants, (e) the qualification of the Securities under the
applicable securities laws in accordance with Section 3(d) and any filing for
review of the offering with NASD, including filing fees and fees and
disbursements of counsel for the Initial Purchasers in connection therewith and
in connection with the preparation of any "blue sky" or legal investment
memoranda, (f) any fees charged by rating agencies for rating the Securities,
(g) the fees and expenses of the Trustee, including the fees and disbursements
of counsel for the Trustee, in connection with the Indenture and the Securities
and (h) the cost of obtaining approval for the trading of the Securities through
PORTAL.
If this Agreement is terminated by the Initial Purchasers in
accordance with the provisions of Section 5 or 9(a)(i), the Company shall
reimburse the Initial Purchasers for all of their out-of-pocket expenses,
including the fees and disbursements of counsel for the Initial Purchasers.
Section 5. Conditions of Initial Purchasers' Obligations. The
---------------------------------------------
obligations of each Initial Purchaser to purchase and pay for the Securities
that it has severally agreed to purchase hereunder are subject to the accuracy
of the representations and warranties of the Company contained herein and in
certificates of any officer of the Company and any Subsidiary delivered pursuant
to the provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following further conditions:
(a) At the Closing Time, each of you shall have received a signed
opinion of Ropes & Gray, counsel for the Company, dated as of the Closing
Time, in substantially the form attached hereto as Exhibit B-1. Such
opinion shall be to such further effect with respect to other legal matters
relating to this Agreement and the sale of the Securities pursuant to this
Agreement as counsel for the Initial Purchasers may reasonably request. In
giving such opinion, such counsel may rely, as to all matters governed by
the laws of jurisdictions other than the law of the Commonwealth of
Massachusetts, the federal law of the United States and the General
Corporation Law of the State of Delaware, upon opinions of other counsel,
who shall be counsel satisfactory to counsel for the Initial Purchasers, in
which case the opinion shall state that they believe you are entitled to so
rely. In giving such opinion, such counsel may rely upon the opinion of
Reboul, MacMurray, Hewitt, Maynard & Kristol, as to all matters governed by
the laws of the State of New York and the Initial Purchasers are entitled
to rely thereon. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper,
upon certificates of officers of the Company and the Subsidiaries and
certificates of public officials; provided that such certificates have been
--------
delivered to the Initial Purchasers.
<PAGE>
21
(b) At the Closing Time, each of you shall have received a signed
opinion of Lovell White Durrant, counsel to BEA(UK) and FEEL, dated as of
Closing Time, in substantially the form attached hereto as Exhibit B-2.
Such opinion shall be to such further effect with respect to other legal
matters relating to this Agreement and the sale of the Securities pursuant
to this Agreement as counsel for the Initial Purchasers may reasonably
request.
(c) At the Closing Time, each of you shall have received a signed
opinion of Trenite Van Doorne, counsel to Royal Inventum, dated as of
Closing Time, in substantially the form attached hereto as Exhibit B-3.
Such opinion shall be to such further effect with respect to other legal
matters relating to this Agreement and the sale of the Securities pursuant
to this Agreement as counsel for the Initial Purchasers may reasonably
request.
(d) At the Closing Time, each of you shall have received the favorable
opinion of Shearman & Sterling, counsel for the Initial Purchasers, dated
as of the Closing Time, to the effect that the opinions delivered pursuant
to Sections 5(a), 5(b) and 5(c) appear on their face to be appropriately
responsive to the requirements of this Agreement except, specifying the
same, to the extent waived by you, and with respect to the incorporation
and legal existence of the Company, the Securities, this Agreement, the
Indenture, the Registration Rights Agreement, the Offering Memorandum and
such other related matters as you may require. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions
other than the law of the State of New York, the federal law of the United
States and the General Corporation Law of the State of Delaware, upon the
opinions of counsel satisfactory to you. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and
the Subsidiaries and certificates of public officials; provided that such
--------
certificates have been delivered to the Initial Purchasers.
(e) At the Closing Time, (i) the Offering Memorandum, as it may then
be amended or supplemented, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
there shall not have been, since the respective dates as of which
information is given in the Offering Memorandum, any material adverse
change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and its subsidiaries,
considered as one enterprise, whether or not arising in the ordinary course
of business, (iii) no action, suit or proceeding at law or in equity shall
be pending or, to the knowledge of the Company, threatened against the
Company or any Subsidiary that would be required to be set forth in the
Offering Memorandum other than as set forth therein and no proceedings
shall be pending or, to the knowledge of the Company, threatened against
the
<PAGE>
22
Company or any Subsidiary before or by any government, governmental
instrumentality or court, domestic or foreign, that could result in any
material adverse change in the condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise, other than as set forth in the
Offering Memorandum, (iv) the Company shall have in all material respects
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Time, (v) no event of
default shall exist under any contract, indenture, mortgage, loan
agreement, note, lease or other agreement or instrument to which the
Company or any Subsidiary is a party or to which the Company or any
Subsidiary is subject and (vi) the other representations and warranties of
the Company set forth herein shall be accurate in all material respects as
though expressly made at and as of the Closing Time. At the Closing Time,
each of you shall have received a certificate of the Chief Executive
Officer and the Chief Financial Officer of the Company, dated as of the
Closing Time, to such effect.
(f) At the time that this Agreement is executed by the Company, each
of you shall have received from Deloitte & Touche L.L.P., independent
auditors for the Company, a letter, dated such date, in form and substance
satisfactory to you, confirming that they are independent public
accountants with respect to the Company within the meaning of the 1933 Act
and the applicable published rules and regulations thereunder, and stating
in effect that:
(i) in their opinion, the audited financial statements related to
the Company and its consolidated subsidiaries and the related
financial statement schedules included in the Offering Memorandum
comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and the related published
rules and regulations thereunder;
(ii) on the basis of procedures (but not an audit in accordance
with generally accepted auditing standards) consisting of a reading of
the latest available unaudited interim consolidated financial
statements of the Company included in the Offering Memorandum, a
reading of the minutes of all meetings of the stockholders and
directors of the Company and the Audit, Stock Option and Compensation,
and Pricing Committees of the Company's Board of Directors since
February 25, 1995 (except for those meetings for which minutes have
not yet been provided, in which case minutes for such meetings in
draft form have been read) inquiries of certain officials of the
Company and its subsidiaries responsible for financial and accounting
matters, a review in accordance with procedures established by the
American Institute of Certified Public Accountants (the "AICPA") with
respect to the nine-month periods ended November 25, 1995 and November
26, 1994 performed at the
<PAGE>
23
request of the Company, and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention that
caused them to believe that:
(A) the unaudited financial statements for the Company and
its consolidated subsidiaries for the nine-month periods ended
November 25, 1995 and November 26, 1994 included in the Offering
Memorandum do not comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act and the
related published rules and regulations or are not in conformity
with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial
statements included in the Offering Memorandum;
(B) at a specified date not more than five days prior to
the date of this Agreement, there was any change in the capital
stock of the Company or any decrease in the consolidated net
current assets or net assets of the Company and its subsidiaries
or any increase in the consolidated long-term debt of the Company
and its subsidiaries, in each case as compared with amounts shown
in the latest balance sheet included in the Offering Memorandum,
except in each case for changes, decreases or increases that the
Offering Memorandum discloses have occurred or may occur; or
(C) for the period from the date of the latest financial
statement included in the Offering Memorandum to a specified date
not more than five days prior to the date of this Agreement,
there was any decrease in consolidated net sales, operating
earnings, net earnings or net earnings per share of the Company
and its subsidiaries, in each case as compared with the
comparable period in the preceding year, except in each case for
any decreases that the Offering Memorandum discloses have
occurred or may occur;
(iii) based on a comparison of the information included under
the heading "Selected Financial Information" with the requirements
of Item 301 of Regulation S-K and inquiries of certain officials of
the Company who have responsibility for financial and accounting
matters whether this information conforms in all material respects
with the disclosure requirements of Item 301 of Regulation S-K,
nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does not
conform in all material respects with the disclosure requirements of
item 301 of Regulation S-K;
<PAGE>
24
(iv) they are unable to and do not express any opinion on the
Unaudited Pro Forma Combined Financial Information and the other pro
forma financial information appearing under the captions "Summary
Financial Information" and "Selected Financial Information of BEA"
(collectively, the "Pro Forma Information") included in the
Registration Information or on the pro forma adjustments applied to
the historical amounts included in the Pro Forma Information; however,
for purposes of such letter they have:
(A) (x) read the Pro Forma Information; and
(y) made inquiries of certain officials of the Company
who have responsibility for financial and
accounting matters about the basis for their
determination of the pro forma adjustments and
whether the Pro Forma Information complies in form
in all material respects with the applicable
accounting requirements of Rule 11-02 of
Regulation S-X; and
(B) stated those officials' response to such inquiries; and
(C) proved the arithmetic accuracy of the application of the
pro forma adjustments to the historical amounts in the Pro Forma
Information;
on the basis of such procedures, and such other inquiries and
procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that the Pro Forma Information
included in the Offering Memorandum does not comply in form in all
material respects with the applicable requirements of Rule 11-02 of
Regulation S-X and that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of that
statement; and
(v) in addition to the procedures referred to in clause (ii)
above, they have performed other specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing in the Offering
Memorandum appearing in the Offering Memorandum, including the
Selected Financial Information, which have previously been specified
by you and which shall be specified in such letter, and have compared
certain of such items with, and have found such items to be in
agreement with, the accounting and financial records of the Company
and its subsidiaries.
<PAGE>
25
(g) At the Closing Time, each of you shall have received from Deloitte
& Touche L.L.P. a letter, in form and substance satisfactory to you and
dated as of the Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to Section 5(f), except
that the specified date referred to shall be a date not more than five days
prior to the Closing Time.
(h) At the time that this Agreement is executed by the Company, each
of you shall have received from Arthur Andersen LLP, independent auditors
for Burns, a letter, dated such date, in form and substance satisfactory to
you, confirming that they are independent public accountants with respect
to Burns within the meaning of the 1933 Act and the applicable published
rules and regulations thereunder, and stating in effect that:
(i) in their opinion, the audited financial statements related to
Burns and the related financial statement schedules included in the
Offering Memorandum comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act and the related
published rules and regulations thereunder; and
(ii) on the basis of procedures (but not an audit in accordance
with generally accepted auditing standards) consisting of a reading of
the latest available unaudited interim financial statements of Burns
included in the Offering Memorandum, a reading of the minutes of all
meetings of the stockholders and directors of Burns and its
subsidiaries and the Committees of Burns' Board of Directors since
January 1, 1995 (except for those meetings for which minutes have not
yet been provided, in which case minutes for such meetings in draft
form have been read), inquiries of certain officials of Burns and its
subsidiaries responsible for financial and accounting matters, a
review in accordance with procedures established by the American
Institute of Certified Public Accountants (the "AICPA") with respect
to the nine-month periods ended September 30, 1995 and September 30,
1994 performed at the request of Burns, and such other inquiries and
procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) the unaudited financial statements for Burns and its
consolidated subsidiaries for the nine-month periods ended
September 30, 1995 and September 30, 1994 included in the
Offering Memorandum do not comply as to form in all material
respects with the applicable accounting requirements of the 1933
Act and the related published rules and regulations or are not in
conformity with generally accepted accounting principles applied
on a basis substantially
<PAGE>
26
consistent with that of the audited financial statements included
in the Offering Memorandum;
(B) at a specified date not more than five days prior to the
date of this Agreement, there was any change in the capital stock
of Burns or any decrease in the consolidated net current assets
or net assets of Burns or any increase in the consolidated long-
term debt of Burns, in each case as compared with amounts shown
in the latest balance sheet included in the Offering Memorandum,
except in each case for changes, decreases or increases that the
Offering Memorandum discloses have occurred or may occur; or
(C) for the period from the date of the latest financial
statement included in the Offering Memorandum to a specified date
not more than five days prior to the date of this Agreement,
there was any decrease in consolidated net sales, operating
earnings or net earnings of Burns, in each case as compared with
the comparable period in the preceding year, except in each case
for any decreases that the Offering Memorandum discloses have
occurred or may occur;
(iii) in addition to the procedures referred to in clause (ii)
above, they have performed other specified procedures, not
constituting an audit, with respect to certain amounts, percentages,
numerical data and financial information appearing in the Offering
Memorandum included in the Selected Financial Information, which have
previously been specified by you and which shall be specified in such
letter, and have compared certain of such items with, and have found
such items to be in agreement with, the accounting and financial
records of Burns and its subsidiaries.
(i) At the Closing Time, each of you shall have received from Arthur
Andersen LLP, independent auditors for Burns, a letter, in form and
substance satisfactory to you and dated as of the Closing Time, to the
effect that they reaffirm the statements made in the letter furnished
pursuant to Section 5(h), except that the specified date referred to shall
be a date not more than five days prior to the Closing Time.
(j) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Time, there shall not have been any downgrading, nor
any notice given of any intended or potential downgrading or of a possible
change that does not indicate the direction of the possible change, in the
rating accorded any of the Company's securities, including the Securities,
by any "nationally recognized statistical rating
<PAGE>
27
organization," as such term is defined for purposes of Rule 436(g)(2) under
the 1933 Act.
(k) At the Closing Time, counsel for the Initial Purchasers shall have
been furnished with all such documents, certificates and opinions as they
may reasonably request for the purpose of enabling them to pass upon the
issuance and sale of the Securities as contemplated in this Agreement and
the matters referred to in Section 5(d) and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of the Company, the performance of any of the covenants of the
Company, or the fulfillment of any of the conditions herein contained; and
all proceedings taken by the Company at or prior to the Closing Time in
connection with the authorization, issuance and sale of the Securities as
contemplated in this Agreement shall be reasonably satisfactory in form and
substance to the Initial Purchasers and to counsel for the Initial
Purchasers.
(l) At the Closing Time, the Supplemental Indenture shall have been
fully executed and in full force and effect.
(m) At or prior to the Closing Time, the Company shall have entered
into the Amended Bank Credit Agreement; no event shall have occurred and be
continuing, the occurrence or continuance of which would relieve the
Lenders of their obligation to advance funds, or preclude them from
advancing funds, to the Company pursuant to the terms of the Amended Bank
Credit Agreement; the Amended Bank Credit Agreement shall conform in all
material respects to the terms and provisions described in the Offering
Memorandum; and the Company shall have provided to you and your counsel
copies of such closing documents delivered to the Lenders as you or your
counsel may reasonably request (including originals addressed to you of any
legal opinions of counsel for the Company).
(n) At the Closing Time, the Acquisition Agreement shall be in full
force and effect; the closing contemplated by the Acquisition Agreement
shall have been consummated in accordance with the terms thereof in all
material respects (except to the extent any conditions precedent have been
waived with your prior written consent, which consent shall not be
unreasonably withheld); and the Company shall have provided to you or your
counsel copies of all closing documents delivered to the parties to the
transactions contemplated by the Acquisition Agreement (including originals
addressed to you of any legal opinions of counsel for the Company).
(o) At the Closing Time, the Registration Rights Agreement shall have
been fully executed and be in full force and effect.
<PAGE>
28
(p) At or prior to the Closing Time, the Company shall have entered
into an amendment to the Term Loan Agreement between the Company and
Nationsbank of Florida, National Association, as lender, dated as of
December 20, 1994 to amend certain covenants to allow the issuance of the
Securities.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement, this Agreement may be
terminated by you on notice to the Company at any time at or prior to the
Closing Time, and such termination shall be without liability of any party to
any other party, except as provided in Section 4. Notwithstanding any such
termination, the provisions of Sections 6, 7 and 8 shall remain in effect.
Section 6. Indemnification. (a) The Company agrees to indemnify and
---------------
hold harmless the Initial Purchasers and each person, if any, who controls the
Initial Purchasers within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of an untrue statement or alleged
untrue statement of a material fact included in any preliminary offering
memorandum or the Offering Memorandum (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, as incurred (including
fees and disbursements of counsel chosen by you), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity agreement does not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of an untrue
statement or omission or alleged
<PAGE>
29
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by the Initial Purchasers expressly
for use in any preliminary offering memorandum or the Offering Memorandum (or
any amendment or supplement thereto). The foregoing indemnity with respect to
any untrue statement contained in or any omission from a preliminary offering
memorandum shall not inure to the benefit of any Initial Purchaser (or any
person who controls such Initial Purchaser within the meaning of Section 5 of
the 1933 Act) from whom the person asserting any such loss, liability, claim,
damage or expense purchased any of the Securities that are the subject thereof
if the Company shall sustain the burden of proving that such person was not sent
or given a copy of the Offering Memorandum (or any amendment or supplement
thereto) at or prior to the written confirmation of the sale of such Securities
to such person and the untrue statement contained in or the omission from such
preliminary offering memorandum was corrected in the Offering Memorandum (or any
amendment or supplement thereto).
(b) Each Initial Purchaser severally (but not jointly) agrees to
indemnify and hold harmless the Company, its directors, each of its officers and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act, against any and all loss, liability, claim, damage and expense
described in the indemnity agreement in Section 6(a), as incurred, but only with
respect to untrue statements or omissions made in any preliminary offering
memorandum or the Offering Memorandum (or any amendment or supplement thereto)
in reliance upon and in conformity with written information furnished to the
Company by such Initial Purchaser expressly for use in such preliminary offering
memorandum or the Offering Memorandum (or any amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. An indemnifying party may participate
at its own expense in the defense of such action. In no event shall the
indemnifying party or parties be liable for the fees and expenses of more than
one counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
<PAGE>
30
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request with such request prior to the date of such
settlement.
Section 7. Contribution. In order to provide for just and equitable
------------
contribution in circumstances under which the indemnity provided for in Section
6 is for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, the Company and the Initial Purchasers
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity incurred by the Company
and the Initial Purchasers, as incurred, in such proportions that the Initial
Purchasers are responsible for that portion represented by the percentage that
the Initial Purchasers' discount appearing on the cover page of the Offering
Memorandum bears to the price to investors appearing thereon, and the Company is
responsible for the balance; provided, however, that no person guilty of
-------- -------
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section, each person,
if any, who controls an Initial Purchaser within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such Initial
Purchaser and its affiliates, and each director of the Company, each officer of
the Company and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as the
Company.
Section 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. The representations, warranties, indemnities, agreements and other
- --------
statements of the Company or its officers set forth in or made pursuant to this
Agreement will remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Company, the Initial Purchasers or any
person who controls the Company or the Initial Purchasers within the meaning of
Section 15 of the 1933 Act and will survive delivery of and payment for the
Securities.
Section 9. Termination of Agreement. (a) The Initial Purchasers may
------------------------
terminate this Agreement, by notice to the Company, at any time at or prior to
the Closing Time (i) if there has been, since the respective dates as of which
information is given in the Offering Memorandum, any material adverse change in
the condition (financial or otherwise), earnings, business affairs or business
prospects of the Company and its subsidiaries, considered as one enterprise,
whether or not arising in the ordinary course of
<PAGE>
31
business, or (ii) if there has occurred any material adverse change in the
financial markets or any outbreak of hostilities or escalation thereof or other
calamity or crisis the effect of which is such as to make it, in the Initial
Purchasers' judgment, impracticable to market the Securities or enforce
contracts for the sale of the Securities or (iii) if trading in any securities
of the Company has been suspended by the Commission or the NASD, or if trading
generally on either the American Stock Exchange or the New York Stock Exchange
or in the over-the-counter market has been suspended, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for securities
have been required, by such exchange or by order of the Commission, the NASD or
any other governmental authority or (iv) if a banking moratorium has been
declared by either federal, New York or Florida authorities.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 4. Notwithstanding any such termination, the
provisions of Sections 6, 7 and 8 shall remain in effect.
Section 10. Default. If one of the Initial Purchasers shall fail at
-------
the Closing Time to purchase the Securities that it is obligated to purchase
(the "Defaulted Securities"), the non-defaulting Initial Purchaser shall have
the right, within 24 hours thereafter, to make arrangements to purchase all, but
not less than all, of the Defaulted Securities upon the terms herein set forth;
if, however, such non-defaulting Initial Purchaser has not completed such
arrangements within such 24-hour period, then:
(a) if the aggregate principal amount of Defaulted Securities does not
exceed 10% of the aggregate principal amount of the Securities to be
purchased, the non-defaulting Initial Purchaser shall be obligated to
purchase the full amount thereof, or
(b) if the aggregate principal amount of Defaulted Securities exceeds
10% of the aggregate principal amount of the Securities to be purchased,
this Agreement shall terminate without liability on the part of the non-
defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default that does not result in a termination
of this Agreement, either you or the Company shall have the right to postpone
the Closing Time for a period not exceeding seven days in order to effect any
required changes in the Offering Memorandum or in any other documents or
arrangements. As used herein, the term "Initial Purchaser" includes any person
substituted for an Initial Purchaser under this Section 10.
<PAGE>
32
Section 11. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if delivered,
mailed or transmitted by any standard form of telecommunication. Notices to the
Initial Purchasers shall be directed to the Initial Purchasers at Merrill Lynch
World Headquarters, North Tower, World Financial Center, New York, New York
10281, Attention: Mr. Michael F. Senft with copies to Shearman & Sterling at 599
Lexington, New York, New York 10022, Attention: Mr. Rohan S. Weerasinghe; and
notices to the Company shall be directed to it at 1400 Corporate Center Way,
Wellington, Florida 33414, Attention: Mr. Amin J. Khoury, Chairman of the Board
of Directors and Chief Executive Officer with copies to Ropes & Gray, One
International Place, Boston, Massachusetts 02110, Attention: Mr. C. Dean
Dusseault.
Section 12. Parties. This Agreement is made solely for the benefit
-------
of the Initial Purchasers, the Company and, to the extent expressed, any person
who controls the Company or any Initial Purchaser within the meaning of Section
15 of the 1933 Act, and the directors of the Company, its officers and their
respective executors, administrators, successors and assigns and no other person
shall acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from the Initial Purchasers of the Securities.
Section 13. Governing Law and Time. This Agreement shall be governed
----------------------
by the laws of the State of New York. Specified times of the day refer to New
York City time.
Section 14. Counterparts. This Agreement may be executed in one or
------------
more counterparts and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
_________________________
<PAGE>
33
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between the Company and the Initial
Purchasers in accordance with its terms.
Very truly yours,
BE AEROSPACE, INC.
By
---------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
By
------------------------------------
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
By
------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Principal Amount
of Securities
Initial Purchasers to be Purchased
------------------ ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................. $ 70,000,000
Morgan Stanley & Co. Incorporated............ $ 30,000,000
Total.................................. $100,000,000
</TABLE>
<PAGE>
EXHIBIT A
FORM OF
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT B-1
FORM OF
OPINION OF ROPES & GRAY
[Ropes & Gray Letterhead]
[Date]
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, NY 10281
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, NY 10036
Ladies and Gentlemen:
We have acted as counsel for BE Aerospace, Inc., a Delaware
corporation (the "Company"), in connection with the issuance and sale by the
Company of $100,000,000 aggregate principal amount of its 9 7/8% Senior
Subordinated Notes due 2006 (the "Securities"). This opinion is furnished to
you pursuant to Section 5(a) of the Purchase Agreement dated January 19, 1996
(the "Purchase Agreement") among the Company, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and Morgan Stanley & Co. Incorporated
(together with Merrill Lynch, the "Initial Purchasers") relating to the issuance
and sale of the Securities. Terms defined in the Purchase Agreement and not
otherwise defined herein are used herein with the meanings so defined.
We have attended the closing of the sale of Securities held today. We
have examined a copy of the Offering Memorandum dated January 19, 1996, relating
to the Securities; an executed copy of each of the Purchase Agreement, the
Registration Rights Agreement, the Acquisition Agreement, the Amended Bank
Credit Agreement, the Supplemental Indenture and the Indenture; and such other
documents as we have deemed necessary as a basis for the opinions expressed
herein.
<PAGE>
-2-
We express no opinion as to the laws of any jurisdiction other than
those of The Commonwealth of Massachusetts, the General Corporation Law of the
State of Delaware and the federal laws of the United States of America. With
your approval, we have relied to the extent necessary as to certain matters
governed by the laws of the State of New York on the opinion to you dated this
date of Reboul, MacMurray, Hewitt, Maynard & Kristol. Said opinion is
satisfactory in form and scope to enable us to render the opinion set forth
below and, although we have made no independent investigation of such matters,
we are of the opinion that you may properly rely thereon as to all matters
covered thereby.
Insofar as this opinion relates to factual matters, information with
respect to which is in the possession of the Company, we have made inquiries to
the extent we believe reasonable with respect to such matters and have relied
upon representations made by the Company in the Purchase Agreement and
representations made to us by one or more officers of the Company. Although we
have not independently verified the accuracy of such representations we do not
know of the existence or absence of any fact contradicting such representations.
Any reference herein to "our knowledge," "known to us" or any variation thereof
shall mean the actual knowledge of lawyers in this firm who have participated in
our representation of the Company in connection with the preparation of the
Offering Memorandum, the Indenture, the Registration Rights Agreement, the
Acquisition Agreement, the Supplemental Indenture and the Amended Bank Credit
Agreement. With respect to our opinion set forth in paragraphs 10(ii) and
11(iii) below, other than as specified therein we have not searched the dockets
of any court, administrative body, agency or other filing office in any
jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that:
1. Each of the Company and Acurex is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with corporate power to own or lease all assets owned or leased by it and
conduct its business as described in the Offering Memorandum. The Company has
authority to issue, sell and deliver the Securities, to execute and deliver the
Purchase Agreement, the Registration Rights Agreement, the Acquisition
Agreement, the Amended Bank Credit Agreement and the Indenture, and to perform
its obligations thereunder. The Company is qualified to transact business, and
is in good standing as a foreign corporation, in California, Connecticut,
Florida, Massachusetts, New Jersey and Washington; the states of California,
Connecticut, Florida, Minnesota, New Jersey and Washington being the only
jurisdictions in the United States in which the Company has advised us that it
owns or leases real property. Acurex is qualified to transact business, and is
in good standing as a foreign corporation, in California and Florida; the states
of California and Florida being the only jurisdictions in which the Company has
advised us that Acurex owns or leases real property.
<PAGE>
-3-
2. Burns is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, with corporate power to
own or lease all assets owned or leased by it and conduct its business as
described in the Offering Memorandum. Burns is qualified to transact business,
and is in good standing as a foreign corporation, in California, North Carolina
and Washington; the states of California, North Carolina and Washington being
the only jurisdictions in which the Company has advised us that Burns owns or
leases real property.
3. The authorized, issued and outstanding capital stock of the
Company is as set forth in the Capitalization table in the Offering Memorandum
under the caption "Historical BEA", except for issuances or forfeitures
subsequent to the date of the information provided in such table, if any,
pursuant to the Company's stock option plans. The shares of the Company's
common stock, $.01 par value (the "Common Stock") issued and outstanding on this
date as set forth in the certificate of the Company's Chief Financial Officer
included in the documents delivered at the Closing have been duly authorized and
validly issued and are fully paid and nonassessable. None of the outstanding
shares of Common Stock was issued in violation of any preemptive rights under
the Delaware General Corporation Law or the Restated Certificate of
Incorporation of the Company or, to the best of our knowledge, any preemptive
rights pursuant to any contract to which the Company is a party or by which it
is bound.
4. The Securities and the Indenture conform to the description
thereof contained in the Offering Memorandum under the caption "Description of
the Notes."
5. The statements made in the Offering Memorandum under the captions
"Business-Legal Proceedings," "Exchange Offer; Registration Rights," and
"Certain Federal Tax Considerations," to the extent that they constitute matters
of law or legal conclusions, have been reviewed by us and fairly present the
information disclosed therein in all material respects.
6. The Acquisition Agreement, the Supplemental Indenture and the
Amended Bank Credit Agreement conform in all material respects as to legal
matters to the descriptions thereof in the Offering Memorandum.
7. The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
8. The Indenture, the Acquisition Agreement, the Supplemental
Indenture and the Amended Bank Credit Agreement have been duly authorized,
executed and delivered by the Company and constitute valid and binding
agreements of the Company, and are enforceable against the Company in accordance
with their respective terms, except as enforceability (i) may be limited by
bankruptcy, insolvency, reorganization or other similar
<PAGE>
-4-
laws affecting creditors' rights generally and (ii) is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
9. The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the Indenture and issued and
delivered to and paid for by you pursuant to the Purchase Agreement, will
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as enforceability (i) may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and (ii) is subject to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law), and will be entitled to the benefits of the
Indenture.
10. The Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, and is enforceable against the Company in accordance
with its terms except as enforceability (i) may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (ii) is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
and (iii) of any rights to indemnity and contribution may be limited by federal
and state securities laws and public policy considerations.
11. To the best of our knowledge, (i) neither the Company, Acurex nor
Burns is in violation of its certificate of incorporation or by-laws or in
default in the performance of any obligation, agreement or condition in any
agreement or instrument known to us to which the Company, Acurex or Burns is a
party or by which either of them is bound and which default could have a
material adverse effect on the business or financial condition of the Company
and its subsidiaries taken as a whole and (ii) neither the Company, Acurex, nor
Burns is in violation of any applicable law, rule or regulation, or, to our
knowledge after having made inquiry of the Company, any order, writ, injunction
or decree, of any jurisdiction, court or governmental instrumentality, where
such violation or default could have a material adverse effect on the business
or financial condition of the Company and its subsidiaries taken as a whole.
12. The execution and delivery of the Purchase Agreement, the
Registration Rights Agreement, the Amended Bank Credit Agreement, the
Acquisition Agreement, the Supplemental Indenture and the Indenture by the
Company, the issuance and sale of the Securities, the consummation by the
Company of the transactions contemplated in the Purchase Agreement (including,
without limitation, the Acquisition and the financing thereof), and compliance
by the Company with the terms of the Purchase Agreement, the Registration Rights
Agreement, the Amended Bank Credit Agreement, the Acquisition Agreement, the
Supplemental Indenture and the Indenture do not, and will not, result in any
violation of, be in conflict with, constitute a default under, or result in the
creation of a lien
<PAGE>
-5-
under, any term or provision of (i) the certificate of incorporation or by-laws
of the Company or Acurex, (ii) any agreement or instrument known to us to which
the Company or Acurex is a party or by which either of them or their properties
is bound except for the consensual liens created pursuant to the Amended Bank
Credit Agreement or (iii) any applicable law or regulation, or, to our knowledge
after having made inquiry of the Company, any order, writ, injunction or decree
of any jurisdiction, court or governmental instrumentality, except that we
express no opinion as to state securities or "blue sky" laws and except that we
express no opinion in this paragraph 11 as to compliance with the antifraud
provisions of federal and state securities laws.
13. No authorization, approval, consent or license of any
governmental or regulatory body, agency or instrumentality of the United States
or any state thereof is required for the (i) valid issuance of the Securities in
accordance with the provisions of the Indenture, (ii) sale of the Securities to
you as contemplated by the Purchase Agreement or (iii) execution, delivery or
performance by the Company of the Purchase Agreement, the Registration Rights
Agreement, the Indenture, the Amended Bank Credit Agreement, the Supplemental
Indenture or the Acquisition Agreement other than (x) under the 1933 Act and the
rules and regulations thereunder with respect to the Registration Rights
Agreement and the transactions contemplated thereunder and (y) such as have been
obtained, except that we express no opinion with respect to qualification under,
or compliance with, any state securities or "blue sky" laws.
14. The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
15. Neither the issuance, sale or delivery of the Securities nor the
application of the proceeds thereof by the Company in accordance with the
Offering Memorandum will violate regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
16. Assuming (i) the accuracy of the representations and warranties
of the Initial Purchasers in Section 2 of the Purchase Agreement and (ii) the
due performance by the Initial Purchasers of the covenants and agreements set
forth in Section 2 of the Purchase Agreement, it is not necessary in connection
with the offer, sale and delivery of the Securities to the Initial Purchasers
under, or in connection with the initial resale of such Securities by the
Initial Purchasers in accordance with, the Purchase Agreement to register the
Securities under the 1933 Act or to qualify any indenture in respect of the
Securities under the Trust Indenture Act.
We have not independently verified the accuracy, completeness or
fairness of the statements made or the information contained in the Offering
Memorandum and, except with respect to the descriptions referred to in
paragraphs 3, 4 and 5 above, we are not
<PAGE>
-6-
passing upon and do not assume any responsibility therefor. In the course of
the preparation by the Company of the Offering Memorandum, we have participated
in discussions with your representatives and those of the Company and its
independent accountants, in which the business and affairs of the Company and
the contents of the Offering Memorandum were discussed. On the basis of
information that we have gained in the course of our representation of the
Company in connection with its preparation of the Offering Memorandum and our
participation in the discussions referred to above, we do not know of any
statute or regulation or any pending or threatened legal or governmental
proceeding to which the Company or any of its subsidiaries is a party or to
which any of its property is subject required to be described or referred to in
the Offering Memorandum, if it were filed as a part of a registration statement
on Form S-1 under the 1933 Act, which is not so described or referred to, nor of
any contract or other document of a character required to be described or
referred to in the Offering Memorandum, if it were filed as a part of a
registration statement or Form S-1 under the 1933 Act, which is not so described
or referred to. Further, based upon such information and participation, we have
no reason to believe that the Offering Memorandum as of its date or the date
hereof contained or contains any untrue statement of a material fact or omitted
or omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. We
express no opinion, however, as to the financial statements, including the notes
and schedules thereto, or any other financial or accounting information set
forth or referred to in the Offering Memorandum.
This opinion is furnished by us as counsel for the Company to you as
Initial Purchasers and is solely for the benefit of the Initial Purchasers. You
are hereby entitled to rely upon our opinion delivered today to Eagle
Industries, Inc. and our opinion dated January 24, 1996 delivered to The Chase
Manhattan Bank (National Association) as if such opinions were addressed to you.
Very truly yours,
Ropes & Gray
<PAGE>
EXHIBIT B-2
FORM OF
OPINION OF LOVELL WHITE DURRANT
[Lovell White Durrant Letterhead]
[Date]
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York
NY 10281-1201
USA
Morgan Stanley & Co. Incorporated
1585 Broadway
New York
NY 10036
USA
Dear Sirs
BE AEROSPACE (UK) LIMITED AND FLIGHT EQUIPMENT AND ENGINEERING LIMITED
- ----------------------------------------------------------------------
1. We have acted as English legal advisers to BE Aerospace (UK) Limited
(formerly Flight Equipment and Engineering Limited), a company registered
in England and Wales under registered number 516846, the registered office
of which is located at Nissen House, Grovebury Road, Leighton Buzzard,
Bedfordshire ("BEA(UK)"), since its acquisition by BE Aerospace, Inc.
(formerly BE Avionics, Inc.) (the "Issuer") on 2 April, 1992. We have also
acted as English legal advisers to Flight Equipment and Engineering
Limited, a company registered in England and Wales under registered number
1417308, the registered office of which is located at Nissen House,
Grovebury Road, Leighton Buzzard, Bedfordshire ("FEEL"), 2 April, 1992. We
have been asked by the Issuer, a Delaware corporation, to provide this
opinion in connection with the issue and sale by the Issuer of
US$100,000,000 principal amount of 9 7/8% Senior Subordinated Notes due
2006 (the "Securities"). We have been provided with copies of:-
<PAGE>
-2-
(a) an Offering Memorandum dated _________, 1996, related to the
Securities;
(b) a draft dated __________, 1996, of an indenture to be dated as of
_________, 1996, between the Issuer and the trustee named therein (the
"Indenture") which we have been advised is the final form thereof;
(c) the purchase agreement dated as of _________, 1996, between the Issuer
and you relating to the issue and sale of the Securities (the
"Purchase Agreement");
(d) the registration rights agreement to be dated as of __________, 1996,
between the Issuer and you relating to the filing of a registration
statement with respect to the Securities (the "Registration Rights
Agreement);
(e) the acquisition agreement dated as of 14 December, 1995, between the
Issuer and Eagle Industries, Inc. and certain of its affiliates
relating to the purchase by the Issuer of all of the outstanding
shares of Burns Aerospace Corporation (the "Acquisition Agreement");
(f) the second amended and restated credit agreement dated as of 19
January, 1996, between the Issuer and the lenders party thereto (the
"Lenders") and The Chase Manhattan Bank (National Association), as
agent for the Lenders (the "Amended Bank Credit Agreement"); and
(g) the first supplemental indenture dated as of 5 January, 1996, between
the Issuer and United States Trust Company of New York, as trustee
(the "Supplemental Indenture"), effecting certain amendments to, and a
waiver of a provision of, the indenture dated as of March 3, 1993
between the Issuer and such trustee, related to the Issuer's 9-3/4%
Senior Notes due 2003.
2. We understand that this opinion is required by you pursuant to Section 5(b)
of the Agreement.
3. For the purposes of giving this opinion, we have examined the following
documents relating to each of BEA(UK) and FEEL:-
(a) Statutory Books, including the Register of Members and the Minutes of
board meetings and general meetings of the shareholders contained
therein;
(b) copies of the Memorandum and Articles of Association and Certificate
of Incorporation; and
<PAGE>
-3-
(c) Certificates of good standing issued by the Registrar of Companies on
_________, 1996, copies of which are annexed hereto marked "A".
4. We have carried out a search of microfiches relating to each of BEA(UK) and
FEEL supplied to us by the Companies Registration Office on _________,
1996, timed at _______ which revealed no order or resolution to wind up
either BEA(UK) or FEEL and no notice of the appointment of an administrator
or receiver of either BEA(UK) or FEEL. We have also carried out a search
at the Central Registry of Winding Up Petitions, London on _________, 1996,
which shows no pending petition to wind up either BEA(UK) or FEEL. We have
not conducted any further search, or any search in any District Registry of
the High Court where winding-up and administration petitions may also be
presented in certain cases, and accordingly this opinion is given on the
assumption that such searches (if made) would not reveal any circumstances
which would require amendment of this opinion.
5. Except for the documents listed in paragraph 3 above, we have not examined
for the purposes of this opinion any contracts or other documents entered
into by or affecting either BEA(UK) or FEEL or any corporate records of
either BEA(UK) or FEEL. We have not made any other enquiries or searches
concerning either BEA(UK) or FEEL (whether within this firm or otherwise),
except as mentioned in paragraph 4 above. For the purposes of this
opinion, we have relied as to factual matters upon certificates of officers
and directors of the Issuer and of BEA(UK) and FEEL and have relied on
representations made by the Issuer in the Purchase Agreement.
6. This opinion is given only with respect to English law in force at the date
of this letter as applied by English Courts and is given on the basis that
it will be governed by and construed in accordance with English law. No
opinion is expressed or implied as to the laws of any other territory.
7. This opinion is based on the assumptions set out in the appendix to this
letter, which we have taken no steps to verify independently.
8, Based upon and subject to the foregoing, and subject as stated herein and
to any matters not disclosed to us, we are of the opinion that:-
(a) each of BEA(UK) and FEEL is duly incorporated under the Companies Act
1948 as a private company with limited liability under English law, is
validly existing under English law and has the necessary corporate
power under the Companies Act 1985 and 1989 and its Memorandum and
Articles of Association to conduct its business and to own, lease and
operate its properties as described in the Offering Memorandum at
pages ____ (copies of which are annexed hereto marked "B");
<PAGE>
-4-
(b) as reflected in the register of members of BEA(UK), the Issuer is the
registered holder of the 500,000 issued ordinary shares of (Pounds)1
each of BEA(UK) and the 380,000 shares issued cumulative redeemable
preference shares of (Pounds)1 each of BEA(UK). Pursuant to Section
361 Companies Act 1985, the register of members of a company (as
defined in that Act) is prima facie evidence of any matters which are
by that Act directed or authorised to be inserted in it, and of legal
ownership of shares;
(c) as reflected in the register of members of FEEL, BEA(UK) is the
registered holder of the 100 issued ordinary shares of (Pounds)1 each
of FEEL. Pursuant to Section 361 Companies Act 1985, the register of
members of a company (as defined in that Act) is prima facie evidence
of any matters which are by that Act directed or authorised to be
inserted in it, and of legal ownership of shares;
(d) in the absence of any circumstance by which a member of a company
limited by shares (as defined in the Companies Act 1985) may become
liable for the company's debts, the liability of the member
(including, with respect to BEA(UK), the Issuer or with respect to
FEEL, BEA(UK)) for such debts will be limited to the par value of the
shares held and any premium agreed to be paid, to the extent that such
amounts have not been paid by any previous holder of those shares.
According to the register of members of each of BEA(UK) and FEEL, the
search of microfiches relating to each of BEA(UK) and FEEL referred to
in paragraph 4 above and the certificates of the officers and
directors of the Issuer, BEA(UK) and FEEL, but having made no other
enquiry, investigation or verification, we are of the opinion that the
issued ordinary shares of (Pounds)1 each in BEA(UK) and FEEL are fully
paid;
(e) the issued cumulative redeemable preference shares of (Pounds)1 each
of BEA(UK) have been duly authorised, validly issued and fully paid;
(f) the issued cumulative redeemable preference shares of (Pounds)1 each
of BEA(UK) were not issued in violation of any pre-emptive rights
under statute or under the Memorandum and Articles of Association of
BEA(UK);
(g) none of the following will result in any breach of the Memorandum and
Articles of Association of either of BEA(UK) or FEEL:-
(i) the execution and delivery by the Issuer of the Purchase
Agreement, the consummation by the Issuer of the transactions
therein contemplated and the compliance by the Issuer with its
terms;
(ii) the execution and delivery by the Issuer of the Registration
Rights Agreement and the compliance by the Issuer with its terms;
<PAGE>
-5-
(iii) the execution and delivery by the Issuer of the Indenture and
the compliance by the Issuer with its terms;
(iv) the issue and delivery by the Issuer of the Securities as
contemplated by the Offering Memorandum;
(v) the consummation by the Issuer of the transactions contemplated
in the Offering Memorandum;
(vi) the execution and delivery by the Issuer of the Acquisition
Agreement, the consummation by the Issuer of the transactions
therein contemplated and the compliance by the Issuer with its
terms;
(vii) the execution and delivery by the Issuer of the Amended Bank
Credit Agreement and the compliance by the Issuer with the
terms; and
(viii) the execution and delivery by the Issuer of the Supplemental
Indenture and the compliance by the Issuer with its terms; and
(h) the matters referred to in paragraph 8(g)(i) to (viii) inclusive above
do not and will not conflict with, or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of either BEA(UK) or FEEL under:-
(i) any existing English law, rule or regulation; or
(ii) to our knowledge (based solely upon written notification by
BEA(UK) and FEEL) and on the basis of the certificates of the
officers and directors of BEA(UK), FEEL and the Issuer, any
judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over BEA(UK) or
FEEL or any of their properties.
9. This opinion is addressed to you in connection with the Issue. It is given
for your benefit for the purpose of the issue of the Securities only, and
may not be disclosed or quoted to or relied upon by any other person,
without our prior written consent in each specific case, or used for any
other purpose. No person (other than you) into whose possession a copy of
this opinion may come may rely on this opinion without our express written
consent addressed to him.
Yours faithfully
Lovell White Durrant
<PAGE>
-6-
Appendix to Opinion
-------------------
In this opinion letter, we have assumed that:-
(a) All documents submitted to us as originals are authentic and complete and
all signatures and seals are genuine.
(b) All documents supplied to us as photocopies or facsimile transmitted copies
or other copies conform to the originals and such originals are authentic
and complete.
(c) All documents, forms, notices and information which should have been
delivered to the Companies Registration Office and the Central Registry of
Winding Up Petitions on behalf of or relating to the Company have been so
delivered and the file of records maintained at the Companies Registration
Office and the Central Registry of Winding Up Petitions concerning the
Company, and reproduced on microfiche for public inspection or disclosed to
us orally, was complete, accurate and up-to-date at the time of the
respective searches referred to in paragraph 4 of this opinion letter and
there has been no change in the information filed or the oral disclosure
made since the date on which those searches were made.
(d) All documents dated earlier than the date of this opinion letter on which
we have expressed reliance remain accurate, complete and in full force and
effect at the date of the opinion letter.
(e) Neither BEA(UK) nor FEEL has passed a resolution for its winding-up and no
proceedings have been instituted or steps taken for the winding-up of
BEA(UK) or FEEL or the appointment of an administrator or receiver in
respect of all or any assets of BEA(UK) or FEEL.
(f) No law (other than English law) affects any of the conclusions stated in
this opinion letter.
(g) The resolutions contained in the minutes referred to in paragraph 3(a) of
this opinion letter were duly passed at a properly convened, constituted
and conducted meeting of duly appointed directors and shareholders,
respectively, of the Company at which all constitutional, statutory and
other formalities were duly observed (including, if applicable, those
relating to the declaration of directors' interests or the power of
interested directors to vote); such resolutions have not been amended or
rescinded and are in full force and effect; and the minutes of such
meetings referred to in paragraph 3(a) of this opinion letter are a true
record of the proceedings at such meetings.
<PAGE>
-7-
(h) The certificates of the officers and directors of the Issuer and BEA(UK)
and FEEL provided for the purposes of this opinion letter are true and
accurate in all respects.
<PAGE>
EXHIBIT B-3
FORM OF
OPINION OF TRENITE VAN DOORNE
[Trenite van Doorne Letterhead]
Merrill Lynch & Co.
Merrill Lynch, Pierce,
Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
NEW YORK, NY 10281-1201
U.S.A.
Morgan Stanley & Co. Incorporated
1585 Broadway
NEW YORK, NY 10036
U.S.A.
Rotterdam, [ ] January 1996
Dear Sirs,
Re: Royal Inventum Company B.V.
- -- ---------------------------
We have acted as legal advisers in The Netherlands to BE Aerospace (Netherlands)
B.V. ("BEAN"), Koninklijke Fabriek Inventum B.V. ("KFI") and BE Aerospace (Sales
and Services) B.V. ("BEASS"), which companies have their registered office at
Galvanibaan 5, 3439 MG Nieuwegein, The Netherlands, for the purpose of rendering
an opinion on certain matters of Netherlands law in connection with the issue
and sale by BE Aerospace Inc. of USD 100,000,000 principal amount of [___] %
Senior Subordinated Notes due 2006.
For the purposes of this opinion, we have examined and relied only on the
following documents:
<PAGE>
-2-
(a) a copy of the notarial deed of incorporation of BEAN, KFI and BEASS dated
28 April 1993, 20 May 1915 and 20 August 1990 respectively (the "Deeds of
Incorporation");
(b) a copy of the articles of association (as amended) of BEAN and KFI dated 20
May 1994 and of BEASS, dated 11 January 1995 (the "Articles of
Association");
(c) a copy of the register of shareholders of BEAN, KFI and BEASS respectively
(the "Shareholders Registers");
(d) an extract dated 15 January 1996 (updated by a computer generated extract
dated [_________]) from the Commercial Register (Handels-register) in
Utrecht, The Netherlands in respect of BEAN, KFI and BEASS respectively
(the "Extracts");
(e) two notarial deeds of transfer of shares in the share capital of BEASS
dated 22 September 1994 (the "Deeds of Transfer");
(f) a notarial deed of transfer of shares in the share capital of KFI dated 29
April 1993 (the "Deed of Transfer KFI")
The documents referred to in paragraphs (a) to (f) inclusive above are
hereinafter referred to as the "Certificates".
In connection with such examination and in giving this opinion, we have assumed:
(i) the genuineness of all signatures to all Certificates, the authenticity and
completeness of all Certificates submitted to us as originals, the
completeness and the conformity to the original documents of all
Certificates submitted to us as copies and the authenticity of such
original documents;
(ii) the accuracy, validity and binding effect of the Certificates and the
matters certified or evidenced thereby at the date hereof (and any other
relevant date);
This opinion shall be governed by and construed in accordance with Netherlands
law and is given only with respect to Netherlands law in effect on the date of
this opinion. We have not investigated the law of any jurisdiction other than
The Netherlands. We express no opinion as to any matters of fact, tax law,
anti-trust law or international law, including, without limitation, the law of
the European Community (except to the extent that such matters of fact and law
are explicitly covered by the opinions below). We have assumed that any foreign
law which may apply does not affect this opinion.
<PAGE>
-3-
Based on and subject to the foregoing, and subject to the qualifications set out
below, we express the following opinions:
1 Each of BEAN, KFI and BEASS is a closed company with limited liability
(besloten vennootschap met beperkte aansprakelijkheid), duly incorporated
and validly existing under the laws of The Netherlands.
2 According to the deed of incorporation and the shareholders register of
BEAN, BE Aerospace Inc. ("BEAI"), with registered office at 1400 Corporate
Center Way, Wellington, Florida 33414, U.S.A., is the registered holder of
36 (thirty six) issued ordinary registered shares, with a par value of NLG
1,000 each, and BE Aerospace (USA) Inc. ("BEAU"), with registered office at
1400 Corporate Center Way, Wellington, Florida 33414, U.S.A., is the
registered holder of 4 (four) issued ordinary registered shares, with a par
value of NLG 1,000 each, in the issued share capital of BEAN consisting of
40 shares.
3 According to the shareholders register of KFI and the Deed of Transfer KFI,
BEAN is the registered holder of 5,584 (five thousand five hundred and
eighty-four) issued ordinary registered shares, with a par value of NLG 500
each, in the issued share capital of KFI consisting of 5604 shares.
4 According to the shareholders register of BEASS and the Deeds of Transfer,
BEAN is the registered holder of 40 (forty) shares, with a par value of NLG
1,000 each, in the issued share capital of BEASS consisting of 40 shares.
5 In the absence of any circumstance by which a shareholder of a closed
company with limited liability (een besloten vennootschap met beperkte
aansprakelijkheid) may become liable for the company's debts, the liability
of BEAN, as shareholder of KFI and BEASS, will be limited to the obligation
to fully pay the par value of the shares held and any share premium agreed
to be paid, to the extent that such amounts have not been paid.
6 Pursuant to the Articles of Association, BEAI and BEAU, as shareholders of
BEAN, are each personally liable for everything performed in the name of
BEAN.
7 According to the Shareholders Registers and the Extracts, but having made
no other enquiry, investigation or verification, the par value of the
issued ordinary shares in BEAN, KFI and BEASS is fully paid.
The opinions expressed above are subject to the following qualifications:
<PAGE>
-4-
(A) We have assumed that the Extracts fully and accurately reflect the
corporate status and position of BEAN, KFI and BEASS respectively. It is
noted, however, that the Extracts may not completely and accurately reflect
such status and position insofar as there may be a delay between the taking
of a corporate action (such as the issuance of shares, the appointment or
removal of a director, a winding-up (ontbinding) or suspension of payment
resolution or the making of a court order, like a winding-up, suspension of
payment or bankruptcy order) and the filing of the necessary documentation
at the Commercial Register and a further delay between such filing and an
entry appearing on the file of the relevant party at the Commercial
Register.
(B) There is no public register of shares in The Netherlands. In respect of
the title to shares in the share capital of BEAN, KFI and BEASS
respectively per the date of this opinion, we have compared the deed of
incorporation of BEAN with the shareholders register of BEAN, the Deed of
Transfer KFI with the shareholders register of KFI and the Deeds of
Transfer with the shareholders register of BEASS and established the
consistency of each of these Certificates. The absence of any registration
in the Shareholders Registers of any subsequent transfer of title to the
shares of BEAN, KFI or BEASS (as the case may be) is, however, no
conclusive evidence that any such subsequent transfer of title has not
occurred.
(C) We have assumed that the difference between the total number of shares
issued in the share capital of KFI and the number of shares held by BEAN,
as reflected in the shareholders register of KFI, is explained by the fact
that at conversion of the company of KFI from a company limited by shares
(naamlose vennootschap) into a closed company with limited liability
(besloten vennootschap met beperkte aansprakelijkheid) on 2 March 1992, not
each holder of shares has offered its shares in order to be registered as a
shareholder of the company, as converted. Pursuant to section 2:183,
subsection 4, of the Dutch Civil Code, after conversion a shareholder is
not able to exercise the rights pertaining to the shares as long as the
shareholder has not been registered in the shareholders register of the
company.
This opinion is given solely for your benefit in this particular matter and the
context specified herein and no opinion may be inferred or implied beyond that
expressly stated herein. It may not be, without our prior written consent,
transmitted or otherwise disclosed to, or relied upon by, others, referred to in
any other matter or context whatsoever, or be quoted or made public in any way,
save for disclosure to your legal advisors.
Yours faithfully,
Trenite van Doorne
[ Signature ] [ Signature ]
-------------------- ----------------------
<PAGE>
EXECUTION COPY
DRAFT
- --------------------------------------------------------------------------------
BE AEROSPACE, INC.
TO
FLEET NATIONAL BANK OF
CONNECTICUT
Trustee
----------------------
Indenture
Dated as of January 24, 1996
----------------------
$100,000,000
9-7/8% Senior Subordinated Notes due 2006
and
9-7/8% Series B Senior Subordinated Notes due 2006
- --------------------------------------------------------------------------------
<PAGE>
BE AEROSPACE, INC.
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of
------------------------------------------------------
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
(S) 310(a)(1) .................................. 607
(a)(2) .................................. 607
(b) .................................. 608
(S) 312(c) .................................. 701
(S) 314(a)(4) .................................. 1008(a)
(c)(1) .................................. 103
(c)(2) .................................. 103
(e) .................................. 103
(S) 315(b) .................................. 601
(S) 316(a)(last
sentence) .................................. 101 ("Outstanding")
(a)(1)(A) .................................. 502, 512
(a)(1)(B) .................................. 513
(b) .................................. 508
(c) .................................. 105(d)
(S) 317(a)(1) .................................. 503
(a)(2) .................................. 504
(b) .................................. 1003
(S) 318(a) .................................. 112
</TABLE>
- --------------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
PAGE
PARTIES................................................................... 1
RECITALS.................................................................. 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions............................................. 1
Acquired Indebtedness............................................. 2
Act............................................................... 2
Acurex............................................................ 2
AET............................................................... 2
AET Contract...................................................... 2
Affiliate......................................................... 2
Agent Bank........................................................ 3
Asset Acquisition................................................. 3
Asset Sale........................................................ 3
Aurora............................................................ 3
Average Life...................................................... 3
Bank Credit Agreement............................................. 3
Banks............................................................. 3
Board of Directors................................................ 4
Board Resolution.................................................. 4
Business Day...................................................... 4
Capital Stock..................................................... 4
Capitalized Lease Obligation...................................... 4
Cash Equivalents.................................................. 4
Change of Control................................................. 4
Closing Date...................................................... 5
Commission........................................................ 5
Common Stock...................................................... 5
Company........................................................... 5
Company Request" or "Company Order................................ 6
- ------------------
Note: This table of contents shall not, for any purpose, be deemed to be part
of this Indenture.
<PAGE>
(ii)
Consolidated Adjusted Net Income.................................. 6
Consolidated Fixed Charge Coverage Ratio.......................... 6
Consolidated Income Tax Expense................................... 7
Consolidated Interest Expense..................................... 7
Consolidated Net Worth............................................ 7
Consolidated Non-cash Charges..................................... 7
Corporate Trust Office............................................ 7
corporation....................................................... 8
Default........................................................... 8
Defaulted Interest................................................ 8
Depositary........................................................ 8
Designated Senior Indebtedness.................................... 8
Disinterested Director............................................ 8
Eligible Inventories.............................................. 8
Eligible Receivables.............................................. 8
Event of Default.................................................. 8
Exchange Act...................................................... 9
Exchange Offer.................................................... 9
Exchange Offer Registration Statement............................. 9
Exchange Securities............................................... 9
Fair Market Value................................................. 9
Federal Bankruptcy Code........................................... 9
FEEL.............................................................. 9
Fully Traded Common Stock......................................... 9
GAAP.............................................................. 9
guarantee......................................................... 10
Guarantee......................................................... 10
Guarantor......................................................... 10
Holder............................................................ 10
Indebtedness...................................................... 10
Indenture......................................................... 11
Initial Securities................................................ 11
Interest Payment Date............................................. 11
Interest Rate Protection Obligations.............................. 11
Investment........................................................ 11
Lien.............................................................. 12
Maturity.......................................................... 12
Moody's........................................................... 12
Net Cash Proceeds................................................. 12
Non-payment Event of Default...................................... 12
Non-U.S. Person................................................... 12
Officers' Certificate............................................. 12
Opinion of Counsel................................................ 13
<PAGE>
(iii)
Outstanding....................................................... 13
Pari Passu Indebtedness........................................... 14
Paying Agent...................................................... 14
Payment Event of Default.......................................... 14
Permitted Indebtedness............................................ 14
Permitted Investments............................................. 15
Permitted Liens................................................... 15
Permitted Subsidiary Indebtedness................................. 16
Person............................................................ 17
Predecessor Security.............................................. 17
Preferred Stock................................................... 17
Public Offering................................................... 17
QIB............................................................... 17
Qualified Capital Stock........................................... 17
Redeemable Capital Stock.......................................... 17
Redemption Date................................................... 18
Redemption Price.................................................. 18
Registration Rights Agreement..................................... 18
Registration Statement............................................ 18
Regular Record Date............................................... 18
Regulation S...................................................... 18
Responsible Officer............................................... 18
Restricted Subsidiary............................................. 18
Royal Inventum.................................................... 18
Rule 144A......................................................... 18
S&P............................................................... 18
Securities........................................................ 19
Securities Act.................................................... 19
Security Register" and "Security Registrar........................ 19
Senior Indebtedness............................................... 19
Senior Notes...................................................... 19
Senior Notes Indenture............................................ 20
Shelf Registration Statement...................................... 20
Significant Subsidiary............................................ 20
Special Record Date............................................... 20
Stated Maturity................................................... 20
Subordinated Indebtedness......................................... 20
Subsidiary........................................................ 20
Trust Indenture Act" or "TIA...................................... 20
Trustee........................................................... 20
Unrestricted Subsidiary........................................... 21
Vice President.................................................... 21
<PAGE>
(iv)
Voting Stock...................................................... 21
wholly-owned...................................................... 21
SECTION 102. Incorporation by Reference of Trust Indenture Act........... 21
SECTION 103. Compliance Certificates and Opinions........................ 22
SECTION 104. Form of Documents Delivered to Trustee...................... 23
SECTION 105. Acts of Holders............................................. 23
SECTION 106. Notices, Etc., to Trustee, Company.......................... 24
SECTION 107. Notice to Holders; Waiver................................... 25
SECTION 108. Effect of Headings and Table of Contents.................... 25
SECTION 109. Successors and Assigns...................................... 25
SECTION 110. Separability Clause......................................... 26
SECTION 111. Benefits of Indenture....................................... 26
SECTION 112. Governing Law............................................... 26
SECTION 113. Legal Holidays.............................................. 26
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally............................................. 27
SECTION 202. Restrictive Legends......................................... 28
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms............................................. 30
SECTION 302. Denominations............................................... 31
SECTION 303. Execution, Authentication, Delivery and Dating.............. 31
SECTION 304. Temporary Securities........................................ 32
SECTION 305. Registration, Registration of Transfer and Exchange......... 33
SECTION 306. Book-Entry Provisions for U.S. Global Security.............. 34
SECTION 307. Special Transfer Provisions................................. 36
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities............ 39
SECTION 309. Payment of Interest; Interest Rights Preserved.............. 40
SECTION 310. Persons Deemed Owners....................................... 42
SECTION 311. Cancellation................................................ 42
SECTION 312. Computation of Interest..................................... 42
<PAGE>
(v)
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture..................... 43
SECTION 402. Application of Trust Money.................................. 44
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default........................................... 44
SECTION 502. Acceleration of Maturity; Rescission and Annulment.......... 46
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Trustee................................................... 48
SECTION 504. Trustee May File Proofs of Claim............................ 49
SECTION 505. Trustee May Enforce Claims Without Possession of Securities. 50
SECTION 506. Application of Money Collected.............................. 50
SECTION 507. Limitation on Suits......................................... 50
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest...................................... 51
SECTION 509. Restoration of Rights and Remedies.......................... 51
SECTION 510. Rights and Remedies Cumulative.............................. 52
SECTION 511. Delay or Omission Not Waiver................................ 52
SECTION 512. Control by Holders.......................................... 52
SECTION 513. Waiver of Past Defaults..................................... 52
SECTION 514. Waiver of Stay or Extension Laws............................ 53
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.......................................... 53
SECTION 602. Certain Rights of Trustee................................... 54
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities................................................ 55
SECTION 604. May Hold Securities......................................... 55
SECTION 605. Money Held in Trust......................................... 56
SECTION 606. Compensation and Reimbursement.............................. 56
SECTION 607. Corporate Trustee Required; Eligibility..................... 57
SECTION 608. Resignation and Removal; Appointment of Successor........... 57
SECTION 609. Acceptance of Appointment by Successor...................... 58
SECTION 610. Merger, Conversion, Consolidation or Succession to Business. 59
<PAGE>
(vi)
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders................ 59
SECTION 702. Reports by Trustee.......................................... 59
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms........ 60
SECTION 802. Successor Substituted....................................... 61
SECTION 803. Securities to Be Secured in Certain Events.................. 61
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.......... 62
SECTION 902. Supplemental Indentures with Consent of Holders............. 62
SECTION 903. Execution of Supplemental Indentures........................ 63
SECTION 904. Effect of Supplemental Indentures........................... 64
SECTION 905. Conformity with Trust Indenture Act......................... 64
SECTION 906. Reference in Securities to Supplemental Indentures.......... 64
SECTION 907. Notice of Supplemental Indentures........................... 64
SECTION 908. Effect on Senior Indebtedness............................... 64
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and Interest........ 65
SECTION 1002. Maintenance of Office or Agency............................ 65
SECTION 1003. Money for Security Payments to Be Held in Trust............ 65
SECTION 1004. Corporate Existence........................................ 67
SECTION 1005. Payment of Taxes and Other Claims.......................... 67
SECTION 1006. Maintenance of Properties.................................. 67
SECTION 1007. Insurance.................................................. 67
SECTION 1008. Statement by Officers as to Default........................ 68
SECTION 1009. Provision of Financial Statements.......................... 68
SECTION 1010. Limitation on Indebtedness................................. 68
SECTION 1011. Limitation on Restricted Payments.......................... 69
<PAGE>
(vii)
SECTION 1012. Limitation on Issuances and Sales of Restricted Subsidiary
Stock.................................................... 73
SECTION 1013. Limitation on Transactions with Affiliates................. 73
SECTION 1014. Limitation on Liens Securing Pari Passu Indebtedness or
Subordinated Indebtedness................................ 73
SECTION 1015. Change of Control.......................................... 74
SECTION 1016. Limitation on Disposition of Proceeds of Asset Sales....... 75
SECTION 1017. Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries............................................. 77
SECTION 1018. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries........................ 77
SECTION 1019. Limitation on Other Senior Subordinated Indebtedness....... 78
SECTION 1020. Waiver of Certain Covenants................................ 78
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption........................................ 79
SECTION 1102. Applicability of Article................................... 79
SECTION 1103. Election to Redeem; Notice to Trustee...................... 79
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.......... 79
SECTION 1105. Notice of Redemption....................................... 80
SECTION 1106. Deposit of Redemption Price................................ 80
SECTION 1107. Securities Payable on Redemption Date...................... 81
SECTION 1108. Securities Redeemed in Part................................ 81
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Defeasance or Covenant
Defeasance............................................... 81
SECTION 1202. Defeasance and Discharge................................... 83
SECTION 1203. Covenant Defeasance........................................ 83
SECTION 1204. Conditions to Defeasance or Covenant Defeasance............ 84
SECTION 1205. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions............ 86
SECTION 1206. Reinstatement.............................................. 86
<PAGE>
(viii)
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 1301. Securities Subordinate to Senior Indebtedness........ 87
SECTION 1302. Payment Over of Proceeds upon Dissolution, Etc....... 87
SECTION 1303. Suspension of Payment When Senior Indebtedness in
Default............................................ 89
SECTION 1304. Payment Permitted If No Default...................... 90
SECTION 1305. Subrogation to Rights of Holders of Senior
Indebtedness....................................... 90
SECTION 1306. Provisions Solely to Define Relative Rights.......... 91
SECTION 1307. Trustee to Effectuate Subordination.................. 91
SECTION 1308. No Waiver of Subordination Provisions................ 91
SECTION 1309. Notice to Trustee.................................... 92
SECTION 1310. Reliance on Judicial Order or Certificate of
Liquidating Agent.................................. 92
SECTION 1311. Rights of Trustee As a Holder of Senior Indebtedness;
Preservation of Trustee's Rights................... 93
SECTION 1312. Article Applicable to Paying Agents.................. 93
SECTION 1313. No Suspension of Remedies............................ 93
SECTION 1314. Trust Moneys Not Subordinated........................ 93
TESTIMONIUM............................................................... 92
SIGNATURES AND SEALS...................................................... 93
EXHIBITS
Exhibit A - Form of Security
Exhibit B - Form of Certificate to Be Delivered upon Termination of Restricted
Period
Exhibit C - Form of Certificate to Be Delivered in Connection with Transfers
to Non-QIB Institutional Accredited Investors
Exhibit D - Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S
<PAGE>
INDENTURE, dated as of January 24, 1996 between BE AEROSPACE, INC., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 1400 Corporate
Center Way, Wellington, Florida 33414, and FLEET NATIONAL BANK OF CONNECTICUT, a
national banking association formed under the laws of the United States of
America, Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of 9-7/8% Senior
Subordinated Notes due 2006 (herein called the "Initial Securities"), and 9-7/8%
Series B Senior Subordinated Notes due 2006 (the "Exchange Securities" and,
together with the Initial Securities, the "Securities") of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Company has
duly authorized the execution and delivery of this Indenture.
Upon the issuance of the Exchange Securities, if any, or the effectiveness
of the Shelf Registration Statement (as defined herein), this Indenture will be
subject to the provisions of the Trust Indenture Act of 1939, as amended, that
are required to be part of this Indenture and shall, to the extent applicable,
be governed by such provisions.
All things necessary have been done to make the Securities, when executed
by the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company and to make this Indenture a valid
agreement of the Company, in accordance with their and its terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
<PAGE>
2
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and "self-
liquidating paper", as used in TIA Section 311, shall have the meanings
assigned to them in the rules of the Commission adopted under the Trust
Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Articles Two, Ten and Twelve, are
defined in those Articles.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a subsidiary of any other Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a subsidiary).
"Act", when used with respect to any Holder, has the meaning specified
in Section 105.
"Acurex" means Acurex Corporation, a Delaware corporation.
"AET" means Applied Extrusion Technologies, Inc., a Delaware
corporation.
"AET Contract" means the supply contract between the Company and AET,
dated April 17, 1990 and expiring March 31, 1998, as in effect on the date of
this Indenture.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person and, in the case of the
Company and its Restricted Subsidiaries, also means AET and The K.A.D.
Companies, Inc.
<PAGE>
3
"Agent Bank" means The Chase Manhattan Bank, N.A., as Administrative
Agent under the Bank Credit Agreement, and any future agent under the Bank
Credit Agreement.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company shall be merged with or into the Company or any
Restricted Subsidiary of the Company or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person or any division
or line of business of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or
other disposition to any Person other than the Company or a wholly-owned
Restricted Subsidiary of the Company, in one or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary of the
Company held by the Company or any Restricted Subsidiary; (b) all or
substantially all of the properties and assets of any division or line of
business of the Company or any Restricted Subsidiary of the Company; or (c) any
other properties or assets of the Company or any Restricted Subsidiary other
than in the ordinary course of business. For the purposes of this definition,
the term "Asset Sale" shall not include any sale, issuance, conveyance,
transfer, lease or other disposition of properties or assets (i) that is
governed by the provisions of Article Eight of this Indenture, (ii) to an
Unrestricted Subsidiary, if permitted under Section 1011 of this Indenture or
(iii) having a Fair Market Value of less than $10,000.
"Aurora" means Aurora Management, Inc., a California corporation and
its affiliates.
"Average Life" means, with respect to any Indebtedness, as at any date
of determination, the quotient obtained by dividing (a) the sum of the products
of (i) the number of years from such date to the date or dates of each
successive scheduled principal payment (including, without limitation, any
sinking fund requirements) of such Indebtedness multiplied by (ii) the amount of
each such principal payment by (b) the sum of all such principal payments.
"Bank Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of October 29, 1993, as amended and restated as of January
19, 1996, among the Company, the Banks and the Agent Bank, as in effect on the
date hereof and as such Agreement may be amended, restated, supplemented,
replaced, substituted or otherwise modified from time to time.
<PAGE>
4
"Banks" means the banks and other financial institutions from time to
time that are lenders under the Bank Credit Agreement.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
or the city in which the principal trust office of the Trustee is located are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of
(or other agreement conveying the right to use) any property (whether real,
personal or mixed) that is required to be classified and accounted for as a
capital lease obligation under GAAP, and, for the purpose of this Indenture, the
amount of such obligation at any date shall be the capitalized amount thereof at
such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 180 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 180 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; and (iii) commercial paper with a
maturity of 180 days or less issued by a corporation that is not an Affiliate of
the Company and is organized under the laws of any state of the United States or
the District of Columbia and rated at least A-1 by S&P or at least P-1 by
Moody's.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have "beneficial
<PAGE>
5
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 40% of the total Voting Stock of the
Company; (b) the Company consolidates with, or merges with or into, another
Person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Redeemable Capital Stock) of
the surviving or transferee corporation or (2) cash, securities and other
property in an amount that could be paid by the Company as a Restricted Payment
under this Indenture and (ii) immediately after such transaction no "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act)
is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 40% of the total Voting Stock of the
surviving or transferee corporation; (c) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of 66-2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (d) any final order, judgment or decree of a court of competent jurisdiction
shall be entered against the Company decreeing the dissolution or liquidation of
the Company.
"Closing Date" means January 24, 1996.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such Person's common stock, whether
outstanding at the Closing Date or issued after the Closing Date, and includes,
without limitation, all series and classes of such common stock.
<PAGE>
6
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
in sufficient form and detail satisfactory to the Trustee signed in the name of
the Company by its Chairman, Chief Executive Officer, its President, any Vice
President, its Treasurer, Director of Finance or an Assistant Treasurer, and
delivered to the Trustee.
"Consolidated Adjusted Net Income" means, for any period, the
consolidated net income (or loss) of the Company and its Restricted Subsidiaries
for such period as determined in accordance with GAAP, adjusted by excluding (a)
net after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to asset dispositions, (c) the net income (or net loss) of
any Person (other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any of its Restricted
Subsidiaries has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or its Restricted
Subsidiaries in cash by such other Person during such period, (d) net income (or
net loss) of any Person combined with the Company or any of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (e) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary is not at the date of determination permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders and (f)
income resulting from transfers of assets received by the Company or any
Restricted Subsidiary from an Unrestricted Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for
any period, the ratio of (a) the sum of Consolidated Adjusted Net Income,
Consolidated Interest Expense, Consolidated Tax Expense and Consolidated Non-
cash Charges, in each case, for such period, of such Person and its subsidiaries
on a consolidated basis, all determined in accordance with GAAP, to (b) the sum
of such Consolidated Interest Expense for such period; provided that (i) in
--------
making such computation, the Consolidated Interest Expense of such Person
attributable to interest on any Indebtedness computed on a pro forma basis and
--- -----
bearing a floating interest rate shall be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period, (ii)
in making such computation, the Consolidated Interest Expense of such Person
attributable to interest on any Indebtedness under a revolving credit facility
computed on a pro forma basis shall be computed based upon the average daily
--- -----
balance of such Indebtedness during the applicable period, and (iii)
notwithstanding clauses (i) and (ii) above, interest on Indebtedness determined
on a fluctuating basis, to the extent such interest is covered by agreements
<PAGE>
7
relating to Interest Rate Protection Obligations, shall be deemed to have
accrued at the rate per annum resulting after giving effect to the operation of
--- -----
such agreements. If such Person or any of its subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such Person
or such subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Income Tax Expense" means, with respect to any Person
for any period, the provision for federal, state, local and foreign income taxes
of such Person and its Restricted Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the interest expense of such
Person and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and (e) all accrued interest, (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Subsidiaries during such period as determined on
a consolidated basis in accordance with GAAP and (iii) the aggregate dividends
paid or accrued on Preferred Stock of such Person or its Subsidiaries, to the
extent such Preferred Stock is owned by Persons other than such Person and its
Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person at any
date, the consolidated stockholders' equity of such Person less the amount of
such stockholders' equity attributable to Redeemable Capital Stock or treasury
stock of such Person and its Subsidiaries, as determined in accordance with
GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for
any period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Subsidiaries reducing Consolidated Adjusted Net Income of
such Person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee, at which at any particular time its corporate trust business shall
be administered, which office at the date of execution of this Indenture is
located at 777 Main Street, Hartford, Connecticut 06115, Attention: Corporate
Trust Division, except that with respect to presentation of Securities for
payment or for registration of transfer or exchange, such
<PAGE>
8
term shall mean the office or agency of the Trustee at which, at any particular
time, its corporate agency business shall be conducted.
"corporation" includes corporations, associations, companies and
business trusts.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness
under the Bank Credit Agreement and the Senior Notes and (ii) following the full
repayment of Indebtedness under the Bank Credit Agreement and the termination of
the commitments thereunder, any other Senior Indebtedness which, at the time of
determination, has an aggregate principal amount outstanding of at least
$17,000,000 and is specifically designated in the instrument evidencing such
Senior Indebtedness as "Designated Senior Indebtedness" by the Company.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under this Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Eligible Inventories" as of any date means the consolidated
inventories of the Company and its Restricted Subsidiaries (net of any reserve)
on the basis of the method of accounting (either last in/first out or first
in/first out) used by the Company in the preparation of its financial statements
included in the latest Form 10-K filed by the Company under the Securities Act,
as shown on a consolidated balance sheet of the Company and its Restricted
Subsidiaries, all in accordance with GAAP.
"Eligible Receivables" as of any date means the consolidated accounts
receivables (net of any reserve) of the Company and its Restricted Subsidiaries
that are not more than 60 days past their due date and that were entered into on
normal payment terms as shown on a consolidated balance sheet of the Company and
its Restricted Subsidiaries, all in accordance with GAAP.
"Event of Default" has the meaning specified in Section 501.
<PAGE>
9
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations thereunder.
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the first recital of
this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that such Exchange
Securities shall not contain terms with respect to transfer restrictions) that
are issued and exchanged for the Initial Securities pursuant to the Registration
Right Agreement and this Indenture.
"Fair Market Value" means, with respect to any asset, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the
United States Code, as amended from time to time.
"FEEL" means Flight Equipment and Engineering Limited, an English
corporation.
"Fully Traded Common Stock" means Common Stock issued by any
corporation if (A) such Common Stock is listed on The New York Stock Exchange,
The American Stock Exchange or The London Stock Exchange or is included for
trading privileges in the National Market System of the National Association of
Securities Dealers Automated Quotation System; provided that such Common Stock
--------
is freely tradeable under the Securities Act (or, in the case of The London
Stock Exchange, any applicable law, rule or regulation) upon issuance; and (B)
such Common Stock does not constitute more than 15% of the issued and
outstanding Common Stock of such corporation held by Persons other than 10%
holders of such Common Stock and Affiliates and insiders of such corporation.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States of America, which are
applicable as of the Closing Date.
<PAGE>
10
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of any Indebtedness of the Company
incurred by any Restricted Subsidiary pursuant to (1) paragraph (a) of Section
1017, (2) clause (v) of Section 1018, (3) clause (y) of paragraph (b) of Section
1010 or (4) clause (ii) of the definition of Permitted Investment. When used as
a verb, "Guarantee" shall have a corresponding meaning.
"Guarantor" means any Restricted Subsidiary that incurs a Guarantee.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all liabilities of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit, bankers' acceptance or other
similar credit transaction and in connection with any agreement to purchase,
redeem, exchange, convert or otherwise acquire for value any Capital Stock of
such Person, or any warrants, rights or options to acquire such Capital Stock,
now or hereafter outstanding, if, and to the extent, any of the foregoing would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, (b) all obligations of such Person evidenced by bonds, notes,
debentures or other similar instruments, if, and to the extent, any of the
foregoing would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (c) all indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such Person, (e) all Indebtedness referred to in the preceding
clauses of other Persons and all dividends of other Persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligation being deemed to be
the lesser
<PAGE>
11
of the value of such property or asset or the amount of the obligation so
secured), (f) all guarantees by such Person of Indebtedness referred to in this
definition, (g) all Redeemable Capital Stock of such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends, (h) all obligations of such Person under or in respect of
currency exchange contracts and Interest Rate Protection Obligations and (i) any
amendment, supplement, modification, deferral, renewal, extension or refunding
of any liability of such Person of the types referred to in clauses (a) through
(h) above. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Indenture, and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Securities" has the meaning stated in the first recital of
this Indenture.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Interest Rate Protection Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect
loan or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person. In addition, the Fair
Market Value of the net assets of any Restricted Subsidiary of the Company at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary shall be deemed to be an "Investment" made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices.
<PAGE>
12
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A Person shall be deemed to own subject to a Lien any property which such
Person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of interest becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption, purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary of the Company),
net of (i) brokerage commissions and other fees and expenses (including fees and
expenses of legal counsel and investment banks) related to such Asset Sale, (ii)
provisions for all taxes payable as a result of such Asset Sale, (iii) amounts
required to be paid to any Person (other than the Company or any Restricted
Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale
and (iv) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve required in accordance with GAAP
consistently applied against any liabilities associated with such Asset Sale and
retained by the Company or any Restricted Subsidiary, as the case may be, after
such Asset Sale, including, without limitation, pension and other post-
employment benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale, all as reflected in an Officers' Certificate delivered to the Trustee.
"Non-payment Event of Default" means any event (other than a Payment
Event of Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a Person that is not a "U.S. person" as
defined in Regulation S.
"Officers' Certificate" means a certificate signed by the Chairman,
the Chief Executive Officer, the President or a Vice President, and by the
Treasurer, the Director of Finance, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
<PAGE>
13
"Opinion of Counsel" means a written opinion of counsel in form and
substance reasonably satisfactory to the Trustee, who may be counsel for the
Company, including an employee of the Company, and who shall be acceptable to
the Trustee.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled pursuant to a Company Order by
the Trustee or delivered to the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore irrevocably deposited
with the Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Securities; provided that,
--------
if such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made;
(iii) Securities, except to the extent provided in Sections 1202 and
1203, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Twelve; and
(iv) Securities which have been paid pursuant to Section 308 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented and delivered to the
Trustee proof satisfactory to it in its sole discretion that such
Securities are held by a bona fide purchaser in whose hands the Securities
are valid obligations of the Company;
provided, however, that, in determining whether the Holders of the requisite
- -------- -------
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee actually knows to be so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee
<PAGE>
14
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or such other obligor.
"Pari Passu Indebtedness" means Indebtedness of the Company which is
pari passu with the Securities.
- ---- -----
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (and premium, if
any, on) or interest on any Securities on behalf of the Company.
"Payment Event of Default" means any default in the payment of
Designated Senior Indebtedness.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company under the Bank Credit Agreement in an
aggregate principal amount at any one time outstanding not to exceed the
greater of (i) $100,000,000 and (ii) the sum of 80% of the aggregate amount
of Eligible Receivables and 50% of the aggregate amount of Eligible
Inventory, measured as of the most recent fiscal quarter preceding the
time such Indebtedness is incurred;
(ii) Indebtedness of the Company under the Securities;
(iii) Indebtedness of the Company outstanding on the date of this
Indenture (other than Indebtedness incurred pursuant to clause (i) of this
definition);
(iv) obligations of the Company pursuant to Interest Rate Protection
Obligations, which obligations do not exceed the aggregate principal amount
of the Indebtedness covered by such Interest Rate Protection Obligations
and obligations under currency exchange contracts entered into in the
ordinary course of business;
(v) Indebtedness of the Company to any wholly owned Restricted
Subsidiaries;
(vi) Indebtedness of the Company consisting of guarantees, indemnities
or obligations in respect of purchase price adjustments in connection with
the acquisition or disposition of assets, including, without limitation,
shares of Capital Stock of Restricted Subsidiaries;
(vii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by the
Company of any Indebtedness of the Company incurred pursuant to clauses
(ii) and (iii) of this
<PAGE>
15
definition, including any successive refinancings by the Company, so long
as (A) any such new Indebtedness shall be in a principal amount that does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, (B) in the case of any refinancing of
Pari Passu Indebtedness or Subordinated Indebtedness, such new Indebtedness
is made pari passu with or subordinate to the Securities at least to the
---- -----
same extent as the Indebtedness being refinanced and (C) such new
Indebtedness has an Average Life longer than the Average Life of the
Securities and a final Stated Maturity later than the final Stated Maturity
of the Securities; and
(viii) Indebtedness in an aggregate principal amount not in excess of
$30 million at any one time outstanding, less the amount of Permitted
Subsidiary Indebtedness then outstanding pursuant to clause (vii) of the
definition thereof.
"Permitted Investments" means any of the following: (i) Investments
in Cash Equivalents; (ii) Investments in the Company or wholly-owned Restricted
Subsidiaries; provided that if the Company shall make any Investment in FEEL in
--------
excess of $1 million, FEEL shall Guarantee the Securities in compliance with
paragraph (b) and clauses (i)(A) and (ii) of paragraph (a) of Section 1017;
(iii) Investments in an amount not to exceed $15 million at any one time
outstanding; or (iv) Investments by the Company or any Restricted Subsidiary of
the Company in another Person, if as a result of such Investment (A) such other
Person becomes a Restricted Subsidiary or (B) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its assets to, the Company or a Restricted Subsidiary.
"Permitted Liens" means the following types of Liens:
(i) Liens on any property or assets of a Restricted Subsidiary granted
in favor of the Company or any Restricted Subsidiary;
(ii) Liens securing the Securities;
(iii) Liens securing the Guarantees;
(iv) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the
<PAGE>
16
Company or any Restricted Subsidiary; provided that any such Lien does not
--------
extend to any property or assets of the Company or any Restricted
Subsidiary other than the assets acquired in connection with the incurrence
of such Acquired Indebtedness; and
(v) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (i) through (iv); provided that any
--------
such extension, renewal or replacement shall be no more restrictive in any
material respect that the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets.
"Permitted Subsidiary Indebtedness" means any of the following:
(i) Indebtedness of any Restricted Subsidiary outstanding on the date
of this Indenture;
(ii) obligations of any Restricted Subsidiary pursuant to Interest
Rate Protection Obligations, which obligations do not exceed the aggregate
principal amount of the Indebtedness covered by such Interest Rate
Protection Obligations;
(iii) Indebtedness of any Restricted Subsidiary to any wholly-owned
Restricted Subsidiary of the Company or to the Company;
(iv) Indebtedness of any Restricted Subsidiary consisting of
guaranties, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock of Restricted
Subsidiaries;
(v) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by any
Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary
incurred pursuant to clause (i) of this definition, including any
successive refinancings by such Restricted Subsidiary, so long as any such
new Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
by such Restricted Subsidiary as necessary to accomplish such refinancing,
plus the amount of expenses of such Restricted Subsidiary incurred in
connection with such refinancing and such new Indebtedness has an Average
Life longer than the Average Life of the Securities and a final Stated
Maturity later than the final Stated Maturity of the Securities;
<PAGE>
17
(vi) Indebtedness (as defined in clauses (e) and (f) of the
definition of Indebtedness) to the Holders incurred pursuant to provisions
of this Indenture;
(vii) Indebtedness in an amount not to exceed $30 million at any one
time outstanding, less the amount of Permitted Indebtedness then
outstanding pursuant to clause (viii) of the definition thereof; and
(viii) Guarantees of Indebtedness of the Company permitted under
Section 1017.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 308 in exchange for a mutilated
security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding, or issued
after the Closing Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"Public Offering" means an offer and sale of common stock (which is
Qualified Capital Stock) of the Company pursuant to a registration statement
that has been declared effective by the Commission pursuant to the Securities
Act (other than a registration statement on Form S-8 or otherwise relating to
equity securities issuable under any employee benefit plan of the Company).
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Qualified Capital Stock" of any person means any and all Capital
Stock of such person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final Stated Maturity of the Securities or is
<PAGE>
18
redeemable at the option of the holder thereof at any time prior to such final
Stated Maturity, or is convertible into or exchangeable for debt securities at
any time prior to such final Stated Maturity.
"Redemption Date", when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Initial Purchasers named therein, dated as
of January 24, 1996, relating to the Securities.
"Registration Statement" means the Registration Statement as defined
in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the January 15 or July 15 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer", when used with respect to the Trustee, means
the president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, any trust officer or assistant trust officer
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above-designated officers, and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Royal Inventum" means Royal Inventum, B.V., a company incorporated
under the laws of the Netherlands.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-
Hill, Inc.
<PAGE>
19
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture. For all purposes of this Indenture, the term "Securities"
shall include any Exchange Securities to be issued and exchanged for any
Securities pursuant to the Registration Rights Agreement and this Indenture and,
for purposes of this Indenture, all Initial Securities and Exchange Securities
shall vote together as one series of Securities under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations thereunder.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means the principal of (and premium, if any, on)
and interest on (including interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law) and other amounts due
on or in connection with any Indebtedness of the Company, whether outstanding on
the date of this Indenture or hereafter created, incurred or assumed, unless, in
the case of any particular Indebtedness, the instrument creating or evidencing
the same or pursuant to which the same is outstanding expressly provides that
such Indebtedness shall not be senior in right of payment to the Securities.
Without limiting the generality of the foregoing, "Senior Indebtedness" shall
include the principal of (and premium, if any, on) and interest (including
interest accruing after the occurrence of an event of default or after the
filing of a petition initiating any proceeding pursuant to any bankruptcy law)
on all Indebtedness, and all other amounts and obligations of every nature of
the Company from time to time owed, under the Bank Credit Agreement and the
Senior Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not
include (A) Indebtedness evidenced by the Securities, (B) Indebtedness of the
Company that is expressly subordinated in right of payment to any Indebtedness
of the Company or the Securities, (C) Indebtedness of the Company that by
operation of law is subordinate to any general unsecured obligations of the
Company, (D) that portion of any Indebtedness of the Company that at the time of
incurrence thereof is incurred in violation of any provision of this Indenture,
(E) any liability for federal, state or local taxes or other taxes owed or owing
by the Company, (F) trade payables owed or owing by the Company, (G)
Indebtedness of the Company to any Subsidiary or any other Affiliate of the
Company, (H) Redeemable Capital Stock of the Company and (I) Indebtedness which
when incurred and without respect to any election under Section 1111(b) of Title
11 of the United States Code is without recourse to the Company or any
Subsidiary of the Company.
"Senior Notes" means the 9 3/4% Senior Notes due 2003 of the Company
issued under the Senior Notes Indenture.
<PAGE>
20
"Senior Notes Indenture" means the Indenture dated as of March 3, 1993
between the Company and United States Trust Company of New York, as trustee, as
amended by the First Supplemental Indenture thereto dated as of January 5, 1996.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" of the Company means any Restricted
Subsidiary of the Company that is a "significant subsidiary" as defined in Rule
1.02(v) of Regulation S-X under the Securities Act, and in any event shall
include any Guarantor.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable, and when used with respect to any other
Indebtedness, means the date specified in the instrument governing such
Indebtedness as the fixed date on which the principal of such Indebtedness, or
any installment of interest thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Securities.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including without limitation a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions). Unless specifically provided to the contrary herein,
Unrestricted Subsidiaries shall not be included in the definition of
Subsidiaries for any purpose of this Indenture (other than for the purposes of
the definition of "Unrestricted Subsidiary" herein).
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force at the date as of which this Indenture was executed, except as
provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
<PAGE>
21
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company
which at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of the Company, as provided below) and (2)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns, or holds any Lien on, any
property of the Company or any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated; provided that either (x) the
--------
Subsidiary to be designated has total assets of $1,000 or less at the time of
its designation or (y) immediately after giving effect to such designation, the
Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 1010. The Board of Directors may designate
any Unrestricted Subsidiary to be a Subsidiary; provided that immediately after
--------
giving effect to such designation, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 1010.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"wholly-owned" with respect to any Subsidiary, means any Subsidiary of
any Person of which at least 99% of the outstanding Capital Stock is owned by
such Person or another wholly-owned Subsidiary of such Person. For purposes of
this definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
SECTION 102. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the Trust Indenture
Act, the provision is incorporated by reference in and made a part of this
Indenture. The following Trust Indenture Act terms used in this Indenture have
the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
<PAGE>
22
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other Trust Indenture Act terms used in this Indenture that are
defined by the Trust Indenture Act, defined by reference in the Trust Indenture
Act to another statute or defined by a rule of the Commission and not otherwise
defined herein shall have the meanings assigned to them therein.
SECTION 103. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate and an Opinion of Counsel each satisfactory
in form and substance to the Trustee, which, taken together, state that all
conditions precedent, if any, provided for in this Indenture (including any
covenant compliance with which constitutes a condition precedent) relating to
the proposed action have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read and understands such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
<PAGE>
23
SECTION 104. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 105. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him
<PAGE>
24
the execution thereof. Where such execution is by a signer acting in a capacity
other than his individual capacity, such certificate or affidavit shall also
constitute sufficient proof of authority. The fact and date of the execution of
any such instrument or writing, or the authority of the Person executing the
same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by any
Person, and the date of holding the same, shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to Board Resolution, fix in
advance a record date, of which it shall notify the Trustee and Paying Agent,
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. Notwithstanding TIA Section 316(c), such
record date shall be the record date specified in or pursuant to such Board
Resolution, which shall be a date not earlier than the date 30 days prior to the
first solicitation of Holders generally in connection therewith and not later
than the date such solicitation is completed. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, waiver or other
Act may be given before or after such record date, but only the Holders of
record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
--------
the Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than eleven
months after the record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 106. Notices, Etc., to Trustee, Company.
----------------------------------
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
<PAGE>
25
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Corporate
Trust Division, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this Indenture, or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 107. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, to any particular Holder
shall affect the sufficiency of such notice with respect to other Holders. Any
notice mailed to a Holder in the manner herein prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
<PAGE>
26
SECTION 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto, any Paying Agent, any
Securities Registrar and their successors hereunder, the Holders and, with
respect to any provisions hereof relating to the subordination of the Securities
or the rights of holders of Senior Indebtedness, the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 112. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed
in accordance with the law of the State of New York, without regard to the
principles of conflicts of law. Upon the issuance of the Exchange Securities or
the effectiveness of the Shelf Registration Statement, this Indenture shall be
subject to the provisions of the Trust Indenture Act of 1939, as amended, that
are required to be part of this Indenture and shall, to the extent applicable,
be governed by such provisions.
SECTION 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date, Stated
Maturity or Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date or at the
Stated Maturity or Maturity; provided that no interest shall accrue for the
--------
period from and after such Interest Payment Date, Redemption Date, Stated
Maturity or Maturity, as the case may be.
<PAGE>
27
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
---------------
The definitive Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the officers of the Company executing such Securities, as
evidenced by their execution of such Securities.
The Initial Securities shall be known as the "9-7/8% Senior
Subordinated Notes due 2006" and the Exchange Securities shall be known as the
"9-7/8% Series B Senior Subordinated Notes due 2006", in each case, of the
Company. The Securities and the Trustee's certificate of authentication shall
be in substantially the form annexed hereto as Exhibit A. The Securities may
have such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by the Indenture and may have letters, notations or
other marks of identification and such notations, legends or endorsements
required by law, stock exchange agreements to which the Company is subject or
usage. Any portion of the text of any Security may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Security. The
Company shall approve the form of the Securities and any notation, legend or
endorsement on the Securities. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Initial Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Securities
substantially in the form set forth in Exhibit A (the "U.S. Global Security")
deposited with the Trustee, as custodian for the Depositary, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the U.S. Global Security may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Initial Securities offered and sold in reliance on Regulation S shall
be issued initially in the form of temporary certificated Securities in
registered form substantially in the form set forth in Exhibit A (the "Temporary
Offshore Physical Securities"). The Temporary Offshore Physical Securities will
be registered in the name of, and held by, a temporary certificate holder
designated by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
<PAGE>
28
Smith Incorporated until the later of the completion of the distribution of the
Initial Securities and the termination of the "restricted period" (as defined in
Regulation S) with respect to the offer and sale of the Initial Securities (the
"Offshore Securities Exchange Date"). At any time following the Offshore
Securities Exchange Date, upon receipt by the Trustee and the Company of a
certificate substantially in the form of Exhibit B hereto, the Company shall
execute, and the Trustee shall authenticate and deliver, one or more permanent
certificated Securities in registered form substantially in the form set forth
in Exhibit A (the "Permanent Offshore Physical Securities"), in exchange for the
surrender of Temporary Offshore Physical Securities of like tenor and amount.
Initial Securities offered and sold other than as described in the
preceding two paragraphs shall be issued in the form of permanent certificated
Securities in registered form in substantially the form set forth in Exhibit A
(the "U.S. Physical Securities").
The Temporary Offshore Physical Securities, Permanent Offshore
Physical Securities and U.S. Physical Securities are sometimes collectively
herein referred to as the "Physical Securities".
SECTION 202. Restrictive Legends.
-------------------
Unless and until (i) an Initial Security is sold under an effective
Registration Statement or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, each such U.S. Global Security,
Temporary Offshore Physical Security, Permanent Offshore Physical Security and
each U.S. Physical Security shall bear the following legend (the "Private
Placement Legend") on the face thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY, OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
<PAGE>
29
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR", FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
(ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE.
Each U.S. Global Security, whether or not an Initial Security, shall
also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN
<PAGE>
30
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
---------------
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $100,000,000,
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section 304,
305, 306, 307, 308, 906, 1015, 1016 or 1108.
The Initial Securities shall be known and designated as the "9-7/8%
Senior Subordinated Notes due 2006" of the Company. The Exchange Securities
shall be known and designated as the "9-7/8% Series B Senior Subordinated Notes
due 2006" of the Company. The Stated Maturity of the Initial Securities and the
Exchange Securities shall be February 1, 2006, and, except as otherwise set
forth herein, they shall bear interest at the rate of 9-7/8% per annum from
January 24, 1996, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable semi-annually in arrears on
February 1 and August 1 in each year and at said Stated Maturity, until the
principal thereof is paid or duly provided for.
The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose; provided, however, that, at
-------- -------
the option of the Company, interest may be paid by check mailed to addresses of
the Persons entitled thereto as such addresses shall appear on the Security
Register.
<PAGE>
31
The Securities shall be redeemable as provided in Article Eleven.
The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Thirteen.
SECTION 302. Denominations.
-------------
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its
Chairman, its President or a Vice President, under its corporate seal reproduced
thereon and attested by its Secretary or an Assistant Secretary. The signature
of any of these officers on the Securities may be manual or facsimile signatures
of the present or any future such authorized officer and may be imprinted or
otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Initial Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Initial Securities directing the Trustee to
authenticate the Securities and certifying that all conditions precedent to the
issuance of Securities contained herein have been fully complied with, and the
Trustee in accordance with such Company Order shall authenticate and deliver
such Initial Securities. On Company Order, the Trustee shall authenticate for
original issue Exchange Securities in an aggregate principal amount not to
exceed $100,000,000; provided that such Exchange Securities shall be issuable
--------
only upon the valid surrender for cancellation of Initial Securities of a like
aggregate principal amount in accordance with an Exchange Offer pursuant to the
Registration Rights Agreement. In each case, the Trustee shall be entitled to
receive an Officers' Certificate and an Opinion of Counsel of the Company that
it may reasonably request in connection with such authentication of Securities.
Such order shall specify the amount of Securities to be authenticated and the
date on which the original issue of Initial Securities or Exchange Securities is
to be authenticated.
Each Security shall be dated the date of its authentication.
<PAGE>
32
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Exhibit
A duly executed by the Trustee by manual signature of an authorized officer, and
such certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be consolidated
or merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which the Company shall have been merged, or the
Person which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article Eight, any of the Securities authenticated
or delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Securities executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon Company Request of
the successor Person, shall authenticate and deliver Securities as specified in
such request for the purpose of such exchange. If Securities shall at any time
be authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Securities, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Securities at the time
Outstanding for Securities authenticated and delivered in such new name.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 1002,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Securities, the Company shall execute and the
<PAGE>
33
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as security registrar (the "Security Registrar") for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations of a like aggregate principal amount.
Furthermore, any Holder of the U.S. Global Security shall, by
acceptance of such Global Security, agree that transfers of beneficial interest
in such Global Security may be effected only through a book-entry system
maintained by the Holder at such Global Security (or its agent), and that
ownership of a beneficial interest in the Security shall be required to be
reflected in a book entry.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange (including an
exchange of Initial Securities for Exchange Securities), the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive; provided that no exchange
--------
of Initial Securities for Exchange Securities shall occur until an Exchange
Offer Registration Statement shall have been declared effective by the
Commission and that the Initial Securities to be exchanged for the Exchange
Securities shall be cancelled by the Trustee.
<PAGE>
34
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Security Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 304, 906, 1015, 1016 or 1108 not involving
any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the selection of Securities to be redeemed under Section 1104 and
ending at the close of business on the day of such mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
SECTION 306. Book-Entry Provisions for U.S. Global Security.
----------------------------------------------
(a) The U.S. Global Security initially shall (i) be registered in the
name of the Depositary for such global Security or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 202.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any U.S. Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under the U.S. Global Security, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such U.S. Global Security for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or shall
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a holder of any
Security.
<PAGE>
35
(b) Transfers of the U.S. Global Security shall be limited to
transfers of such U.S. Global Security in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of
beneficial owners in the U.S. Global Security may be transferred in accordance
with the rules and procedures of the Depositary and the provisions of Section
307. Beneficial owners may obtain U.S. Physical Securities in exchange for
their beneficial interests in the U.S. Global Security upon request in
accordance with the Depositary's and the Registrar's procedures. In addition,
U.S. Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in the U.S. Global Security if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the U.S. Global Security and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a request
from the Depositary.
(c) In connection with any transfer of a portion of the beneficial
interest in the U.S. Global Security to beneficial owners pursuant to subsection
(b) of this Section, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the U.S. Global Security in an
amount equal to the principal amount of the beneficial interest in the U.S.
Global Security to be transferred, and the Company shall execute, and the
Trustee shall authenticate and deliver, one or more U.S. Physical Securities of
like tenor and amount.
(d) In connection with the transfer of the entire U.S. Global Security
to beneficial owners pursuant to subsection (b) of this Section, the U.S. Global
Security shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the U.S. Global Security, an equal aggregate principal
amount of U.S. Physical Securities of authorized denominations.
(e) Any U.S. Physical Security delivered in exchange for an interest
in the U.S. Global Security pursuant to subsection (c) or subsection (d) of this
Section shall, except as otherwise provided by paragraph (a)(i)(x) and paragraph
(f) of Section 307, bear the applicable legend regarding transfer restrictions
applicable to the U.S. Physical Security set forth in Section 202.
(f) The registered holder of the U.S. Global Security may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take under this Indenture or the Securities.
<PAGE>
36
SECTION 307. Special Transfer Provisions.
---------------------------
Unless and until (i) an Initial Security is sold under an effective
Registration Statement, or (ii) an Initial Security is exchanged for an Exchange
Security in connection with an effective Registration Statement, in each case
pursuant to the Registration Rights Agreement, the following provisions shall
apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
-------------------------------------------------------
following provisions shall apply with respect to the registration of any
proposed transfer of an Initial Security to any institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act) which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Initial Security,
whether or not such Initial Security bears the Private Placement Legend, if
(x) the requested transfer is at least three years after the original issue
date of the Initial Securities or (y) the proposed transferee has delivered
to the Registrar a certificate substantially in the form of Exhibit C
hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global Security
in an amount equal to the principal amount of the beneficial interest in
the U.S. Global Security to be transferred, and the Company shall execute,
and the Trustee shall authenticate and deliver, one or more U.S. Physical
Certificates of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of an Initial Security to a
QIB (excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of U.S. Physical
Securities, Temporary Offshore Physical Securities or Permanent Offshore
Physical Securities, the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Initial Security stating, or has otherwise
advised the Company and the Registrar in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Initial Security
stating, or has otherwise advised the Company and the Registrar in writing,
that it is purchasing the Initial Security for its own account or an
account with respect to which it
<PAGE>
37
exercises sole investment discretion and that it, or the person on whose
behalf it is acting with respect to any such account, is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the Initial
Security to be transferred consists of U.S. Physical Securities, Temporary
Offshore Physical Securities or Permanent Offshore Physical Securities,
upon receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures therefor, the Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the U.S. Global Security in an amount equal to the principal
amount of the U.S. Physical Securities, Temporary Offshore Physical
Securities or Permanent Offshore Physical Securities, as the case may be,
to be transferred, and the Trustee shall cancel the Physical Security so
transferred.
(c) Transfers by Non-U.S. Persons on or Prior to March 4, 1996. The
----------------------------------------------------------
following provisions shall apply with respect to registration of any proposed
transfer of an Initial Security by a Non-U.S. Person on or prior to March 4,
1996:
(i) The Registrar shall register the transfer of any Initial Security
(x) if the proposed transferee is a Non-U.S. Person and the proposed
transferor has delivered to the Registrar a certificate substantially in
the form of Exhibit D hereto or (y) if the proposed transferee is a QIB and
the proposed transferor has checked the box provided for on the form of
Initial Security stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Initial Security stating, or has otherwise
advised the Company and the Registrar in writing, that it is purchasing the
Initial Security for its own account or an account with respect to which it
exercises sole investment discretion and that it, or the person on whose
behalf it is acting with respect to any such account, is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A. Unless clause
(ii) below is applicable, the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Temporary Offshore Physical
Securities of like tenor and amount.
<PAGE>
38
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of instructions given in accordance with the Depositary's and
the Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of the
U.S. Global Security in an amount equal to the principal amount of the
Temporary Offshore Physical Security to be transferred, and the Trustee
shall cancel the Temporary Offshore Physical Security so transferred.
(d) Transfers by Non-U.S. Persons on or After March 4, 1996. The
-------------------------------------------------------
following provisions shall apply with respect to any transfer of an Initial
Security by a Non-U.S. Person on or after March 4, 1996:
(i) (x) If the Initial Security to be transferred is a Permanent
Offshore Physical Security, the Registrar shall register such transfer, (y)
if the Initial Security to be transferred is a Temporary Offshore Physical
Security, upon receipt of a certificate substantially in the form of
Exhibit D from the proposed transferor, the Registrar shall register such
transfer and (z) in the case of either clause (x) or (y), unless clause
(ii) below is applicable, the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Permanent Offshore Physical
Securities of like tenor and amount.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of instructions given in accordance with the Depositary's and
the Registrar's procedures therefor, the Registrar shall reflect on its
books and records the date and an increase in the principal amount of the
U.S. Global Security in an amount equal to the principal amount of the
Temporary Offshore Physical Security or Permanent Offshore Physical
Security to be transferred, and the Trustee shall cancel the Physical
Security so transferred.
(e) Transfers to Non-U.S. Persons at Any Time. The following
-----------------------------------------
provisions shall apply with respect to any transfer of an Initial Security to a
Non-U.S. Person:
(i) Prior to March 4, 1996, the Registrar shall register any proposed
transfer of an Initial Security to a Non-U.S. Person upon receipt of a
certificate substantially in the form of Exhibit D hereto from the proposed
transferor and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Temporary Offshore Physical
Securities of like tenor and amount.
(ii) On and after March 4, 1996, the Registrar shall register any
proposed transfer to any Non-U.S. Person (w) if the Initial Security to be
transferred is a Permanent Offshore Physical Security, (x) if the Initial
Security to be transferred is a Temporary Offshore Physical Security, upon
receipt of a certificate substantially in the form of Exhibit D from the
proposed transferor, (y) if the Initial Security to be
<PAGE>
39
transferred is a U.S. Physical Security or an interest in the U.S. Global
Security, upon receipt of a certificate substantially in the form of
Exhibit D from the proposed transferor and (z) in the case of either clause
(w), (x) or (y), the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Permanent Offshore Physical
Securities of like tenor and amount.
(iii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the document, if any, required by paragraph (i), and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global Security
in an amount equal to the principal amount of the beneficial interest in
the U.S. Global Security to be transferred and the Company shall execute,
and the Trustee shall authenticate and deliver, one or more Permanent
Offshore Physical Securities of like tenor and amount.
(f) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless either (i) the circumstances contemplated by
the fifth paragraph of Section 201 or paragraphs (a)(i)(x), (d)(i) or (e)(ii) of
this Section 307 exist or (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
(g) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 306 or this Section 307.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If (i) any mutilated Security is surrendered to the Trustee or the
Registrar, or (ii) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss
<PAGE>
40
or theft of any Security, and there is delivered to the Company and the Trustee
such security or indemnity as may be required by them to save each of them
harmless, then, in the absence of notice to the Company or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon Company Order the Trustee shall authenticate and deliver, in exchange
for any such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and principal amount, bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 309. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company maintained for such purpose pursuant to Section
1002; provided, however, that each installment of interest may at the Company's
-------- -------
option be paid by (i) mailing a check for such interest, payable to or upon the
written order of the Person entitled thereto pursuant to Section 310, to the
address of such Person as it appears in the Security Register or (ii) transfer
to an account maintained by the payee located in the United States.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted
<PAGE>
41
interest and (to the extent lawful) interest on such defaulted interest at the
rate borne by the Securities (such defaulted interest and interest thereon
herein collectively called "Defaulted Interest") may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security and
the date of the proposed payment, and at the same time the Company shall
irrevocably deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited to be
held in trust for the benefit of the Persons entitled to such Defaulted
Interest as in this clause provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date, and in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given in the
manner provided for in Section 107, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so given, such
Defaulted Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are registered at
the close of business on such Special Record Date and shall no longer be
payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
<PAGE>
42
SECTION 310. Persons Deemed Owners.
---------------------
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any, on) and (subject to Sections 305 and 309) interest on such Security and
for all other purposes whatsoever, whether or not such Security be overdue, and
none of the Company, the Trustee or any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 311. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly cancelled by the Trustee. If
the Company shall so acquire any of the Securities, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation along with an Officer's Certificate and Company Order
requesting the cancellation. No Securities shall be authenticated in lieu of or
in exchange for any Securities cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company unless
by Company Order the Company shall direct that cancelled Securities be returned
to it.
SECTION 312. Computation of Interest.
-----------------------
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
<PAGE>
43
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
Securities herein expressly provided for) and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture when
(1) either
(a) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 308 and (ii)
Securities for whose payment money has theretofore been deposited in
trust with the Trustee or any Paying Agent or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have been
delivered to the Trustee for cancellation; or
(b) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company or any Guarantor, in the case of (i), (ii) or (iii)
above, has irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust for the purpose an amount sufficient
to pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for principal
(and premium, if any) and interest to the date of such deposit (in the
case of Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
<PAGE>
44
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each satisfactory in form and substance to the
Trustee, which, taken together, state that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 606 and, if money shall
have been deposited with the Trustee pursuant to subclause (b) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Thirteen or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of the principal of or premium, if any,
when due and payable, on any of the Securities; or
(2) default in the payment of an installment of interest on any of the
Securities, when due and payable, for 30 days; or
<PAGE>
45
(3) default in the performance or breach of the provisions of Article
Eight of this Indenture, the failure to make or consummate a Change of
Control Offer in accordance with the provisions of Section 1015 or the
failure to make or consummate an Excess Proceeds Offer in accordance with
the provisions of Section 1016; or
(4) the Company or any Guarantor shall fail to perform or observe any
other term, covenant or agreement contained in the Securities, any
Guarantee or this Indenture (other than a default specified in (1), (2) or
(3) above) for a period of 30 days after written notice of such failure
requiring the Company to remedy the same shall have been given (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the holders
of 25% in aggregate principal amount of the Securities then outstanding; or
(5) default or defaults under one or more mortgages, bonds, debentures
or other evidences of Indebtedness under which the Company or any
Significant Subsidiary then has outstanding Indebtedness in excess of
$5,000,000, individually or in the aggregate, and either (a) such
Indebtedness is already due and payable in full or (b) such default or
defaults have resulted in the acceleration of the maturity of such
Indebtedness; or
(6) one or more final judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5,000,000, individually or in the aggregate,
shall be entered against the Company or any of its Significant Subsidiaries
or any of their respective properties and shall not be discharged or fully
bonded and there shall have been a period of 60 days after the date on
which any period for appeal has expired and during which a stay of
enforcement of such judgment, order or decree, shall not be in effect; or
(7) (A) any holder of at least $5,000,000 in aggregate principal
amount of secured Indebtedness of the Company or of any Significant
Subsidiary as to which a default has occurred and is continuing shall
commence judicial proceedings (which proceedings shall remain unstayed for
five Business Days) to foreclose upon assets of the Company or any
Significant Subsidiary having an aggregate Fair Market Value, individually
or in the aggregate, in excess of $5,000,000 or shall have exercised any
right under applicable law or applicable security documents to take
ownership of any such assets in lieu of foreclosure or (B) any action
described in the foregoing clause (A) shall result in any court of
competent jurisdiction issuing any order for the seizure of such assets; or
(8) any Guarantee ceases to be in full force and effect or is declared
null and void or any Guarantor denies that it has any further liability
under any Guarantee,
<PAGE>
46
or gives notice to such effect (other than by reason of the termination of
this Indenture or the release of any such Guarantee in accordance with this
Indenture) and such condition shall have continued for a period of 30 days
after written notice of such failure requiring the Guarantor and the
Company to remedy the same shall have been given (x) to the Company by the
Trustee or (y) to the Company and the Trustee by the holders of 25% in
aggregate principal amount of the Securities then outstanding; or
(9) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company or any Significant Subsidiary a bankrupt
or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustments or composition of or in respect of
the Company or any Significant Subsidiary under the Federal Bankruptcy Code
or any other applicable federal or state law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the Company or any Significant Subsidiary or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period
of 90 consecutive days; or
(10) the institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by it
to the institution of bankruptcy or insolvency proceedings against it, or
the filing by it of a petition or answer or consent seeking reorganization
or relief under the Federal Bankruptcy Code or any other applicable federal
or state law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or any Significant Subsidiary or
of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default (other than an Event of Default specified in
Section 501(9) or 501(10) occurs and is continuing, then and in every such case
the Trustee or the Holders of not less than 25% in principal amount of the
Securities Outstanding may declare the principal amount of, premium, if any, and
accrued interest on all the Securities to be due and payable immediately, by a
notice in writing to the Company (and to the Trustee if given by Holders), upon
which declaration all amounts payable in respect of the Securities shall be
immediately due and payable; provided, however, that, for so long as the Bank
-------- -------
Credit
<PAGE>
47
Agreement is in effect, such declaration shall not become effective until the
earlier of (i) five Business Days following delivery of notice to the Agent Bank
of the intention to accelerate the Securities or (ii) the acceleration of any
Indebtedness under the Bank Credit Agreement. If an Event of Default specified
in Section 501(9) or 501(10) occurs and is continuing, then the principal amount
of all the Securities shall ipso facto become and be immediately due and payable
---- -----
without any declaration or other act on the part of the Trustee or any Holder.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Securities Outstanding, by written notice to the
Company and the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Company has paid or irrevocably deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on all Outstanding Securities,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Securities which has become due otherwise than by such
declaration of acceleration, and interest on such unpaid principal at
the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest on overdue interest at the rate borne by the Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) such rescission would not conflict with any judgment or decree of
a court of competent jurisdiction; and
(3) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
<PAGE>
48
Notwithstanding the preceding paragraph, in the event of a declaration
of acceleration in respect of the Securities because of an Event of Default
specified in Section 501(5) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Indebtedness
that is the subject of such Event of Default has been discharged or the holders
thereof have rescinded their declaration of acceleration in respect of such
Indebtedness, and written notice of such discharge or rescission, as the case
may be, shall have been given to the Trustee by the Company and countersigned by
the holders of such Indebtedness or a trustee, fiduciary or agent for such
holders, within 30 days after such declaration of acceleration in respect of the
Securities, and no other Event of Default has occurred during such 30-day period
which has not been cured or waived during such period.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
The Company covenants that if
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to the Trustee for the benefit
of the Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest, and interest on any
overdue principal (and premium, if any) and, to the extent that payment of such
interest shall be legally enforceable, upon any overdue installment of interest,
at the rate borne by the Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and
<PAGE>
49
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
<PAGE>
50
SECTION 505. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities.
- ----------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
and as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
------------------------------
Subject to Article Thirteen, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal (or premium, if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any, on) and interest on the Securities in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute
<PAGE>
51
proceedings in respect of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities (including fees and
expenses of its agents and counsel) to be incurred in compliance with such
request;
(4) the Trustee for 15 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 15-day period by the Holders of a majority or
more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- --------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article Twelve)
and in such Security of the principal of (and premium, if any, on) and (subject
to Section 309) interest on, such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
<PAGE>
52
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 308, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might subject it to
personal liability or be unjustly prejudicial to the Holders not
consenting.
SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities may on behalf of the Holders of all the Securities waive
any past default hereunder and its consequences, except a default
<PAGE>
53
(1) in respect of the payment of the principal of (or premium, if any,
on) or interest on any Security, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
------------------
If any Default hereunder is actually known to the Trustee, the Trustee
shall transmit in the manner and to the extent provided in TIA Section 313(c),
notice of such Default within 5 days after the occurrence of any such Default,
unless such Default shall have been cured or waived; provided, however, that,
-------- -------
except in the case of a Default in the payment of the principal of (or premium,
if any, on) or interest on any Security, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders; and provided further that in the case of any Default of
-------- -------
the character specified in Section 501(4) no such notice to Holders shall be
given until at least 30 days after the occurrence thereof.
<PAGE>
54
SECTION 602. Certain Rights of Trustee.
-------------------------
Subject to the provisions of TIA Sections 315(a) through 315(d):
(1) the Trustee may conclusively rely and shall be protected in acting
or refraining from acting, pursuant to the terms of this Indenture or
otherwise, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order with
sufficient detail as may be requested by the Trustee and any resolution of
the Board of Directors may be sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate and/or an Opinion of
Counsel;
(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities (including fees and expenses of its agents
and counsel) which might be incurred by it in compliance with such request
or direction;
(6) the Trustee shall not be bound to make any investigation into, and
may conclusively rely upon, the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
<PAGE>
55
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(8) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture; and
(9) notwithstanding anything else to the contrary contained herein,
the Trustee need perform only those duties as are specifically set forth in
this Indenture and no others and no implied covenants or obligations shall
be read into this Indenture as against the Trustee.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
---------------------------------------------------
Securities.
- ----------
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and, upon the effectiveness of
the Registration Statement, that the statements made by it in a Statement of
Eligibility on Form T-1 supplied to the Company are true and accurate, subject
to the qualifications set forth therein. The Trustee shall not be accountable
for the use or application by the Company of Securities or the proceeds thereof.
SECTION 604. May Hold Securities.
-------------------
The Trustee, any Paying Agent, any Security Registrar or any other
agent of the Company or of the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to TIA Sections
310(b) and 311, may otherwise deal with the Company with the same rights it
would have if it were not Trustee, Paying Agent, Security Registrar or such
other agent.
<PAGE>
56
SECTION 605. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 606. Compensation and Reimbursement.
------------------------------
The Company agrees:
(1) to pay to the Trustee (in its capacity as Trustee, Paying Agent
and Registrar) from time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel); and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the
Securities upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of (and premium, if any,
on) or interest on particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(9) or Section 501(10), the
expenses and the compensation for the services are intended to constitute
expenses of administration under any bankruptcy law.
<PAGE>
57
SECTION 607. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 609 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, except when the Trustee's duty to resign is stayed in accordance
with the provisions of TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section 607 and shall
fail to resign after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
<PAGE>
58
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided subject to
TIA Section 315(e), any Holder who has been a bona fide Holder of a Security for
at least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to the Holders of
Securities in the manner provided for in Section 107. Each notice shall include
the name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
--------------------------------------
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder subject to the retiring Trustee's rights as
provided under the last sentence of Section 606. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
<PAGE>
59
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
- --------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities;
and in case at that time any of the Securities shall not have been
authenticated, any successor Trustee may authenticate such Securities either in
the name of any predecessor hereunder or in the name of the successor Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Securities or in this Indenture provided that the certificate of
the Trustee shall have; provided, however, that the right to adopt the
-------- -------
certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
--------------------------------------------
Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that none of the Company or the Trustee or any
agent of either of them shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders in accordance
with TIA Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under TIA Section 312(b).
SECTION 702. Reports by Trustee.
------------------
Within 60 days after May 15 of each year commencing with the first May
15 after the first issuance of Securities, the Trustee shall transmit to the
Holders, in the manner
<PAGE>
60
and to the extent provided in TIA Section 313(c), a brief report dated as of
such May 15 if required by TIA Section 313(a).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not, in any transaction or series of transactions,
merge or consolidate with or into, or sell, assign, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets as an entirety
to, any Person or Persons, and the Company will not permit any Restricted
Subsidiary to enter into any such transaction or series of transactions if such
transaction or series of transactions, in the aggregate, would result in a sale,
assignment, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any other Person or Persons, unless at the time and after
giving effect thereto:
(1) either (A) if the transaction or transactions is a merger or
consolidation, the Company shall be the surviving Person of such merger or
consolidation, or (B) the Person formed by such consolidation or into which
the Company or such Restricted Subsidiary is merged or to which the
properties and assets of the Company or such Restricted Subsidiary, as the
case may be, substantially as an entirety, are sold, assigned, transferred,
leased or otherwise disposed of (any such surviving Person or transferee
Person being the "Surviving Entity") shall be a corporation organized and
existing under the laws of the United States of America, any state thereof
or the District of Columbia and shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form satisfactory to
the Trustee, all the obligations of the Company under the Securities and
the Indenture, and, in each case, the Indenture shall remain in full force
and effect;
(2) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including,
--- -----
without limitation, any Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing and the Company or the Surviving Entity, as the case may be,
after giving effect to such transaction or series of transactions on a pro
---
forma basis, could incur $1.00 of additional Indebtedness (other than
-----
Permitted Indebtedness) pursuant to Section 1010;
(3) immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Consolidated Net Worth of the
--- -----
Company, or the Surviving Entity, as the case may be, is at least equal to
the Consolidated Net
<PAGE>
61
Worth of the Company immediately before such transaction or series of
transactions; and
(4) the Company or such Person shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel satisfactory in form and
substance to the Trustee, which, taken together, state that such
consolidation, merger, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such
supplemental indenture, comply with this Article and that all conditions
precedent herein provided for relating to such transaction have been
complied with.
SECTION 802. Successor Substituted.
---------------------
Upon any consolidation of the Company with or merger of the Company
with or into any other corporation or any conveyance, transfer or lease of the
properties and assets of the Company substantially as an entirety to any Person
in accordance with Section 801, the Surviving Entity formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such Surviving Entity had been named as the Company herein,
and in the event of any such conveyance or transfer, the Company (which term
shall for this purpose mean the Person named as the "Company" in the first
paragraph of this Indenture or any Surviving Entity which shall theretofore
become such in the manner described in Section 801), except in the case of a
lease, shall be discharged of all obligations and covenants under this Indenture
and the Securities and may be dissolved and liquidated.
SECTION 803. Securities to Be Secured in Certain Events.
------------------------------------------
If, upon any such consolidation of the Company with or merger of the
Company into any other corporation, or upon any conveyance, lease or transfer of
the property of the Company substantially as an entirety to any other Person,
any property or assets of the Company would thereupon become subject to any
Lien, then unless such Lien could be created pursuant to Section 1014 without
equally and ratably securing the Securities, the Company, prior to or
simultaneously with such consolidation, merger, conveyance, lease or transfer,
will as to such property or assets, secure the Securities Outstanding (together
with, if the Company shall so determine any other Indebtedness of the Company
now existing or hereinafter created which is not subordinate in right of payment
to the Securities) equally and ratably with (or prior to) the Indebtedness which
upon such consolidation, merger, conveyance, lease or transfer is to become
secured as to such property or assets by such Lien, or will cause such
Securities to be so secured.
<PAGE>
62
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
contained herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default; or
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section
609; or
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture; provided that such action shall not adversely affect
--------
the interests of the Holders in any material respect; or
(6) to secure the Securities pursuant to the requirements of Section
803 or 1014 or otherwise; or
(7) to qualify, or maintain the qualification of, this Indenture under
the Trust Indenture Act.
SECTION 902. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities, by Act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however,
- -------- -------
<PAGE>
63
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby:
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the coin or currency in which any Security or any
premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture,
or
(3) release any Guarantor from any of its obligations under its
Guarantee or this Indenture other than in accordance with the terms of this
Indenture, or
(4) modify any of the provisions of this Section or Sections 513 and
1020, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby, or
(5) modify any of the provisions of Section 1014 or Section 1019 or
any of the provisions of this Indenture relating to the subordination of
the Securities in a manner adverse to the Holders thereof, or
(6) amend, change or modify the obligation of the Company to make and
consummate a Change in Control Offer in the event of a Change in Control or
make and consummate an Offer with respect to any Asset Sale or modify any
of the provisions or definitions with respect thereto.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Opinion of Counsel stating that
the execution of such supplemental indenture is
<PAGE>
64
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to the Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form and substance approved by the Trustee as to
any matter provided for in such supplemental indenture. If the Company shall so
determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures.
---------------------------------
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Security affected,
in the manner provided for in Section 107, setting forth in general terms the
substance of such supplemental indenture.
SECTION 908. Effect on Senior Indebtedness.
-----------------------------
No supplemental indenture shall adversely affect the rights of the
holders of Designated Senior Indebtedness under Article Thirteen without the
consent of the appropriate representatives of such holders.
<PAGE>
65
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, If Any, and Interest.
---------------------------------------------------
The Company covenants and agrees for the benefit of the Holders that
it will duly and punctually pay the principal of (and premium, if any, on) and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in The City of New York, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Trust Office located at 14 Wall Street, New York,
New York 10005 of the Trustee shall be such office or agency of the Company,
unless the Company shall designate and maintain some other office or agency for
one or more of such purposes. The Company will give prompt written notice to
the Trustee of any change in the location of any such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes and may from time
to time rescind any such designation; provided, however, that no such
-------- -------
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
-----------------------------------------------
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any, on) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
<PAGE>
66
Whenever the Company shall have one or more Paying Agents for the
Securities, it will, on or before each due date of the principal of (and
premium, if any, on), or interest on, any Securities, deposit with a Paying
Agent a sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company will promptly notify the Trustee of such action or
any failure so to act.
The Company will cause each Paying Agent (other than the Trustee) to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any, on) or interest on Securities in trust for the benefit of
the Persons entitled thereto until such sums shall be paid to such Persons
or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any, on) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on
<PAGE>
67
each Business Day and of general circulation in the Borough of Manhattan, The
City of New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Corporate Existence.
-------------------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and each
Subsidiary; provided, however, that the Company shall not be required to
-------- -------
preserve any such right or franchise if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. Payment of Taxes and Other Claims.
---------------------------------
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies, which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
--------
however, that the Company shall not be required to pay or discharge or cause to
- -------
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1006. Maintenance of Properties.
-------------------------
The Company will cause all properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section shall
-------- -------
prevent the Company from discontinuing the maintenance of any of such properties
if such discontinuance is, in the judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 1007. Insurance.
---------
The Company will at all times keep all of its and its Subsidiaries
properties which are of an insurable nature insured with insurers, believed by
the Company to be
<PAGE>
68
responsible, against loss or damage to the extent that property of similar
character is usually so insured by corporations similarly situated and owning
like properties.
SECTION 1008. Statement by Officers as to Default.
-----------------------------------
(a) The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year and within 45 days after the end of each fiscal quarter,
a brief certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of compliance
by the Company and the Guarantors with all conditions and covenants under this
Indenture. For purposes of this Section 1008(a), such compliance shall be
determined without regard to any period of grace or requirement of notice under
this Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, or if the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Subsidiary gives any notice or takes any
other action with respect to a claimed default (other than with respect to
Indebtedness in the principal amount of less than $5,000,000), the Company shall
deliver to the Trustee by registered or certified mail or by telegram, telex or
facsimile transmission an Officers' Certificate specifying such event, notice or
other action within 10 days of its occurrence.
SECTION 1009. Provision of Financial Statements.
---------------------------------
The Company will file on a timely basis with the Commission, to the
extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the annual
reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13 or 15 of the Exchange Act.
The Company shall also (a) file with the Trustee, and provide to each holder of
Securities, without cost to such holder, copies of such reports and documents
within 15 days after the date on which the Company files such reports and
documents with the Commission or the date on which the Company would be required
to file such reports and documents if the Company were so required and (b) if
filing such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, the Company shall supply at
its cost copies of such reports and documents to any prospective holder of
Securities promptly upon written request therefor.
SECTION 1010. Limitation on Indebtedness.
--------------------------
(a) The Company will not create, incur, issue, assume, guarantee or in
any manner become directly or indirectly liable for the payment of, or otherwise
incur (collectively to "incur") any Indebtedness (including any Acquired
Indebtedness), other than Permitted Indebtedness, unless (x) the Company's
Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters
immediately preceding the incurrence of such Indebtedness, taken as one period
(and after giving pro forma effect to: (i) the incurrence of
--- -----
<PAGE>
69
such Indebtedness and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such Indebtedness
was incurred and the application of such proceeds occurred at the beginning of
such four-quarter period; (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company or its Restricted Subsidiaries since the first
day of such four-quarter period as if such Indebtedness was incurred, repaid or
retired at the beginning of such four-quarter period; and (iii) notwithstanding
clause (d) of the definition of Consolidated Adjusted Net Income, the
acquisition (whether by purchase, merger or otherwise) or disposition (whether
by sale, merger or otherwise) of any company, entity or business acquired or
disposed of by the Company or its Restricted Subsidiaries, as the case may be,
since the first day of such four-quarter period, as if such acquisition or
disposition occurred at the beginning of such four-quarter period, reflecting,
----------
in the case of such an acquisition, any amount attributable to any operating
expense that will be eliminated or cost reduction that will be realized (in each
case, net of any operating expense or other cost increase) in connection with
such acquisition, as determined in good faith by the chief financial officer of
the Company in accordance with GAAP and the rules, regulations and guidelines of
the Commission, as if such elimination of operating expense or the realization
of such cost reductions were achieved at the beginning of such four-quarter
period), would have been at least equal to 2.0 to 1, and (y) if such
Indebtedness is Subordinated Indebtedness, such Indebtedness shall have an
Average Life longer than the Average Life of the Securities and a final Stated
Maturity of principal later than the final Stated Maturity of principal of the
Securities.
(b) The Company will not permit any Restricted Subsidiary to incur any
Indebtedness (including any Acquired Indebtedness), other than Permitted
Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed Charge
Coverage Ratio for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness, taken as one period (and after giving pro forma
--- -----
effect to the matters referred to in clauses (i), (ii) and (iii) in the
parenthetical in paragraph (a) of this Section 1010), would have been at least
equal to 3.0 to 1, and (y) any Restricted Subsidiary which incurs any
Indebtedness pursuant to clause (x) of this paragraph (b) shall Guarantee the
Securities in compliance with paragraph (b) and clauses (i)(A) and (ii) of
paragraph (a) of Section 1017.
SECTION 1011. Limitation on Restricted Payments.
---------------------------------
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, take the following actions:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than dividends
or distributions payable in shares of its Capital Stock or in options,
warrants or other rights to purchase such Capital Stock, but excluding
dividends or distributions payable in Redeemable Capital Stock or in
options, warrants or other rights to purchase Redeemable Capital Stock),
<PAGE>
70
(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any options, warrants or other rights to
acquire such Capital Stock,
(iii) make any principal payment on or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to a scheduled principal
payment, scheduled sinking fund payment or maturity, any Pari Passu
Indebtedness or Subordinated Indebtedness,
(iv) make any Investment (other than any Permitted Investment) in any
Person, or
(v) incur any guarantee of Indebtedness of any Affiliate, including
any Unrestricted Subsidiary (other than with respect to (a) guarantees of
Indebtedness of any wholly-owned Restricted Subsidiary by the Company or
(b) guarantees of Indebtedness of the Company by any Restricted
Subsidiary),
(such payments or other actions described in (but not excluded from) clauses (i)
through (v) are collectively referred to as "Restricted Payments"), unless at
the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 1010, and
(3) the aggregate amount of all Restricted Payments declared or made after the
date of this Indenture shall not exceed the sum of (A) 50% of the aggregate
cumulative Consolidated Adjusted Net Income of the Company accrued on a
cumulative basis during the period beginning on the first day after the date of
this Indenture and ending on the last day of the Company's last fiscal quarter
ending prior to the date of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Adjusted Net Income shall be a loss, minus
100% of such loss), plus (B) the aggregate net cash proceeds received after the
----
date of this Indenture by the Company from the issuance or sale (other than to
any Restricted Subsidiary) of shares of Capital Stock of the Company (other than
Redeemable Capital Stock) or warrants, options or rights to purchase such shares
of Capital Stock of the Company, plus (C) the aggregate net cash proceeds
----
received after the date of this Indenture by the Company from the issuance or
sale (other than to any Restricted Subsidiary) of debt securities that have been
converted into or exchanged for Capital Stock of the Company (other than
Redeemable Capital Stock) to this extent such debt securities were originally
sold for cash, together with the aggregate cash received by the Company at the
time of such conversion or exchange, plus (D) to the extent not otherwise
----
included in the Company's Consolidated Adjusted Net Income, the net reduction in
Investments in Unrestricted Subsidiaries resulting from the payments of interest
on Indebtedness, dividends, repayments of loans or advances, or other transfers
of assets, in each case to the Company or a Restricted Subsidiary after the date
of this Indenture from any Unrestricted Subsidiary or from the redesignation of
an Unrestricted
<PAGE>
71
Subsidiary as a Restricted Subsidiary (valued in each case as provided in the
definition of Investment), not to exceed in the case of any Unrestricted
Subsidiary the total amount of Investments (other than Permitted Investments) in
such Unrestricted Subsidiary by the Company and its Restricted Subsidiaries,
plus (E) $10,000,000.
- ----
(b) Notwithstanding paragraph (a) above, the Company and its
Restricted Subsidiaries may take the following actions so long as (with respect
to clauses (ii), (iii), (iv), (v) and (vi) below) no Default or Event of Default
shall have occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such declaration complied
with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of, a substantially concurrent issuance and
sale (other than to a Restricted Subsidiary) of shares of Capital Stock
(other than Redeemable Capital Stock) of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness (other than
Redeemable Capital Stock) in exchange for or out of the net cash proceeds
of a substantially concurrent issuance and sale (other than to a Restricted
Subsidiary) of shares of Capital Stock (other than Redeemable Capital
Stock) of the Company;
(iv) the repurchase of any Subordinated Indebtedness of the Company at
a purchase price not greater than 101% of the principal amount of such
Subordinated Indebtedness in the event of a Change of Control pursuant to a
provision similar to Section 1015; provided that prior to such repurchase
--------
the Company has made the Change of Control Offer as provided in such
covenant with respect to the Securities and has repurchased all Securities
validly tendered for payment in connection with such Change of Control
Offer;
(v) the purchase, redemption or other acquisition or retirement for
value of Subordinated Indebtedness (other than Redeemable Capital Stock) in
exchange for, or out of the net cash proceeds of a substantially concurrent
incurrence (other than to a Restricted Subsidiary) of, Indebtedness of the
Company so long as (A) the principal amount of such new Indebtedness does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) of the Indebtedness being so purchased,
redeemed, acquired or retired, plus the amount of any premium required to
----
be paid in connection with such refinancing pursuant to the terms of the
Subordinated Indebtedness refinanced or the amount of any premium
reasonably determined by the
<PAGE>
72
Company as necessary to accomplish such refinancing, plus the amount of
----
expenses of the Company incurred in connection with such refinancing, (B)
such new Indebtedness is subordinated to the Securities to the same extent
as such Subordinated Indebtedness so purchased, redeemed, acquired or
retired and (C) such new Indebtedness has an Average Life longer than the
Average Life of the Securities and a final Stated Maturity of principal
later than the final Stated Maturity of principal of the Securities; and
(vi) the purchase, redemption or other acquisition or retirement for
value of shares of Common Stock of the Company issued pursuant to non-
qualified options granted under stock option plans of the Company in order
to pay withholding taxes due as a result of income recognized upon the
exercise of such options; provided that (1) the Company is required, by the
--------
terms of such plans, to effect such purchase, redemption or other
acquisition or retirement for value of such shares and (2) the aggregate
consideration paid by the Company for such shares so purchased, redeemed or
otherwise acquired or retired for value does not exceed $2,000,000 during
any fiscal year of the Company.
The actions described in clauses (i), (ii), (iii), (iv) and (vi) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
(provided that any dividend paid pursuant to clause (i) of this paragraph (b)
--------
shall reduce the amount that would otherwise be available under clause (3) of
paragraph (a) when declared, but not also when subsequently paid pursuant to
such clause (i)) and the actions described in clause (iv) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be taken in accordance
with this paragraph (b) and shall not reduce the amount that would otherwise be
available for Restricted Payments under clause (3) of paragraph (a).
(c) In computing Consolidated Adjusted Net Income of the Company under
clause (3)(A) of paragraph (a) above, (1) the Company shall use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (2) the
Company shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment would in the
good faith determination of the Company be permitted under the requirements of
this Indenture, such Restricted Payment shall be deemed to have been made in
compliance with this Indenture notwithstanding any subsequent adjustments made
in good faith to the Company's financial statements affecting Consolidated
Adjusted Net Income of the Company for any period.
<PAGE>
73
SECTION 1012. Limitation on Issuances and Sales of Restricted
-----------------------------------------------
Subsidiary Stock.
- ----------------
The Company (i) will not permit any Restricted Subsidiary to issue any
Capital Stock (other than to the Company or a wholly-owned Restricted
Subsidiary) and (ii) will not permit any Person (other than the Company or a
wholly-owned Restricted Subsidiary) to own any Capital Stock of any Restricted
Subsidiary; provided, however, that this covenant shall not prohibit (1) the
-------- -------
issuance and sale of all, but not less than all, of the issued and outstanding
Capital Stock of any Restricted Subsidiary owned by the Company or any of its
Restricted Subsidiaries in compliance with the other provisions of this
Indenture, or (2) the ownership by directors of director's qualifying shares or
the ownership by foreign nationals of Capital Stock of any Restricted
Subsidiary, to the extent mandated by applicable law.
SECTION 1013. Limitation on Transactions with Affiliates.
------------------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into or suffer to exist any transaction with,
or for the benefit of, any Affiliate of the Company or any beneficial owner of
5% or more of any class of the Company's Capital Stock at any time outstanding
("Interested Persons"), unless (i) such transaction is among the Company and
wholly-owned Restricted Subsidiaries or (ii) (A) such transaction is on terms
that are no less favorable to the Company, or such Restricted Subsidiary, as the
case may be, than those which could have been obtained in an arm's length
transaction with third parties who are not Interested Persons and (B) such
transaction has been approved by the Board of Directors (including a majority of
the Disinterested Directors); provided, however, that this covenant will not
-------- -------
restrict (1) the Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted Subsidiary
who are not employees of the Company or any Restricted Subsidiary and (2) the
performance of the Company's obligations under the AET Contract.
SECTION 1014. Limitation on Liens Securing Pari Passu Indebtedness or
-------------------------------------------------------
Subordinated Indebtedness.
- -------------------------
(a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) securing Pari Passu Indebtedness or
Subordinated Indebtedness of the Company on or with respect to any of its
property or assets, including any shares of stock or indebtedness of any
Restricted Subsidiary, whether owned at the date of the Indenture or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or otherwise
convey any right to receive income thereon, unless (x) in the case of any Lien
securing Pari Passu Indebtedness of the Company, the Securities are secured by a
Lien on such property, assets or proceeds that is senior in priority to or pari
----
passu with such Lien and (y) in the case of any Lien securing Subordinated
- -----
Indebtedness of the Company, the Securities are secured by a Lien on such
property, assets or proceeds that is senior in priority to such Lien.
<PAGE>
74
(b) The Company will not permit any Restricted Subsidiary to, directly
or indirectly, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) securing Indebtedness of such Restricted Subsidiary that is
pari passu to or subordinate in right of payment to the Guarantee of such
- ---- -----
Subsidiary, on or with respect to any of such Restricted Subsidiary's properties
or assets, including any shares of stock or Indebtedness of any Subsidiary of
such Restricted Subsidiary, whether owned at the date of the Indenture or
thereafter acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon, unless (x) in the case of
any Lien securing Indebtedness of the Restricted Subsidiary that is pari passu
---- -----
in right of payment to the Guarantee of such Restricted Subsidiary, such
Guarantee is secured by a Lien on such property, assets or proceeds that is
senior in priority to or pari passu with such Lien and (y) in the case of any
---- -----
Lien securing Indebtedness of the Restricted Subsidiary that is subordinate in
right of payment to the Guarantee of such Restricted Subsidiary, such Guarantee
is secured by a Lien on such property, assets or proceeds that is senior in
priority to such Lien.
SECTION 1015. Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control, the Company shall be
obligated to make an offer to purchase all of the outstanding Securities (a
"Change of Control Offer"), and shall purchase, on a business day (the "Change
of Control Purchase Date") not more than 70 nor less than 60 days following the
Change of Control Date, all of the then outstanding Securities validly tendered
pursuant to such Change of Control Offer, at a purchase price (the "Change of
Control Purchase Price") equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the Change of Control Purchase Date.
The Change of Control Offer is required to remain open for at least 20 Business
Days and until the close of business on the Change of Control Purchase Date.
(b) In order to effect such Change of Control Offer, the Company
shall, not later than the 30th day after the Change of Control, notify the
Trustee thereof and mail to each Holder and the Banks notice of the Change of
Control Offer in the manner provided in Section 107, which notice shall govern
the terms of the Change of Control Offer and shall state:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Company to repurchase such Holder's Securities at the
Change of Control Purchase Price.
(2) the circumstances and relevant facts regarding such Change of
Control (including but not limited to information with respect to pro forma
historical income, cash flow and capitalization after giving effect to such
Change of Control);
(3) the Change of Control Purchase Date; and
<PAGE>
75
(4) the instructions a Holder must follow in order to have its
Securities repurchased in accordance with paragraph (c) of this Section.
(c) Holders electing to have Securities purchased will be required to
surrender such Securities to the Company at the address specified in the notice
at least five Business Days prior to the Change of Control Purchase Date.
Holders will be entitled to withdraw their election if the Company receives, not
later than three Business Days prior to the Change of Control Purchase Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Securities delivered for purchase by the
Holder as to which his election is to be withdrawn and a statement that such
Holder is withdrawing his election to have such Securities purchased. Holders
whose Securities are purchased only in part will be issued new Securities equal
in principal amount of the unpurchased portion of the Securities surrendered.
(d) The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Securities as described above.
SECTION 1016. Limitation on Disposition of Proceeds of Asset Sales.
----------------------------------------------------
(a) The Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not
less than the Fair Market Value of the assets sold (as determined by the Board
of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or Cash Equivalents; provided that the Company and
--------
its Restricted Subsidiaries may engage in Asset Sales for consideration not in
the form of cash or Cash Equivalents in amounts in excess of that permitted in
this clause (ii), so long as (x) such excess consideration is in the form of
Fully Traded Common Stock, (y) the aggregate Fair Market Value of such Fully
Traded Common Stock received by the Company and its Restricted Subsidiaries
(measured as of the date of receipt) from all Asset Sales in reliance on this
proviso since the date of this Indenture that has not been converted into cash
or Cash Equivalents does not exceed $10,000,000 and (z) any Fully Traded Common
Stock that is converted into cash or Cash Equivalents shall be applied as
provided in paragraphs (b) and (c) of this Section 1016.
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may use the Net Cash Proceeds thereof, within 12 months after
such Asset Sale, to (i) repay or prepay any then outstanding Senior Indebtedness
of the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or
enter into a legally binding agreement to invest) in properties and assets to
replace the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, existing on the Closing Date or
<PAGE>
76
in businesses reasonably related thereto. If any such legally binding agreement
to invest such Net Cash Proceeds is terminated, then the Company may, within 90
days of such termination or within 12 months of such Asset Sale, whichever is
later, invest such Net Cash Proceeds as provided in clause (i) or (ii) (without
regard to the parenthetical contained in such clause (ii)) above. The amount of
such Net Cash Proceeds not so used as set forth above in this paragraph (b)
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10,000,000,
the Company shall, within 15 Business Days, make an offer to purchase (an
"Excess Proceeds Offer") from all holders of Securities, on a pro rata basis, in
--- ----
accordance with the procedures set forth below, the maximum principal amount
(expressed as a multiple of $1,000) of Securities that may be purchased with the
Excess Proceeds. The offer price as to each Security shall be payable in cash
in an amount equal to 100% of the principal amount of such Security plus accrued
and unpaid interest, if any, to the date such Excess Proceeds Offer is
consummated. To the extent that the aggregate principal amount of Securities
tendered pursuant to an Excess Proceeds Offer is less than the Excess Proceeds,
the Company may use such deficiency for general corporate purposes. If the
aggregate principal amount of Securities validly tendered and not withdrawn by
holders thereof exceeds the Excess Proceeds, Securities to be purchased will be
selected on a pro rata basis. Upon completion of such offer to purchase, the
--- ----
amount of Excess Proceeds shall be reset to zero.
SECTION 1017. Limitation on Guarantees of Indebtedness by Restricted
------------------------------------------------------
Subsidiaries.
- ------------
(a) The Company will not permit any Restricted Subsidiary to guarantee
the payment of any Indebtedness of the Company or any Indebtedness of any other
Restricted Subsidiary unless (i) such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture to this Indenture providing for a
Guarantee of payment of the Securities by such Restricted Subsidiary except that
(A) if the Securities are subordinated in right of payment to such Indebtedness,
the Guarantee under the supplemental indenture shall be subordinated to such
Restricted Subsidiary's guarantee with respect to such Indebtedness
substantially to the same extent as the Securities are subordinated to such
Indebtedness under this Indenture and (B) if such Indebtedness is by its express
terms subordinated in right of payment to the Securities, any such guarantee by
such Restricted Subsidiary with respect to such Indebtedness shall be
subordinated to such Restricted Subsidiary's Guarantee with respect to the
Securities at least to the same extent as such Subordinated Indebtedness is
subordinated to the Securities; (ii) such Restricted Subsidiary waives and will
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company or any other Restricted Subsidiary as a result of any payment by
such Restricted Subsidiary under its Guarantee; (iii) such Restricted Subsidiary
shall appoint CT Corporation in New York City as its agent for the service of
process; and (iv) such Restricted Subsidiary shall deliver to the Trustee an
Opinion of Counsel to the effect that (A) such appointment of CT Corporation is
valid, (B) such Guarantee of the Securities has been duly executed and
authorized and (C) such
<PAGE>
77
Guarantee of the Securities constitutes a valid, binding and enforceable
obligation of such Restricted Subsidiary, except insofar as enforcement thereof
may be limited by bankruptcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity; provided that
--------
this paragraph (a) shall not be applicable to any guarantee of any Restricted
Subsidiary that (x) existed at the time such Person became a Restricted
Subsidiary of the Company and (y) was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary of the Company.
(b) Notwithstanding the foregoing and the other provisions of this
Indenture, any Guarantee by a Restricted Subsidiary of the Securities shall
provide by its terms that it shall be automatically and unconditionally released
and discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release or
discharge of the guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such guarantee.
SECTION 1018. Limitation on Dividends and Other Payment Restrictions
------------------------------------------------------
Affecting Restricted Subsidiaries.
- ---------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make
any other distributions on or in respect of its Capital Stock or any other
interest or participation in, or measured by, its profits, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary of the
Company, (c) make loans or advances to the Company or any other Restricted
Subsidiary of the Company, (d) transfer any of its properties or assets to the
Company or any other Restricted Subsidiary of the Company or (e) guarantee any
Indebtedness of the Company or any other Restricted Subsidiary of the Company,
except for such encumbrances or restrictions existing under or by reason of (i)
applicable law, (ii) customary non-assignment provisions of any lease governing
a leasehold interest of the Company or any Restricted Subsidiary of the Company,
(iii) any agreement or other instrument of a Person acquired by the Company or
any Restricted Subsidiary of the Company in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, (iv) any agreement in existence on the Closing Date (to the extent of
any encumbrances or restrictions in existence thereunder on the Closing Date)
and (v) any agreement providing for the incurrence of Indebtedness of Restricted
Subsidiaries pursuant to either clause (x) of paragraph (b) of Section 1010 or
clause (vii) of the definition of Permitted Subsidiary Indebtedness; provided
--------
that any Restricted Subsidiary (including, without limitation, FEEL, Acurex and
Royal Inventum) that becomes subject to any such encumbrances or restrictions
pursuant to this clause (v) shall Guarantee the Securities in
<PAGE>
78
compliance with the provisions of paragraph (b) and clauses (i) and (ii) of
paragraph (a) of Section 1017.'
SECTION 1019. Limitation on Other Senior Subordinated Indebtedness.
----------------------------------------------------
The Company will not, and will not permit any Restricted Subsidiary
to, incur, create, assume, guarantee or in any other manner become directly or
indirectly liable with respect to or responsible for, or permit to remain
outstanding, any Indebtedness, other than the Securities, that is expressly
subordinate or junior in right of payment to any Senior Indebtedness unless such
Indebtedness is also pari passu with, or subordinate in right of payment to, the
---- -----
Securities pursuant to provisions substantially similar to those contained in
Article Thirteen.
SECTION 1020. Waiver of Certain Covenants.
---------------------------
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 803 or Sections 1007 through
1019, inclusive, if before or after the time for such compliance the Holders of
at least a majority in principal amount of the Outstanding Securities, by Act of
such Holders, waive such compliance in such instance with such term, provision
or condition, but no such waiver shall extend to or affect such term, provision
or condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision or condition shall remain in full
force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
-------------------
The Securities may be redeemed at the election of the Company, as a
whole or from time to time in part, at any time after February 1, 2001, subject
to the conditions and at the Redemption Prices specified in the form of
Security, together with accrued interest to the Redemption Date.
SECTION 1102. Applicability of Article.
------------------------
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.
<PAGE>
79
SECTION 1103. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 30 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the principal of Securities; provided, however, that no such partial
-------- -------
redemption shall reduce the portion of the principal amount of a Security not
redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
--------------------
Notice of redemption shall be given in the manner provided for in
Section 107 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Securities to be redeemed,
<PAGE>
80
(4) that on the Redemption Date the Redemption Price (together with
accrued interest, if any, to the Redemption Date payable as provided in
Section 1107) will become due and payable upon each such Security, or the
portion thereof, to be redeemed, and that interest thereon will cease to
accrue on and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price,
(6) the CUSIP number.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
---------------------------
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and accrued interest on, all
the Securities which are to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security
for redemption in accordance with said notice, such Security shall be paid by
the Company at the Redemption Price, together with accrued interest, if any, to
the Redemption Date; provided, however, that installments of interest whose
-------- -------
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 309.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Securities.
SECTION 1108. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered
at the office or agency of the Company maintained for such purpose pursuant to
Section 1002
<PAGE>
81
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security without service charge,
a new Security or Securities, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company's Option to Effect Defeasance or Covenant
-------------------------------------------------
Defeasance.
- ----------
The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either Section 1202 or Section 1203 be
applied to all Outstanding Securities upon compliance with the conditions set
forth below in this Article Twelve.
SECTION 1202. Defeasance and Discharge.
------------------------
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company and the Guarantors shall be deemed
to have been discharged from their respective obligations with respect to all
Outstanding Securities on the date the conditions set forth in Section 1204 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Securities, which shall thereafter
be deemed to be "Outstanding" only for the purposes of Section 1205 and the
other Sections of this Indenture referred to in (A) and (B) below, and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of Outstanding Securities to receive,
solely from the trust fund described in Section 1204 and as more fully set forth
in such Section, payments in respect of the principal of (and premium, if any,
on) and interest on such Securities when such payments are due, (B) the
Company's obligations with respect to such Securities under Sections 304, 305,
308, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Twelve. Subject to compliance with this
Article Twelve, the Company may exercise its option under this Section 1202
notwithstanding the prior exercise of its option under Section 1203 with respect
to the Securities.
<PAGE>
82
SECTION 1203. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, the Company and the Guarantors shall be
released from their respective obligations under any covenant contained in
Section 801 and Section 803 and in Sections 1007 through 1019 with respect to
the Outstanding Securities on and after the date the conditions set forth below
are satisfied (hereinafter, "covenant defeasance"), and the Securities shall
thereafter be deemed not to be "Outstanding" for the purposes of any direction,
waiver, consent or declaration or Act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"Outstanding" for all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the Outstanding Securities, the Company
and the Guarantors may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 501(3) or
Section 501(4), but, except as specified above, the remainder of this Indenture
and such Securities shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
-----------------------------------------------
The following shall be the conditions to application of either Section
1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 607 who shall agree to comply with the provisions of this
Article Twelve applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (A)
money in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the
due date of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge, the principal
of (and premium, if any, on) and interest on the Outstanding Securities on
the Stated Maturity (or Redemption Date, if applicable) of such principal
(and premium, if any) or installment of interest; provided that the Trustee
--------
shall have been irrevocably instructed to apply such money or the proceeds
of such U.S. Government Obligations to said payments with respect to the
Securities. Before such a deposit, the Company may give to the Trustee, in
accordance with Section 1103 hereof, a notice of its election to redeem all
of the Outstanding Securities at a future
<PAGE>
83
date in accordance with Article Eleven hereof, which notice shall be
irrevocable. Such irrevocable redemption notice, if given, shall be given
effect in applying the foregoing. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the United
States of America for the timely payment of which its full faith and credit
is pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case,
are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian
with respect to any such U.S. Government Obligation or a specific payment
of principal of or interest on any such U.S. Government Obligation held by
such custodian for the account of the holder of such depository receipt,
provided that (except as required by law) such custodian is not authorized
--------
to make any deduction from the amount payable to the holder of such
depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository
receipt.
(2) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit.
(3) Such defeasance or covenant defeasance shall not cause the Trustee
to have a conflicting interest, as determined by the Trustee, with respect
to any securities of the Company or any Guarantor.
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company or any
Guarantor is a party or by which it is bound.
(5) In the case of an election under Section 1202, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since January 24, 1996 there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the Holders
of the Outstanding Securities will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance had not
occurred.
(6) In the case of an election under Section 1203, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Outstanding Securities will not recognize income, gain or
loss for federal income tax
<PAGE>
84
purposes as a result of such covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred.
(7) The Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel satisfactory to the Trustee, which,
taken together, state that all conditions precedent provided for relating
to either the defeasance under Section 1202 or the covenant defeasance
under Section 1203 (as the case may be) have been complied with.
(9) No event or condition shall exist that pursuant to the provisions
of Section 1302 or 1303 would prevent the Company from making payments of
the principal of (and premium, if any, on) or interest on the Securities on
the date of such deposit or at any time during the period ending on the
91st day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period).
SECTION 1205. Deposited Money and U.S. Government Obligations to Be
-----------------------------------------------------
Held in Trust; Other Miscellaneous Provisions.
- ---------------------------------------------
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1205, the "Trustee") pursuant to Section 1204 in respect of the
Outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Governmental Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or
<PAGE>
85
U.S. Government Obligations held by it as provided in Section 1204 which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance, as applicable, in
accordance with this Article.
SECTION 1206. Reinstatement.
-------------
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1205 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1202 or 1203, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1205; provided, however, that if the Company makes any payment of
-------- -------
principal of (or premium, if any, on) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE THIRTEEN
SUBORDINATION OF SECURITIES
SECTION 1301. Securities Subordinate to Senior Indebtedness.
---------------------------------------------
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, for the benefit of the
holders, from time to time, of Senior Indebtedness that, to the extent and in
the manner hereinafter set forth in this Article, the Indebtedness represented
by the Securities and the payment of the principal of (and premium, if any) and
interest on each and all of the Securities are hereby expressly made subordinate
and subject in right of payment as provided in this Article to the prior payment
in full of all Senior Indebtedness; provided, however, that the Securities, the
-------- -------
Indebtedness represented thereby and the payment of the principal of (and
premium, if any) and interest on the Securities in all respects shall rank
equally with, or prior to, all existing and future unsecured indebtedness
(including, without limitation, Indebtedness) of the Company that is
subordinated to Senior Indebtedness.
<PAGE>
86
SECTION 1302. Payment Over of Proceeds upon Dissolution, Etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relating to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets or liabilities of the Company, then and in any
such event
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due on or in respect of all Senior
Indebtedness, or provision shall be made for such payment in cash or Cash
Equivalents, before the Holders of the Securities are entitled to receive
any payment or distribution of any kind or character (other than any
payment or distribution in the form of equity securities or subordinated
securities of the Company or any successor obligor with respect to the
Senior Indebtedness provided for by a plan of reorganization or
readjustment that, in the case of any such subordinated securities, are
subordinated in right of payment to all Senior Indebtedness that may at the
time be outstanding to substantially the same extent as, or to a greater
extent than, the Securities are so subordinated as provided in this Article
(such equity securities or subordinated securities hereinafter being
"Permitted Junior Securities")) on account of principal of (or premium, if
any, on) or interest on the Securities; and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than a payment
or distribution in the form of Permitted Junior Securities), by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the provisions of this Article shall be paid by the liquidating trustee or
agent or other person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full in cash or Cash Equivalents of all
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security shall have received
any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, in respect of principal
of (and premium, if any) or interest on
<PAGE>
87
the Securities before all Senior Indebtedness is paid in full or payment
thereof provided for, then and in such event such payment or distribution
(other than a payment or distribution in the form of Permitted Junior
Securities) shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid, to
the extent necessary to pay all Senior Indebtedness in full, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
into, another Person or the liquidation or dissolution of the Company following
the conveyance, transfer or lease of its properties and assets substantially as
an entirety to another Person upon the terms and conditions set forth in Article
Eight shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshalling of assets
and liabilities of the Company for the purposes of this Section if the Person
formed by such consolidation or into which the Company is merged or the Person
which acquires by conveyance, transfer or lease such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance, transfer or lease, comply with the conditions
set forth in Article Eight.
SECTION 1303. Suspension of Payment When Senior Indebtedness in
-------------------------------------------------
Default.
- -------
(a) Unless Section 1302 shall be applicable, upon the occurrence of a
Payment Event of Default, no payment (other than payments made pursuant to
Article Twelve from monies or U.S. Government Obligations previously deposited
with the Trustee) or distribution of any assets of the Company of any kind or
character, whether in cash, property or securities (other than Permitted Junior
Securities), shall be made by or on behalf of the Company on account of
principal of (or premium, if any) or interest on the Securities or on account of
the purchase or redemption or other acquisition or defeasance of Securities
unless and until such Payment Event of Default shall have been cured or waived
in writing or shall have ceased to exist or the Designated Senior Indebtedness
to which the Payment Event of Default is related shall have been discharged or
paid in full in cash or Cash Equivalents, after which the Company shall resume
making any and all required payments in respect of the Securities, including any
missed payments.
(b) Unless Section 1302 shall be applicable, upon (1) the occurrence
of a Non-payment Event of Default and (2) receipt by the Trustee from the Agent
Bank or any other representative of holders of Designated Senior Indebtedness of
written notice of such occurrence, then no payment (other than payments made
pursuant to Article Twelve from monies or U.S. Government Obligations previously
deposited with the Trustee) or distribution of any assets of the Company of any
kind or character, whether in cash, property
<PAGE>
88
or securities (other than Permitted Junior Securities), shall be made by or on
behalf of the Company on account of any principal of (or premium, if any) or
interest on the Securities or on account of the purchase or redemption or other
acquisition or defeasance of Securities for a period ("Payment Blockage Period")
commencing on the date of receipt by the Trustee of such notice from the Agent
Bank or such other representative unless and until (subject to any blockage of
payments that may then be in effect under paragraph (a) of this Section) (x)
more than 179 days shall have elapsed since receipt of such written notice by
the Trustee (provided that any Designated Senior Indebtedness as to which notice
--------
was given shall not theretofore have been accelerated), (y) such Non-payment
Event of Default shall have been cured or waived in writing or shall have ceased
to exist or such Designated Senior Indebtedness shall have been discharged or
paid in full in cash or Cash Equivalents or (z) such Payment Blockage Period,
shall have been terminated by written notice to the Company or the Trustee from
the Agent Bank or such other representative initiating such Payment Blockage
Period, after which, in the case of clause (x), (y) or (z), the Company shall
resume making any and all required payments in respect of the Securities,
including any missed payments. Notwithstanding any other provision of this
Agreement, only one Payment Blockage Period may be commenced within any
consecutive 365-day period, and no event of default with respect to Designated
Senior Indebtedness which existed or was continuing on the date of the
commencement of any Payment Blockage Period initiated by or behalf of such
Designated Senior Indebtedness shall be, or be made, the basis for the
commencement of a subsequent Payment Blockage Period, whether or not within a
period of 365 consecutive days, unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days subsequent to
the commencement of such initial Payment Blockage Period (it being acknowledged
that any breach of any financial covenant for the period commencing after the
date of commencement of such Payment Blockage Period which would give rise to a
Non-payment Default pursuant to any provision under which a Non-payment Default
previously existed or was continuing shall constitute a new Non-payment
Default). In no event will a Payment Blockage Period extend beyond 179 days.
(c) In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Trustee or the Holder of any Security prohibited
by the foregoing provisions of this Section, then and in such event such payment
shall be paid over and delivered forthwith to the Company.
SECTION 1304. Payment Permitted If No Default.
-------------------------------
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent the Company, at any time except during the
pendency of any case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 1302 or under the conditions
described in Section 1303, from making payments at any time of principal of (and
premium, if any, on) or interest on the Securities.
<PAGE>
89
SECTION 1305. Subrogation to Rights of Holders of Senior
------------------------------------------
Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Securities shall be subrogated (equally and ratably with the holders of
all indebtedness of the Company which by its express terms is subordinated to
Senior Indebtedness of the Company to the same extent as the Securities are
subordinated and which is entitled to like rights of subrogation) to the rights
of the holders of such Senior Indebtedness to receive payments and distributions
of cash, property and securities applicable to the Senior Indebtedness until the
principal of (and premium, if any) and interest on the Securities shall be paid
in full. For purposes of such subrogation, no payments or distributions to the
holders of Senior Indebtedness of any cash, property or securities to which the
Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article, and no payments over pursuant to the provisions of
this Article to the holders of Senior Indebtedness by Holders of the Securities
or the Trustee, shall, as among the Company, its creditors other than holders of
Senior Indebtedness, and the Holders of the Securities, be deemed to be a
payment or distribution by the Company to or on account of the Senior
Indebtedness.
SECTION 1306. Provisions Solely to Define Relative Rights.
-------------------------------------------
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Securities is
intended to or shall (a) impair, as between the Company and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of (and premium, if any)
and interest on the Securities as and when the same shall become due and payable
in accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Securities and creditors of the Company other than
the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of
any Security from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Senior Indebtedness.
SECTION 1307. Trustee to Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
<PAGE>
90
SECTION 1308. No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(b) Without in any way limiting the generality of paragraph (a) of
this Section, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness, do any one or more of the following: (1) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (2) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (3) release any Person liable in any manner for
the collection of Senior Indebtedness; and (4) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 1309. Notice to Trustee.
-----------------
(a) The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company, the Agent Bank or a holder of Senior Indebtedness or from any trustee,
fiduciary or agent therefor; and, prior to the receipt of any such written
notice, the Trustee, subject to TIA Sections 315(a) through 315(d), shall be
entitled in all respects to assume that no such facts exist; provided, however,
-------- -------
that, if the Trustee shall not have received the notice provided for in this
Section at least three Business Days prior to the date upon which by the terms
hereof any money may become payable for any purpose (including, without
limitation, the payment of the principal of (and premium, if any) or interest on
any Security), then, anything herein contained to the contrary notwithstanding,
the Trustee shall have full power and authority to receive such money and to
apply the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within three
Business Days prior to such date.
<PAGE>
91
(b) Subject to TIA Sections 315(a) through 315(d), the Trustee shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 1310. Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent.
- -----------------
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to TIA Sections 315(a) through 315(d), and
the Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 1311. Rights of Trustee As a Holder of Senior Indebtedness;
-----------------------------------------------------
Preservation of Trustee's Rights.
- --------------------------------
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness which
may at any time be held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder. Nothing in this Article shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 606.
SECTION 1312. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to
<PAGE>
92
and including such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article in addition to or in
place of the Trustee; provided, however, that Section 1311 shall not apply to
-------- -------
the Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
SECTION 1313. No Suspension of Remedies.
-------------------------
Nothing contained in this Article shall limit the right of the Trustee
or the Holders of Securities to take any action to accelerate the maturity of
the Securities pursuant to Article Five or to pursue any rights or remedies
hereunder or under applicable law.
SECTION 1314. Trust Moneys Not Subordinated.
-----------------------------
Notwithstanding anything contained herein to the contrary, payments
from cash or the proceeds of U.S. Government Obligations held in trust under
Article Thirteen hereof by the Trustee (or other qualifying trustee) and which
were deposited in accordance with the terms of Article Thirteen hereof and not
in violation of Section 1303 hereof for the payment of principal of (and
premium, if any) and interest on the Securities shall not be subordinated to the
prior payment of any Senior Indebtedness or subject to the restrictions set
forth in this Article Thirteen, and none of the Holders shall be obligated to
pay over any such amount to the Company or any holder of Senior Indebtedness or
any other creditor of the Company.
<PAGE>
93
This Indenture may be signed in any number of counterparts each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
BE AEROSPACE, INC.
By
------------------------------------------
Title:
FLEET NATIONAL BANK OF
CONNECTICUT
By
------------------------------------------
Title:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of January, 1996, before me personally came
__________________, to me known who, being by me duly sworn, did depose and say
that he is ______________ of BE Aerospace, Inc., one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
------------------------------------------
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of January, 1996, before me personally came
__________________, to me known who, being by me duly sworn, did depose and say
that he is ______________ of Fleet National Bank of Connecticut, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
------------------------------------------
<PAGE>
Exhibit A
---------
[FACE OF SECURITY]
BE AEROSPACE, INC.
9-7/8% [Series B]** Senior Subordinated Note due 2006
CUSIP _________
No. _______ $_________________
BE AEROSPACE, INC., a Delaware corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to ___________, or its registered assigns, the
principal sum of ____________________________________ ($___________), on
February 1, 2006.
[Initial Interest Rate: 9-7/8% per annum.]*
[Interest Rate: 9-7/8% per annum.]**
Interest Payment Dates: February 1 and August 1 of each year
commencing August 1, 1996.
Regular Record Dates: January 15 and July 15 of each year.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Date: BE AEROSPACE, INC.
--------------------
By:
-----------------------------------------
Title:
- --------------------
* Include only for Initial Securities.
** Include only for Exchange Securities.
<PAGE>
A-2
(Form of Trustee's Certificate of Authentication)
This is one of the 9-7/8% [Series B]* Senior Subordinated Notes due 2006
described in the within-mentioned Indenture.
FLEET NATIONAL BANK OF
CONNECTICUT, as Trustee
By:
-----------------------------------------
Authorized Signatory
- --------------------
* Include only for Exchange Securities.
<PAGE>
A-3
[REVERSE SIDE OF SECURITY]
BE AEROSPACE, INC.
9-7/8% [Series B]** Senior Subordinated Note due 2006
1. Principal and Interest; Subordination.
-------------------------------------
The Company will pay the principal of this Security on
February 1, 2006.
The Company promises to pay interest on the principal amount of this
Security on each Interest Payment Date, as set forth below, at the rate of [9-
7/8% per annum (subject to adjustment as provided below)]* [9-7/8% per annum,
except that interest accrued on this Security pursuant to the penultimate
paragraph of this Section 1 for periods prior to the applicable Exchange Date
(as such term is defined in the Registration Rights Agreement referred to below)
will accrue at the rate or rates borne by the Securities from time to time
during such periods].**
Interest will be payable semiannually (to the holders of record of the
Securities (or any predecessor Securities) at the close of business on the
January 15 or July 15 immediately preceding the Interest Payment Date) on each
Interest Payment Date, commencing August 1, 1996.
[The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated January 24, 1996, between the Company and
the Purchasers named therein (the "Registration Rights Agreement"). In the
event that either (a) the Exchange Offer Registration Statement (as such term is
defined in the Registration Rights Agreement) is not filed with the Securities
and Exchange Commission on or prior to the 30th calendar day following the date
of original issue of the Securities, (b) the Exchange Offer Registration
Statement has not been declared effective on or prior to the 90th calendar day
following the date of original issue of the Securities or (c) the Exchange Offer
(as such term is defined in the Registration Rights Agreement) is not
consummated or a Shelf Registration Statement (as such term is defined in the
Registration Rights Agreement) is not declared effective on or prior to the
120th calendar day following the date of original issue of the Securities, the
interest rate borne by this Security shall be increased by one-half of one
percent per annum following such 30-day period in the case of (a) above,
following such 90-day period in the case of (b) above or following such 120-day
period in the case of (c) above. The aggregate
- --------------------
* Include only for Initial Securities.
** Include only for Exchange Securities.
<PAGE>
A-4
amount of such increase from the original interest rate pursuant to these
provisions shall in no event exceed one-half of one percent per annum. Upon (x)
the filing of the Exchange Offer Registration Statement after the 30-day period
described in clause (a) above, (y) the effectiveness of the Exchange Offer
Registration Statement after the 90-day period described in clause (b) above or
(z) the consummation of the Exchange Offer or the effectiveness of a Shelf
Registration Statement, as the case may be, after the 120-day period described
in clause (c) above, the interest rate borne by this Security from the date of
such filing, effectiveness or consummation, as the case may be, will be reduced
to the interest rate set forth above.]*
Interest on this Security will accrue from the most recent date to
which interest has been paid [on this Security or the Security surrendered in
exchange herefor]** or, if no interest has been paid, from January 24, 1996;
provided that, if there is no existing default in the payment of interest and if
- --------
this Security is authenticated between a Regular Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum equal to the rate of interest applicable to the Securities.
The indebtedness evidenced by the Securities is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness, and this
Security is issued subject to such provisions. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in the
Indenture and (c) appoints the Trustee his attorney-in-fact for such purpose.
2. Method of Payment.
-----------------
The Company will pay interest (except defaulted interest) on the
principal amount of the Securities on each February 1 and August 1 to the
persons who are Holders (as reflected in the Security Register at the close of
business on the January 15 and July 15 immediately preceding the Interest
Payment Date), in each case, even if the Security is cancelled on registration
of transfer or registration of exchange after such record date;
- --------------------
* Include only for Initial Securities.
** Include only for Exchange Securities
<PAGE>
A-5
provided that, with respect to the payment of principal, the Company will make
- --------
payment to the Holder that surrenders this Security to any Paying Agent on or
after February 1, 2006.
The Company will pay principal, premium, if any, and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts. However, the Company may pay principal, premium, if
any, and interest by its check payable in such money. The Company may mail an
interest check to a Holder's registered address (as reflected in the Security
Register). If a payment date is a date other than a Business Day at a place of
payment, payment may be made at that place on the next succeeding day that is a
Business Day and no interest shall accrue for the intervening period.
3. Paying Agent and Registrar.
--------------------------
Initially, the Trustee will act as Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar upon written notice thereto.
The Company, any Subsidiary or any Affiliate of any of them may act as Paying
Agent, Registrar or co-registrar.
4. Indenture; Limitations.
----------------------
The Company issued the Securities under an Indenture dated as of
January 24, 1996 (the "Indenture"), between the Company and Fleet National Bank
Connecticut, N.A., as trustee (the "Trustee"). Capitalized terms herein are
used as defined in the Indenture unless otherwise indicated. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act. The Securities are subject
to all such terms, and Holders are referred to the Indenture and the Trust
Indenture Act for a statement of all such terms. To the extent permitted by
applicable law, in the event of any inconsistency between the terms of this
Security and the terms of the Indenture, the terms of the Indenture shall
control.
The Securities are general unsecured obligations of the Company. The
Indenture limits the aggregate principal amount of the Securities to
$100,000,000.
5. Redemption.
----------
Optional Redemption. The Securities may be redeemed at the option of
-------------------
the Company, in whole or in part, at any time and from time to time on or after
February 1, 2001, at the following Redemption Prices (expressed in percentages
of principal amount), plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest
<PAGE>
A-6
Payment Date that is on or prior to the Redemption Date), if redeemed during the
12-month period beginning February 1 of each of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2001.......................... 104.97%
2002.......................... 102.47%
2003 and thereafter........... 100.00%
</TABLE>
Notice of a redemption will be mailed at least 30 days but not more
than 60 days before the Redemption Date to each Holder to be redeemed at such
Holder's last address as it appears in the Security Register. Securities in
original denominations larger than $1,000 may be redeemed in part in integral
multiples of $1,000. On and after the Redemption Date, interest ceases to
accrue on Securities or portions of Securities called for redemption, unless the
Company defaults in the payment of the Redemption Price.
6. Repurchase upon a Change in Control and Asset Sales.
---------------------------------------------------
(a) Upon the occurrence of a Change of Control, the Company is
obligated to make an offer to purchase all outstanding Securities at a
redemption price of 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase and (b) upon Asset Sales, the
Company may be obligated to make offers to purchase Securities with a portion of
the Net Cash Proceeds of such Asset Sales at a redemption price of 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase.
7. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form without coupons, in
denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Securities selected for redemption (except the
unredeemed portion of any Security being redeemed in part). Also, it need not
register the transfer or exchange of any Securities for a period of 15 days
before a selection of Securities to be redeemed is made.
<PAGE>
A-7
8. Persons Deemed Owners.
---------------------
A Holder may be treated as the owner of a Security for all purposes.
9. Unclaimed Money.
---------------
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Company irrevocably deposits, or causes to be deposited, with
the Trustee money or U.S. Government Obligations sufficient to pay the then
outstanding principal of, premium, if any, and accrued interest on the
Securities (a) to redemption or maturity, the Company will be discharged from
the Indenture and the Securities, except in certain circumstances for certain
sections thereof, and (b) to the Stated Maturity, the Company will be discharged
from certain covenants set forth in the Indenture.
11. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in aggregate principal amount of the Securities then outstanding, and any
existing default or compliance with any provision may be waived with the consent
of the Holders of a majority in aggregate principal amount of the Securities
then outstanding. Without notice to or the consent of any Holder, the parties
thereto may amend or supplement the Indenture or the Securities to, among other
things, cure any ambiguity, defect or inconsistency and make any change that
does not materially adversely affect the rights of any Holder.
12. Restrictive Covenants.
---------------------
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) Indebtedness;
(ii) Restricted Payments; (iii) issuances and sales of Restricted Subsidiary
stock; (iv) transactions with Affiliates; (v) Liens; (vi) guarantees of
Indebtedness by Restricted Subsidiaries; (vii) disposition of proceeds of Asset
Sales; (viii) dividends and other payment restrictions affecting Restricted
<PAGE>
A-8
Subsidiaries; (ix) merger and certain transfers of assets and (x) issuance of
other senior subordinated indebtedness. Within 120 days after the end of each
fiscal year and within 45 days after each fiscal quarter, the Company must
report to the Trustee on compliance with such limitations.
13. Successor Persons.
-----------------
When a successor person or other entity assumes all the obligations of
its predecessor under the Securities and the Indenture, the predecessor person
will be released from those obligations.
14. Remedies for Events of Default.
------------------------------
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of not less than 25% in principal amount
of the Securities then outstanding may declare all the Securities to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any of its Significant Subsidiaries occurs and is continuing,
the Securities automatically become immediately due and payable. Holders may
not enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of at
least a majority in principal amount of the Securities then outstanding may
direct the Trustee in its exercise of any trust or power.
15. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee.
16. Authentication.
--------------
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
<PAGE>
A-9
17. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to BE Aerospace,
Inc., 1400 Corporate Center Way, Wellington, Florida 33414, Attention: Chief
Executive Officer.
<PAGE>
A-10
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including zip code of assignee)
- --------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------------------------------------------------------------------
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE PHYSICAL
CERTIFICATES]
In connection with any transfer of this Security occurring prior to
the date which is the earlier of the date of an effective Registration Statement
or January 24, 1999, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
-----------
[ ] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
[ ] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Security and the Indenture.
<PAGE>
A-11
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
Date:
---------------------------
--------------------------------------------
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the within-mentioned
instrument in every particular, without
alteration or any change whatsoever.
Signature Guarantee: ------------------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
--------------------------- --------------------------------------------
NOTICE: To be executed by an executive
officer
<PAGE>
A-12
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant to
Section 1015 or Section 1016 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 1015 or Section 1016 of the Indenture, state the
amount (in original principal amount) below:
$_____________________.
Date:
---------------------------
Your Signature:
---------------------------
(Sign exactly as your name appears on the other side of this Security)
Signature Guarantee:
-----------------------------
<PAGE>
Exhibit B
---------
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
--------------------------------
On or after March 4, 1996
Fleet National Bank of Connecticut
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Division
Re: BE Aerospace, Inc. (the "Company") 9-7/8% Senior
Subordinated Notes due 2006 (the "Securities")
--------------------------------------------------------
Ladies and Gentlemen:
This letter relates to U.S. $________ principal amount of Securities
represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 201 of the Indenture dated as of January 24,
1996 relating to the Securities (the "Indenture"), we hereby certify that (1) we
are the beneficial owner of such principal amount of Securities represented by
the Temporary Certificate and (2) we are a person outside the United States to
whom the Securities could be transferred in accordance with Rule 904 of
Regulation S promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to issue a Certificated Security
representing the undersigned's interest in the principal amount of Securities
represented by the Temporary Certificate, all in the manner provided by the
Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
-----------------------------------------
Authorized Signature
<PAGE>
Exhibit C
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
-------------------------------------------------------
___________________, ____
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
c/o
Fleet National Bank of Connecticut
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Division
Re: BE Aerospace, Inc. (the "Company") 9-7/8% Senior
Subordinated Notes due 2006 (the "Securities")
-------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $____________ aggregate
principal amount of the Securities:
1. We understand that the Securities have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and may not
be sold except as permitted in the following sentence. We agree on our own
behalf and on behalf of any investor account for which we are purchasing
the Securities to offer, sell or otherwise transfer such Securities prior
to the date which is three years after the later of the date of original
issue and the last date on which the Company or any affiliate of the
Company was the owner of such Securities, or any predecessor thereto (the
"Resale Restriction Termination Date") only (a) to the Company, (b)
pursuant to a registration statement which has been declared effective
under the Securities Act, (c) for so long as the Securities are eligible
for resale pursuant to Rule 144A under the Securities Act, to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a
"QIB") that purchases for its own account or for the account of a QIB to
whom notice is given that the transfer is being made in reliance on Rule
144A, (d) pursuant to offers and sales to non-U.S. Persons that occur
outside the United States within the meaning of Regulations S under the
Securities Act, (e) to an
<PAGE>
C-2
institutional "accredited investor" within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is
acquiring the Securities for its own account or for the account of such an
institutional "accredited investor" for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution thereof
in violation of the Securities Act or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject
in each of the foregoing cases to any requirement of law that the
disposition of our property and the property of such investor account or
accounts be at all times within our or their control and to compliance with
any applicable state securities laws. The foregoing restrictions on resale
will not apply subsequent to the Resale Restriction Termination Date. If
any resale or other transfer of the Securities is proposed to be made
pursuant to clause (e) above prior to the Resale Restriction Termination
Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to the Trustee, which shall
provide, among other things, that the transferee is an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2), (3)
or (7) or Rule 501 under the Securities Act and that it is acquiring such
Securities for investment purposes and not for distribution in violation of
the Securities Act. We acknowledge that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the
Resale Restriction Termination Date of the Securities pursuant to clauses
(d), (e) and (f) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Company and the
Trustee.
2. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
purchasing for our own account or for the account of such an institutional
"accredited investor," and we are acquiring the Securities for investment
purposes and not with a view to, or for offer or sale in connection with,
any distribution in violation of the Securities Act and we have such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and
we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
3. We are acquiring the Securities purchased by us for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion.
<PAGE>
C-3
4. You are entitled to rely upon this letter and you are irrevocably
authorized to produce this letter or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:
----------------------------------------
(NAME OF PURCHASER)
Date:
----------------------------------------
Upon transfer, the Securities should be registered in the name of the
new beneficial owner as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Taxpayer ID Number:
-------------------------------------------------------------
<PAGE>
Exhibit D
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
_________________, ___
Fleet National Bank of Connecticut
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Division
Re: BE Aerospace, Inc. (the "Company") 9-7/8% Senior
Subordinated Notes due 2006 (the "Securities")
-------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the facilities
of a designated off-shore securities market and neither we nor any person
acting on our behalf knows that the transaction has been pre-arranged with
a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
<PAGE>
D-2
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------------------------
Authorized Signature
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE (the "Supplemental Indenture"), dated as of
January 5, 1996, between BE AEROSPACE, INC., a Delaware corporation (the
"Company"), and United States Trust Company of New York, a New York banking
corporation (the "Trustee").
WITNESSETH:
WHEREAS, in accordance with Section 902 of the Indenture relating to the 9
3/4% Senior Notes due 2003 of the Company, dated as of March 3, 1993, between
the Company and the Trustee (the "Indenture"), (a) the Trustee, the Company and
the Holders (as defined in the Indenture) of a majority in principal amount of
the Outstanding Securities (as defined in the Indenture) as of the date hereof
have agreed to amend certain terms related to the definition of Permitted
Indebtedness (as defined in the Indenture) contained in Section 101 of the
Indenture and the Limitation on Indebtedness covenant contained in Section 1010
of the Indenture (the "Indebtedness Covenant") and (b) the Trustee and the
Holders of a majority in principal amount of the Outstanding Securities as of
the date hereof have agreed to waive the application of certain provisions of
the Indebtedness Covenant.
WHEREAS, all things necessary to make this Supplemental Indenture a valid
supplement to the Indenture according to its terms have been done.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1.1. Certain Terms Defined in the Indenture. All capitalized
--------------------------------------
terms used herein without definition herein shall have the meanings ascribed
thereto in the Indenture.
SECTION 1.2. Amendments of Section 101. (a) Section 101 of the Indenture
-------------------------
is amended by adding the following definitions in appropriate alphabetical
order:
"'Agent Bank' means The Chase Manhattan Bank, N.A., as agent
under the Bank Credit Agreement, and any future agent under the Bank
Credit Agreement."
"'Bank Credit Agreement' means the Amended and Restated Credit
Agreement dated as of May 18, 1994 among the Company, the Banks and
the Agent Bank, as in effect on the First Supplemental Date and as
such Agreement may be amended, restated, supplemented, replaced,
substituted or otherwise modified from time to time."
<PAGE>
2
"'Banks' means the banks and other financial institutions from
time to time that are lenders under the Bank Credit Agreement."
"'First Supplemental Date' means January 5, 1996."
(b) The definition of "Permitted Indebtedness," located in Section 101
of the Indenture, is amended in full to read as follows:
"'Permitted Indebtedness' means any of the following:
(i) Indebtedness of the Company under the Bank Credit Agreement in
an aggregate principal amount at any one time outstanding not to
exceed the sum of 80% of the aggregate amount of Eligible
Receivables and 50% of the aggregate amount of Eligible
Inventory, measured as of the end of the most recent fiscal
quarter preceding the time such Indebtedness is incurred;
(ii) Indebtedness of the Company under the Securities;
(iii) Indebtedness of the Company outstanding on the date of this
Indenture (other than Indebtedness incurred pursuant to clause
(i) of this definition);
(iv) obligations of the Company pursuant to interest Rate Protection
Obligations, which obligations do not exceed the aggregate
principal amount of the Indebtedness covered by such Interest
Rate Protection Obligations;
(v) Indebtedness of the Company to any wholly owned Restricted
Subsidiaries;
(vi) Indebtedness of the Company consisting of guarantees,
indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of
assets, including, without limitation, shares of Capital Stock
of Restricted Subsidiaries;
(vii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a
"refinancing") by the Company of any Indebtedness of the Company
incurred pursuant to clauses (ii) and (iii) of this definition,
including any successive refinancings by the Company, so long as
(A) any such new Indebtedness shall be in a principal amount
that does not exceed the principal amount (or, if such
<PAGE>
3
Indebtedness being refinanced provides for an amount less than
the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the
date of determination) so refinanced plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the
amount of any premium reasonably determined by the Company as
necessary to accomplish such refinancing, plus the amount of
expenses of the Company incurred in connection with such
refinancing, (B) in the case of any refinancing of Pari Passu
Indebtedness or Subordinated Indebtedness, such new Indebtedness
is made pari passu with or subordinate to the Securities at least
---- -----
to the same extent as the Indebtedness being refinanced and (C)
such new Indebtedness has an Average Life longer than the Average
Life of the Securities and a final Stated Maturity later than the
final Stated Maturity of the Securities; and
(viii) Indebtedness in an aggregate principal amount not in excess of
$30 million at any one time outstanding, less the amount of
Permitted Subsidiary Indebtedness then outstanding pursuant to
clause (vii) of the definition thereof."
SECTION 1.3. Amendment of Section 1010. Section 1010(a) of the
-------------------------
Indenture is amended by adding, immediately after the phrase "as if such
acquisition or disposition occurred at the beginning of such four-quarter
period" in subsection (iii) thereof, the following:
"reflecting, in the case of such an acquisition, any amount
----------
attributable to any operating expense that will be eliminated or cost
reduction that will be realized (in each case, net of any operating
expense or other cost increase) in connection with such acquisition, as
determined in good faith by the chief financial officer of the Company in
accordance with GAAP and the rules, regulations and guidelines of the
Commission, as if such elimination of operating expense or the
realization of such cost reductions were achieved at the beginning of
such four-quarter period".
SECTION 1.4. Waiver Relating to Section 1010. The Trustee and the
-------------------------------
Holders of a majority in principal amount of the Outstanding Securities as of
the date hereof hereby waive, solely to permit the issuance by the Company of
its Senior Subordinated Notes due 2006 in an aggregate principal amount not to
exceed $75,000,000, the requirements of Section 1010(a) of the Indenture related
to limitations on Indebtedness.
<PAGE>
4
SECTION 2. Conditions of Effectiveness. This Supplemental Indenture
---------------------------
shall become effective when, and only when, all of the following conditions
shall have been satisfied:
(a) the Trustee shall have received the written consent of the Holders of
a majority in principal amount of the Outstanding Securities to the
execution of this Supplemental Indenture (the "Required Consents");
(b) duly executed counterparts hereof shall have been signed by the
Trustee and the Company; and
(c) the Company shall have acquired all of the outstanding capital stock
of Burns Aerospace Corporation, a Delaware corporation.
The receipt by the Trustee of the Required Consents shall not obligate the
Company to execute this Supplemental Indenture.
SECTION 3. Payment upon Effectiveness. Upon effectiveness of this
--------------------------
Supplemental Indenture, the Company shall pay to the Trustee for the account of
Holders (other than the Company or any Affiliate of the Company) as of the
Expiration Date (as defined in the Company's Consent Solicitation Statement
dated December 15, 1995) who, on or prior to the Expiration Date, shall have
consented to the adoption of this Supplemental Indenture and shall not have
subsequently withdrawn such consent ("Consenting Holders"), a fee equal to 2% of
the principal amount of the Securities for which consents have been received and
not subsequently withdrawn on or prior to the Expiration Date. As soon as
practicable after the effectiveness of this Supplemental Indenture, the Trustee
shall pay to each Consenting Holder (other than the Company or any Affiliate of
the Company) a fee equal to 2% of the principal amount of the Securities of
such Consenting Holder for which consents have been validly received and not
subsequently withdrawn.
SECTION 4. Governing Law. This Supplemental Indenture shall be governed
-------------
by the laws of the State of New York.
SECTION 5. Counterparts. This Supplemental Indenture may be signed in
------------
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 6. Severability. In case any provision in this Supplemental
------------
Indenture shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
<PAGE>
5
SECTION 7. Ratification. Except as expressly amended hereby, each
------------
provision of the Indenture shall remain in full force and effect and, as amended
hereby, the Indenture is in all respects agreed to, ratified and confirmed by
each of the Company and the Trustee.
___________________________________
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
BE AEROSPACE, INC.
By:
----------------------------------
Title:
Attest:
----------------------------
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
----------------------------------
Title:
Attest:
----------------------------
Title:
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
This ESCROW AGREEMENT is made as of ___________________, 1996 among BE
Aerospace, Inc., a Delaware corporation ("BEA"), Eagle Industrial Products, a
Delaware corporation (the "Seller") and First Trust of Illinois, National
Association (the "Bank").
RECITALS
A. BEA, Burns Aerospace Corporation, a Delaware corporation and
wholly-owned subsidiary of Seller, Eagle Industries, Inc., a Delaware
corporation and the sole stockholder of Seller ("Eagle") and Great American
Management and Investment, Inc., a Delaware corporation and the sole stockholder
of Eagle, have entered into an Acquisition Agreement dated as of December 13,
1995 (the "Acquisition Agreement") pursuant to which Seller has agreed to sell,
and BEA has agreed to buy, the Outstanding Stock (as defined in the Acquisition
Agreement).
B. Section 1.2 of the Acquisition Agreement provides that $2,500,000
(the "Escrow Amount") of the Purchase Price (as defined in the Acquisition
Agreement) shall be deposited with and maintained in an escrow account to be
administered pursuant to this Agreement, which amount shall be available to pay
any Losses (as defined in the Acquisition Agreement) of BEA as to which BEA is
entitled to indemnification pursuant to Section 7 of the Acquisition Agreement.
In consideration of the respective representations and warranties,
covenants and conditions contained herein and in the Acquisition Agreement, BEA
and Seller hereby agree as follows:
1. Definitions. Terms defined in the Acquisition Agreement and not otherwise
-----------
defined herein are used herein with the meanings so defined.
2. Appointment of Escrow Agent. The Bank is hereby appointed to act as escrow
---------------------------
agent (the "Escrow Agent") in accordance with the terms hereof, and the Bank
hereby accepts such appointment. The Escrow Agent shall have all the rights,
powers, duties and obligations provided herein.
3. Deposit of the Funds. The Escrow Amount is hereby delivered and deposited
--------------------
with the Escrow Agent. The Escrow Agent has established a separate account (the
"Escrow Account") which shall hold the Escrow Amount and which shall be
increased by any interest or other amount earned with respect thereto
("Interest") and decreased by the distributions provided for in Sections 4 and
5.1. The amount in the Escrow Account from time to time, including, without
limitation, any Interest, is hereinafter referred to as the "Escrowed Funds".
The Escrow Agent
<PAGE>
agrees to hold, invest and otherwise act with respect to the Escrowed Funds in
accordance with the terms and conditions of this Agreement.
The Escrow Agent shall invest and reinvest the Escrowed Funds from
time to time as instructed in writing by Seller in any of the following
investment vehicles, or any combination thereof: (i) securities issued or
directly or fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof having maturities of six months or less from
the date of acquisition; (ii) certificates of deposit with maturities of six
months or less from the date of acquisition and overnight bank deposits, in each
case with any domestic commercial bank having capital and surplus in excess of
$500,000,000; and (iii) commercial paper rated A-1 or the equivalent thereof by
Standard & Poor's Corporation or P-1 or the equivalent thereof by Moody's
Investors Service, Inc. and in each case maturing within six months from the
date of acquisition. In the absence of any instructions from Seller as to
investment, the Escrowed Funds shall be invested as provided in clause (iii) of
the preceding sentence. The Escrow Agent shall have the right to sell any
investments held hereunder in order to comply with the terms of this Escrow
Agreement and shall not be liable for any loss due to the fluctuation of
interest rates or the market value of the investment being sold. All interest
earned on the Escrowed Funds, for tax reporting purposes, shall be allocable to
Seller.
4. Distribution From the Escrowed Fund.
-----------------------------------
4.1. In the event that
(a) from time to time prior to the Termination Date (as defined
below), the Escrow Agent shall have received a notice (a "BEA Notice") from
BEA which (i) specifies an amount (or if a precise amount cannot be
determined at such time, a good faith estimate of such amount) (a "Claim
Amount") which BEA claims is an indemnification obligation of Seller
pursuant to Section 7 of the Acquisition Agreement and (ii) states in
general terms the basis therefor; and
(b) fifteen (15) business days shall have elapsed after the date on
which the Escrow Agent shall have delivered a copy of the BEA Notice to
Seller (which delivery the Escrow Agent shall make no later than the
business day following the date on which the Escrow Agent shall have
received the BEA Notice), and during such 15 business day period the Escrow
Agent shall not have received a notice (a "Dispute Notice") from Seller
protesting or otherwise disputing any assertion contained in such BEA Notice
(including, without limitation, the amount of the Claim Amount),
then, the Escrow Agent is authorized and directed to pay to BEA from the
Escrowed Funds an amount equal to the Claim Amount set forth in such BEA Notice.
-2-
<PAGE>
4.2. In the event that Seller shall have delivered a Dispute Notice
in respect of any BEA Notice in accordance with Section 4.1(b), the Escrow Agent
shall segregate within the Escrowed Funds which have not previously been
segregated pursuant to this Section 4.2 an amount of funds equal to the Claim
Amount set forth in such BEA Notice.
4.3. From time to time during the term hereof, the Escrow Agent is
authorized and directed to pay to BEA or Seller, as applicable, any amount which
the Escrow Agent is directed to pay pursuant to joint written instructions
executed by BEA and Seller.
4.4. The Escrow Agent shall make a disbursement to BEA of amounts as
set forth in any Arbitration Disbursement Order (as defined below) from
segregated funds promptly; provided, however, that the Escrow Agent shall first
-------- -------
give BEA and Seller five business days' written notice before making any such
disbursement (but shall not delay any such disbursement beyond such five
business days due to any objection thereto which may be made by BEA or Seller).
For purposes of this Agreement, an "Outstanding Claim Amount" means a Claim
Amount which is set forth in a BEA Notice with respect to which no disbursement
has yet been made; and an "Arbitration Disbursement Order" means a written
determination made by the Board (as defined below) with respect to a Claim
Amount directing that a disbursement be made from the Escrowed Funds to BEA or
(after the Termination Date) Seller, as the case may be.
5. Distribution At Conclusion of Term of Agreement.
-----------------------------------------------
5.1. Eighteen months after the Closing Date (the "Termination Date"),
the Escrow Agent is authorized and directed to deliver and pay to Seller
pursuant to written instructions from Seller the balance of the Escrow Account
as of the day immediately preceding the Termination Date, less the aggregate
amount of funds, if any, which remain segregated in the Escrow Account pursuant
to Section 4.2 as of such date, and as to any such segregated funds this
Agreement shall continue to apply thereto.
5.2. This Escrow Agreement shall terminate upon payment, in
accordance with the provisions hereof, of all amounts held by the Escrow Agent
in the Escrow Account.
6. Escrow Agent Qualifications. The Escrow Agent shall at all times be a
---------------------------
commercial bank in good standing, organized and doing business under the laws of
the United States or a state thereof having capital and surplus in excess of
$100,000,000 and shall be authorized under the laws governing its organization
to exercise corporate trust powers and shall be authorized to enter into and
perform this Agreement. If the Escrow Agent shall at any time cease to have the
foregoing qualifications, the Escrow Agent shall give notice of resignation to
BEA and Seller as provided in Section 9, and BEA and Seller agree to thereupon
promptly appoint a qualified successor escrow agent in accordance with Section
10.
7. Limitations on Liability of Escrow Agent.
----------------------------------------
-3-
<PAGE>
7.1. The Escrow Agent may act upon any written notice, certificate,
instrument, request, waiver, consent, paper or other document that the Escrow
Agent in good faith reasonably believes to be genuine and to have been made,
sent, signed, prescribed, or presented by the proper person or persons. The
Escrow Agent shall not be liable for any action taken or omitted by it in
connection with the performance of its duties and obligations hereunder, except
for its own gross negligence or wilful misconduct. The Escrow Agent shall be
under no obligation to institute or defend any action, suit or legal proceeding
in connection with this Agreement or the escrow created hereunder unless it is
indemnified to its satisfaction by the party or parties who desire that it
undertake such action. The Escrow Agent's duties shall be determined only with
reference to this Escrow Agreement and applicable law, and the Escrow Agent is
not charged with knowledge of or any duties or responsibilities in connection
with any other document or agreement.
7.2. In consideration of the Escrow Agent's acceptance of its
appointment to that position, the other parties hereto, jointly and severally,
agree to indemnify and hold the Escrow Agent harmless as to any liability
incurred by it to any person, firm or corporation by reason of its having
accepted the same or in carrying out any of the terms hereof; provided, however,
-------- -------
that no indemnity need by paid in the case of the Escrow Agent's gross
negligence or willful misconduct.
7.3. If the Escrow Agent, during or after the term of the escrow,
receives or becomes aware of any conflicting demands or claims with respect to
the Escrowed Funds or the rights of any of the parties hereto or any money or
property deposited herein or affected hereby, the Escrow Agent shall have the
right to discontinue any or all further acts on its part until such conflict is
resolved to its and the parties' satisfaction, and the Escrow Agent shall have
the further right to commence or defend any action or proceeding for the
determination of such conflict. If the Escrow Agent files suit in interpleader,
it shall be fully released and discharged from all further obligations under
this Agreement with respect to any amounts deposited with the court in such
suit.
7.4. The Escrow Agent may consult with legal counsel satisfactory to
it in connection with any dispute, the construction of any provision of this
Agreement or the duties and obligations of the Escrow Agent under this
Agreement. The Escrow Agent shall be protected in any action taken or omitted
in connection with the advice or opinion of such counsel.
7.5. Nothing in this Escrow Agreement shall be deemed to impose upon
the Escrow Agent any duty to qualify to do business or to act as a fiduciary or
otherwise in any jurisdiction other than the State of Illinois. The Escrow
Agent shall not be responsible for and shall not be under a duty to examine into
or pass upon the validity, binding effect, execution or sufficiency of this
Escrow Agreement or of any agreement amendatory or supplemental hereto.
8. Compensation of Escrow Agent. The Escrow Agent shall be entitled to
----------------------------
compensation pursuant to the schedule attached hereto as Exhibit 8, and
reimbursement of fees, costs and
-4-
<PAGE>
expenses, including reasonable fees of counsel, suffered or incurred by the
Escrow Agent in connection with the performance of its duties and obligations
hereunder, including, without limitation, any suit in interpleader brought by
the Escrow Agent (such compensation, fees, costs and expenses collectively
referred to as the "Escrow Fees"). BEA, on the one hand, and Seller, on the
other hand, shall each be responsible for one-half of the Escrow Fees.
9. Resignation and Removal of Escrow Agent. The Escrow Agent or any
---------------------------------------
successor to it may resign and be discharged of its duties and obligations
hereunder by delivering written notice to BEA and Seller specifying the
effective date of such resignation, which date shall not be earlier than 30 days
following the receipt by BEA and Seller of such notice of resignation. Such
resignation shall take effect on the date specified in the notice of
resignation, unless a successor escrow agent has been appointed in accordance
with the provisions of Section 11 and has accepted such appointment, in which
case such resignation shall take effect immediately upon receipt by such
successor escrow agent of the Escrowed Funds. The Escrow Agent may be removed by
the joint action of BEA and Seller, with or without cause, at any time upon not
less than ten (10) days' prior written notice to the Escrow Agent, which notice
may be waived by the Escrow Agent.
Notwithstanding any resignation or removal of the Escrow Agent
pursuant to this Section 9, the Escrow Agent shall continue to serve in its
capacity as escrow agent until (a) a successor escrow agent is appointed in
accordance with the provisions of Section 10 and has accepted such appointment
and (b) the Escrowed Funds have been transferred to and received by such
successor escrow agent.
10. Appointment of Successor Escrow Agent. If at any time the Escrow Agent
-------------------------------------
resigns, is removed or otherwise becomes incapable of acting as escrow agent
pursuant to this Agreement, or if at any time a vacancy occurs in the office of
the Escrow Agent for any other cause, a successor escrow agent that meets the
qualifications set forth in Section 6 shall be appointed by BEA and Seller, by a
written instrument delivered to the successor escrow agent. The Escrow Agent
shall have the right to refuse to make any payments from the Escrowed Funds
until a successor escrow agent is appointed and has accepted such appointment,
at which time the Escrow Agent shall transfer the Escrowed Funds to its
successor. Upon receipt by the successor escrow agent of the Escrowed Funds, the
Escrow Agent shall be discharged from any continuing duties or obligations under
this Agreement, but such discharge shall not relieve the Escrow Agent from any
liability incurred prior to such event, and the successor escrow agent shall be
vested with all rights, powers, duties and obligations of the Escrow Agent under
this Agreement.
11. Parties in Interest. This Agreement shall be binding upon and inure to
-------------------
the benefit of each party, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever by, under or by reason of this Agreement. Nothing in this Agreement
is intended to relieve or discharge the obligation of any third person to, or to
confer any right of subrogation or action over against, any party to this
Agreement. No
-5-
<PAGE>
party may, however, assign its interest under this Agreement without the consent
of the other parties hereto.
12. General.
-------
12.1. Dispute Resolution. In the event a dispute under this
------------------
Agreement cannot be resolved by the parties, BEA and Seller shall submit such
dispute to the jurisdiction of a single arbitrator (the "Arbitrator") in
accordance with the procedures set forth in Section 7.4.2 of the Acquisition
Agreement.
12.2. Notices. Any notice or other communication hereunder must be
-------
given in writing and either (a) delivered in person, (b) transmitted by telefax
or other telecopy mechanism provided that any notice so given is also mailed as
provided in clause (c) or (c) mailed by certified or registered mail, postage
prepaid, receipt requested, as follows:
(a) If to Seller, to it at:
Eagle Industrial Products Corporation
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: Gus J. Athas, Vice President and
General Counsel
Telecopy No: (312) 906-8402
With a copy to:
Donald J. Liebentritt
Rosenberg & Liebentritt, P.C.
Suite 1515
Two North Riverside Plaza
Chicago, IL 60606
Telecopy: (312) 454-0335
and
-6-
<PAGE>
(b) If to BEA, to it at:
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
Attention: Amin J. Khoury
Chairman of the Board
Telecopy No: (407) 791-1272
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: C. Dean Dusseault, Esq.
Telecopy No.: (617) 951-7050
(c) If to Escrow Agent, addressed to:
First Trust of Illinois, National Association
400 North Michigan Avenue
Floor 2 South
Chicago, Illinois 60617
Attention: Corporate Trust Department
Telecopy No.: (312) 836-6702
or to such other address or to such other person as any party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (a) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 12 and an appropriate answerback is received, (b) if given by mail,
three business days after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid, or (c) if given by any
other means, when actually received at such address.
12.3. Entire Agreement. This Agreement, together with the schedules
----------------
and exhibits hereto, constitutes the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein.
12.4. Amendment. This Agreement may be amended by the parties hereto
---------
at any time, but only by an instrument in writing duly executed and delivered on
behalf of each of the parties hereto.
-7-
<PAGE>
12.5. Headings. Section headings are not to be considered part of
--------
this Agreement and are included solely for convenience and are not intended to
be full or accurate descriptions of the content thereof. References to sections
are to portions of this Agreement, unless the context otherwise requires.
12.6. Successors and Assigns. Subject to Section 11, all of the
----------------------
terms and provisions of this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective transferees, successors
and assigns.
12.7. Governing Law. This Agreement and all amendments hereof and
-------------
waivers and consents hereunder shall be governed by and construed in accordance
with the laws (other than the conflict of laws rules) of the State of Illinois.
12.8. Severability. The provisions of this Agreement are severable,
------------
and in the event that any one or more provisions are deemed illegal or
unenforceable, the remaining provisions shall remain in full force and effect.
12.9. Waivers. No course of dealing between the parties hereto,
-------
including, without limitation, any delay or omission in exercising any right
hereunder, shall operate as a waiver of any of the rights of any party
hereunder. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.
12.10. Counterparts. This Agreement may be executed simultaneously
------------
in any number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BE AEROSPACE, INC.
By________________________
Title:
EAGLE INDUSTRIAL PRODUCTS
CORP.
By________________________
Title:
Agreed to and accepted:
FIRST TRUST OF ILLINOIS,
NATIONAL ASSOCIATION, as Escrow Agent
By:____________________________
Title:
-9-
<PAGE>
Exhibit 8
---------
Schedule of Escrow Agent Fees
Acceptance $
Administration
First Year
Subsequent
To Termination Date
Per quarter thereafter
Other
Per BEA Notice
Per Investment Transaction
Per Wire Transfer
-10-
<PAGE>
[EXECUTION COUNTERPART]
********************************************************************************
BE AEROSPACE, INC.
------------------------------
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 29, 1993
Amended and Restated as of January 19, 1996
------------------------------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent
NATIONSBANK, N.A. (SOUTH),
as Co-Agent
********************************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Matters......................... 1
1.01 Certain Defined Terms...................................... 1
1.02 Accounting Terms and Determinations........................ 24
1.03 Classes and Types of Loans................................. 25
Section 2. Commitments, Loans, Notes and Prepayments.................. 26
2.01 Loans...................................................... 26
2.02 Borrowings................................................. 27
2.03 Letters of Credit.......................................... 27
2.04 Changes of Commitments..................................... 32
2.05 Commitment Fee............................................. 33
2.06 Lending Offices............................................ 33
2.07 Several Obligations; Remedies Independent.................. 34
2.08 Notes...................................................... 34
2.09 Optional Prepayments and Conversions or
Continuations of Loans................................... 34
2.10 Mandatory Prepayments and Reductions of
Commitments.............................................. 35
Section 3. Payments of Principal and Interest......................... 38
3.01 Repayment of Loans......................................... 38
3.02 Interest................................................... 38
Section 4. Payments; Pro Rata Treatment; Computations;
Etc...................................................... 39
4.01 Payments................................................... 39
4.02 Pro Rata Treatment......................................... 40
4.03 Computations............................................... 40
4.04 Minimum Amounts............................................ 41
4.05 Certain Notices............................................ 41
4.06 Non-Receipt of Funds by the Administrative Agent........... 42
4.07 Sharing of Payments, Etc................................... 43
Section 5. Yield Protection, Etc...................................... 44
5.01 Additional Costs........................................... 44
5.02 Limitation on Types of Loans............................... 47
5.03 Illegality................................................. 48
5.04 Treatment of Affected Loans................................ 48
5.05 Compensation............................................... 49
5.06 Additional Costs in Respect of Letters of Credit........... 50
5.07 U.S. Taxes................................................. 50
Section 6. Conditions Precedent....................................... 52
6.01 Conditions to Effectiveness................................ 52
6.02 Initial and Subsequent Extensions of Credit................ 56
(i)
<PAGE>
Section 7. Representations and Warranties............................. 57
7.01 Corporate Existence........................................ 57
7.02 Financial Condition........................................ 57
7.03 Litigation................................................. 57
7.04 No Breach.................................................. 58
7.05 Action..................................................... 58
7.06 Approvals.................................................. 58
7.07 Use of Credit.............................................. 59
7.08 ERISA...................................................... 59
7.09 Taxes...................................................... 59
7.10 Investment Company Act..................................... 59
7.11 Public Utility Holding Company Act......................... 59
7.12 Material Agreements and Liens.............................. 59
7.13 Environmental Matters...................................... 60
7.14 Acquisition Documents...................................... 62
7.15 Burns Acquisition.......................................... 62
7.16 Capitalization............................................. 62
7.17 Subsidiaries, Etc.......................................... 63
7.18 Title to Assets............................................ 64
7.19 Compliance with Law........................................ 64
7.20 True and Complete Disclosure............................... 64
Section 8. Covenants of the Company................................... 65
8.01 Financial Statements, Etc.................................. 65
8.02 Litigation................................................. 69
8.03 Existence, Etc............................................. 69
8.04 Insurance.................................................. 70
8.05 Prohibition of Fundamental Changes......................... 70
8.06 Limitation on Liens........................................ 71
8.07 Indebtedness............................................... 73
8.08 Investments................................................ 74
8.09 Restricted Payments........................................ 75
8.10 Leverage Ratio............................................. 76
8.11 Adjusted Net Worth......................................... 76
8.12 [Intentionally Omitted].................................... 77
8.13 Interest Coverage Ratio.................................... 77
8.14 Net Worth of Acurex........................................ 77
8.15 Lines of Business.......................................... 77
8.16 Transactions with Affiliates............................... 77
8.17 Use of Proceeds............................................ 78
8.18 Certain Obligations Respecting Subsidiaries................ 78
8.19 Modifications of Certain Documents......................... 79
8.20 Environmental Matters...................................... 79
8.21 Security for Series A Loans................................ 80
8.22 Redemption of Senior Subordinated Notes.................... 80
8.23 Merger of Burns............................................ 80
Section 9. Events of Default.......................................... 81
Section 10. The Administrative Agent................................... 85
10.01 Appointment, Powers and Immunities......................... 85
(ii)
<PAGE>
10.02 Reliance by Administrative Agent........................... 86
10.03 Defaults................................................... 86
10.04 Rights as a Lender......................................... 87
10.05 Indemnification............................................ 87
10.06 Non-Reliance on Administrative Agent and Other
Lenders.................................................. 88
10.07 Failure to Act............................................. 88
10.08 Resignation or Removal of Administrative Agent............. 88
10.09 Consents under Basic Documents............................. 89
10.10 Collateral Sub-Agents...................................... 90
10.11 Co-Agent................................................... 90
Section 11. Miscellaneous.............................................. 90
11.01 Waiver..................................................... 90
11.02 Notices.................................................... 90
11.03 Expenses, Etc.............................................. 91
11.04 Amendments, Etc............................................ 92
11.05 Successors and Assigns..................................... 93
11.06 Assignments and Participations............................. 93
11.07 Survival................................................... 95
11.08 Captions................................................... 96
11.09 Counterparts............................................... 96
11.10 Governing Law; Submission to Jurisdiction.................. 96
11.11 Waiver of Jury Trial....................................... 96
11.12 Treatment of Certain Information;
Confidentiality.......................................... 97
11.13 Amendments to Security Documents........................... 98
(iii)
<PAGE>
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Hazardous Materials
SCHEDULE III - Subsidiaries and Investments
SCHEDULE IV - Approvals and Compliance
SCHEDULE V - Existing Letters of Credit
SCHEDULE VI - Taxes
SCHEDULE VII - Transactions with Affiliates
EXHIBIT A-1 - Form of Series A Note
EXHIBIT A-2 - Form of Series B Note
EXHIBIT B-1 - Form of Revolving Credit Security
Agreement
EXHIBIT B-2 - Form of Term Loan Security Agreement
EXHIBIT C - Form of Opinion of Counsel to
the Company
EXHIBIT D - Form of Opinion of Special New York
Counsel to Chase
EXHIBIT E - Form of Confidentiality Agreement
(iv)
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 29,
1993, amended and restated as of January 19, 1996, among: BE AEROSPACE, INC., a
corporation duly organized and validly existing under the laws of the State of
Delaware (the "Company"); each of the lenders that is a signatory hereto
-------
identified under the caption "LENDERS" on the signature pages hereto or which,
pursuant to Section 11.06(b) hereof, shall become a "Lender" hereunder
(individually, a "Lender" and, collectively, the "Lenders"); and THE CHASE
------ -------
MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association, as agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "Administrative Agent").
--------------------
The Company, certain Lenders and the Administrative Agent are party to
an Amended and Restated Credit Agreement dated as of October 29, 1993, amended
and restated as of May 18, 1994 (as modified and supplemented and in effect
immediately prior to the Amendment Effective Date referred to below, the
"Existing Credit Agreement"). The Company has requested that the Lenders and
- --------------------------
the Administrative Agent agree to amend and restate the Existing Credit
Agreement, and the Lenders and the Administrative Agent are willing to amend and
restate the Existing Credit Agreement, all on the terms and conditions herein
set forth.
Accordingly, the parties hereto agree to amend and restate the
Existing Credit Agreement so that, as amended and restated, it reads in its
entirety as provided herein.
Section 1. Definitions and Accounting Matters.
----------------------------------
1.01 Certain Defined Terms. As used herein, the following terms
---------------------
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
---- -----
"Acquisition" shall mean any transaction, or any series of related
-----------
transactions, by which the Company and/or any of its Subsidiaries (a) acquires
any ongoing business or all or substantially all of the assets of any Person,
whether through purchase of assets, merger or otherwise, (b) directly or
indirectly acquires control of at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors or (c) directly or indirectly acquires control of a majority ownership
interest in any partnership, joint venture or similar arrangement. The terms
"Acquire" and "Acquired" used as a verb shall have a correlative meaning.
- -------- --------
"Acquisition Agreement" shall mean the Acquisition Agreement dated as
---------------------
of December 14, 1995 among the Company, Burns,
Credit Agreement
----------------
<PAGE>
- 2 -
Seller, Eagle Industries, Inc. and (to the limited extent set forth above its
signature thereto) Great American Management and Investment, Inc., as modified
and supplemented and in effect from time to time.
"Acquisition Documents" shall mean the Acquisition Agreement, the
---------------------
Disclosure Schedule referred to in the Acquisition Agreement, the Receivables
Sale Agreement and the Escrow Agreement.
"Acurex" shall mean Acurex Corporation, a Delaware corporation.
------
"Adjusted Net Worth" shall mean, as at any date, the sum of (a) total
------------------
stockholders' equity of the Company and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP) plus (b) the
----
fair market value of any shares of capital stock of the Company (determined as
of the date such shares are issued) which are utilized in any business
combination accounted for using pooling of interest accounting plus (c) an
----
amount not to exceed $20,000,000 in the aggregate of the after-tax amount
(calculated using the then effective corporate Federal tax rate, regardless of
the after-tax amount determined in accordance with GAAP) of any nonrecurring
noncash write-offs of intangible assets since November 25, 1995; provided that
notwithstanding the accounting treatment of engineering expenditures, "Adjusted
Net Worth" shall be calculated as if such expenditures had been expensed (and
not capitalized) from and after February 24, 1996.
"Affiliate" shall mean any Person that directly or indirectly
---------
controls, or is under common control with, or is controlled by, the Company and,
if such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
-------
"controlled by" and "under common control with") shall mean possession, directly
------------- -------------------------
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), provided that, in any event, any
--------
Person that owns directly or indirectly securities having 5% or more of the
voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual
Credit Agreement
----------------
<PAGE>
- 3 -
shall be an Affiliate solely by reason of his or her being a director, officer
or employee of the Company or any of its Subsidiaries and (b) none of the
Subsidiaries of the Company shall be Affiliates.
"Amendment Effective Date" shall mean the date on which all of the
------------------------
conditions set forth in Section 6.01 hereof shall have been satisfied or waived
by the Lenders and the Administrative Agent.
"Applicable Lending Office" shall mean, for each Lender and for each
-------------------------
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or such
other office of such Lender (or of an affiliate of such Lender) as such Lender
may from time to time specify to the Administrative Agent and the Company as the
office by which its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean with respect to Base Rate Loans and
-----------------
Eurodollar Loans, the rate for such Type of Loan for each rating level period
set forth in the schedule below:
<TABLE>
<CAPTION>
Applicable Margin
Rating Level Period Base Rate Loans Eurodollar Loans
- ------------------- --------------- ----------------
<S> <C> <C>
Level I Period 0.00% 0.75%
Level II Period 0.00% 1.25%
Level III Period 0.25% 1.50%
Level IV Period 0.50% 1.75%
Level V Period 1.00% 2.25%
</TABLE>
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
---------------
amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the
---------
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
---------------
upon the Base Rate.
Credit Agreement
----------------
<PAGE>
- 4 -
"Basic Documents" shall mean, collectively, this Agreement, the Notes,
---------------
the Letter of Credit Documents and the Security Documents.
"Borrowing Base" shall mean, as at any date, the sum of (a) 80% of the
--------------
aggregate amount of Eligible Receivables at said date plus (b) 50% of the
----
aggregate value of Eligible Inventory at said date plus (c) from and after the
----
Fiscal Date in May 1996, the lesser of (i) 40% of the net book value of personal
Property (excluding real estate owned or leased, and excluding Eligible
Inventory and Eligible Receivables) of the Company in which the Administrative
Agent has a valid and perfected first-priority security interest and (ii)
$20,000,000 through and including the third anniversary of the Restatement Date,
$15,000,000 from the third anniversary of the Restatement Date through and
including the fourth anniversary of the Restatement Date, and $10,000,000
thereafter; provided that in no event shall the amount of the Borrowing Base
--------
exceed the amount of Indebtedness permitted to be secured by Liens under clause
(d) of Section 1014 of the Senior Indenture.
"Burns" shall mean Burns Aerospace Corporation, a Delaware
-----
corporation.
"Burns Acquisition" shall mean the purchase by the Company of 100% of
-----------------
the issued and outstanding capital stock of Burns from Seller and certain
accounts receivable from the Receivables Trustee pursuant to the Acquisition
Agreement.
"Business Day" shall mean any day (a) on which commercial banks are
------------
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Company with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, which is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Lease Obligations" shall mean, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
Credit Agreement
----------------
<PAGE>
- 5 -
"Casualty Event" shall mean, with respect to any Property of any
--------------
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"Chase" shall mean The Chase Manhattan Bank (National Association).
-----
"Class" shall have the meaning assigned to such term in Section 1.03
-----
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"Collateral Account" shall have the meaning assigned to such term in
------------------
Section 4.01 of the Revolving Credit Security Agreement.
"Commitment Fee Rate" shall mean (a) .20% for any Level I Period, (b)
-------------------
.25% for any Level II Period, (c) .30% for any Level III Period, (d) .375% for
any Level IV Period and (e) .50% for any Level V Period.
"Commitments" shall mean the Series A Commitments and the Series B
-----------
Commitments.
"Consent Solicitation" shall mean the Consent Solicitation Statement
--------------------
dated as of December 15, 1995 soliciting the consent of the holders of a
majority of the Senior Notes to amend the Senior Indenture as contemplated
therein.
"Continue", "Continuation" and "Continued" shall refer to the
-------- ------------ ---------
continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion
------- ---------- ---------
pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans,
which may be accompanied by the transfer by a Lender (at its sole discretion) of
a Loan from one Applicable Lending Office to another.
"Default" shall mean an Event of Default or an event that with notice
-------
or lapse of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
-----------
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to
Credit Agreement
----------------
<PAGE>
- 6 -
any Person excluding any sale, assignment, transfer or other disposition of
inventory in the ordinary course of business and on ordinary business terms;
provided that the term "Disposition" shall not include (i) any Equity Issuance
- --------
or (ii) any sale, assignment, transfer or other disposition of Property by any
Subsidiary of the Company to the Company or to any other Subsidiary of the
Company, in each case for consideration that is not in excess of the fair market
value of such Property as determined in good faith by the chief financial
officer of the Company. The term "Dispose" shall have a correlative meaning.
-------
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
"Domestic Subsidiary" shall mean any Subsidiary of the Company that is
-------------------
incorporated under the law of any State of the United States of America.
"EBITDA" shall mean, for any period, for the Company and its
------
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), net operating earnings (calculated before depreciation
and amortization expense, non-recurring non-cash write-offs of assets (to the
extent deducted in computing net operating earnings), Interest Expense, taxes
and extraordinary and unusual items) for such period; provided that
--------
notwithstanding the accounting treatment of capitalized engineering
expenditures, "EBITDA" shall be calculated as if such expenditures had been
expensed (and not capitalized) from and after February 24, 1996.
"Eligible Inventory" shall mean, as at any date, the inventories (net
------------------
of any reserve and excluding capitalized engineering expenditures) of the
Company on the basis of the method of accounting (either last in/first out or
first in/first out) used by the Company in the preparation of its financial
statements included in the latest Form 10-K filed by the Company under the
Securities Exchange Act, as included in the most recent consolidated balance
sheet of the Company and its Subsidiaries delivered pursuant to Section 8.01
hereof (or, prior to the delivery of the first consolidated balance sheet under
Section 8.01 hereof, (i) if the merger of Burns into the Company has been
consummated and the Company has delivered to the Banks a post-merger
consolidated balance sheet setting forth the information otherwise required by
Section 8.01(a) hereof and accompanied by a certificate of a senior financial
officer of the Company, which certificate shall state that said post-merger
consolidated balance sheet presents fairly, in all material respects, the
consolidated financial condition of the Company and its Subsidiaries, in
accordance with generally accepted accounting principles, consistently applied,
as at the date of said post-
Credit Agreement
----------------
<PAGE>
- 7 -
merger balance sheet (subject to normal year-end audit adjustments), said post-
merger balance sheet, and (ii) otherwise, the consolidated balance sheet as at
November 25, 1995 referred to in Section 7.02 hereof) and in which the
Administrative Agent has a valid and perfected first-priority security interest.
"Eligible Receivables" shall mean, as at any date, the trade accounts
--------------------
receivable (net of any reserve) of the Company that are not more than 60 days
past their due date and that were entered into on normal payment terms as
included in the most recent consolidated balance sheet of the Company and its
Subsidiaries delivered pursuant to Section 8.01 hereof (or, prior to the
delivery of the first consolidated balance sheet under Section 8.01 hereof, (i)
if the merger of Burns into the Company has been consummated and the Company has
delivered to the Banks a post-merger consolidated balance sheet setting forth
the information otherwise required by Section 8.01(a) hereof and accompanied by
a certificate of a senior financial officer of the Company, which certificate
shall state that said post-merger consolidated balance sheet presents fairly, in
all material respects, the consolidated financial condition of the Company and
its Subsidiaries, in accordance with generally accepted accounting principles,
consistently applied, as at the date of said post-merger balance sheet (subject
to normal year-end audit adjustments), said post-merger balance sheet, and (ii)
otherwise, the consolidated balance sheet as at November 25, 1995 referred to in
Section 7.02 hereof) and in which the Administrative Agent has a valid and
perfected first-priority security interest.
"Environmental Claim" shall mean, with respect to any Person, (a) any
-------------------
written notice, claim, demand or other communication (collectively, a "claim")
-----
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any written claim by any governmental
authority for enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any applicable Environmental Law, and any written claim
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
Credit Agreement
----------------
<PAGE>
- 8 -
"Environmental Laws" shall mean any and all present and future
------------------
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Equity Issuance" shall mean (a) any issuance or sale by the Company
---------------
or any of its Subsidiaries after November 25, 1995 of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital stock (other than
any warrants or options issued to directors, officers, employees, agents,
consultants or advisors of the Company or any of its Subsidiaries and any
capital stock of the Company issued upon the exercise of such warrants) or (iii)
any other security or instrument representing an equity interest (or the right
to obtain any equity interest) in the issuing or selling Person or (b) the
receipt by the Company or any of its Subsidiaries after the Closing Date of any
capital contribution received (whether or not evidenced by any equity security
issued by the recipient of such contribution); provided that Equity Issuance
--------
shall not include (x) any such issuance or sale by any Subsidiary of the Company
to the Company or any Wholly Owned Subsidiary of the Company or (y) any capital
contribution by the Company or any Wholly Owned Subsidiary of the Company to any
Subsidiary of the Company.
"Equity Rights" shall mean, with respect to any Person, any
-------------
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any stockholders' or
voting trust agreements) for the issuance, sale, registration or voting of, or
outstanding securities convertible into, any additional shares of capital stock
of any class, or partnership or other ownership interests of any type in, such
Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that
---------------
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and
Credit Agreement
----------------
<PAGE>
- 9 -
Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the
Code of which the Company is a member.
"Escrow Agreement" shall mean the Escrow Agreement among the Company
----------------
and Seller, substantially in the form of Exhibit B to the Acquisition Agreement,
as modified and supplemented and in effect from time to time.
"Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan
--------------------
for any Interest Period therefor, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/100 of 1%) of the respective rates per annum quoted
by each Reference Lender at approximately 11:00 a.m. London time (or as soon
thereafter as practicable) on the date two Business Days prior to the first day
of such Interest Period for the offering by such Reference Lender to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan to be made by such Reference Lender for such Interest
Period. If any Reference Lender is not participating in any Eurodollar Loan
during any Interest Period therefor, the Eurodollar Base Rate for such Loan for
such Interest Period shall be determined by reference to the amount of the
Eurodollar Loan to be made by Chase for such Interest Period.
"Eurodollar Loans" shall mean Loans the interest rates on which are
----------------
determined on the basis of rates referred to in the definition of "Eurodollar
Base Rate" in this Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest
---------------
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Administrative Agent to be equal to the
Eurodollar Base Rate for such Loan for such Interest Period divided by 1 minus
the Reserve Requirement for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in
----------------
Section 9 hereof.
"Existing Credit Agreement" shall have the meaning assigned to such
-------------------------
term in the recitals hereto.
"Existing Lenders" shall mean the lenders party to the Existing Credit
----------------
Agreement.
"Existing Letters of Credit" shall have the meaning assigned to such
--------------------------
term in Section 2.03(l) hereof.
Credit Agreement
----------------
<PAGE>
- 10 -
"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
--------
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent.
"Fiscal Date" shall mean the last day of each fiscal quarterly period
-----------
of the Company.
"Funded Debt" shall mean, for any Person: (a) all Indebtedness of
-----------
such Person that should be reflected on a balance sheet of such Person in
accordance with GAAP; and (b) all Indebtedness of any other Person that should
be reflected on a balance sheet of such other Person in accordance with GAAP and
that is secured by a Lien on the Property of, is supported by a letter of credit
issued for account of, or is Guaranteed by, such Person.
"GAAP" shall mean generally accepted accounting principles applied on
----
a basis consistent with those which, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
---------
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
Credit Agreement
----------------
<PAGE>
- 11 -
course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall
--------- ----------
have a correlative meaning.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
------------------
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person: (a) obligations created,
------------
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for account of such Person; (e)
Capital Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person.
"Information Memorandum" shall mean the Confidential Information
----------------------
Memorandum dated January 11, 1996 distributed to the Lenders.
"Interest Coverage Ratio" shall mean, as at any date the ratio of (i)
-----------------------
EBITDA for the period of four consecutive complete fiscal quarters of the
Company ending on or most recently ended prior to such date (or such lesser
number of complete fiscal quarters of the Company as shall have ended since the
Restatement Date) to (ii) Interest Expense for such period.
Credit Agreement
----------------
<PAGE>
- 12 -
"Interest Expense" shall mean, for any period, the sum, for the
----------------
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness accrued or capitalized during such period (whether or
not actually paid during such period) plus (b) the net amounts payable (or minus
---- -----
the net amounts receivable) under Interest Rate Protection Agreements accrued
during such period (whether or not actually paid or received during such period)
minus (c) interest income during such period.
- -----
"Interest Period" shall mean, with respect to any Eurodollar Loan,
---------------
each period commencing on the date such Eurodollar Loan is made or Converted
from a Base Rate Loan or the last day of the next preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first, second,
third or sixth calendar month thereafter, as the Company may select as provided
in Section 4.05 hereof, except that each Interest Period that commences on the
last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period for any Series A Loan may
end after the Series A Commitment Termination Date; (ii) no Interest Period for
any Series B Loan may commence before and end after any Series B Commitment
Reduction Date unless, after giving effect thereto, the aggregate principal
amount of the Series B Loans having Interest Periods that end after such Series
B Commitment Reduction Date shall be equal to or less than the aggregate
principal amount of the Series B Loans scheduled to be outstanding after giving
effect to the payments of principal required to be made on such Series B
Commitment Reduction Date; (iii) each Interest Period that would otherwise end
on a day which is not a Business Day shall end on the next succeeding Business
Day (or, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (iv) notwithstanding
clauses (i) and (ii) above, no Interest Period shall have a duration of less
than one month and, if the Interest Period for any Eurodollar Loan would
otherwise be a shorter period, such Eurodollar Loan shall not be available
hereunder for such period; and (v) until the earlier of (a) the date that Chase
shall have notified the Company that its syndication of the Commitments and
Loans is completed and (b) the ninetieth day after the Amendment Effective Date,
Interest Periods in excess of one month shall not be available.
"Interest Rate Protection Agreement" shall mean, for any Person, an
----------------------------------
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial
Credit Agreement
----------------
<PAGE>
- 13 -
institutions providing for the transfer or mitigation of interest risks either
generally or under specific contingencies. For purposes hereof, the "credit
------
exposure" at any time of any Person under an Interest Rate Protection Agreement
- --------
to which such Person is a party shall be determined at such time in accordance
with the standard methods of calculating credit exposure under similar
arrangements as prescribed from time to time by the Administrative Agent, taking
into account potential interest rate movements and the respective termination
provisions and notional principal amount and term of such Interest Rate
Protection Agreement.
"Investment" shall mean, for any Person: (a) the acquisition (whether
----------
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering into such
short sale); (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including the purchase of Property
from another Person subject to an understanding or agreement, contingent or
otherwise, to resell such Property to such Person, but excluding any such
advance, loan or extension of credit having a term not exceeding 90 days
representing the purchase price of inventory or supplies sold by such Person in
the ordinary course of business); (c) the entering into of any Guarantee of, or
other contingent obligation with respect to, Indebtedness or other liability of
any other Person and (without duplication) any amount committed to be advanced,
lent or extended to such Person; or (d) the entering into of any Interest Rate
Protection Agreement.
"Issuing Lender" shall mean Chase, as the issuer of Letters of Credit
--------------
under Section 2.03 hereof, together with its successors and assigns in such
capacity.
"Letter of Credit" shall have the meaning assigned to such term in
----------------
Section 2.03 hereof.
"Letter of Credit Documents" shall mean, with respect to any Letter of
--------------------------
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be modified and supplemented and in effect from time to
time.
Credit Agreement
----------------
<PAGE>
- 14 -
"Letter of Credit Interest" shall mean, for each Series A Lender, such
-------------------------
Lender's participation interest (or, in the case of the Issuing Lender, the
Issuing Lender's retained interest) in the Issuing Lender's liability under
Letters of Credit and such Lender's rights and interests in Reimbursement
Obligations and fees, interest and other amounts payable in connection with
Letters of Credit and Reimbursement Obligations.
"Letter of Credit Liability" shall mean, without duplication, at any
--------------------------
time and in respect of any Letter of Credit, the sum of (a) the undrawn amount
of such Letter of Credit plus (b) the aggregate unpaid principal amount of all
----
Reimbursement Obligations of the Company at such time due and payable in respect
of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Series A Lender (other than the Issuing Lender) shall be deemed to
hold a Letter of Credit Liability in an amount equal to its participation
interest in the related Letter of Credit under Section 2.03 hereof, and the
Issuing Lender shall be deemed to hold a Letter of Credit Liability in an amount
equal to its retained interest in the related Letter of Credit after giving
effect to the acquisition by the Series A Lenders other than the Issuing Lender
of their participation interests under said Section 2.03.
"Level I Period" shall mean any period during which (a) no Event of
--------------
Default shall have occurred and be continuing, and (b) Rating Level 1 is in
effect or the Leverage Ratio is less than 2.0 to 1; "Level II Period" shall mean
---------------
any period, other than a Level I Period, during which (a) no Event of Default
shall have occurred and be continuing, (b) neither of Rating Level 1 or Rating
Level 2 is in effect and (c) the Leverage Ratio is greater than or equal to 2.0
to 1 but less than 3.0 to 1; "Level III Period" shall mean any period, other
----------------
than a Level I Period or a Level II Period, during which (a) no Event of Default
shall have occurred and be continuing, (b) neither of Rating Level 1 or Rating
Level 2 is in effect and (c) the Leverage Ratio is greater than or equal to 3.0
to 1 but less than 4.25 to 1; "Level IV Period" shall mean any period, other
---------------
than a Level I Period, a Level II Period or a Level III Period, during which (a)
no Event of Default shall have occurred and be continuing, (b) neither Rating
Level 1 or Rating Level 2 is in effect and (c) the Leverage Ratio is greater
than or equal to 4.25 to 1 but less than 5.75 to 1; and "Level V Period" shall
--------------
mean any period that is not a Level I Period, a Level II Period, a Level III
Period or a Level IV Period. Any change in the Applicable Margin for any Type
of Loan or any change in the Commitment Fee by reason of (x) a change in the
Standard & Poor's Rating or the Moody's Rating shall become effective on the
date of announcement or publication by the respective rating agencies of a
change in such rating or, in the absence of such announcement or publication,
the effective
Credit Agreement
----------------
<PAGE>
- 15 -
date of such rating and (y) a change in the Leverage Ratio shall become
effective on the first day of the next succeeding fiscal quarterly period of the
Company following receipt by the Administrative Agent of the financial
statements of the Company and its Subsidiaries for such most recent Fiscal Date
delivered as required by Section 8.01(a) or (b) hereof; provided that failure to
--------
deliver such financial statements as required by Section 8.01(a) or (b) hereof
shall result in the Applicable Margin and Commitment Fee Rate being at the rates
set forth opposite Level V Period. Notwithstanding the foregoing, until the
Company has delivered the financial statements required by Section 8.01(b) for
the Fiscal Date in August 1996, a Level IV Period shall be deemed to be in
effect unless Rating Level 2 is in effect, in which case a Level V Period shall
------
be deemed to be in effect.
"Leverage Ratio" shall mean, at any time, the ratio of Total Funded
--------------
Debt at such time to (x) prior to the completion of four complete fiscal
quarters after the Restatement Date for which financial statements have been
delivered pursuant to Section 8.01(a) or (b) hereof, EBITDA for the period of
such number of complete fiscal quarters since the Restatement Date for which
financial statements have been delivered pursuant to Section 8.01(a) or (b)
hereof multiplied by a fraction, the numerator of which is 4 and the denominator
of which shall be such number of complete fiscal quarters since the Restatement
Date for which financial statements have been delivered pursuant to Section
8.01(a) or (b) hereof and (y) thereafter, EBITDA for the four most recent fiscal
quarters for which financial statements have been delivered pursuant to Section
8.01(a) or (b) hereof.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Basic Documents, a
Person shall be deemed to own subject to a Lien any Property that it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
(other than an operating lease) relating to such Property.
"Line of Credit" shall mean the unsecured short-term line of credit
--------------
providing for, among other things, loans and advances by Chase to the Company in
an aggregate principal amount not to exceed $10,000,000, the obligation to repay
such loans and advances being evidenced by a Demand Note of the Company dated
November 20, 1995 and payable to Chase, as the same shall be modified and
supplemented and in effect from time to time.
Credit Agreement
----------------
<PAGE>
- 16 -
"Loans" shall mean the Series A Loans and the Series B Loans.
-----
"Majority Lenders" shall mean Majority Series A Lenders and Majority
----------------
Series B Lenders.
"Majority Series A Lenders" shall mean Series A Lenders having at
-------------------------
least 60% of the aggregate amount of the Series A Commitments or, if the Series
A Commitments shall have terminated, Lenders holding at least 60% of the sum of
(a) the aggregate unpaid principal amount of the Series A Loans plus (b) the
----
aggregate amount of all Letter of Credit Liabilities.
"Majority Series B Lenders" shall mean Series B Lenders having at
-------------------------
least 60% of the aggregate amount of the Series B Commitments or, if the Series
B Commitments shall have terminated, Lenders holding at least 60% of the
aggregate unpaid principal amount of the Series B Loans.
"Margin Stock" shall mean "margin stock" within the meaning of
------------
Regulations U and X.
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the Property, business, operations, financial condition, prospects, liabilities
or capitalization of the Company and its Subsidiaries taken as a whole, (b) the
ability of the Company to perform its obligations under any of the Basic
Documents to which it is a party, (c) the validity or enforceability of any of
the Basic Documents, (d) the rights and remedies of the Lenders and the
Administrative Agent under any of the Basic Documents or (e) the timely payment
of the principal of or interest on the Loans or the Reimbursement Obligations or
other amounts payable in connection therewith.
"Moody's" shall mean Moody's Investors Services, Inc. or any successor
-------
corporation thereto.
"Moody's Rating" shall mean, at any time, the then current rating
--------------
(including the failure to rate) by Moody's of the Company's long-term senior
Indebtedness.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
------------------
in Section 3(37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean:
----------------------
(i) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;
Credit Agreement
----------------
<PAGE>
- 17 -
(ii) in the case of any Casualty Event, the aggregate amount of proceeds
of insurance, condemnation awards and other compensation received by the
Company and its Subsidiaries in respect of such Casualty Event net of (A)
reasonable expenses incurred by the Company and its Subsidiaries in
connection therewith and (B) contractually required repayments of
Indebtedness to the extent secured by a Lien on such Property and any
income and transfer taxes payable by the Company or any of its Subsidiaries
in respect of such Casualty Event;
(iii) in the case of any Equity Issuance, the aggregate amount of all
cash received by the Company and its Subsidiaries in respect of such Equity
Issuance net of reasonable expenses incurred by the Company and its
Subsidiaries in connection therewith; and
(iv) in the case of any Reversion, the aggregate amount of all cash
received by the Company or any of its Subsidiaries in respect of such
Reversion net of (A) reasonable expenses incurred by the Company and its
Subsidiaries in connection therewith and (B) any income and excise taxes
payable by the Company or any of its Subsidiaries in respect of such
Reversion.
"Net Cash Payments" shall mean, with respect to any Disposition, the
-----------------
aggregate amount of all cash payments, and the fair market value of any non-cash
consideration, received by the Company and its Subsidiaries directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
--------
Payments shall be net of (i) the amount of any legal, accounting and other
professional fees, title and recording tax expenses, commissions and other fees
and expenses paid by the Company and its Subsidiaries in connection with such
Disposition and (ii) any Federal, state and local income or other taxes
estimated to be payable by the Company and its Subsidiaries as a result of such
Disposition (but only to the extent that such estimated taxes are in fact paid
to the relevant Federal, state or local governmental authority within three
months of date of such Disposition or the Company or any of its Subsidiaries
uses any applicable tax benefit available to it as set forth on its balance
sheet to reduce such estimated taxes payable within such three month period),
(b) Net Cash Payments shall not include any cash payments of less than $50,000
from any one Disposition or a series of related Dispositions, and (c) Net Cash
Payments shall be net of any repayments by the Company or any of its
Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is secured
by a Lien on the Property that is the subject of such Disposition and (ii) the
transferee of (or holder
Credit Agreement
----------------
<PAGE>
- 18 -
of a Lien on) such Property requires that such Indebtedness be repaid as a
condition to the purchase of such Property.
"Notes" shall mean the Series A Notes and the Series B Notes.
------
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
----
entity succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean: (a) direct obligations of the
---------------------
United States of America, or of any agency thereof, or obligations guaranteed as
to principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 120 days from the date of
acquisition thereof; (b) certificates of deposit issued by any bank or trust
company organized under the laws of the United States of America or any state
thereof and having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 120 days from the date of acquisition
thereof; (c) commercial paper rated A-1 or better or P-1 by S&P or Moody's,
respectively, maturing not more than 120 days from the date of acquisition
thereof and (d) shares, partnership interests or other units of beneficial
interest in investment companies or other pooled investment vehicles which
invest exclusively in Permitted Investments described in clauses (a), (b) and/or
(c) of this definition.
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit plan established or maintained
----
by the Company or any ERISA Affiliate and that is covered by Title IV of ERISA,
other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of any
-----------------
Loan, any Reimbursement Obligation or any other amount under this Agreement, any
Note or any other Basic Document that is not paid when due (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise), a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to 2% plus the
----
Base Rate as in effect from time to time plus the Applicable Margin for Base
----
Rate Loans (provided that, if the amount so in default is principal of a
--------
Eurodollar Loan and the due date thereof is a day other than the last day of the
Interest Period therefor, the "Post-Default Rate" for such principal shall be,
for the period for and including such due
Credit Agreement
----------------
<PAGE>
- 19 -
date to but excluding the last day of the Interest Period, 2% plus the interest
----
rate for such Loan as provided in Section 3.02 hereof and, thereafter, the rate
provided for above in this definition).
"Prime Rate" shall mean the rate of interest from time to time
----------
announced by Chase at the Principal Office as its prime commercial lending rate.
"Principal Office" shall mean the principal office of Chase, located
----------------
on the date hereof at 1 Chase Manhattan Plaza, New York, New York 10081.
"Property" shall mean any right or interest in or to property of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the quarterly anniversaries of the
---------------
Restatement Date; provided that, if any such date is not a Business Day, the
--------
Quarterly Date shall be the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, the next
preceding Business Day).
"Rating Level 1" shall mean (a) the Standard & Poor's Rating is at or
--------------
above BBB- (or any successor rating) and (b) the Moody's Rating is at or above
Baa3 (or any successor rating).
"Rating Level 2" shall mean (a) the Standard & Poor's Rating is below
--------------
BB- (or any successor rating) or (b) the Moody's Rating is below Ba3 (or any
successor rating).
"Recapture Date" shall mean the last day of the Recapture Period.
--------------
"Recapture Period" shall mean each period (a) commencing on the later
----------------
of (i) October 29, 1993 and (ii) the day immediately following the last day of
the immediately preceding Recapture Period, and (b) ending on the date on which
the Company and/or its Subsidiaries receives Net Available Proceeds which,
together with all Net Available Proceeds received since the first day of such
Recapture Period, equal or exceeds in the aggregate $1,000,000.
"Receivables Sale Agreement" shall mean the Receivables Sale Agreement
--------------------------
among the Company, the Receivables Trustee and Centrally Held Eagle Receivables
Program, Inc., substantially in the form of Exhibit A to the Acquisition
Agreement, as modified and supplemented and in effect from time to time.
Credit Agreement
----------------
<PAGE>
- 20 -
"Receivables Trustee" shall mean First Illinois Trust of Illinois,
-------------------
National Association, as trustee under the Eagle Trade Receivables Master Trust.
"Reference Lenders" shall mean Chase and NationsBank, N.A. (or their
-----------------
respective Applicable Lending Offices, as the case may be).
"Regulations A, D, U and X" shall mean, respectively, Regulations A,
-------------------------
D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
-----------------
after the date of this Agreement in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Reimbursement Obligations" shall mean, at any time, the obligations
-------------------------
of the Company then outstanding, or which may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, groundwater,
wetlands, land or subsurface strata. The terms "Release" and "Released" used as
------- --------
a verb shall have a correlative meaning.
"Reserve Requirement" shall mean, for any Interest Period for any
-------------------
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any
Credit Agreement
----------------
<PAGE>
- 21 -
category of liabilities that includes deposits by reference to which the
Eurodollar Base Rate is to be determined as provided in the definition of
"Eurodollar Base Rate" in this Section 1.01 or (ii) any category of extensions
of credit or other assets that includes Eurodollar Loans.
"Restatement Date" shall mean January 19, 1996.
----------------
"Restricted Payment" shall mean, with respect to any Person, (a)
------------------
dividends (in cash, Property or obligations) on, or other payments or
distributions on account of, or the setting apart of money for a sinking or
other analogous fund for, or the purchase, redemption, retirement or other
acquisition of, any shares of any class of stock of such Person or of any
warrants, options or other rights to acquire the same (or to make any payments
to any other Person, such as "phantom stock" payments, where the amount thereof
is calculated with reference to the fair market or equity value of such Person
or any of its Subsidiaries), but excluding dividends payable solely in shares of
common stock or in options, warrants or other rights to purchase such common
stock of such Person or (b) any payment (whether made by such Person or any of
its Subsidiaries) on account of the purchase, redemption, prepayment, defeasance
or other acquisition or retirement of value of any Indebtedness (i) which is
subordinated in right of payment to the prior payment of the Loans or (ii) which
is evidenced by the Senior Notes.
"Reversion" shall mean the termination by the Company or any of its
---------
Subsidiaries of a Plan which results in a payment to the Company or any of its
Subsidiaries of any part of the over-funded portion of such Plan.
"Revolving Credit Security Agreement" shall mean the Revolving Credit
-----------------------------------
Security Agreement in the form of Exhibit B-1 hereto, as amended by Section
11.14(a) hereof and as the same shall be further modified, supplemented and in
effect from time to time.
"Securities Exchange Act" shall mean the Securities Exchange Act of
-----------------------
1934, as amended.
"Security Documents" shall mean, collectively, the Revolving Credit
------------------
Security Agreement and the Term Loan Security Agreement.
"Seller" shall mean Eagle Industrial Products Corporation, a Delaware
------
corporation and the sole stockholder of Burns.
Credit Agreement
----------------
<PAGE>
- 22 -
"Senior Indenture" shall mean the Indenture dated as of March 3, 1993
----------------
between the Company and United States Trust Company of New York, as Trustee, as
the same shall be modified and supplemented and in effect from time to time.
"Senior Notes" shall mean the Company's 9-3/4% Senior Notes due 2003
------------
issued pursuant to the Senior Indenture, as the same shall be modified and
supplemented and in effect from time to time.
"Senior Subordinated Indenture" shall mean the Indenture dated as of
-----------------------------
the Amendment Effective Date between the Company and Fleet National Bank
Connecticut, N.A., as Trustee, as the same shall be modified and supplemented
and in effect from time to time.
"Senior Subordinated Notes" shall mean the Company's Senior
-------------------------
Subordinated Notes due 2006 issued pursuant to the Senior Subordinated
Indenture, as the same shall be modified and supplemented and in effect from
time to time.
"Series A Commitment" shall mean, for each Series A Lender, the
-------------------
obligation of such Lender to make Series A Loans in an aggregate amount at any
one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on the signature pages hereof under the caption "Series A
Commitment" (as the same may be reduced from time to time pursuant to Section
2.04 hereof or increased or reduced from time to time pursuant to Section 11.06
hereof). The original aggregate principal amount of the Series A Commitments is
$75,000,000.
"Series A Commitment Percentage" shall mean, with respect to any
------------------------------
Series A Lender, the ratio of (a) the amount of the Series A Commitment of such
Lender to (b) the aggregate amount of the Series A Commitments of all of the
Lenders.
"Series A Commitment Termination Date" shall mean the fifth
------------------------------------
anniversary of the Restatement Date; provided that if such day is not a Business
--------
Day, the Series A Commitment Termination Date shall be the immediately preceding
Business Day.
"Series A Lenders" shall mean (a) on the Amendment Effective Date, the
----------------
Lenders having Series A Commitments on the signature pages hereof and (b)
thereafter, the Lenders from time to time holding Series A Loans and Series A
Commitments after giving effect to any assignments thereof permitted by Section
11.06 hereof.
"Series A Loans" shall mean the loans provided for by Section 2.01(a)
--------------
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
Credit Agreement
----------------
<PAGE>
- 23 -
"Series A Notes" shall mean the promissory notes provided for by
--------------
Section 2.08(a) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Series B Commitment" shall mean, for each Series B Lender, the
-------------------
obligation of such Lender to make Series B Loans in an aggregate amount at any
one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on the signature pages hereof under the caption "Series B
Commitment" (as the same may be reduced from time to time pursuant to Section
2.04 hereof or increased or reduced from time to time pursuant to Section 11.06
hereof). The original aggregate principal amount of the Series B Commitments is
$25,000,000.
"Series B Commitment Reduction Dates" shall mean the eight Quarterly
-----------------------------------
Dates commencing with the Quarterly Date falling on or nearest to the date three
years and three months after the Restatement Date and ending on the Series B
Commitment Termination Date.
"Series B Commitment Termination Date" shall mean the fifth
------------------------------------
anniversary of the Restatement Date; provided that if such day is not a Business
--------
Day, the Series B Commitment Termination Date shall be the immediately preceding
Business Day.
"Series B Lenders" shall mean (a) on the Amendment Effective Date, the
----------------
Lenders having Series B Commitments on the signature pages hereof and (b)
thereafter, the Lenders from time to time holding Series B Loans and Series B
Commitments after giving effect to any assignments thereof permitted by Section
11.06 hereof.
"Series B Loans" shall mean the loans provided for by Section 2.01(b)
--------------
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Series B Notes" shall mean the promissory notes provided for by
--------------
Section 2.08(b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"S&P" shall mean Standard & Poor's Rating Group or any successor
---
thereto.
"Specified Subsidiary" shall mean each of BE Aerospace International,
--------------------
Inc., BE Aerospace (France) S.A.R.L. and Nordskog Industries, Inc., but only
until all (or, in the case of a
Credit Agreement
----------------
<PAGE>
- 24 -
Subsidiary that is not a Domestic Subsidiary, 65%) of its shares that are owned
by the Company become subject to the Lien of the Revolving Credit Security
Agreement or are otherwise pledged to the Administrative Agent for the benefit
of the Series A Lenders pursuant to documentation in form and substance
reasonably satisfactory to the Majority Series A Lenders.
"Standard & Poor's Rating" shall mean, at any time, the then current
------------------------
rating (including the failure to rate) by S&P of the Company's long-term senior
Indebtedness.
"Subsidiary" shall mean, for any Person, any corporation, partnership
----------
or other entity of which at least a majority of the securities or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
of such corporation, partnership or other entity (irrespective of whether or not
at the time securities or other ownership interests of any other class or
classes of such corporation, partnership or other entity shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person. "Wholly Owned Subsidiary" shall mean any such corporation,
-----------------------
partnership or other entity of which all of the equity securities or other
ownership interests (other than, in the case of a corporation, directors'
qualifying shares) are so owned or controlled.
"Term Loan Security Agreement" shall mean the Term Loan Security
----------------------------
Agreement in the form of Exhibit B-2 hereto, as amended by Section 11.14(b)
hereof and as the same shall be further modified, supplemented and in effect
from time to time.
"Total Funded Debt" shall mean, as at any date, the sum, for the
-----------------
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of all Funded Debt.
"Type" shall have the meaning assigned to such term in Section 1.03
----
hereof.
1.02 Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in subsection (b)
Credit Agreement
----------------
<PAGE>
- 25 -
below) be prepared, in accordance with generally accepted accounting principles
applied on a basis consistent with those used in the preparation of the latest
financial statements furnished to the Lenders hereunder (which, prior to the
delivery of the first financial statements under Section 8.01 hereof, shall mean
the audited financial statements as at February 25, 1995 referred to in Section
7.02 hereof). All calculations made for the purposes of determining compliance
with this Agreement shall (except as otherwise expressly provided herein) be
made by application of generally accepted accounting principles applied on a
basis consistent with those used in the preparation of the latest annual or
quarterly financial statements furnished to the Lenders pursuant to Section 8.01
hereof (or, prior to the delivery of the first financial statements under
Section 8.01 hereof, used in the preparation of the audited financial statements
as at February 25, 1995 referred to in Section 7.02 hereof) unless (i) the
Company shall have objected to determining such compliance on such basis at the
time of delivery of such financial statements or (ii) the Majority Lenders shall
so object in writing within 30 days after delivery of such financial statements,
in either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01 hereof,
shall mean the audited financial statements as at February 25, 1995 referred to
in Section 7.02 hereof).
(b) The Company shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, the fiscal year of the Company
shall end on the last Saturday in February of each year, and the last days of
the first three fiscal quarters shall fall on the last Saturday in each of May,
August and November of each year, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished
--------------------------
by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a
Loan) refers to whether such Loan
Credit Agreement
----------------
<PAGE>
- 26 -
is a Series A Loan or a Series B Loan, each of which constitutes a Class. The
"Type" of a Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar
Loan, each of which constitutes a Type. Loans may be identified by both Class
and Type.
Section 2. Commitments, Loans, Notes and Prepayments.
-----------------------------------------
2.01 Loans.
-----
(a) Series A Loans. Each Series A Lender severally agrees, on the
--------------
terms and conditions of this Agreement, to make loans to the Company in Dollars
to but not including the Series A Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Series A Commitment of such Lender as in effect from time to time (such
Loans, together with the "Series A Loans" made under the Existing Credit
Agreement, being herein called "Series A Loans"), provided that in no event
-------------- --------
shall the aggregate principal amount of all Series A Loans, together with the
aggregate amount of all Letter of Credit Liabilities, exceed the aggregate
amount of the Series A Commitments or the Borrowing Base as in effect from time
to time. Subject to the terms and conditions of this Agreement, the Company may
borrow, repay and reborrow the amount of the Series A Commitments by means of
Base Rate Loans and Eurodollar Loans and may Convert Series A Loans of one Type
into Series A Loans of another Type (as provided in Section 2.09 hereof) or
Continue Series A Loans of one Type as Series A Loans of the same Type (as
provided in Section 2.09 hereof); provided that prior to the earlier of (i) the
--------
date that the Administrative Agent shall have notified the Company that it has
completed its syndication of the Commitments or (ii) the date 90 days after the
Restatement Date, all Eurodollar Loans must have Interest Periods of one month.
(b) Series B Loans. Each Series B Lender severally agrees, on the
--------------
terms and conditions of this Agreement, to make loans to the Company in Dollars
to but not including the Series B Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Series B Commitment of such Lender as in effect from time to time (such
Loans, together with the "Series B Loans" made under the Existing Credit
Agreement, being herein called "Series B Loans"), provided that in no event
-------------- --------
shall the aggregate principal amount of all Series B Loans exceed the aggregate
amount of the Series B Commitments as in effect from time to time. Subject to
the terms and conditions of this Agreement, the Company may borrow, repay and
reborrow the amount of the Series B Commitments by means of Base Rate Loans and
Eurodollar Loans and may Convert Series B Loans of one Type into Series B Loans
of another Type (as provided in Section 2.09 hereof) or Continue Series B Loans
Credit Agreement
----------------
<PAGE>
- 27 -
of one Type as Series B Loans of the same Type (as provided in Section 2.09
hereof); provided that prior to the earlier of (i) the date that the
--------
Administrative Agent shall have notified the Company that it has completed its
syndication of the Commitments or (ii) the date 90 days after the Restatement
Date, all Eurodollar Loans must have Interest Periods of one month.
(c) Limit on Eurodollar Loans. No more than six separate Interest
-------------------------
Periods in respect of Eurodollar Loans of either Class from each Lender may be
outstanding at any one time.
2.02 Borrowings. The Company shall give the Administrative Agent
----------
(which shall promptly notify the Lenders) notice of each borrowing hereunder as
provided in Section 4.05 hereof. Not later than 1:00 p.m. New York time on the
date specified for each borrowing hereunder, each Lender shall make available
the amount of the Loan or Loans to be made by it on such date to the
Administrative Agent, at account number NYAO-DI-900-9-000002 maintained by the
Administrative Agent with Chase at the Principal Office, in immediately
available funds, for account of the Company. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained with Chase
at the Principal Office designated by the Company.
2.03 Letters of Credit. Subject to the terms and conditions of this
-----------------
Agreement, the Series A Commitments may be utilized, upon the request of the
Company, in addition to the Series A Loans provided for by Section 2.01(a)
hereof, by the issuance by the Issuing Lender of letters of credit
(collectively, "Letters of Credit") for account of the Company or any of its
-----------------
Subsidiaries (as specified by the Company), provided that in no event shall (i)
--------
the aggregate amount of all Letter of Credit Liabilities, together with the
aggregate principal amount of the Series A Loans, exceed the aggregate amount of
the Series A Commitments as in effect from time to time, (ii) the outstanding
aggregate amount of all Letter of Credit Liabilities exceed $15,000,000 and
(iii) the expiration date of any Letter of Credit extend beyond the earlier of
the Series A Commitment Termination Date and the date twelve months following
the issuance of such Letter of Credit. The following additional provisions
shall apply to Letters of Credit:
(a) The Company shall give the Administrative Agent at least three
Business Days' irrevocable prior notice (effective upon receipt) specifying
the Business Day (which shall be no later than thirty days preceding the
Series A Commitment Termination Date) each Letter of Credit is to be
Credit Agreement
----------------
<PAGE>
- 28 -
issued and the account party or parties therefor and describing in
reasonable detail the proposed terms of such Letter of Credit (including
the beneficiary thereof) and the nature of the transactions or obligations
proposed to be supported thereby (including whether such Letter of Credit
is to be a commercial letter of credit or a standby letter of credit).
Upon receipt of any such notice, the Administrative Agent shall advise the
Issuing Lender of the contents thereof.
(b) On each day during the period commencing with the issuance by the
Issuing Lender of any Letter of Credit and until such Letter of Credit
shall have expired or been terminated, the Series A Commitment of each
Series A Lender shall be deemed to be utilized for all purposes of this
Agreement in an amount equal to such Lender's Series A Commitment
Percentage of the then undrawn face amount of such Letter of Credit. Each
Series A Lender (other than the Issuing Lender) agrees that, upon the
issuance of any Letter of Credit hereunder, it shall automatically acquire
a participation in the Issuing Lender's liability under such Letter of
Credit in an amount equal to such Lender's Series A Commitment Percentage
of such liability, and each Series A Lender (other than the Issuing Lender)
thereby shall absolutely, unconditionally and irrevocably assume, as
primary obligor and not as surety, and shall be unconditionally obligated
to the Issuing Lender to pay and discharge when due, its Series A
Commitment Percentage of the Issuing Lender's liability under such Letter
of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify the Company (through the Administrative Agent) of the
amount to be paid by the Issuing Lender as a result of such demand and the
date on which payment is to be made by the Issuing Lender to such
beneficiary in respect of such demand. Notwithstanding the identity of the
account party of any Letter of Credit, the Company hereby unconditionally
agrees to pay and reimburse the Administrative Agent for account of the
Issuing Lender for the amount of each demand for payment under such Letter
of Credit at or prior to the date on which payment is to be made by the
Issuing Lender to the beneficiary thereunder, without presentment, demand,
protest or other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in clause (c)
of this Section 2.03, the Company shall advise the Administrative Agent
whether or not the Company intends to borrow hereunder to finance its
obligation to reimburse
Credit Agreement
----------------
<PAGE>
- 29 -
the Issuing Lender for the amount of the related demand for payment and, if
it does, submit a notice of such borrowing as provided in Section 4.05
hereof. In the event that the Company fails to so advise the
Administrative Agent, or if the Company fails to reimburse the Issuing
Lender for a demand for payment under a Letter of Credit by the date of
such payment, the Administrative Agent shall give each Series A Lender
prompt notice of the amount of the demand for payment, specifying such
Lender's Series A Commitment Percentage of the amount of the related demand
for payment.
(e) Each Series A Lender (other than the Issuing Lender) shall pay to
the Administrative Agent for account of the Issuing Lender at the Principal
Office in Dollars and in immediately available funds, the amount of such
Lender's Series A Commitment Percentage of any payment under a Letter of
Credit upon notice by the Issuing Lender (through the Administrative Agent)
to such Series A Lender requesting such payment and specifying such amount;
provided that such Series A Lender shall not be obligated to reimburse the
--------
Issuing Bank if such payment is the result of the willful misconduct or
gross negligence of the Issuing Bank in determining that the request or
demand for such payment complied with the terms of such Letter of Credit.
Each such Series A Lender's obligation to make such payments to the
Administrative Agent for account of the Issuing Lender under this clause
(e), and the Issuing Lender's right to receive the same, shall be absolute
and unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, (i) the failure of any other Series A Lender
to make its payment under this clause (e), the financial condition of the
Company (or any other account party), the existence of any Default or (ii)
the termination of the Commitments. Each such payment to the Issuing
Lender shall be made without any offset, abatement, withholding or
reduction whatsoever. If any Series A Lender shall default in its
obligation to make any such payment to the Administrative Agent for account
of the Issuing Lender, for so long as such default shall continue the
Administrative Agent shall at the request of the Issuing Bank withhold from
any payments received by the Administrative Agent under this Agreement or
any Note for account of such Series A Lender the amount so in default and
the Administrative Agent shall pay the same to the Issuing Lender in
satisfaction of such defaulted obligation.
(f) Upon the making of each payment by a Series A Lender to the
Issuing Lender pursuant to clause (e) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action on
the part of
Credit Agreement
----------------
<PAGE>
- 30 -
the Administrative Agent, the Issuing Lender or such Lender, acquire (i) a
participation in an amount equal to such payment in the Reimbursement
Obligation owing to the Issuing Lender by the Company hereunder and under
the Letter of Credit Documents relating to such Letter of Credit and (ii) a
participation in a percentage equal to such Lender's Series A Commitment
Percentage in any interest or other amounts payable by the Company
hereunder and under such Letter of Credit Documents in respect of such
Reimbursement Obligation (other than the commissions, charges, costs and
expenses payable to the Issuing Lender pursuant to clause (g) of this
Section 2.03). Upon receipt by the Issuing Lender from or for account of
the Company of any payment in respect of any Reimbursement Obligation or
any such interest or other amount (including by way of setoff or
application of proceeds of any collateral security) the Issuing Lender
shall promptly pay to the Administrative Agent for account of each Series A
Lender entitled thereto, such Series A Lender's Series A Commitment
Percentage of such payment, each such payment by the Issuing Lender to be
made in the same money and funds in which received by the Issuing Lender.
In the event any payment received by the Issuing Lender and so paid to the
Series A Lenders hereunder is rescinded or must otherwise be returned by
the Issuing Lender, each Series A Lender shall, upon the request of the
Issuing Lender (through the Administrative Agent), repay to the Issuing
Lender (through the Administrative Agent) the amount of such payment paid
to such Lender, with interest as specified in clause (j) of this Section
2.03.
(g) The Company shall pay to the Administrative Agent for account of
the Series A Lenders in respect of each Letter of Credit a letter of credit
fee in an amount equal to the product of the Applicable Margin for
Eurodollar Loans times the daily average undrawn amount of such Letter of
-----
Credit for the period from and including the date of issuance of such
Letter of Credit to and including the date such Letter of Credit is drawn
in full, expires or is terminated (such fee to be non-refundable, to be
paid in arrears on each Quarterly Date and on the Series A Commitment
Termination Date and to be calculated, for any day, after giving effect to
any payments made under such Letter of Credit on such day). In addition,
the Company shall pay to the Administrative Agent for account of the
Issuing Lender all commissions, charges, costs and expenses in the amounts
customarily charged by the Issuing Lender from time to time in like
circumstances with respect to the issuance of each Letter of Credit and
drawings and other transactions relating thereto.
Credit Agreement
----------------
<PAGE>
- 31 -
(h) Promptly following the end of each calendar month, the Issuing
Lender shall deliver (through the Administrative Agent) to each Series A
Lender and the Company a notice describing the aggregate amount of all
Letters of Credit outstanding at the end of such month. Upon the request
of any Series A Lender from time to time, the Issuing Lender shall deliver
any other information reasonably requested by such Lender with respect to
each Letter of Credit then outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 6
hereof, be subject to the conditions precedent that (i) such Letter of
Credit shall be in such form, contain such terms and support such
transactions as shall be satisfactory to the Issuing Lender consistent with
its then current practices and procedures with respect to letters of credit
of the same type and (ii) the Company shall have executed and delivered
such applications, agreements and other instruments relating to such Letter
of Credit as the Issuing Lender shall have reasonably requested consistent
with its then current practices and procedures with respect to letters of
credit of the same type, provided that in the event of any conflict between
--------
any such application, agreement or other instrument and the provisions of
this Agreement or any Security Document, the provisions of this Agreement
and the Security Documents shall control.
(j) To the extent that any Series A Lender fails to pay any amount
required to be paid pursuant to clause (e) or (f) of this Section 2.03 on
the due date therefor, such Lender shall pay interest to the Issuing Lender
(through the Administrative Agent) on such amount from and including such
due date to but excluding the date such payment is made (i) during the
period from and including such due date to but excluding the date three
Business Days thereafter, at a rate per annum equal to the Federal Funds
Rate (as in effect from time to time) and (ii) thereafter, at a rate per
annum equal to the Base Rate (as in effect from time to time) plus 2%.
----
(k) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (x) the respective Letter of Credit affected
thereby would have complied with such conditions had it originally been
issued hereunder in such modified or
Credit Agreement
----------------
<PAGE>
- 32 -
supplemented form or (y) each Series A Lender shall have consented thereto.
(l) Pursuant to Section 2.03 of the Existing Credit Agreement, Chase
has issued the Letters of Credit identified on Schedule V hereto (the
"Existing Letters of Credit"). Each Series A Lender hereby agrees that
---------------------------
each Existing Letter of Credit shall constitute, on and after the Amendment
Effective Date, a Letter of Credit for all purposes of this Agreement.
The Company hereby indemnifies and holds harmless each Series A Lender and the
Administrative Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses which such Lender or the Administrative Agent may
incur (or which may be claimed against such Lender or the Administrative Agent
by any Person whatsoever) by reason of or in connection with the execution and
delivery or transfer of or payment or refusal to pay by the Issuing Lender under
any Letter of Credit; provided that the Company shall not be required to
--------
indemnify any Lender or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (x) the willful misconduct or gross negligence of the Issuing Lender
in determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or (y) in the case of the Issuing
Lender, such Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of Credit. Nothing in this Section 2.03 is intended to limit the
other obligations of the Company, any Lender or the Administrative Agent under
this Agreement.
2.04 Changes of Commitments.
----------------------
(a) Series A Commitments.
--------------------
(i) The Series A Commitments shall terminate on the Series A
Commitment Termination Date.
(ii) The Company shall have the right at any time or from time to
time (x) so long as no Series A Loans or Letter of Credit Liabilities are
outstanding, to terminate the Series A Commitments and (y) to reduce the
aggregate unused amount of the Series A Commitments (for which purpose use
of the Series A Commitments shall be deemed to include the aggregate amount
of Letter of Credit Liabilities); provided that (A) the Company shall give
--------
notice of each such termination or reduction as provided in Section 4.05
hereof, (B) each partial reduction shall be in an aggregate amount
Credit Agreement
----------------
<PAGE>
- 33 -
at least equal to $5,000,000 or in multiples of $1,000,000 in excess
thereof and (C) the aggregate amount of the Series A Commitments may not be
(I) terminated so long as the Series B Commitments are outstanding or (II)
reduced below the aggregate amount of the Series B Commitments then
outstanding.
(b) Series B Commitments.
--------------------
(i) The Series B Commitments shall terminate on the Series B
Commitment Termination Date. In addition, the aggregate amount of the
Series B Commitments shall be automatically reduced on each Series B
Commitment Reduction Date by an amount equal to the product of (x) the
aggregate amount of the Series B Commitments as originally in effect times
-----
(y) 12.5%.
(ii) The Company shall have the right at any time or from time to
time (x) so long as no Series B Loans are outstanding, to terminate the
Series B Commitments and (y) to reduce the aggregate amount of the Series B
Commitments; provided that (A) the Company shall give notice of each such
--------
termination or reduction as provided in Section 4.05 hereof; (B) each
partial reduction shall be in an aggregate amount at least equal to
$5,000,000 or in multiples of $1,000,000 in excess thereof; and (C) to the
extent that, after giving effect to any such reduction, the aggregate
principal amount of the Series B Loans would exceed the Series B
Commitments, the Company shall prepay the Series B Loans.
(c) All Commitments. The Commitments once terminated or reduced may
---------------
not be reinstated.
2.05 Commitment Fee. The Company shall pay to the Administrative
--------------
Agent for account of (i) each Series A Lender a commitment fee on the daily
average unused amount of such Lender's Series A Commitment (for which purpose
Letter of Credit Liabilities shall be deemed to be a use of any Lender's Series
A Commitment) and (ii) each Series B Lender a commitment fee on the daily
average unused amount of such Lender's Series B Commitment, for the period from
and including the Amendment Effective Date to but not including the date such
Commitment is terminated, at a rate per annum equal to the Commitment Fee Rate.
Accrued commitment fee shall be payable on each Quarterly Date and on the date
the relevant Commitments are terminated.
2.06 Lending Offices. The Loans of each Type made by each Lender
---------------
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
Credit Agreement
----------------
<PAGE>
- 34 -
2.07 Several Obligations; Remedies Independent. The failure of any
-----------------------------------------
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor the Administrative Agent shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender, and
no Lender shall have any obligation to the Administrative Agent (except as
provided in Section 4.06 hereof) or any other Lender for the failure by such
Lender to make any Loan required to be made by such Lender.
2.08 Notes.
-----
(a) The Series A Loans made by each Lender shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit A-1
hereto, dated the Restatement Date, payable to such Lender in a principal amount
equal to the amount of its Series A Commitment as in effect on the Amendment
Effective Date and otherwise duly completed.
(b) The Series B Loans made by each Lender shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit A-2
hereto, dated the Restatement Date, payable to such Lender in a principal amount
equal to its Series B Commitment as in effect on the Amendment Effective Date
and otherwise duly completed.
(c) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan of each Class made by each Lender to the
Company, and each payment made on account of the principal thereof, shall be
recorded by such Lender on its books and, prior to any transfer of the Note
evidencing the Loans of such Class held by it, endorsed by such Lender on the
schedule attached to such Note or any continuation thereof; provided that the
--------
failure of such Lender to make any such recordation or endorsement shall not
affect the obligations of the Company to make a payment when due of any amount
owing hereunder or under such Note in respect of the Loans to be evidenced by
such Note.
(d) No Lender shall be entitled to have its Notes subdivided, by
exchange for promissory notes of lesser denominations or otherwise, except in
connection with a permitted assignment of all or any portion of such Lender's
relevant Commitment, Loans and Notes pursuant to Section 11.06(b) hereof.
2.09 Optional Prepayments and Conversions or Continuations of Loans.
--------------------------------------------------------------
Subject to Sections 4.04 and 5.05 hereof, the Company shall have the right to
prepay Loans, or to Convert Loans of one Type into Loans of another Type or
Continue
Credit Agreement
----------------
<PAGE>
- 35 -
Loans of one Type as Loans of the same Type, at any time or from time to time,
provided that the Company shall give the Administrative Agent notice of each
- --------
such prepayment, Conversion or Continuation as provided in Section 4.05 hereof
(and, upon the date specified in any such notice of prepayment, the amount to be
prepaid shall become due and payable hereunder). Notwithstanding the foregoing,
and without limiting the rights and remedies of the Lenders under Section 9
hereof, in the event that any Event of Default shall have occurred and be
continuing, the Administrative Agent may (and at the request of the Majority
Lenders shall) suspend the right of the Company to Convert any Loan into a
Eurodollar Loan, or to Continue any Loan as a Eurodollar Loan, in which event
all Loans shall be Converted (on the last day(s) of the respective Interest
Periods therefor) or Continued, as the case may be, as Base Rate Loans.
2.10 Mandatory Prepayments and Reductions of Commitments.
---------------------------------------------------
(a) Borrowing Base. Until the Series A Commitment Termination Date,
--------------
the Company shall from time to time prepay the Series A Loans (and/or provide
cover for Letter of Credit Liabilities as specified in clause (f) below) in such
amounts as shall be necessary so that at all times the aggregate outstanding
amount of the Series A Loans together with the outstanding Letter of Credit
Liabilities shall not exceed the Borrowing Base, such amount to be applied,
first, to Series A Loans outstanding and, second, as cover for Letter of Credit
Liabilities outstanding.
(b) Casualty Events. Unless the Company or any of its Subsidiaries,
---------------
as the case may be, shall have irrevocably committed to repair or replace any
Property of the Company or such Subsidiary affected by a Casualty Event, on the
date 30 days following the receipt by the Company of the proceeds of insurance,
condemnation award or other compensation in respect of such Casualty Event
affecting such Property (or upon such earlier date as the Company or such
Subsidiary, as the case may be, shall have determined not to repair or replace
the Property affected by such Casualty Event), the Company shall prepay the
Loans (and/or provide cover for Letter of Credit Liabilities as specified in
clause (f) below), and the Commitments shall be subject to automatic reduction,
in an aggregate amount, if any, equal to 75% of the Net Available Proceeds of
such Casualty Event not theretofore applied to the repair or replacement of such
Property (or reserved by the Company for application to such purposes), such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (e) of this Section 2.10. Nothing in this clause (b)
shall be deemed to limit any obligation of the Company or any of its
Subsidiaries pursuant to any of the Security Documents to remit to a
Credit Agreement
----------------
<PAGE>
- 36 -
collateral or similar account (including, without limitation, the Collateral
Account) maintained by the Administrative Agent pursuant to any of the Security
Documents the proceeds of insurance, condemnation award or other compensation
received in respect of any Casualty Event.
(c) Recapture of Proceeds from Asset Sales. In the event of a
--------------------------------------
Disposition, the Company shall deposit 75% of the Net Available Proceeds
therefrom into the Collateral Account no later than five Business Days after
receipt thereof; provided that prior to such deposit the Company may invest such
--------
Net Available Proceeds, or after such deposit the Company may withdraw such Net
Available Proceeds from the Collateral Account within 270 days after such
Disposition so long as immediately thereafter such Net Available Proceeds are
invested, in Property to be used by the Company or any of its Subsidiaries in
the lines of business in which the Company or any of its Subsidiaries is engaged
as of the Restatement Date or in any business related thereto. No later than
270 days following the occurrence of any such Disposition, the Company will
deliver to the Lenders a statement, certified by the chief financial officer of
the Company, in form and detail satisfactory to the Administrative Agent, of the
amount of the Net Available Proceeds of such Disposition not applied as
contemplated by the immediately preceding sentence and, on the first Recapture
Date thereafter, the Company shall withdraw the remaining Net Available Proceeds
from the Collateral Account and prepay the Loans (and/or provide cover for
Letter of Credit Liabilities as specified in clause (f) below), and the
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 75% of the Net Available Proceeds received or which become available
for prepayment or reduction during such Recapture Period ending on such
Recapture Date, such prepayment and reduction to be effected in each case in the
manner and to the extent specified in clause (e) of this Section 2.10. In
addition to the foregoing, to the extent the remaining 25% of the Net Available
Proceeds from such Disposition would become "Excess Proceeds" (as defined in the
Subordinated Indenture) under clause (b) of Section 1016 of the Subordinated
Indenture (the "Remainder Amount"), the Company shall, immediately prior to such
----------------
Remainder Amount becoming "Excess Proceeds" as aforesaid, prepay the Loans
(and/or provide cover for Letter of Credit Liabilities as specified in clause
(f) below), and the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to such Remainder Amount, such prepayment and reduction
to be effected in each case in the manner and to the extent specified in clause
(e) of this Section 2.10. Nothing in this Section 2.10(c) shall be deemed to
excuse or otherwise limit the obligation of the Company to obtain the consent of
the Majority Lenders pursuant to Section 8.05 hereof to any Disposition not
otherwise permitted hereunder.
Credit Agreement
----------------
<PAGE>
- 37 -
(d) Reversions. Without limiting the obligation of the Company under
----------
Section 8.01(c) hereof, upon any Reversion the Company shall prepay the Loans
(and/or provide cover for Letter of Credit Liabilities as specified in clause
(f) below), and the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to 75% of the Net Available Proceeds thereof, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (e) of this Section 2.10.
(e) Application. Prepayments and reductions of Commitments described
-----------
in the above clauses of this Section 2.10 (other than clause (a) above) shall be
effected as follows:
(i) first, the Series B Commitments shall be reduced in an amount
equal to the prepayment or reduction specified in such clauses (and to the
extent that, after giving effect to such reduction, the aggregate principal
amount of Series B Loans would exceed the Series B Commitments, the Company
shall prepay Series B Loans (such prepayments shall be applied first to
Base Rate Loans and then to Eurodollar Loans) in an aggregate amount equal
to such excess); and
(ii) second, any excess over the amount referred to in the foregoing
clause (i) shall automatically reduce the Series A Commitments (and to the
extent that, after giving effect to such reduction, the aggregate principal
amount of Series A Loans, together with the aggregate amount of all Letter
of Credit Liabilities, would exceed the Series A Commitments, the Company
shall, first, prepay Series A Loans (such prepayments shall be applied
first to Base Rate Loans and then to Eurodollar Loans) and, second, provide
cover for Letter of Credit Liabilities as specified in clause (f) below, in
an aggregate amount equal to such excess).
(f) Cover for Letter of Credit Liabilities. In the event that the
--------------------------------------
Company shall be required pursuant to this Section 2.10 to provide cover for
Letter of Credit Liabilities, the Company shall effect the same by paying to the
Administrative Agent immediately available funds in an amount equal to the
required amount, which funds shall be retained by the Administrative Agent in
the Collateral Account (as provided therein as collateral security in the first
instance for the Letter of Credit Liabilities) until such time as the Letters of
Credit shall have been terminated and all of the Letter of Credit Liabilities
paid in full.
Credit Agreement
----------------
<PAGE>
- 38 -
Section 3. Payments of Principal and Interest.
----------------------------------
3.01 Repayment of Loans.
------------------
(a) The Company hereby promises to pay to the Administrative Agent
for account of each Series A Lender the entire outstanding principal amount of
such Lender's Series A Loans, and each Series A Loan shall mature, on the Series
A Commitment Termination Date.
(b) The Company hereby promises to pay to the Administrative Agent
for account of each Series B Lender the entire outstanding principal amount of
such Lender's Series B Loans, and each Series B Loan shall mature, on the Series
B Commitment Termination Date. In addition, if following any Series B
Commitment Reduction Date the aggregate principal amount of the Series B Loans
shall exceed the Series B Commitments, the Company shall pay Series B Loans in
an aggregate amount equal to such excess.
3.02 Interest. The Company hereby promises to pay to the
--------
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender for the period from and including the
date of such Loan to but excluding the date such Loan shall be paid in full, at
the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin (if any)
----
and
(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period plus the Applicable Margin.
----
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable Post-
Default Rate on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount payable by
the Company hereunder or under the Notes held by such Lender to or for account
of such Lender, which shall not be paid in full when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), for the period
from and including the due date thereof to but excluding the date the same is
paid in full. Accrued interest on each Loan shall be payable (i) in the case of
a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three
Credit Agreement
----------------
<PAGE>
- 39 -
months, at three-month intervals following the first day of such Interest
Period, and (iii) in the case of any Loan, upon the payment or prepayment
thereof or the Conversion of such Loan to a Loan of another Type (but only on
the principal amount so paid, prepaid or Converted), except that interest
payable at the Post-Default Rate shall be payable from time to time on demand.
Promptly after the determination of any interest rate provided for herein or any
change therein, the Administrative Agent shall give notice thereof to the
Lenders to which such interest is payable and to the Company.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
-----------------------------------------------
4.01 Payments.
--------
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Company under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Company under any
other Basic Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent at
account number NYAO-DI-900-9-000002 maintained by the Administrative Agent with
Chase at the Principal Office, not later than 1:00 p.m. New York time on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is not
made by such time to any ordinary deposit account of the Company with such
Lender (with notice to the Company and the Administrative Agent).
(c) The Company shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans,
Reimbursement Obligations or other amounts payable by the Company hereunder to
which such payment is to be applied (and in the event that the Company fails to
so specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to the Lenders for application
in such manner as it or the Majority Lenders, subject to Section 4.02 hereof,
may determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence of
Section 2.03(e) hereof, each payment received by
Credit Agreement
----------------
<PAGE>
- 40 -
the Administrative Agent under this Agreement or any Note for account of any
Lender shall be paid by the Administrative Agent promptly to such Lender, in
immediately available funds, for account of such Lender's Applicable Lending
Office for the Loan or other obligation in respect of which such payment is
made.
(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein: (a) each borrowing of Loans of a particular Class from the Lenders
under Section 2.01 hereof shall be made from the relevant Lenders, each payment
of commitment fee under Section 2.05 hereof in respect of Commitments of a
particular Class shall be made for account of the relevant Lenders, and each
termination or reduction of the amount of the Commitments of a particular Class
under Section 2.04 hereof and under Section 2.10(e) hereof shall be applied to
the respective Commitments of such Class of the relevant Lenders, pro rata
according to the amounts of their respective Commitments of such Class; (b) the
making, Conversion and Continuation of Series A Loans and Series B Loans of a
particular Type (other than Conversions provided for by Section 5.04 hereof)
shall be made pro rata among the relevant Lenders according to the amounts of
their respective Series A and Series B Commitments (in the case of making of
Loans) or their respective Series A and Series B Loans (in the case of
Conversions and Continuations of Loans) and the then current Interest Period for
each Eurodollar Loan shall be coterminous; (c) each payment or prepayment of
principal of Series A Loans or Series B Loans by the Company shall be made for
account of the relevant Lenders pro rata in accordance with the respective
unpaid principal amounts of the Loans of such Class held by them; and (d) each
payment of interest on Series A Loans and Series B Loans by the Company shall be
made for account of the relevant Lenders pro rata in accordance with the amounts
of interest on such Loans then due and payable to the respective Lenders.
4.03 Computations. Interest on Eurodollar Loans and Reimbursement
------------
Obligations and commitment fee and letter of credit fee shall be computed on the
basis of a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable and interest
on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
Notwithstanding the foregoing, for
Credit Agreement
----------------
<PAGE>
- 41 -
each date that the Base Rate is calculated by reference to the Federal Funds
Rate, interest on Base Rate Loans shall be computed on the basis of a year of
360 days and actual days elapsed.
4.04 Minimum Amounts. Except for mandatory prepayments made pursuant
---------------
to Section 2.10 hereof and Conversions or prepayments made pursuant to Section
5.04 hereof, (i) each borrowing, Conversion and partial prepayment of principal
of Series A Loans shall be in multiples of $1,000,000 and (ii) each borrowing,
Conversion or partial prepayment of principal of Series B Loans shall be in
multiples of $1,000,000 (borrowings, Conversions or prepayments of or into Loans
of different Types, or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period). Anything in this Agreement to the contrary notwithstanding,
the aggregate principal amount of Eurodollar Loans having the same Interest
Period shall be in an amount at least equal to $5,000,000 or in multiples of
$1,000,000 in excess thereof and, if any Eurodollar Loans would otherwise be in
a lesser principal amount for any period, such Loans shall be Base Rate Loans
during such period.
4.05 Certain Notices. Notices by the Company to the Administrative
---------------
Agent of terminations or reductions of the Commitments, of borrowings,
Conversions, Continuations and optional prepayments of Loans and of Classes of
Loans and of Types of Loans and of the duration of Interest Periods shall be
irrevocable and shall be effective only if received by the Administrative Agent
not later than 10:00 a.m. New York time on the number of Business Days prior to
the date of the relevant termination, reduction, borrowing, Conversion,
Continuation or prepayment or the first day of such Interest Period specified
below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Credit Agreement
----------------
<PAGE>
- 42 -
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event that the
Company fails to select the Type of Loan, or the duration of any Interest Period
for any Eurodollar Loan, within the time period and otherwise as provided in
this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
------------------------------------------------
Administrative Agent shall have been notified by a Lender or the Company (the
"Payor") prior to the date on which the Payor is to make payment to the
- ------
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender, or a participation in a Letter of Credit drawing to be
acquired by such Lender, hereunder or (in the case of the Company) a payment to
the Administrative Agent for account of one or more of the Lenders hereunder
(such payment being herein called the "Required Payment"), which notice shall be
----------------
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
------------
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
--------
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the
Credit Agreement
----------------
<PAGE>
- 43 -
Advance Date, then, retroactively to the Advance Date, the Payor and the
recipient(s) shall each be obligated to pay interest on the Required Payment as
follows:
(i) if the Required Payment shall represent a payment to be made by
the Company to the Lenders, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the Post-Default Rate (and, in case the
recipient(s) shall return the Required Payment to the Administrative Agent,
without limiting the obligation of the Company under Section 3.02 hereof to
pay interest to such recipient(s) at the Post-Default Rate in respect of
the Required Payment) and
(ii) if the Required Payment shall represent proceeds of a loan to be
made by the Lenders to the Company, the Payor and the Company shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the rate of interest provided for such Required
Payment pursuant to Section 3.02 hereof (and, in case the Company shall
return the Required Payment to the Administrative Agent, without limiting
any claim the Company may have against the Payor in respect of the Required
Payment).
4.07 Sharing of Payments, Etc.
------------------------
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option, to offset balances held by
it for account of the Company at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such balances are then due to
the Company), in which case it shall promptly notify the Company and the
Administrative Agent thereof, provided that such Lender's failure to give such
--------
notice shall not affect the validity thereof.
(b) If any Lender shall obtain from the Company payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Basic Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater
Credit Agreement
----------------
<PAGE>
- 44 -
percentage of the principal of or interest on the Loans of such Class or Letter
of Credit Liabilities or such other amounts then due hereunder or thereunder by
the Company to such Lender than the percentage received by any other Lender, it
shall promptly purchase from such other Lenders participations in (or, if and to
the extent specified by such Lender, direct interests in) the Loans of such
Class or Letter of Credit Liabilities or such other amounts, respectively, owing
to such other Lenders (or in interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit of such
excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans of such Class or Letter of
Credit Liabilities or such other amounts, respectively, owing to each of the
Lender. To such end all the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if such payment
is rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Company. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
---------------------
5.01 Additional Costs.
----------------
(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by
Credit Agreement
----------------
<PAGE>
- 45 -
such Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change that:
- -----------------
(i) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such Loans
(other than taxes imposed on or measured by the overall net income of such
Lender or of its Applicable Lending Office for any of such Loans by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender (including,
without limitation, the Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or its Notes
(or any of such extensions of credit or liabilities) or its Commitments.
If any Lender requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the
Regulatory Change giving rise to such request ceases to be in effect (in which
case the provisions of Section 5.04 hereof shall be applicable), provided that
--------
such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender that includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Lender that includes
Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets that it may hold, then, if such
Credit Agreement
----------------
<PAGE>
- 46 -
Lender so elects by notice to the Company (with a copy to the Administrative
Agent), the obligation of such Lender to make or Continue, or to Convert Base
Rate Loans into, Eurodollar Loans hereunder shall be suspended until such
Regulatory Change ceases to be in effect (in which case the provisions of
Section 5.04 hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Lender from time to time on request such amounts as such Lender may determine to
be necessary to compensate such Lender (or, without duplication, the bank
holding company of which such Lender is a subsidiary) for any costs that it
determines are attributable to the maintenance by such Lender (or any Applicable
Lending Office or such bank holding company), pursuant to any law or regulation
or any interpretation, directive or request (whether or not having the force of
law and whether or not failure to complete therewith would be unlawful) of any
court or governmental or monetary authority (i) following any Regulatory Change
or (ii) implementing any risk-based capital guideline or other requirement
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) heretofore or hereafter issued by any government or
governmental or supervisory authority implementing at the national level the
Basle Accord (including, without limitation, the Final Risk-Based Capital
Guidelines of the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and the Final Risk-Based
Capital Guidelines of the Office of the Comptroller of the Currency (12 C.F.R.
Part 3, Appendix A)), of capital in respect of its Commitments or Loans (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Lender (or any Applicable Lending
Office or such bank holding company) to a level below that which such Lender (or
any Applicable Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or request). For
purposes of this Section 5.01(c) and Section 5.06 hereof, "Basle Accord" shall
------------
mean the proposals for risk-based capital framework described by the Basle
Committee on Banking Regulations and Supervisory Practices in its paper entitled
"International Convergence of Capital Measurement and Capital Standards" dated
July 1988, as amended, modified and supplemented and in effect from time to time
or any replacement thereof.
(d) Each Lender shall notify the Company of any event occurring after
the Amendment Effective Date entitling such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in any
event within
Credit Agreement
----------------
<PAGE>
- 47 -
45 days, after such Lender obtains actual knowledge thereof; provided that (i)
--------
if any Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Lender does
give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Lender
will furnish to the Company a certificate setting forth the basis and amount of
each request by such Lender for compensation under paragraph (a) or (c) of this
Section 5.01. Determinations and allocations by any Lender for purposes of this
Section 5.01 of the effect of any Regulatory Change pursuant to paragraph (a) or
(b) of this Section 5.01, or of the effect of capital maintained pursuant to
paragraph (c) of this Section 5.01, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive, provided that such determinations
--------
and allocations are made on a reasonable basis.
5.02 Limitation on Types of Loans. Anything herein to the contrary
----------------------------
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:
(a) the Administrative Agent reasonably determines, which
determination shall be conclusive, that quotations of interest rates for
the relevant deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof are not being provided in the relevant amounts
or for the relevant maturities for purposes of determining rates of
interest for Eurodollar Loans as provided herein; or
(b) if the related Loans are Series A Loans, the Majority Series A
Lenders or, if the related Loans are Series B Loans, the Majority Series B
Lenders reasonably determine, which determination shall be conclusive, and
notify the Administrative Agent that the relevant rates of interest
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof upon the basis of which the rate of interest for Eurodollar Loans
for such Interest Period is to be determined are not likely adequately to
Credit Agreement
----------------
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- 48 -
cover the cost to such Lenders of making or maintaining Eurodollar Loans
for such Interest Period;
then the Administrative Agent shall give the Company and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Company shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Company thereof
(with a copy to the Administrative Agent) and such Lender's obligation to make
or Continue, or to Convert Loans of any other Type into, Eurodollar Loans shall
be suspended until such time as such Lender may again make and maintain
Eurodollar Loans (in which case the provisions of Section 5.04 hereof shall be
applicable).
5.04 Treatment of Affected Loans. If the obligation of any Lender to
---------------------------
make Eurodollar Loans or to Continue, or to Convert Base Rate Loans into,
Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof,
such Lender's Eurodollar Loans shall be automatically Converted into Base Rate
Loans on the last day(s) of the then current Interest Period(s) for Eurodollar
Loans (or, in the case of a Conversion required by Section 5.01(b) or 5.03
hereof, on such earlier date as such Lender may specify to the Company with a
copy to the Administrative Agent) and, unless and until such Lender gives notice
as provided below that the circumstances specified in Section 5.01 or 5.03
hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Loans shall be applied instead to
its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Lender that would otherwise be
Converted into Eurodollar Loans shall remain as Base Rate Loans.
Credit Agreement
----------------
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- 49 -
If such Lender gives notice to the Company with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent necessary so that, after giving
effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by
such Lender are held pro rata (as to principal amounts, Types and Interest
Periods) in accordance with their respective Commitments.
5.05 Compensation. The Company shall pay to the Administrative Agent
------------
for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense incurred by it that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 9 hereof) on
a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Eurodollar Loan from such
Lender on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid or
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with
Credit Agreement
----------------
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- 50 -
maturities comparable to such period (as reasonably determined by such Lender).
5.06 Additional Costs in Respect of Letters of Credit. Without
------------------------------------------------
limiting the obligations of the Company under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing or maintaining participations in) or
maintaining its obligation hereunder to issue (or purchase participations in)
any Letter of Credit hereunder or reduce any amount receivable by any Lender
hereunder in respect of any Letter of Credit (which increases in cost, or
reductions in amount receivable, shall be the result of such Lender's or
Lenders' reasonable allocation of the aggregate of such increases or reductions
resulting from such event), then, upon demand by such Lender or Lenders (through
the Administrative Agent), the Company shall pay immediately to the
Administrative Agent for account of such Lender or Lenders, from time to time as
specified by such Lender or Lenders (through the Administrative Agent), such
additional amounts as shall be sufficient to compensate such Lender or Lenders
(through the Administrative Agent) for such increased costs or reductions in
amount. A statement as to such increased costs or reductions in amount incurred
by any such Lender or Lenders, submitted by such Lender or Lenders to the
Company shall be conclusive in the absence of manifest error as to the amount
thereof, provided that the determination of such increased costs or reductions
--------
are made on a reasonable basis.
5.07 U.S. Taxes.
----------
(a) The Company agrees to pay to each Lender that is not a U.S.
Person such additional amounts as are necessary in order that the net payment of
any amount due to such non-U.S. Person hereunder after deduction for or
withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then due and payable, provided
--------
that the foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to a Lender hereunder unless such Lender is, on
the Amendment Effective Date (or on the date
Credit Agreement
----------------
<PAGE>
- 51 -
it becomes a Lender as provided in Section 11.06(b) hereof) and on the date
of any change in the Applicable Lending Office of such Lender, either
entitled to submit a Form 1001 (relating to such Lender and entitling it to
a complete exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all interest
to be received by such Lender hereunder in respect of the Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure by such
non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of
such non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.07(a), (w) "Form 1001" shall mean Form 1001
---------
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
---------
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates), (y) "U.S. Person" shall mean a citizen, national or
-----------
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under any laws of the United States of
America, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income and (z) "U.S. Taxes" shall mean any
----------
present or future tax, assessment or other charge or levy imposed by or on
behalf of the United States of America or any taxing authority thereof or
therein.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the Company
shall deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
Credit Agreement
----------------
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- 52 -
Section 6. Conditions Precedent.
--------------------
6.01 Conditions to Effectiveness. The effectiveness of the amendment
---------------------------
and restatement of the Existing Credit Agreement provided for hereby is subject
to the receipt by the Administrative Agent of the following documents, each of
which shall be satisfactory to the Administrative Agent (and to the extent
specified below, to each Lender) in form and substance:
(a) Corporate Documents. The following documents, each certified as
-------------------
indicated below:
(i) a copy of the charter, as amended and in effect, of the
Company certified as of a recent date by the Secretary of State of the
State of Delaware (or, if there have been no modifications to such
charter from the copy thereof delivered by the Company pursuant to
Section 6.01(a)(i) of the Existing Credit Agreement, a certificate of
the Secretary or an Assistant Secretary of the Company to that
effect), and a certificate from such Secretary of State dated as of a
recent date as to the good standing of and charter documents filed by
the Company;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company, dated the Amendment Effective Date and certifying (A)
that attached thereto is a true and complete copy of the by-laws of
the Company as amended and in effect at all times from the date on
which the resolutions referred to in clause (B) below were adopted to
and including the date of such certificate (or if there have been no
modifications to such by-laws from the copy thereof delivered by the
Company pursuant to Section 6.01(a)(ii)(A) of the Existing Credit
Agreement, a certificate of the Secretary or an Assistant Secretary of
the Company to that effect), (B) that attached thereto is a true and
complete copy of resolutions duly adopted by the board of directors of
the Company authorizing the execution, delivery and performance of the
amendment and restatement of the Existing Credit Agreement and such
other of the Basic Documents to which the Company is or is intended to
be a party and the extensions of credit hereunder, and that such
resolutions have not been modified, rescinded or amended and are in
full force and effect, (C) that the charter of the Company has not
been amended since the date of the certification thereto furnished
pursuant to clause (i) above, and (D) as to the incumbency and
specimen signature of each officer of the Company executing the
amendment and
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----------------
<PAGE>
- 53 -
restatement of the Existing Credit Agreement and such other of the
Basic Documents to which the Company is intended to be a party and
each other document to be delivered by the Company from time to time
in connection therewith (and the Administrative Agent and each Lender
may conclusively rely on such certificate until it receives notice in
writing from the Company to the contrary); and
(iii) a certificate of another officer of the Company as to the
incumbency and specimen signature of the Secretary or Assistant
Secretary, as the case may be, of the Company.
(b) Officer's Certificate. A certificate of a senior officer of the
---------------------
Company, dated the Amendment Effective Date, to the effect that (i) no
Default shall have occurred and be continuing and (ii) the representations
and warranties made by the Company in Section 7 hereof, and in each of the
other Basic Documents, are true and correct on and as of the Amendment
Effective Date with the same force and effect as if made on and as of such
date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date).
(c) Opinion of Counsel to the Company. An opinion, dated the
---------------------------------
Amendment Effective Date, of Ropes & Gray, counsel to the Company,
substantially in the form of Exhibit C hereto and covering such other
matters as the Administrative Agent or any Lender may reasonably request
(and the Company hereby instructs such counsel to deliver such opinions to
the Lenders and the Administrative Agent).
(d) Opinion of Special New York Counsel to Chase. An opinion, dated
--------------------------------------------
the Amendment Effective Date, of Milbank, Tweed, Hadley & McCloy, special
New York counsel to Chase, substantially in the form of Exhibit D hereto.
(e) Notes. The Notes, duly completed and executed, in exchange for
-----
the promissory notes of the Company delivered to each Lender on May 18,
1994 pursuant to the Existing Credit Agreement.
(f) [Intentionally Omitted].
(g) Senior Indenture Consent. Evidence satisfactory to the
------------------------
Administrative Agent that the Senior Indenture shall have been amended in
accordance with the Consent Solicitation, and the Administrative Agent
shall have received a copy of any such amendment to the Senior
Credit Agreement
----------------
<PAGE>
- 54 -
Indenture certified as true and correct by a senior officer of the Company.
(h) Issuance of Subordinated Notes. Evidence satisfactory to the
------------------------------
Administrative Agent that (a) the Senior Subordinated Indenture shall have
been duly authorized, executed and delivered, and that the Senior
Subordinated Notes shall have been duly issued, in each case containing
terms in form and substance satisfactory to the Lenders, and the
Administrative Agent shall have received a copy of the Senior Subordinated
Indenture certified as true and correct by a senior officer of the Company
and (b) the Company shall have received net cash proceeds (prior to the
payment of any transaction expenses) in an aggregate amount of not less
than $100,000,000 from the issuance of the Senior Subordinated Notes (less
an aggregate amount resulting from issuance at below par to reflect
customary pricing adjustments).
(i) Financial Information. True, correct and complete copies of the
---------------------
financial statements, projections and other information referred to in
Section 7.02 hereof.
(j) Acquisition Documents. (i) a true and complete copy of each
---------------------
Acquisition Document (which shall include copies of all amendments,
schedules, exhibits and other attachments thereto and contain terms and
conditions in form and substance satisfactory to the Lenders in their
reasonable determination), together with true and complete copies of each
document, certificate and opinion (together with a letter from counsel
delivering such opinion authorizing the Lenders and the Administrative
Agent to rely on such opinion) referred to in such Acquisition Document,
and (ii) a certificate of a senior officer of the Company, dated the
Amendment Effective Date, to the effect that each Acquisition Document has
been duly executed and delivered by each of the parties thereto and is in
full force and effect on the Amendment Effective Date.
(k) Consummation of the Burns Acquisition. A certificate of a senior
-------------------------------------
officer of the Company, dated the Amendment Effective Date, to the effect
that (i) none of the Acquisition Documents and the Senior Subordinated
Indenture have been amended or otherwise modified, or executed and
delivered in a form other than the form heretofore delivered to the
Administrative Agent, (ii) the Burns Acquisition has been consummated in
accordance with the Acquisition Agreement, and (iii) all conditions to the
consummation of the Burns Acquisition as set forth in the Acquisition
Agreement have been fulfilled or waived by the parties
Credit Agreement
----------------
<PAGE>
- 55 -
thereto (which waiver, in the case of any waiver by the Company, shall be
given only with the consent of the Majority Lenders if such waiver could
have a Material Adverse Effect).
(l) Approvals and Consents. Evidence that all necessary governmental
----------------------
and third party filings, licenses, permits, consents and approvals have
been obtained by the Company and are in full force and effect on the
Amendment Effective Date.
(m) Payment of Fees and Expenses. Evidence that (i) all principal of
----------------------------
and interest on, and all other amount owing in respect of, the loans made
by the Existing Lenders under the Existing Credit Agreement shall have been
paid in full and (ii) all fees and expenses payable to the Existing Lenders
and the Administrative Agent under the Existing Credit Agreement accrued to
the Amendment Effective Date and unpaid and such fees as the Company shall
have agreed to pay or deliver to the Administrative Agent in connection
herewith, including, without limitation, the reasonable fees and expenses
of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase in
connection with the negotiation, preparation, execution and delivery of the
amendment and restatement of the Existing Credit Agreement and the Notes
and the other Basic Documents and the extensions of credit hereunder (to
the extent that statements for such fees and expenses have been delivered
to the Company) shall have been paid in full.
(n) Line of Credit. Evidence that all principal of, and interest on,
--------------
and all other amount owing in respect of, the Line of Credit shall have
been paid in full.
(o) Governmental Proceedings; Etc. Evidence that no litigation or
-----------------------------
similar proceeding is threatened by any governmental agency or authority or
any other person with respect to the execution and delivery of the
amendment and restatement of the Existing Credit Agreement, the Notes and
the other Basic Documents, and the consummation of the transactions herein
or therein contemplated which, in each case, the Lenders shall reasonably
determine is likely to have a material adverse effect on (i) the assets,
business, operations, or condition (financial or otherwise) or prospects of
the Company and its Subsidiaries taken as a whole or (ii) the timely
payment of the Loans and interest thereon or the enforceability of the
Basic Documents or the rights and remedies thereunder.
Credit Agreement
----------------
<PAGE>
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(p) Other Documents. Such other documents as the Administrative
---------------
Agent or any Lender or special New York counsel to Chase may reasonably
request.
6.02 Initial and Subsequent Extensions of Credit. The obligation of
-------------------------------------------
the Lenders to make any Loan or otherwise extend any credit to the Company upon
the occasion of each borrowing or other extension of credit hereunder (including
the initial borrowing) is subject to the further conditions precedent that:
(a) Both immediately prior to the making of such Loan or other
extension of credit and also after giving effect thereto and to the
intended use thereof: (i) no Default shall have occurred and be
continuing; (ii) the representations and warranties made by the Company in
Section 7 hereof, and in each of the other Basic Documents, shall be true
and correct on and as of the date of the making of such Loan or other
extension of credit with the same force and effect as if made on and as of
such date (or, if any such representation or warranty is expressly stated
to have been made as of a specific date, as of such specific date). Each
notice of borrowing or request for the issuance of a Letter of Credit by
the Company hereunder shall constitute a certification by the Company to
the effect set forth in the preceding sentence (both as of the date of such
notice or request and, unless the Company otherwise notifies the
Administrative Agent prior to the date of such borrowing or issuance, as of
the date of such borrowing or issuance); and
(b) The Administrative Agent shall have received a certificate of a
senior financial officer of the Company setting forth in reasonable detail
the computations necessary to demonstrate that both immediately prior to
the making of such Loan or other extension of credit and immediately after
giving effect thereto, the Company is or will be in compliance with (i)
Section 1010 of the Senior Indenture, (ii) if the Loan to be made is a
Series A Loan or the extension of credit is to be a Letter of Credit,
Section 1014 of the Senior Indenture and (iii) the Borrowing Base as at the
end of the quarterly fiscal period of the Company ending on or most
recently ended prior to the date of such extension of credit.
Credit Agreement
----------------
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Section 7. Representations and Warranties. The Company represents
------------------------------
and warrants to the Lenders that:
7.01 Corporate Existence. Each of the Company and its Subsidiaries:
-------------------
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could have a Material
Adverse Effect.
7.02 Financial Condition. (a) The Company has heretofore furnished
-------------------
to each of the Lenders the consolidated balance sheet of the Company and its
Subsidiaries as at February 25, 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the fiscal year ended on said date, with the opinion thereon of
Deloitte & Touche, and the unaudited consolidated balance sheet of the Company
and its Subsidiaries as at November 25, 1995 and the related unaudited
consolidated statements of operations, stockholders' equity and cash flows of
the Company for the nine-month period ended on such date. All such financial
statements are complete and correct and fairly present the financial condition
of the Company and its Subsidiaries as at, and the results of operations for the
fiscal year and nine-month period ended on, said dates (subject, in the case of
such financial statements as at November 25, 1995, to normal year-end audit
adjustments), all in accordance with generally accepted accounting principles
and practices applied on a consistent basis. Neither the Company nor any of its
Subsidiaries has on the Restatement Date any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in said balance sheets as at said dates.
(b) Since November 25, 1995, there has been no material adverse change
in the financial condition, operations, business or prospects of the Company and
its Subsidiaries from that set forth in said financial statements as at said
date.
7.03 Litigation. Except as disclosed to the Lenders in writing prior
----------
to the Amendment Effective Date, there are no legal or arbitral proceedings, or
any proceedings by or before any governmental or regulatory authority or agency,
now pending
Credit Agreement
----------------
<PAGE>
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or (to the knowledge of the Company) threatened against the Company or any of
its Subsidiaries which, if adversely determined, could have a Material Adverse
Effect.
7.04 No Breach. None of the execution and delivery of this Agreement
---------
and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of the Company, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any agreement or instrument to
which the Company or any of its Subsidiaries is a party (including, without
limitation, the Indenture) or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any such
agreement or instrument, or (except for Liens created pursuant to the Security
Documents) result in the creation or imposition of any Lien upon any Property of
the Company or any of its Subsidiaries pursuant to the terms of any such
agreement or instrument.
7.05 Action. The Company has all necessary corporate power,
------
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents; the execution, delivery and performance by the
Company of each of the Basic Documents have been duly authorized by all
necessary corporate action on its part (including, without limitation, any
required shareholder approvals); and this Agreement has been duly and validly
executed and delivered by the Company and constitutes, and each of the Notes and
the other Basic Documents to which it is a party when executed and delivered (in
the case of the Notes, for value) will constitute, its legal, valid and binding
obligation, enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by the Company of the Basic Documents to which it is a party or for
the legality, validity or enforceability hereof or thereof, except for filings
and recordings in respect of the Liens created pursuant to the Security
Documents.
Credit Agreement
----------------
<PAGE>
- 59 -
7.07 Use of Credit. Neither the Company nor any of its Subsidiaries
-------------
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and no part of the proceeds of any extension
of credit hereunder will be used to buy or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Lenders under Section 8.01(f)
hereof.
7.09 Taxes. The Company and its Domestic Subsidiaries are members of
-----
an affiliated group of corporations filing consolidated returns for Federal
income tax purposes, of which the Company is the "common parent" (within the
meaning of Section 1504 of the Code) of such group. Except as set forth in
Schedule VI hereto, the Company and its Domestic Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company or any of its Domestic
Subsidiaries. The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of taxes and other governmental charges are, in
the opinion of the Company, adequate. The Company has not given or been
requested to give a waiver of the statute of limitations relating to the payment
of Federal, state, local and foreign taxes or other impositions.
7.10 Investment Company Act. Neither the Company nor any of its
----------------------
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.11 Public Utility Holding Company Act. Neither the Company nor any
----------------------------------
of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.12 Material Agreements and Liens.
-----------------------------
(a) Part A of Schedule I hereto is a complete and correct list, as of
the Restatement Date, of each credit agreement, loan agreement, indenture,
purchase agreement,
Credit Agreement
----------------
<PAGE>
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guarantee, letter of credit or other arrangement providing for or otherwise
relating to any Indebtedness or any extension of credit (or commitment for any
extension of credit) to, or guarantee by, the Company or any of its Subsidiaries
the aggregate principal or face amount of which equals or exceeds (or may equal
or exceed) $1,000,000, and the aggregate principal or face amount outstanding or
that may become outstanding under each such arrangement is correctly described
in Part A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list, as of
the Restatement Date, of each Lien securing Indebtedness the aggregate principal
or face amount of which equals or exceeds $1,000,000 of any Person and covering
any Property of the Company or any of its Subsidiaries, and the aggregate amount
of such Indebtedness secured (or which may be secured) by each such Lien and the
Property covered by each such Lien is correctly described in Part B of said
Schedule I.
7.13 Environmental Matters. Except as set forth in Schedule II
---------------------
hereto, each of the Company and its Subsidiaries has obtained all environmental,
health and safety permits, licenses and other authorizations required under all
Environmental Laws to carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such permit, license or
authorization would not have a Material Adverse Effect. All of the permits,
licenses and authorizations that have been obtained are in full force and effect
and each of the Company and its Subsidiaries is in compliance with the terms and
conditions thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply therewith would not have a Material Adverse Effect.
In addition, except as set forth in Schedule II hereto:
(a) To the Company's knowledge after due inquiry, no written notice,
notification, demand, request for information, citation, summons or order
has been issued, no complaint has been filed, no penalty has been assessed
and no investigation or review is pending or threatened by any governmental
or other entity with respect to any alleged failure by the Company or any
of its Subsidiaries to have any environmental, health or safety permit,
license or other authorization required under any Environmental Law in
connection with the conduct of the business of the Company or any of its
Subsidiaries or with respect to any
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generation, treatment, storage, recycling, transportation, discharge or
disposal, or any Release of any Hazardous Materials generated by the
Company or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries owns, operates or
leases a treatment, storage or disposal facility requiring a permit under
the Resource Conservation and Recovery Act of 1976, as amended, or under
any comparable state or local statute; and
(i) to the Company's knowledge after due inquiry, no PCB
Transformers (as defined in the Toxic Substances Control Act, 15
U.S.C. (S)1601, et seq., as amended, and the regulations relating
thereto) are present at any site or facility owned, operated or leased
by the Company or any of its Subsidiaries;
(ii) to the Company's knowledge after due inquiry, no asbestos or
asbestos-containing materials is present at any site or facility
owned, operated or leased by the Company or any of its Subsidiaries;
(iii) to the Company's knowledge after due inquiry, there are no
underground storage tanks or surface impoundments for Hazardous
Materials, active or abandoned, at any site or facility owned,
operated or leased by the Company or any of its Subsidiaries; and
(iv) to the Company's knowledge after due inquiry, no Hazardous
Materials have been Released by the Company or any of its Subsidiaries
at, on or under any site or facility now owned, operated or leased by
the Company or any of its Subsidiaries in a reportable quantity
established by any Environmental Law.
(c) To the Company's knowledge after due inquiry, neither the Company
nor any of its Subsidiaries has transported or arranged for the
transportation of any Hazardous Material to any location that is listed on
the National Priorities List ("NPL") under the Comprehensive Environmental
---
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"),
------
listed for possible inclusion on the NPL by the Environmental Protection
Agency, or listed in the Comprehensive Environmental Response and Liability
Information System, as provided for by 40 C.F.R. (S) 300.5 ("CERCLIS"), or
-------
on any similar state or local list or that is the subject of Federal, state
or local enforcement actions or other investigations that may lead to
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----------------
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Environmental Claims against the Company or any of its Subsidiaries.
(d) No Liens are presently recorded with the appropriate land records
under or pursuant to any Environmental Laws on any site or facility owned,
operated or leased by the Company or any of its Subsidiaries, and to the
Company's knowledge no government action has been taken or is in process
that could subject any such site or facility to such Liens. Neither the
Company nor any of its Subsidiaries would be required to place any notice
or restriction relating to the presence of Hazardous Materials at any site
or facility owned by it in any deed to the real property on which such site
or facility is located.
(e) There have been no environmental investigations, written studies,
audits, tests, reviews or other analyses conducted by or that are in the
possession of the Company or any of its Subsidiaries in relation to any
site or facility now or previously owned, operated or leased by the Company
or any of its Subsidiaries which have not been made available to the
Lenders.
7.14 Acquisition Documents. On the Amendment Effective Date, the
---------------------
Acquisition Documents shall have been duly executed and delivered by the parties
thereto and shall be in full force and effect. As of the date of any
Acquisition Document and as of the Amendment Effective Date, the representations
and warranties of the Company contained in such Acquisition Document (including
all exhibits, schedules and disclosure letters referred to therein or delivered
pursuant thereto, if any) are true, complete and correct in all material
respects.
7.15 Burns Acquisition. (a) On and as of the Amendment Effective
-----------------
Date, none of the Acquisition Documents and the Senior Subordinated Indenture
have been amended or otherwise modified since, or executed and delivered in a
form other than, the form heretofore delivered to the Administrative Agent.
(b) On and as of the Amendment Effective Date, all conditions to the
consummation of the Burns Acquisition as set forth in the Acquisition Agreement
shall have been fulfilled or waived by the parties thereto (which waiver, in the
case of any waiver by the Company, shall be given only with the consent of the
Majority Banks if such waiver could have a Material Adverse Effect).
7.16 Capitalization. The authorized capital stock of the Company
--------------
consists, on the Amendment Effective Date, of an
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aggregate of 31,000,000 shares consisting of (i) 30,000,000 shares of common
stock, par value $0.01 per share, of which 16,238,322 shares were, as at
November 25, 1995 duly and validly issued and outstanding, each of which shares
is fully paid and nonassessable and (ii) 1,000,000 shares of preferred stock,
par value $0.01 per share, of which no shares were outstanding as at November
25, 1995. As of the Amendment Effective Date the Company is registered with the
Securities and Exchange Commission under the Securities Exchange Act, and its
shares of common stock are publicly owned and traded on the NASDAQ National
Market System. As of the Amendment Effective Date, (x) except for options to
purchase 2,763,350 shares of the common stock of the Company, there are no
outstanding Equity Rights with respect to the Company and (y) there are no
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem, or otherwise acquire any shares of capital stock of the Company nor are
there any outstanding obligations of the Company or any of its Subsidiaries to
make payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
the Company or any of its Subsidiaries.
7.17 Subsidiaries, Etc.
-----------------
(a) Set forth in Part A of Schedule III hereto is a complete and
correct list, as of the Restatement Date, of all of the Subsidiaries of the
Company, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests in
such Subsidiary and (iii) the nature of the ownership interests held by each
such Person and the percentage of ownership of such Subsidiary represented by
such ownership interests. Except as disclosed in Part A of Schedule III hereto,
(x) each of the Company and its Subsidiaries owns, free and clear of Liens
(other than Liens created pursuant to the Security Documents), and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it in Part A of Schedule III hereto, (y) all of the issued
and outstanding capital stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule III hereto is a complete and
correct list, as of the Restatement Date, of all Investments (other than
Investments disclosed in Part A of said Schedule III hereto) of $100,000 or more
held by the Company or any of its Subsidiaries in any Person and, for each such
Investment, (x) the identity of the Person or Persons in which such Investment
has been made, (y) the nature of such Investment and (z) the amount of such
Investment. Except as disclosed in
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Part B of Schedule III hereto, each of the Company and its Subsidiaries owns,
free and clear of all Liens (other than Liens created pursuant to the Security
Documents), all such Investments.
(c) Except as set forth in Schedule III hereto, none of the
Subsidiaries of the Company is, on the Restatement Date, subject to any
indenture, agreement, instrument or other arrangement of the type described in
the last sentence of Section 8.18 hereof.
7.18 Title to Assets. The Company owns and has on the Restatement
---------------
Date, and will own and have on the Amendment Effective Date, good and marketable
title (subject only to Liens permitted by Section 8.06 hereof) to the Properties
shown to be owned in the most recent financial statements referred to in Section
7.02 hereof (other than Properties disposed of in the ordinary course of
business or otherwise permitted to be disposed of pursuant to Section 8.05
hereof). The Company owns and has on the Restatement Date, and will own and
have on the Amendment Effective Date, good and marketable title to, and enjoys
on the Restatement Date, and will enjoy on the Amendment Effective Date,
peaceful and undisturbed possession of, all Properties (subject only to Liens
permitted by Section 8.06 hereof) that are necessary for the operation and
conduct of its businesses.
7.19 Compliance with Law. Except as set forth in Schedule IV hereto,
-------------------
each of the Company and its Subsidiaries is in compliance with all applicable
laws, rules, regulations and orders of, and all applicable restrictions imposed
by, all governmental authorities or bodies, domestic or foreign, in respect of
the conduct of its business and the ownership of its Property (including
Environmental Laws), except such noncompliance as would not, in the aggregate,
have a Material Adverse Effect on the business, properties, assets, operations,
condition (financial or otherwise), or prospects of the Company and its
Subsidiaries, taken as a whole.
7.20 True and Complete Disclosure. The information, reports,
----------------------------
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Administrative Agent or any Lender prior to the
Amendment Effective Date in connection with the negotiation, preparation or
delivery of this Agreement and the other Basic Documents or included herein or
therein or delivered pursuant hereto or thereto, when taken as a whole (together
with the Information Memorandum which the Lenders acknowledge contains
projections based on certain assumptions therein stated) do not contain any
untrue statement of material fact or omit to state any material fact necessary
to make the statements herein or therein, in light of the circumstances under
Credit Agreement
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which they were made, not misleading. All written information furnished on or
after the Amendment Effective Date by the Company and its Subsidiaries to the
Administrative Agent and the Lenders in connection with this Agreement and the
other Basic Documents and the transactions contemplated hereby and thereby will
be true, complete and accurate in every material respect, or (in the case of
projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to the Company that
could have a Material Adverse Effect that has not been disclosed herein, in the
other Basic Documents or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to the Lenders for use in
connection with the transactions contemplated hereby or thereby.
Section 8. Covenants of the Company. The Company covenants and
------------------------
agrees with the Lenders and the Administrative Agent that, so long as any
Commitment, Loan or Letter of Credit Liability is outstanding and until payment
in full of all amounts payable by the Company hereunder:
8.01 Financial Statements, Etc. The Company shall deliver to each of
-------------------------
the Lenders:
(a) as soon as available and in any event within 45 days after the
end of each quarterly fiscal period of each fiscal year of the Company,
consolidated statements of earnings, stockholders' equity and cash flows of
the Company and its Subsidiaries, and of Acurex, for such period and for
the period from the beginning of the respective fiscal year to the end of
such period, setting forth in each case in comparative form the
corresponding consolidated figures for the corresponding period in the
preceding fiscal year, and the related consolidated balance sheet of the
Company and its Subsidiaries, and of Acurex, as at the end of such period,
setting forth in comparative form the corresponding consolidated figures
for the last day of the preceding fiscal year, accompanied by a certificate
of a senior financial officer of the Company, which certificate shall state
that said consolidated financial statements present fairly, in all material
respects, the consolidated financial condition and results of operations of
the Company and its Subsidiaries, and of Acurex, in accordance with
generally accepted accounting principles, consistently applied, as at the
end of, and for, such period (subject to normal year-end audit
adjustments);
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, consolidated and consolidating
statements of operations and
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stockholders' equity of the Company and its Subsidiaries, and consolidated
statements of cash flows of the Company and its Subsidiaries, for such
fiscal year and the related consolidated and consolidating balance sheets
of the Company and its Subsidiaries as at the end of such fiscal year,
setting forth in each case in comparative form the corresponding
consolidated and consolidating figures for the preceding fiscal year, and
accompanied, (i) in the case of said consolidated statements and balance
sheet of the Company, by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
said consolidated financial statements present fairly, in all material
respects, the consolidated financial condition and results of operations of
the Company and its Subsidiaries as at the end of, and for, such fiscal
year in accordance with generally accepted accounting principles, and a
report of such accountants stating that, in making the examination
necessary for their opinion, nothing came to their attention, except as
specifically stated, that caused them to believe that the Company had
failed to comply with Sections 8.10, 8.11, 8.13 or 8.14 hereof, or any
other provisions hereof, insofar as they relate to accounting matters, and
(ii) in the case of said consolidating statements and balance sheets, by a
certificate of a senior financial officer of the Company which certificate
shall state that said consolidating financial statements fairly present the
respective individual unconsolidated financial condition and results of
operations of the Company and of each of its Subsidiaries, in each case in
accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such fiscal year;
(c) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, statements of information concerning
net sales, operating earnings, depreciation and amortization of each
division of the Company and its Subsidiaries (including, without
limitation, the Seating Products Division, Galley Products Division, In-
Flight Entertainment Division and Service Division) for such period setting
forth in each case in comparative form the corresponding figures for the
preceding fiscal year;
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the
Company shall have filed with the Securities and Exchange Commission (or
any governmental agency substituted therefor) or any national securities
exchange;
Credit Agreement
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(e) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(f) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a senior financial officer of the Company
setting forth details respecting such event or condition and the action, if
any, that the Company or its ERISA Affiliate proposes to take with respect
thereto (and a copy of any report or notice required to be filed with or
given to PBGC by the Company or an ERISA Affiliate with respect to such
event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event (provided that a failure to meet the minimum funding
--------
standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Company or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan
by the Company or any ERISA Affiliate that results in liability under
Section 4201 or 4204 of ERISA (including the obligation to satisfy
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secondary liability as a result of a purchaser default) or the receipt
by the Company or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days;and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if the Company or an ERISA Affiliate fails to timely provide
security to the Plan in accordance with the provisions of said
Sections;
(g) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken or
proposes to take with respect thereto;
(h) within 45 days after the end of each quarterly fiscal period of
each fiscal year of the Company, a certificate of a senior financial
officer of the Company setting forth in reasonable detail a true and
accurate calculation of the Borrowing Base as at the end of such quarterly
fiscal period;
(i) within 45 days after the end of each quarterly fiscal period of
each fiscal year of the Company, a statement of a senior officer of the
Company (A) listing each Disposition by the Company and its Subsidiaries
that occurred during such quarterly fiscal period if the Net Available
Proceeds thereof exceeded $50,000 and (B) setting forth in reasonable
detail the Net Available Proceeds of each such Disposition and the
aggregate Net Available Proceeds since the first day of the then current
Recapture Period; and
(j) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under
Credit Agreement
----------------
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ERISA) as any Lender or the Administrative Agent may reasonably request.
The Company will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company (i) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that the
Company has taken or proposes to take with respect thereto) and (ii) setting
forth in reasonable detail the computations necessary to determine whether the
Company is in compliance with Sections 8.07(e), 8.07(g), 8.08(f), 8.08(h), 8.09,
8.10, 8.11, 8.13 and 8.14 hereof as of the end of the respective quarterly
fiscal period or fiscal year.
8.02 Litigation. The Company will promptly give to each Lender
----------
notice of all legal or arbitral proceedings, and of all proceedings by or before
any governmental or regulatory authority or agency, and any material development
in respect of such legal or other proceedings, affecting the Company or any of
its Subsidiaries, except proceedings which, if adversely determined, would not
have a Material Adverse Effect. Without limiting the generality of the
foregoing, the Company will give to each Lender notice of the assertion of any
Environmental Claim by any Person against, or with respect to the activities of,
the Company or any of its Subsidiaries and notice of any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations, other than any Environmental Claim or alleged violation which,
if adversely determined, would not have a Material Adverse Effect.
8.03 Existence, Etc. The Company will, and will cause each of its
--------------
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (provided that nothing in this
--------
Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such
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tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves
are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Administrative Agent,
during normal business hours, to examine, copy and make extracts from its
books and records, to inspect any of its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably
requested by such Lender or the Administrative Agent (as the case may be).
8.04 Insurance. The Company will, and will cause each of its
---------
Subsidiaries to, keep insured by financially sound and reputable insurers all
Property of a character usually insured by corporations engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such corporations and carry such
other insurance as is usually carried by such corporations.
8.05 Prohibition of Fundamental Changes. The Company will not, nor
----------------------------------
will it permit any of its Subsidiaries to, enter into any transaction of merger
or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution) or Dispose of all or substantially all of
its Property (for which purpose the Disposition of all or substantially all of
the shares of capital stock of any Subsidiary of the Company shall be deemed to
be a Disposition by such Subsidiary of all or substantially all of its
Property). The Company will not, nor will it permit any of its Subsidiaries to,
to make any Acquisition except for Investments permitted under Section 8.08
hereof. Notwithstanding the foregoing provisions of this Section 8.05:
(a) any Subsidiary of the Company may be merged or consolidated with
or into: (i) the Company if the Company shall be the continuing or
surviving corporation or (ii) any other such Subsidiary; provided that (x)
--------
if any such transaction shall be between a Subsidiary and a Wholly Owned
Subsidiary, the Wholly Owned Subsidiary shall be the continuing or
surviving corporation;
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(b) subject to Section 8.15 hereof, the Company or any Subsidiary of
the Company may make any Acquisition; provided that immediately prior to
--------
and after giving effect to any such Acquisition, (i) no Default shall have
occurred and be continuing and (ii) not more than $25,000,000 of the
proceeds of Series A Loans then outstanding shall have been applied,
directly by the Company or indirectly through a Subsidiary, to the purchase
price of one or more Acquisitions;
(c) the Company may make the Burns Acquisition pursuant to the
Acquisition Agreement; and
(d) the Company or any Subsidiary of the Company may make any
Acquisition from any Subsidiary of the Company in each case for
consideration that is not in excess of the fair market value of the
Property acquired in such Acquisition as determined in good faith by the
chief financial officer of the Company.
8.06 Limitation on Liens. The Company will not, nor will it permit
-------------------
any of its Domestic Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any of its Property, whether now owned or hereafter acquired,
except:
(a) Liens created pursuant to the Security Documents;
(b) Liens outstanding on the Restatement Date and listed in Part B of
Schedule I hereto;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or which are being contested in good
faith and by appropriate proceedings if, unless the amount thereof is not
material with respect to it or its financial condition, adequate reserves
with respect thereto are maintained on the books of the Company or the
affected Domestic Subsidiaries, as the case may be, in accordance with
GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings and Liens securing judgments
but only to the extent for an amount and for a period not resulting in an
Event of Default under Section 9(h) hereof;
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(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto which, in the
aggregate, are not material in amount, and which do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Company or any
of its Domestic Subsidiaries;
(h) Liens on Property of any corporation which becomes a Domestic
Subsidiary of the Company after Restatement Date, provided that such Liens
--------
are in existence at the time such corporation becomes a Domestic Subsidiary
of the Company and were not created in anticipation thereof;
(i) subject to the restrictions contained in the Security Documents,
Liens upon real and/or tangible personal Property acquired after the
Restatement Date (by purchase, construction or otherwise) by the Company or
any of its Domestic Subsidiaries (other than Acurex or, with respect to
tangible personal property only, Burns) other than in connection with any
Acquisition by the Company or any of its Domestic Subsidiaries, each of
which Liens either (A) existed on such Property before the time of its
acquisition and was not created in anticipation thereof, or (B) was created
solely for the purpose of securing Indebtedness representing, or incurred
to finance, refinance or refund, the cost (including the cost of
construction) of such Property; provided that no such Lien shall extend to
--------
or cover any Property of the Company or such Domestic Subsidiary other than
the Property so acquired and improvements thereon; and provided, further,
-------- -------
that the principal amount of Indebtedness secured by any such Lien shall at
no time exceed 100% of the fair market value (as determined in good faith
by a senior financial officer of the Company) of such Property at the time
it was acquired (by purchase, construction or otherwise);
Credit Agreement
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(j) additional Liens upon real and/or tangible personal Property of
the Company or any of its Domestic Subsidiaries (other than Acurex or
Burns) created after the Restatement Date, provided that the aggregate
--------
Indebtedness secured thereby and incurred on and after the Restatement Date
shall not exceed $10,000,000 in the aggregate at any one time outstanding;
and
(k) any extension, renewal or replacement of the foregoing, provided,
--------
however, that the Liens permitted hereunder shall not be spread to cover
any additional Indebtedness or Property (other than a substitution of like
Property).
8.07 Indebtedness. The Company will not, nor will it permit any of
------------
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding or committed on the Restatement Date and
listed in Part A of Schedule I hereto and any extension, renewal or
replacement thereof;
(c) Indebtedness of Subsidiaries of the Company to the Company in the
aggregate amounts permitted by Section 8.08(d) hereof;
(d) Indebtedness of the Company to its Subsidiaries and Indebtedness
of Subsidiaries of the Company to other Subsidiaries of the Company;
(e) Indebtedness of the Company and its Subsidiaries secured by Liens
permitted under Sections 8.06(i) and 8.06(j) hereof;
(f) Guarantees by any Subsidiary of the Company (other than Acurex,
at all times prior to the Series B Commitment Termination Date) of
Indebtedness of the Company or any Subsidiary of the Company; provided that
--------
at all times prior to the Series B Commitment Termination Date, Acurex may
Guarantee Indebtedness of the Company or any Subsidiary of the Company from
time to time so long as the Company shall reduce the Series B Commitments
pursuant to Section 2.04(b)(ii) hereof simultaneously with the execution of
any such Guarantee by Acurex in an amount equal to the value of such
Guarantee; and
(g) additional unsecured Indebtedness of the Company and its
Subsidiaries (other than Acurex and Burns) up to but
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not exceeding in the aggregate $20,000,000 at any one time outstanding;
provided that any such Indebtedness of any such individual Subsidiary may
--------
not exceed $10,000,000 in the aggregate at any one time outstanding;
provided that the Company may incur additional unsecured Indebtedness that has
- --------
no regularly scheduled maturity or mandatory prepayments on or before the Series
A Commitment Termination Date.
8.08 Investments. The Company will not, nor will it permit any of
-----------
its Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the Restatement Date and identified in
Schedule III Part B hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Company in capital stock of Subsidiaries of
the Company and advances by the Company to Subsidiaries of the Company in
the ordinary course of business; provided that the aggregate amount of the
--------
Investments by the Company or any of its Subsidiaries in the Specified
Subsidiaries shall not exceed $5,000,000 at any one time outstanding;
(e) Investments by Subsidiaries of the Company in capital stock of
other Subsidiaries of the Company and advances by Subsidiaries of the
Company to the Company and to other Subsidiaries of the Company in the
ordinary course of business;
(f) Interest Rate Protection Agreements so long as the aggregate
credit exposure under all Interest Rate Protection Agreements calculated at
the time any Interest Rate Protection Agreement is entered into does not
exceed $10,000,000;
(g) Investments permitted by clause (b) of the last sentence of
Section 8.05 hereof; and
(h) Investments of the Company and its Subsidiaries representing
obligations of customers owing to the Company and its Subsidiaries in
respect of the deferred purchase price of products or services sold or the
leasing of products to customers, in each case in the ordinary course of
business of the Company and its Subsidiaries as provided
Credit Agreement
----------------
<PAGE>
- 75 -
for in Section 8.15 hereof and on such terms as the management of the
Company may determine in its reasonable business judgment, provided that
--------
the aggregate amount of such obligations that are not fully secured
(whether by a perfected Lien on, or an indefeasible title retention to, the
products so sold or leased, or otherwise) shall not exceed at any one time
outstanding the greater of (i) $7,500,000 and (ii) 5% of Adjusted Net
Worth.
8.09 Restricted Payments. The Company will not, nor will it permit
-------------------
any of its Subsidiaries to, declare or make any Restricted Payment at any time;
provided that (i) the Company may pay dividends ("Dividend Payments") and/or
- -------- -----------------
prepay, redeem or otherwise retire the Senior Notes ("Senior Note Payments" and,
--------------------
together with Dividend Payments, "Permitted Payments") during any fiscal year
------------------
(the "Current Fiscal Year") in an aggregate amount up to but not exceeding 25%
-------------------
of the net earnings of the Company for the immediately preceding fiscal year
("Available Net Earnings"), provided that (x) any portion of Available Net
----------------------
Earnings not used for Permitted Payments in the Current Fiscal Year (the
"Carry-Over Amount") may be used for Senior Note Payments only (for which
-----------------
purpose Senior Note Payments shall first be deemed to have been made from the
Carry-Over Amount and only thereafter from Available Net Earnings) in any
succeeding fiscal year and (y) no more than $25,000,000 in the aggregate of
principal of the Senior Notes may be prepaid, redeemed or retired and (ii) any
Subsidiary of the Company (other than Acurex, at all times prior to the Series B
Commitment Termination Date) may make Restricted Payments to the Company from
time to time; and provided, further, that at all times prior to the Series B
-------- -------
Commitment Termination Date, Acurex may make Restricted Payments to the Company
from time to time so long as the Company shall reduce the Series B Commitments
pursuant to Section 2.04(b)(ii) hereof simultaneously with the receipt of each
such Restricted Payment in an amount equal to the proceeds thereof (less the
amount of any such proceeds, if any, applied to the payment of interest on the
Series B Loans).
Credit Agreement
----------------
<PAGE>
- 76 -
8.10 Leverage Ratio. The Company will not permit the Leverage Ratio
--------------
to exceed the following respective ratios at any time during the following
respective periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Fiscal Date in
May 1996 through the
Fiscal Date in August 1996 6.5 to 1
From (but not including) the
Fiscal Date in August 1996
through the Fiscal Date in
February 1997 6.0 to 1
From (but not including) the
Fiscal Date in February 1997
through the Fiscal Date in
August 1997 5.5 to 1
From (but not including) the
Fiscal Date in August 1997
through the Fiscal Date in
February 1998 5.0 to 1
From (but not including) the
Fiscal Date in February 1998
through the Fiscal Date in
February 1999 4.0 to 1
Thereafter 3.50 to 1
</TABLE>
8.11 Adjusted Net Worth. The Company will not at any date permit
------------------
Adjusted Net Worth to be less than the sum of (a) $123,140,000 minus (b)
-----
$15,000,000 minus (c) the after-tax effect on total stockholders' equity that
-----
would result from a change on February 24, 1996 in the accounting treatment of
capitalized engineering expenditures plus (d) 75% of the aggregate amount of Net
----
Available Proceeds of Equity Issuances received after November 25, 1995 plus (e)
----
75% of the sum of consolidated net earnings of the Company and its Subsidiaries
(determined on a consolidated basis without duplication in accordance with GAAP)
for each fiscal quarter of the Company ending after November 25, 1995; provided
--------
that consolidated net earnings for any fiscal quarter in which there is a
consolidated net loss shall be deemed to be zero; and provided further, that
-------- -------
notwithstanding the accounting treatment of engineering expenditures,
consolidated net earnings shall be calculated as if such expenditures had been
expensed (and not capitalized) from and after February 24, 1996.
Credit Agreement
----------------
<PAGE>
- 77 -
8.12 [Intentionally Omitted].
8.13 Interest Coverage Ratio. The Company will not permit the
-----------------------
Interest Coverage Ratio to be less than the following respective ratios during
the following respective periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Fiscal Date in
May 1996 through the
Fiscal Date in August 1996 1.50 to 1
From (but not including) the
Fiscal Date in August 1996
through the Fiscal Date in
February 1997 1.75 to 1
From (but not including) the
Fiscal Date in February 1997
through the Fiscal Date in
August 1997 2.00 to 1
From (but not including) the
Fiscal Date in August 1997
through the Fiscal Date in
February 1998 2.25 to 1
From (but not including) the
Fiscal Date in February 1998
through the Fiscal Date in
February 1999 2.50 to 1
Thereafter 3.00 to 1
</TABLE>
8.14 Net Worth of Acurex. The Company shall cause Acurex to
-------------------
maintain, at all times, a minimum net worth of not less than two times the
aggregate amount of the Series B Commitments then in effect.
8.15 Lines of Business. Neither the Company nor any of its
-----------------
Subsidiaries shall engage to any substantial extent in any line or lines of
business activity other than the business of designing, manufacturing,
distributing, selling, leasing and servicing products used in the interior of
airplanes, buses and trains and servicing and acting as a broker in the sales
and leases of such products together with any other business directly related to
the foregoing.
8.16 Transactions with Affiliates. Except as set forth in Schedule
----------------------------
VII hereto or as expressly permitted by this
Credit Agreement
----------------
<PAGE>
- 78 -
Agreement, the Company will not, nor will it permit any of its Subsidiaries to,
directly or indirectly: (a) make any Investment in an Affiliate; (b) transfer,
sell, lease, assign or otherwise dispose of any Property to an Affiliate; (c)
merge into or consolidate with or purchase or acquire Property from an
Affiliate; or (d) enter into any other transaction directly or indirectly with
or for the benefit of an Affiliate (including, without limitation, guarantees
and assumptions of obligations of an Affiliate); provided that (x) any Affiliate
--------
who is an individual may serve as a director, officer or employee of the Company
or any of its Subsidiaries and receive reasonable compensation for his or her
services in such capacity and (y) the Company and its Subsidiaries may enter
into transactions (other than extensions of credit by the Company or any of its
Subsidiaries to an Affiliate) providing for the leasing of Property, the
rendering or receipt of services or the purchase or sale of inventory and other
Property in the ordinary course of business if the monetary or business
consideration arising therefrom would be substantially as advantageous to the
Company and its Subsidiaries as the monetary or business consideration which
would obtain in a comparable transaction with a Person not an Affiliate.
8.17 Use of Proceeds. The Company will use the proceeds of the Loans
---------------
hereunder solely to refinance a portion of the purchase price of Acurex and to
provide working capital and make additional Acquisitions (subject to clause (b)
of the last sentence of Section 8.05) (in compliance with all applicable legal
and regulatory requirements); provided that neither the Administrative Agent nor
any Lender shall have any responsibility as to the use of any of such proceeds.
8.18 Certain Obligations Respecting Subsidiaries.
-------------------------------------------
(a) The Company will, and will cause each of its Subsidiaries to, take
such action from time to time as shall be necessary to ensure that the Company
and each of its Subsidiaries at all times owns (subject only to the Lien of the
Security Documents) at least the same percentage of the issued and outstanding
shares of each class of stock of each of its Subsidiaries as is owned on the
Restatement Date. Without limiting the generality of the foregoing, none of the
Company nor any of its Subsidiaries shall sell, transfer or otherwise dispose of
any shares of stock in any Subsidiary owned by them, nor permit any Subsidiary
to issue any shares of stock of any class whatsoever to any Person (other than
to the Company or the immediate parent of such Subsidiary which is a Wholly
Owned Subsidiary of the Company). In the event that (a) any such additional
shares of stock shall be issued by any such Subsidiary or (b) the Company shall
create any new Subsidiary or Acquire any
Credit Agreement
----------------
<PAGE>
- 79 -
additional Subsidiary and shall thereby become the owner, directly or
indirectly, of the shares of capital stock of such new or additional Subsidiary,
as the case may be, the Company agrees forthwith to deliver to the
Administrative Agent pursuant to terms of the Revolving Credit Security
Agreement the certificates representing such shares of stock, accompanied by
undated stock powers executed in blank and shall take such other action as the
Administrative Agent shall request to perfect the security interest created
therein pursuant to the Revolving Credit Security Agreement; provided that if
--------
any such Subsidiary is organized under the laws of a jurisdiction other than the
United States of America or a State thereof, the Company need not pledge to the
Administrative Agent more than 65% of the capital stock or other ownership
interest in such Subsidiary and such pledge shall, at the request of the
Majority Series A Lenders, be made either under the Revolving Credit Security
Agreement or under a pledge or other agreement governed by the law of such
Subsidiary's jurisdiction of organization.
(b) The Company will not permit any of its Subsidiaries to enter
into, after the Restatement Date, any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence or payment of Indebtedness, the granting of Liens, the
declaration or payment of dividends, the making of loans, advances or
Investments or the sale, assignment, transfer or other disposition of Property.
8.19 Modifications of Certain Documents. The Company will not
----------------------------------
consent to any modification, supplement or waiver of any of the provisions of
the Senior Indenture, the Senior Subordinated Indenture, the Senior Notes, the
Senior Subordinated Notes or the corporate documents referred to in Section
6.01(a) hereof (other than the by-laws of the Company) without the prior consent
of the Administrative Agent (with the approval of the Majority Lenders);
provided that the Senior Indenture may be amended as contemplated by the Consent
- --------
Solicitation.
8.20 Environmental Matters.
---------------------
(a) The Company will, and will cause each of its Subsidiaries to,
comply with all Environmental Laws applicable to the Company and each of its
Subsidiaries, except to the extent that failure to comply with such laws would
not have a Material Adverse Effect, and shall obtain, at or prior to the time
required by applicable Environmental Laws, all environmental, health and safety
permits, licenses and other authorizations necessary for its operations and
maintain such authorizations in full force and effect.
Credit Agreement
----------------
<PAGE>
- 80 -
(b) If the Company discovers evidence of the presence of any
Hazardous Materials in any amount that is required to be reported under
Environmental Law, the Company will promptly clean-up such Hazardous Materials
or take such other remedial action as is (a) required by law or (b) deemed
necessary by the Company in its reasonable determination, such determination to
be based in part on the advice of independent environmental consultants
acceptable to the Company and the Administrative Agent.
(c) The Company shall promptly furnish to the Administrative Agent
all written notices of any Environmental Claims received by the Company or any
of its Subsidiaries with respect to any alleged violation of or non-compliance
with any Environmental Laws or any permits, licenses or authorizations issued
thereunder in connection with the ownership, operation or use of any site or
facility or the operation of their businesses or the presence or Release of
Hazardous Substances, which Environmental Claim if determined adversely to the
Company would have a Material Adverse Effect.
8.21 Security for Series A Loans. The Company shall, no later than
---------------------------
90 days following the request by the Majority Series A Lenders, file in each
governmental office or agency in each appropriate jurisdiction as owner of
record of each of the Foreign Trademarks identified on Annex 4 to the Revolving
Credit Security Agreement.
8.22 Redemption of Senior Subordinated Notes. The Company will not
---------------------------------------
prepay, redeem, effect a defeasance or covenant defeasance or otherwise retire
any of the Senior Subordinated Notes.
8.23 Merger of Burns. Not later than the date 60 days after the
---------------
Amendment Effective Date, the Company shall either (i) have caused Burns to be
merged into the Company or (ii) pledge and grant to the Administrative Agent,
for the benefit of the Series A Lenders as provided in the Revolving Credit
Security Agreement, a security interest in all of the Company's right, title and
interest in the shares of capital stock of Burns now or hereafter owned by the
Company and the Company shall deliver to the Administrative Agent the share
certificates evidencing the same accompanied by undated stock powers duly
executed in blank.
Credit Agreement
----------------
<PAGE>
- 81 -
Section 9. Events of Default. If one or more of the following events
-----------------
(herein called "Events of Default") shall occur and be continuing:
-----------------
(a) The Company shall (i) default in the payment of any principal of
any Loan or any Reimbursement Obligation when due (whether at stated
maturity or upon mandatory or optional prepayment) or (ii) default in the
payment of any interest on any Loan, any fee or any other amount payable by
it hereunder or under any other Basic Document when due (whether at stated
maturity or upon mandatory or optional prepayment or otherwise) and such
default shall have continued unremedied for three or more Business Days; or
(b) The Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness, or in the payment when due of any amount under any Interest
Rate Protection Agreement; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
or any event specified in any Interest Rate Protection Agreement shall
occur if the effect of such event is to cause, or (with the giving of any
notice or the lapse of time or both) to permit the holder or holders of
such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due, or to be prepaid in
full (whether by redemption, purchase, offer to purchase or otherwise),
prior to its stated maturity or to have the interest rate thereon reset to
a level so that securities evidencing such Indebtedness trade at a level
specified in relation to the par value thereof or, in the case of an
Interest Rate Protection Agreement, to permit the payments owing under such
Interest Rate Protection Agreement to be liquidated; or
(c) Any representation, warranty or certification made or deemed made
herein or in any other Basic Document (or in any modification or supplement
hereto or thereto) by the Company, or in the Acquisition Documents by any
party thereto, or any certificate furnished to any Lender or the
Administrative Agent pursuant to the provisions hereof or thereof shall
prove to have been false or misleading in any material respect as of the
time made or furnished; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09,
8.10, 8.11, 8.13 or 8.14 hereof or the Company shall default in the
performance of any of its obligations under Section 5.02 of the Revolving
Credit Security Agreement or Section 4.02 of the Term Loan Security
Credit Agreement
----------------
<PAGE>
- 82 -
Agreement; or the Company shall default in the performance of any of its
other obligations in this Agreement or any other Basic Document and such
default shall continue unremedied for a period of thirty days after notice
thereof to the Company by the Administrative Agent or any Lender (through
the Administrative Agent); or
(e) The Company or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or
(f) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under the Bankruptcy Code or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the Company or any of its Subsidiaries, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment
of its debts, (ii) the appointment of a receiver, custodian, trustee,
examiner, liquidator or the like of the Company or such Subsidiary or of
all or any substantial part of its Property, or (iii) similar relief in
respect of the Company or such Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days; or an order for relief against the Company or
such Subsidiary shall be entered in an involuntary case under the
Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $5,000,000 in the aggregate (exclusive of judgment amounts fully covered
by insurance where the insurer has admitted liability in respect of such
judgment)
Credit Agreement
----------------
<PAGE>
- 83 -
or in excess of $20,000,000 in the aggregate (regardless of insurance
coverage) shall be rendered by one or more courts, administrative tribunals
or other bodies having jurisdiction against the Company or any of its
Subsidiaries and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and the Company or
the relevant Subsidiary shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(i) An event or condition specified in Section 8.01(f) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or in the
opinion of the Majority Lenders shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) which would constitute, in the determination of the Majority
Lenders, a Material Adverse Effect; or
(j) A reasonable basis shall exist for the assertion against the
Company or any of its Subsidiaries of (or there shall have been asserted
against the Company or any of its Subsidiaries) claims or liabilities,
whether accrued, absolute or contingent, based on or arising from the
generation, storage, transport, handling or disposal of Hazardous Materials
by the Company or any of its Subsidiaries or Affiliates, or any predecessor
in interest of the Company or any of its Subsidiaries or Affiliates, or
relating to any site or facility owned, operated or leased by the Company
or any of its Subsidiaries or Affiliates, which claims or liabilities
(insofar as they are payable by the Company or any of its Subsidiaries but
after deducting any portion thereof which is reasonably expected to be paid
by other creditworthy Persons jointly and severally liable therefor), in
the judgment of the Majority Lenders are reasonably likely to be determined
adversely to the Company or any of its Subsidiaries, and the amount thereof
is, singly or in the aggregate, reasonably likely to have a Material
Adverse Effect; or
(k) Any "person" or "group" (as such terms are defined in Sections
13(d) and 14(d) of the Securities Exchange Act (other than Amin or Robert
Khoury, their lineal descendants or trusts established by such Persons for
their respective lineal descendants)) is or becomes the "beneficial owner"
Credit Agreement
----------------
<PAGE>
- 84 -
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all shares that
any such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
30% or more of the aggregate voting rights of the outstanding capital stock
of the Company (on a fully diluted basis); or during any consecutive 25-
month period, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors
whose election by the stockholders of the Company was approved by a vote of
66-2/3% of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the Board of Directors of the Company then in office; or
(l) Except for expiration in accordance with its terms, any of the
Security Documents shall be terminated or shall cease to be in full force
and effect, for whatever reason;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to the Company, the
Administrative Agent may, by notice to the Company, terminate the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans, the Reimbursement Obligations and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 or 5.06 hereof) to be
forthwith due and payable (provided that (x) if so requested by the Majority
--------
Series A Lenders, the Administrative Agent shall take such action with respect
to the Series A Commitments and/or the Series A Loans, Reimbursement Obligations
and such interest and other amounts to the extent owed to the Series A Lenders
and (y) if so requested by the Majority Series B Lenders, the Administrative
Agent shall take such action with respect to the Series B Commitments and the
Series B Loans and such interest and other amounts to the extent owed to the
Series B Lenders), whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by the Company; and (2) in the case of the
occurrence of an Event of Default referred to in clause (f) or (g) of this
Section 9 with respect to the Company, the Commitments shall automatically be
terminated and the principal amount then outstanding of, and the accrued
interest on, the Loans, the Reimbursement Obligations and all other amounts
payable by the Company hereunder and under the Notes (including,
Credit Agreement
----------------
<PAGE>
- 85 -
without limitation, any amounts payable under Section 5.05 or 5.06 hereof) shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company.
In addition, upon the occurrence and during the continuance of any
Event of Default (if the Administrative Agent has declared the principal amount
then outstanding of, and accrued interest on, the Series A Loans and all other
amounts payable by the Company hereunder and under the Notes to be due and
payable), the Company agrees that it shall, if requested by the Administrative
Agent or the Majority Series A Lenders through the Administrative Agent (and, in
the case of any Event of Default referred to in clause (f) or (g) of this
Section 9 with respect to the Company, forthwith, without any demand or the
taking of any other action by the Administrative Agent or such Lenders) provide
cover for the Letter of Credit Liabilities by paying to the Administrative Agent
immediately available funds in an amount equal to the then aggregate undrawn
face amount of all Letters of Credit, which funds shall be held by the
Administrative Agent in the Collateral Account as collateral security in the
first instance for the Letter of Credit Liabilities and be subject to withdrawal
only as therein provided.
Section 10. The Administrative Agent.
------------------------
10.01 Appointment, Powers and Immunities. Each Lender hereby
----------------------------------
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the other Basic Documents with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and of the other Basic Documents, together with such other powers as
are reasonably incidental thereto. The Administrative Agent (which term as used
in this sentence and in Section 10.05 and the first sentence of Section 10.06
hereof shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Basic Documents, and shall not by reason of this Agreement or any other
Basic Document be a trustee for any Lender; (b) shall not be responsible to the
Lenders for any recitals, statements, representations or warranties contained in
this Agreement or in any other Basic Document, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or any other Basic Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, any
Note or any other Basic Document or any other document referred to or
Credit Agreement
----------------
<PAGE>
- 86 -
provided for herein or therein or for any failure by the Company or any other
Person to perform any of its obligations hereunder or thereunder; (c) shall not
be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Basic Document; and (d) shall not be responsible
for any action taken or omitted to be taken by it hereunder or under any other
Basic Document or under any other document or instrument referred to or provided
for herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct. The Administrative Agent may deem and
treat the payee of any Note as the holder thereof for all purposes hereof unless
and until a notice of the assignment or transfer thereof shall have been filed
with the Administrative Agent, together with the consent of the Company to such
assignment or transfer (to the extent provided in Section 11.06(b) hereof).
10.02 Reliance by Administrative Agent. The Administrative Agent
--------------------------------
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telex,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Basic Document, the Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Lenders or, if provided herein, in accordance with the instructions given by the
Majority Series A Lenders, the Majority Series B Lenders or all of the Lenders
as is required in such circumstance, and such instructions of such Lenders and
any action taken or failure to act pursuant thereto shall be binding on all of
the Lenders.
10.03 Defaults. The Administrative Agent shall not be deemed to have
--------
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Company specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 10.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders or, if
provided herein, the Majority Series A Lenders or the Majority Series B Lenders,
provided that, unless and until the Administrative Agent shall have received
- --------
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to
Credit Agreement
----------------
<PAGE>
- 87 -
such Default as it shall deem advisable in the best interest of the Lenders
except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of the
Majority Lenders, the Majority Series A Lenders, the Majority Series B Lenders
or all of the Lenders.
10.04 Rights as a Lender. With respect to its Commitments and the
------------------
Loans made by it, Chase (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. Chase (and any successor acting as Administrative Agent)
and its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Company (and any of its
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase and its affiliates may accept fees and other consideration from
the Company for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
10.05 Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent (to the extent not reimbursed under Section 11.03 hereof,
but without limiting the obligations of the Company under said Section 11.03,
and including in any event any payments under any indemnity that the
Administrative Agent is required to issue to any bank referred to in Section
4.02 of the Revolving Credit Security Agreement to which remittances in respect
of Accounts, as defined therein, are to be made) ratably in accordance with the
aggregate principal amount of the Loans and Reimbursement Obligations held by
the Lenders (or, if no Loans or Reimbursement Obligations are at the time
outstanding, ratably in accordance with their respective Commitments), for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the
Administrative Agent (including by any Lender) arising out of or by reason of
any investigation in or in any way relating to or arising out of this Agreement
or any other Basic Document or any other documents contemplated by or referred
to herein or therein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses that the Company is
obligated to pay under Section 11.03 hereof, and including also any payments
under any indemnity that the Administrative Agent is required to issue to any
bank referred to in Section 4.02 of the Revolving Credit Security Agreement to
Credit Agreement
----------------
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which remittances in respect of Accounts, as defined therein, are to be made,
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents, provided that no Lender shall be liable for any of the
--------
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
10.06 Non-Reliance on Administrative Agent and Other Lenders. Each
------------------------------------------------------
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and its Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Administrative Agent
shall not be required to keep itself informed as to the performance or
observance by the Company of this Agreement or any of the other Basic Documents
or any other document referred to or provided for herein or therein or to
inspect the Properties or books of the Company or any of its Subsidiaries.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Administrative Agent hereunder,
the Administrative Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the affairs,
financial condition or business of the Company or any of its Subsidiaries (or
any of their affiliates) that may come into the possession of the Administrative
Agent or any of its affiliates.
10.07 Failure to Act. Except for action expressly required of the
--------------
Administrative Agent hereunder and under the other Basic Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 10.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
10.08 Resignation or Removal of Administrative Agent. Subject to the
----------------------------------------------
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Company, and the Administrative Agent may be removed at
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any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, after consultations with the Company, appoint a successor
Administrative Agent, that shall be a bank which has an office in New York, New
York with a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Section 10 shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Administrative Agent.
10.09 Consents under Basic Documents. Except as otherwise provided
------------------------------
in Section 11.04 hereof with respect to this Agreement, the Administrative Agent
may, with the prior consent of the Majority Lenders (but not otherwise), consent
to any modification, supplement or waiver under any of the Basic Documents,
provided that, (i) without the prior consent of the Majority Series B Lenders,
- --------
the Administrative Agent shall not consent to any modification, supplement or
waiver under the Term Loan Security Agreement, (ii) without the prior consent of
the Majority Series A Lenders, the Administrative Agent shall not consent to any
modification, supplement or waiver under the Revolving Credit Security
Agreement, (iii) without the consent of each Series B Lender, the Administrative
Agent shall not (except as provided herein or in the Term Loan Security
Agreement) release any collateral or otherwise terminate any Lien under the Term
Loan Security Agreement providing for collateral security, or agree to
additional obligations being secured by such collateral security (unless the
Lien for such additional obligations shall be junior to the Lien in favor of the
other obligations secured by such Term Loan Security Agreement) and (iv) without
the consent of each Series A Lender, the Administrative Agent shall not (except
as provided herein or in the Revolving Credit Security Agreement) release any
collateral or otherwise terminate any Lien under the Revolving Credit Security
Agreement providing for collateral security, or agree to additional obligations
being secured by such collateral security
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(unless the Lien for such additional obligations shall be junior to the Lien in
favor of the other obligations secured by such Revolving Credit Security
Agreement), except that no such consent shall be required, and the
Administrative Agent is hereby authorized, to release any Lien covering Property
which is the subject of a disposition of Property permitted hereunder or to
which the Majority Lenders have consented.
10.10 Collateral Sub-Agents. Each Series A Lender by its execution
---------------------
and delivery of this Agreement agrees, as contemplated by Section 4.03 of the
Revolving Credit Security Agreement, that, in the event it shall hold any
Permitted Investments referred to therein, such Permitted Investments shall be
held in the name and under the control of such Series A Lender, and such Series
A Lender shall hold such Permitted Investments as a collateral sub-agent for the
Administrative Agent thereunder. The Company by its execution and delivery of
this Agreement hereby consents to the foregoing.
10.11 Co-Agent. The Co-Agent identified on the front cover page of
--------
this Agreement shall have no duties or responsibilities hereunder other than as
a Bank hereunder.
Section 11. Miscellaneous.
-------------
11.01 Waiver. No failure on the part of the Administrative Agent or
------
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
11.02 Notices. All notices, requests and other communications
-------
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telecopy)
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof); or, as to any party, at such other
address as shall be designated by such party in a notice to each other party.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
Credit Agreement
----------------
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11.03 Expenses, Etc. The Company agrees to pay or reimburse each of
-------------
the Lenders and the Administrative Agent for paying: (a) all reasonable out-of-
pocket costs and expenses of the Administrative Agent (including, without
limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase), in connection with (i) the negotiation,
preparation, execution and delivery of this Agreement and the other Basic
Documents and the extension of credit hereunder and (ii) any modification,
supplement or waiver of any of the terms of this Agreement or any of the other
Basic Documents; (b) all reasonable costs and expenses of the Lenders and the
Administrative Agent (including, without limitation, reasonable counsels' fees)
in connection with (i) any Default and any enforcement or collection proceedings
resulting therefrom or in connection with the negotiation of any restructuring
or "work-out" (whether or not consummated), or the obligations of the Company
hereunder and (ii) the enforcement of this Section 11.03; and (c) all transfer,
stamp, documentary, intangibles or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement or
any of the other Basic Documents or any other document referred to herein or
therein and all costs, expenses, taxes, assessments and other charges incurred
in connection with any filing, registration, recording or perfection of any
security interest contemplated by any Basic Document or any other document
referred to therein.
The Company hereby agrees (i) to indemnify the Administrative Agent
and each Lender and their respective directors, officers, employees, attorneys
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them (including,
without limitation, any and all losses, liabilities, claims, damages or expenses
incurred by the Administrative Agent to any Lender, whether or not the
Administrative Agent or any Lender is a party thereto) arising out of or by
reason of any investigation or litigation or other proceedings (including any
threatened investigation or litigation or other proceedings) relating to the
extensions of credit hereunder or any actual or proposed use by the Company or
any of its Subsidiaries of the proceeds of any of the extensions of credit
hereunder, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified) and (ii) not to assert any claim against the
Administrative Agent, any Lender, any of their affiliates, or any of their
respective directors, officers, employees, attorneys and agents, on any theory
of liability, for special, indirect,
Credit Agreement
----------------
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- 92 -
consequential or punitive damages arising out of or otherwise relating to any of
the transactions contemplated herein or in any other Basic Document. Without
limiting the generality of the foregoing, the Company will (x) indemnify the
Administrative Agent for any payments that the Administrative Agent is required
to make under any indemnity issued to any bank referred to in Section 4.02 of
the Revolving Credit Security Agreement to which remittances in respect to
Accounts, as defined therein, are to be made and (y) indemnify the
Administrative Agent and each Lender from, and hold the Administrative Agent and
each Lender harmless against, any losses, liabilities, claims, damages or
expenses described in the preceding sentence (but excluding, as provided in the
preceding sentence, any loss, liability, claim, damage or expense incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified) arising under any Environmental Law as a result of the past,
present or future operations of the Company or any of its Subsidiaries (or any
predecessor in interest to the Company or any of its Subsidiaries), or the past,
present or future condition of any site or facility owned, operated or leased by
the Company or any of its Subsidiaries (or any such predecessor in interest), or
any Release or threatened Release of any Hazardous Materials from any such site
or facility, including any such Release or threatened Release which shall occur
during any period when the Administrative Agent or any Lender shall be in
possession of any such site or facility following the exercise by the
Administrative Agent or any Lender of any of its rights and remedies hereunder
or under any of the Security Documents but only to the extent that such Release
or threatened Release is directly or indirectly attributable to facts,
circumstances or Releases of Hazardous Materials existing prior to the date of
such possession.
11.04 Amendments, Etc. Except as otherwise expressly provided in
---------------
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company, the Administrative Agent
and the Majority Lenders, or by the Company and the Administrative Agent acting
with the consent of the Majority Lenders, and any provision of this Agreement
may be waived by the Majority Lenders or by the Administrative Agent acting with
the consent of the Majority Lenders; provided that: (a) no modification,
--------
supplement or waiver shall, unless by an instrument signed by all of the Lenders
or by the Administrative Agent acting with the consent of all of the Lenders:
(i) increase, or extend the term of any of the Commitments, or extend the time
or waive any requirement for the reduction or termination of any of the
Commitments, (ii) extend the date fixed for the payment of principal of or
interest on any Loan, the Reimbursement Obligations or any fee hereunder, (iii)
reduce the amount of any such payment of
Credit Agreement
----------------
<PAGE>
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principal, (iv) reduce the rate at which interest is payable thereon or any fee
is payable hereunder, (v) alter the rights or obligations of the Company to
prepay Loans, (vi) alter the terms of this Section 11.04, (vii) modify the
definition of the term "Majority Lenders", "Majority Series A Lenders" or
"Majority Series B Lenders", or modify in any other manner the number or
percentage of the Lender required to make any determinations or waive any rights
hereunder or to modify any provision hereof, or (viii) waive any of the
conditions precedent set forth in Section 6 hereof; (b) any modification or
supplement of Section 10 hereof shall require the consent of the Administrative
Agent; and (c) notwithstanding the above, (i) Sections 2.01(a), 2.03, 2.04(a),
2.05(i) and 5.06, may be modified or supplemented only by an instrument in
writing signed by the Company, the Administrative Agent and the Series A
Lenders, or by the Company and the Administrative Agent acting with the consent
of the Series A Lenders, and any such provision may be waived by the Series A
Lenders or by the Administrative Agent acting with the consent of the Series A
Lenders, and (ii) Sections 2.01(b), 2.04(b) and 2.05(ii) may be modified or
supplemented only by an instrument in writing signed by the Company, the
Administrative Agent and the Series B Lenders, or by the Company and the
Administrative Agent acting with the consent of the Series B Lenders, and any
such provision may be waived by the Series B Lenders or by the Administrative
Agent acting with the consent of the Series B Lenders.
11.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 Assignments and Participations.
------------------------------
(a) The Company may not assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders and
the Administrative Agent.
(b) Each Lender may assign any of its Loans, its Notes, its
Commitments, and, if such Lender is a Series A Lender, its Letter of Credit
Interest (but only with the consent of the Company and the Administrative Agent
and, in the case of a Series A Commitment or a Letter of Credit Interest, the
Issuing Lender, which consents in the case of the Company and the Administrative
Agent shall not be unreasonably withheld or delayed); provided that (i) any such
--------
consent by the Company shall not be unreasonably withheld, (ii) no such consent
by the Company or the Administrative Agent shall be required in the case of any
assignment to another Lender; (iii) any such partial assignment shall be in an
amount at least equal to $5,000,000; (iv) unless the Company and the
Administrative Agent shall otherwise consent
Credit Agreement
----------------
<PAGE>
- 94 -
(which consents shall not be unreasonably withheld or delayed), each such
assignment by a Lender of its Series A Loans, Series A Note, Series A Commitment
or Letter of Credit Interest shall be made in such manner so that the same
percentage of its Series A Loans, Series A Note, Series A Commitment and Letter
of Credit Interest, Series B Loans, Series B Note and Series B Commitment is
assigned to the respective assignee; and (v) unless the Company and the
Administrative Agent shall otherwise consent (which consents shall not be
unreasonably withheld or delayed), each such assignment by a Lender of its
Series B Loans, Series B Note or Series B Commitment shall be made in such
manner so that the same percentage of its Series B Loans, Series B Note and
Series B Commitment, Series A Loans, Series A Note, Series A Commitment and
Letter of Credit Interest is assigned to the respective assignee. Upon
execution and delivery by the assignee to the Company, the Administrative Agent
and the Issuing Lender of an instrument in writing pursuant to which such
assignee agrees to become a "Lender" hereunder (if not already a Lender) having
the Commitment(s), Loans, and, if applicable, Letter of Credit Interest
specified in such instrument, and upon consent thereto by the Company, the
Administrative Agent and the Issuing Lender, to the extent required above, the
assignee shall have, to the extent of such assignment (unless otherwise provided
in such assignment with the consent of the Company, the Administrative Agent and
the Issuing Lender), the obligations, rights and benefits of a Lender hereunder
holding the Commitment(s), Loans and, if applicable, Letter of Credit Interest
(or portions thereof) assigned to it (in addition to the Commitment(s), Loans
and Letter of Credit Interest, if any, theretofore held by such assignee) and
the assigning Lender shall, to the extent of such assignment, be released from
the Commitment(s) (or portion(s) thereof) so assigned. Upon each such
assignment the assigning Lender shall pay the Administrative Agent an assignment
fee of $3,000.
(c) A Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loans or Letter of Credit Interest held
by it, or in its Commitments, in which event each purchaser of a participation
(a "Participant") shall be entitled to the rights and benefits of the provisions
-----------
of Section 8.01(j) hereof with respect to its participation in such Loans,
Letter of Credit Interest and Commitments as if (and the Company shall be
directly obligated to such Participant under such provisions as if) such
Participant were a "Lender" for purposes of said Section, but, except as
otherwise provided in Section 4.07(c) hereof, shall not have any other rights or
benefits under this Agreement or any Note or any other Basic Document (the
Participant's rights against such Lender in respect of such participation to be
those set forth in the agreements executed by such Lender in favor of the
Participant). All
Credit Agreement
----------------
<PAGE>
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amounts payable by the Company to any Lender under Section 5 hereof in respect
of Loans, Letter of Credit Interest held by it, and its Commitments, shall be
determined as if such Lender had not sold or agreed to sell any participations
in such Loans, Letter of Credit Interest and Commitments, and as if such Lender
were funding each of such Loan, Letter of Credit Interest and Commitments in the
same way that it is funding the portion of such Loan, Letter of Credit Interest
and Commitments in which no participations have been sold. In no event shall a
Lender that sells a participation agree with the Participant to take or refrain
from taking any action hereunder or under any other Basic Document except that
such Lender may agree with the Participant that it will not, without the consent
of the Participant, agree to (i) increase or extend the term, or extend the time
or waive any requirement for the reduction or termination, of such Lender's
related Commitment, (ii) extend the date fixed for the payment of principal of
or interest on the related Loan or Loans, Reimbursement Obligations or any
portion of any fee hereunder payable to the Participant, (iii) reduce the amount
of any such payment of principal, (iv) reduce the rate at which interest is
payable thereon, or any fee hereunder payable to the Participant, to a level
below the rate at which the Participant is entitled to receive such interest or
fee, (v) alter the rights or obligations of the Company to prepay the related
Loans or (vi) consent to any modification, supplement or waiver hereof or of any
of the other Basic Documents to the extent that the same, under Section 10.10 or
11.04 hereof, requires the consent of each Lender.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 11.06, any Lender may assign and pledge
all or any portion of its Loans and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank. No such assignment shall release the assigning
Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan or Reimbursement
Obligation held by it hereunder to the Company or any of its Affiliates or
Subsidiaries without the prior written consent of each Lender.
11.07 Survival. The obligations of the Company under Sections 5.01,
--------
5.05, 5.06, 5.07 and 11.03 hereof and the
Credit Agreement
----------------
<PAGE>
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obligations of the Lenders under Sections 10.05 and 11.12 hereof shall survive
the repayment of the Loans and Reimbursement Obligations and the termination of
the Commitments. In addition, each representation and warranty made, or deemed
to be made by a notice of any extension of credit (whether by means of a Loan or
a Letter of Credit), herein or pursuant hereto shall survive the making of such
representation and warranty, and no Lender shall be deemed to have waived, by
reason of making any extension of credit hereunder (whether by means of a Loan
or a Letter of Credit), any Default which may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that such Lender or the Administrative Agent may have had notice
or knowledge or reason to believe that such representation or warranty was false
or misleading at the time such extension of credit was made.
11.08 Captions. The table of contents and captions and section
--------
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
11.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This Agreement and
-----------------------------------------
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York. The Company hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Company irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
11.11 Waiver of Jury Trial. EACH OF THE COMPANY, THE ADMINISTRATIVE
--------------------
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
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11.12 Treatment of Certain Information; Confidentiality.
-------------------------------------------------
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender and the Company hereby authorizes each Lender to share
any information delivered to such Lender by the Company and its Subsidiaries
pursuant to this Agreement, or in connection with the decision of such Lender to
enter into this Agreement, to any such subsidiary or affiliate, it being
understood that any such subsidiary or affiliate receiving such information
shall be bound by the provisions of clause (b) below as if it were a Lender
hereunder.
(b) Each Lender and the Administrative Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices, any non-
public information supplied to it by the Company pursuant to this Agreement
which is identified by the Company as being confidential at the time the same is
delivered to the Lenders or the Administrative Agent, provided that nothing
--------
herein shall limit the disclosure of any such information (i) to the extent
required by statute, rule, regulation or judicial process, (ii) to counsel for
any of the Lenders or the Administrative Agent, (iii) to bank examiners,
auditors or accountants, (iv) to the Administrative Agent or any other Lender
(or to Chase Securities, Inc.), (v) in connection with any litigation to which
any one or more of the Lenders or the Administrative Agent is a party, (vi) to a
subsidiary or affiliate of such Lender as provided in clause (a) above or (vii)
to any assignee or participant (or prospective assignee or participant) so long
as such assignee or participant (or prospective assignee or participant) first
executes and delivers to the respective Lender a Confidentiality Agreement
substantially in the form of Exhibit E hereto; provided, further, that (x)
-------- -------
unless specifically prohibited by applicable law or court order, each Lender and
the Administrative Agent shall, prior to disclosure thereof, notify the Company
of any request for disclosure of any such non-public information (A) by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental agency) or (B) pursuant to legal process and (y) in no event shall
any
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Lender or the Administrative Agent be obligated or required to return any
materials furnished by the Company.
11.13 Amendments to Security Documents.
--------------------------------
(a) The Revolving Credit Security Agreement is hereby amended so that
(i) from and after the Amendment Effective Date, (x) all references therein to
the Credit Agreement shall be deemed to be a reference to the Credit Agreement
as amended and restated hereby and (y) all references therein to "$85,000,000"
shall be deemed to be a reference to "$100,000,000", and (ii) from and after May
18, 1994, all references therein to "Revolving Credit Lenders", "Revolving
Credit Loans", "Revolving Credit Notes" and "Revolving Credit Commitments" shall
be deemed to be references to "Series A Lenders", "Series A Loans", "Series A
Notes" and "Series A Commitments", respectively.
(b) The Term Loan Security Agreement is hereby amended so that (i)
from and after the Amendment Effective Date, (x) all references therein to the
Credit Agreement shall be deemed to be a reference to the Credit Agreement as
amended and restated hereby and (y) all references therein to "$85,000,000"
shall be deemed to be a reference to "$100,000,000", and (ii) from and after May
18, 1994, all references therein to "Term Loan Lenders", "Term Loans", "Term
Loan Notes" and "Term Loan Commitments" shall be deemed to be references to
"Series B Lenders", "Series B Loans", "Series B Notes" and "Series B
Commitments", respectively.
Credit Agreement
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<PAGE>
- 99 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
BE AEROSPACE, INC.
By____________________________
Title:
Address for Notices:
BE Aerospace, Inc.
1300 Corporate Center Way
Wellington, Florida 33414
Attention: Amin J. Khoury
Telecopier No.: (407) 791-1272
Telephone No.: (407) 791-1266
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: C. Dean Dusseault, Esq.
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7000
Credit Agreement
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LENDERS
-------
Series A Commitment THE CHASE MANHATTAN BANK
- -------------------
(NATIONAL ASSOCIATION)
$20,250,000
Series B Commitment By____________________________
- ------------------- Title:
$6,750,000
Lending Office for all Loans:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Address for Notices:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Matthew H. Massie
Telecopier No.: (212) 552-5879
Telephone No.: (212) 552-3005
Credit Agreement
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<PAGE>
- 101 -
Series A Commitment NATIONSBANK, N.A. (SOUTH)
- -------------------
$18,750,000
Series B Commitment By____________________________
- ------------------- Title:
$6,250,000
Lending Office for all Loans:
100 Southeast Second Street
14th Floor, FL7-950-14-02
Miami, Florida 33131
Address for Notices:
NationsBank, N.A. (South)
NationsBank NC1-001-15-03
101 North Tryon Street
Charlotte, North Carolina 28255
Attention: Barbara Pollack
Telecopier No.: (704) 386-8694
Telephone No.: (704) 388-1112
Credit Agreement
----------------
<PAGE>
- 102 -
Series A Commitment LASALLE BUSINESS CREDIT, INC.
- -------------------
$15,000,000
Series B Commitment By____________________________
- ------------------- Title:
$5,000,000
Lending Office for all Loans:
LaSalle Business Credit, Inc.
120 East Baltimore Street
Suite 1802
Baltimore, Maryland 21202
Address for Notices:
LaSalle Business Credit, Inc.
120 East Baltimore Street
Suite 1802
Baltimore, Maryland 21202
Attention: Herbert M. Kidd II
Telecopier No.: (410) 837-0644
Telephone No.: (410) 837-0324
Credit Agreement
----------------
<PAGE>
- 103 -
Series A Commitment LTCB TRUST COMPANY
- -------------------
$11,250,000
Series B Commitment By____________________________
- ------------------- Title:
$3,750,000
Lending Office for all Loans:
LTCB Trust Company
165 Broadway
New York, New York 10006
Address for Notices:
LTCB Trust Company
165 Broadway
New York, New York 10006
Attention: Winston Brown
Telecopier No.: (212) 608-3081
Telephone No.: (212) 335-4854
Credit Agreement
----------------
<PAGE>
- 104 -
Series A Commitment CREDITANSTALT-BANKVEREIN
- -------------------
$9,750,000
Series B Commitment By____________________________
- ------------------- Title:
$3,250,000
By____________________________
Title:
Lending Office for all Loans:
Creditanstalt-Bankverein
245 Park Avenue
27th Floor
New York, New York 10167
Address for Notices:
Creditanstalt-Bankverein
4 Embarcadero Center
Suite 1630
San Francisco, California 94111
Attention: Patrick J. Rounds
Telecopier No.: (415) 781-0622
Telephone No.: (415) 788-1371
ext. 228
Credit Agreement
----------------
<PAGE>
- 105 -
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent
By____________________________
Title:
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
(National Association)
4 Metrotech Center -- 13th Floor
Brooklyn, New York 11245
Attention: New York Agency
Telecopier No.: (718) 242-6910
Telephone No.: (718) 242-7979
Credit Agreement
----------------
<PAGE>
SCHEDULE I
Material Agreements and Liens
-----------------------------
Part A - Material Agreements
-------------------
1. Indenture dated as of March 3, 1993 between the Company, as issuer, and the
United States Trust Company of New York, as trustee, in connection with
$125,000,000 of 9-3/4% Senior Notes of the Company.
2. Loan agreements dated February 24, 1993 between the Company's subsidiary
Flight Equipment and Engineering Limited, and English corporation ("FEEL"),
and Barclays Bank PLC ("Barclays"), as amended, providing for the
following:
a. an overdraft facility in the aggregate principal amount of
(Pounds)3,000,000;
b. a real property facility in the aggregate principal amount of
(Pounds)396,000;
c. a medium term loan facility in the aggregate principal amount of
(Pounds)2,250,000;
d. a medium term loan facility in the aggregate principal amount of
(Pounds)3,430,000; and
e. a short-term facility in the aggregate principal amount of
(Pounds)600,000.
3. Guarantee dated February 24, 1993 by the Company to Barclays limited to
(Pounds)2,750,000 of the Indebtedness of FEEL described in Item 2 above.
4. Guarantee as of March 1, 1993 of Aircraft Furnishing Limited ("AFL") in an
unlimited amount of the Indebtedness of FEEL described in Item 2 above.
5. Loan agreement between Royal Inventum B.V. and ING Bank dated July 14, 1993
in the aggregate principal amount of Dfl. 2,000,000.
6. Demand Promissory Note dated August 27, 1993 from Aero Holdings Acquisition
Corp. (now known as Acurex Corporation) to the Company in the aggregate
principal amount of $6,950,000.
7. Amended and Restated Acquisition Agreement among the Company, Acurex
Corporation, Aero Holdings Corp. and the stockholders thereof dated as of
July 16, 1993. (Acquisition purchase price adjustment unknown)
8. Acquisition Agreement among the Company, Elinor T. Nordskog and Nordskog
Industries, Inc. dated as of July 27, 1993. (Acquisition purchase price
adjustment unknown)
<PAGE>
2
9. Amended and Restated Asset Purchase Agreement between the Company and
Philips Electronics North America Corporation dated as of August 27, 1993.
(Acquisition purchase price adjustment unknown)
10. Purchase Agreement dated October 26, 1993 between the Company and Thomas P.
McCaffrey and Kerry J. McCaffrey, Trustees of the Thomas P. and Kerry J.
McCaffrey Living Trust, Dated August 3, 1990 pursuant to which the trust
sold certain residential property located in San Clemente, California to
the Company, and the Company, among other things, assumed Indebtedness
which, as of the date hereof, is outstanding to Countrywide Funding
Corporation in the aggregate principal amount of $457,484.
11. Capitalized lease obligations of FEEL and AFL for machinery and equipment
in the aggregate amount of $945,000.
12. Indebtedness of FEEL to the Company in an aggregate principal amount not in
excess of (Pounds)3,369,541.
13. Indebtedness of BE Aerospace (Netherlands) B.V. to the Company in an
aggregate principal amount not in excess of Dfls. 49,385,000.
14. Term Loan Agreement by and between BE Aerospace, Inc. and NationsBank of
Florida, NA dated as of December 20, 1994 in the aggregate principal amount
of $4,000,000 secured by real estate of BEA.
<PAGE>
SCHEDULE I
Part B - Liens
-----
BE Aerospace, Inc.
- -----------------
1. California
----------
a. UCC - Secretary of State
(i) 1st Source Bank, filed September 3, 1993, file number 93180963.
Certain leased machining equipment.
(ii) Allied American Insurance Company, filed May 24, 1993, file number
93099606. Certain leased machining equipment.
(iii) United Jersey Bank, filed May 3, 1993, file number 93086057.
Certain leased computer equipment and related tangible and
intangible property.
(iv) 1st Source Bank, filed March 18, 1993, file number 93054020.
Certain leased computer equipment.
(v) 1st Source Bank, filed March 18, 1993, file number 93054019.
Certain leased machining equipment.
(vi) Yale Financial Services, Inc., filed March 15, 1993, file number
93052839. Forklift.
(vii) Tilden Financial Corp., filed March 4, 1993, file number 93044645.
Certain leased equipment.
(viii) United Jersey Bank, filed March 5, 1993, file number 93043802.
Certain leased computer equipment and related tangible and
intangible property.
(ix) Bankers Leasing Association, Inc., filed December 29, 1992, file
number 92275389. Certain leased computer equipment.
(x) First Bank and Trust Company of Illinois, filed May 7, 1993, file
number 92275389. Certain leased computer equipment. (Assignment of
No. 92275389)
<PAGE>
(xi) United Jersey Bank, filed December 14, 1992, file number 92263097.
Certain leased machining equipment.
(xii) United Jersey Bank, filed March 30, 1993, file number 92263097.
Certain leased computer equipment.
(xiii) Guaranty Lease Funding Corporation, filed September 24, 1992, file
number 92207704. Certain leased equipment.
(xiv) GE Capital Corporation, filed August 7, 1992, file number
92170592. Certain leased office furniture and fixtures.
b. Other
(i) An outstanding mortgage on a residential property in San Clemente,
California in favor of Countrywide Funding Corporation secures, as
of the date hereof, $457,484 of Indebtedness.
2. Connecticut
-----------
a. UCC - Secretary of State
(i) Yale Financial Services, Inc., filed March 11, 1993, file number
1001222. Forklift.
(ii) IBM Credit Corporation, filed July 6, 1992, file number 972855.
Certain leased computer equipment.
(iii) IBM Credit Corporation, filed November 24, 1992, file number
0988857. Certain leased computer equipment.
(iv) Colonial Pacific Leasing, filed September 28, 1992, file number
982477. Certain leased equipment.
(v) Tilden Financial Corp., filed March 4, 1993, file number 1000393.
Certain leased equipment.
<PAGE>
3. Florida
-------
a. UCC - Secretary of State
(i) GE Capital Corporation, filed October 9, 1992, file number
92204637. Certain equipment.
(ii) United Jersey Bank, filed December 14, 1992, file number 92255761.
Certain leased machining equipment.
(iii) United Jersey Bank, filed March 1, 1993, file number 93044459.
Certain leased computer equipment.
(iv) Bankers Leasing Association, Inc., filed January 15, 1993, file
number 93010622. Certain computer hardware and software.
(v) First Bank and Trust Company of Illinois, filed May 6, 1993, file
number 93095513. Certain computer hardware and software.
(Assignment of No. 93010622)
(vi) United Jersey Bank, filed March 4, 1993, file number 93047191.
Certain leased computer equipment and certain other tangible and
intangible property related thereto.
(vii) NationsBanc Leasing Corporation, filed March 22, 1993, file number
93060950. Certain leased machining equipment.
(viii) 1st Source Bank, filed March 25, 1993, file number 93063496.
Certain leased computer equipment.
(ix) United Jersey Bank, filed May 3, 1993, file number 93091970.
Certain leased computer equipment and certain other tangible and
intangible property related thereto.
4. North Carolina
--------------
a. Other
(i) An outstanding mortgage on a residential property in Pfafftown,
North Carolina in favor of The Pfefferkorn Company secures, as of
the date hereof, $136,568 of Indebtedness.
<PAGE>
BE Avionics, Inc.
- -----------------
1. California
----------
a. UCC - Secretary of State
(i) California City Bank, filed February 20, 1990, file number
90045391. Certain computer equipment.
(ii) AT&T Credit Corporation, filed September 17, 1990, file number
90231153. Certain leased equipment.
(iii) Pitney Bowes Credit Corporation, filed February 22, 1991, file
number 91037908. Certain leased copier equipment.
(iv) Pitney Bowes Credit Corporation, filed June 21, 1991, file number
91135535. Certain leased equipment.
(v) Leasametric Inc., filed May 18, 1992, file number 92111404.
Certain leased equipment.
(vi) Colonial Pacific Leasing, filed September 24, 1992, file number
92208231. Certain leased equipment.
2. Massachusetts
-------------
a. UCC - Secretary of State
(i) The Chase Manhattan Bank, N.A., as Agent, filed March 3, 1992,
file number 077540. All personal property, whether tangible or
intangible.
Aircraft Products Company
- -------------------------
1. Florida
-------
a. UCC - Secretary of State
(i) Chrysler Capital Corporation, filed November 9, 1989, file number
89297767. Certain leased computer equipment.
<PAGE>
(ii) General Electric Capital Corporation, filed September 29, 1992,
file number 92197513. Certain leased computer hardware and
software. (Assignment of No. 89297767)
(iii) Chrysler Capital Corporation, filed November 9, 1989, file number
89297768. Certain leased computer hardware and software.
(iv) General Electric Capital Corporation, filed September 25, 1992,
file number 92194967. Certain leased equipment. (Assignment of
No. 89297768)
(v) Chrysler Capital Corporation, filed September 27, 1990, file
number 90245856. Certain leased equipment.
(vi) Chrysler Capital Corporation, filed December 24, 1990, file
number 90315841. Certain leased equipment.
(vii) Oliver-Allen Corporation, filed July 22, 1991, file number
91157029. Certain leased equipment.
(viii) Datamatic Leasing Inc., filed August 12, 1991, file number
91173649. Certain leased equipment.
(ix) GE Capital Corporation, filed October 8, 1992, file number
92204637. Certain leased machining equipment.
(x) Minolta Leasing Services, filed June 14, 1993, file number
93123779. Certain leased equipment.
PTC Aerospace, Inc.
- -------------------
1. California
----------
a. UCC - Secretary of State
(i) Chrysler Credit Corporation, filed January 9, 1990, file number
90004136, certain leased computer equipment.
(ii) Pactel Finance, filed April 2, 1990, file number 90085088, certain
equipment.
<PAGE>
(iii) Oliver-Allen Corporation, filed March 20, 1991, file number
91057403, certain leased equipment.
(iv) LB Credit Corporation, filed September 11, 1992, file number
91057403, certain leased equipment. (Assignment of File No.
91057403)
(v) Yale Financial Services, Inc., filed November 3, 1992, file number
92237178, certain leased transportation equipment.
(vi) Yale Financial Services, Inc., filed November 17, 1992, file
number 92247474, certain leased transportation equipment.
(vii) 1st Source Bank, filed March 18, 1993, file number 93054019,
certain leased machining equipment.
(viii) 1st Source Bank, filed March 18, 1993, file number 93054020,
certain leased computer equipment.
(ix) Allied American Insurance Company, filed May 24, 1993, file number
93099606, certain leased equipment.
(x) The CIT Group/Equipment Financing Inc., filed June 2, 1993, file
number 93105767, certain leased equipment.
(xi) 1st Source Bank, filed September 3, 1993, file number 93180960,
certain leased equipment.
2. Connecticut
-----------
a. UCC - Secretary of State
(i) Oliver-Allen Corporation, filed June 30, 1992, file number 971989.
Certain leased printer.
(ii) LB Credit Corporation, filed September 14, 1992, file number
980699. Certain leased printer. (Assignment of No. 971989)
(iii) United Financial Corporation, filed July 17, 1992, file number
974379. Certain equipment.
<PAGE>
(iv) SNET Credit, Inc., filed May 18, 1992, file number 966514. Certain
equipment.
(v) SNET Credit, Inc., filed November 12, 1991, file number 945438.
Certain leased equipment.
(vi) Colonial Pacific Leasing, filed March 18, 1991, file number
916823. Certain leased equipment.
(vii) Tennant Company, filed January 22, 1991, file number 909896.
Certain sweeper/scrubber.
(viii) Citicorp Dealer Finance, filed May 18, 1990, file number 877886.
Forklift.
(ix) Banc One Leasing Corp., filed November 20, 1989, file number
853254. Certain leased copier equipment.
(x) Chrysler Capital Corporation, filed December 27, 1990, file number
905889. Certain leased machining and computer equipment.
(xi) Chrysler Capital Corporation, filed January 25, 1991, file number
908754. Certain leased equipment.
(xii) Chrysler Capital Corporation, filed March 28, 1991, file number
916898. Certain manufacturing equipment.
(xiii) General Electric Capital Corporation, filed November 17, 1992,
file number 0988131. Certain leased equipment.
(xiv) XL/Datacomp, Inc., filed March 16, 1992, file number 959099.
Certain leased computer hardware and software.
(xv) Citicorp Leasing, Inc., filed April 22, 1993, file number 1006782.
Certain leased computer hardware and software.
(xvi) R.A.S. Financial, Inc., filed November 20, 1992, file number
0988534. Certain leased computer equipment.
(xvii) First Source Bank, filed January 8, 1993, file number 0993996.
Certain leased computer equipment.
<PAGE>
(xviii) 1st Source Bank, filed March 12, 1993, file number 1001480.
Certain leased machining equipment.
(xix) R.A.S. Financial, Inc., filed December 28, 1992, file number
0992519. Certain leased computer equipment.
(xx) First Source Bank, filed January 27, 1993, file number 0996132.
Certain leased computer equipment.
(xxi) First Source Bank, filed March 12, 1993, file number 1001481.
Certain leased computer equipment.
(xxii) XL/Datacomp, Inc., filed March 17, 1993, file number 1002012.
Certain leased computer hardware and software.
(xxiii) Allied American Insurance Company, filed May 24, 1993, file number
1013743. Certain leased manufacturing equipment.
(xxiv) The CIT Group/Equipment Financing, Inc., filed June 2, 1993, file
number 1015241. Certain leased machining equipment.
(xxv) 1st Source Bank, filed August 19, 1993, file number 1025133.
Certain leased manufacturing equipment.
(xxvi) XL/Datacomp, Inc., filed October 18, 1991, file number 942433.
Certain leased computer hardware and software.
(xxvii) Citicorp Leasing, Inc., filed January 17, 1992, file number
952759. Certain leased computer hardware and software.
(xxviii) Chrysler Capital Corporation, filed January 10, 1990, file number
859351. Certain leased computer hardware and software.
3. New Jersey
----------
a. UCC - Secretary of State
(i) Chrysler Corporation, filed January 9, 1990, file number 1314179.
Certain computer hardware and software.
<PAGE>
(ii) General Electric Capital Corporation, filed December 2, 1992, file
number 1314179. Certain computer hardware and software.
(Assignment of No. 1314179)
Acurex Corporation
- ------------------
1. California
----------
a. UCC - Secretary of State
(i) Foothill Bank, filed March 30, 1992, file number 92063114. Certain
leased equipment.
Nordskog Industries, Inc.
- -------------------------
1. California
----------
a. UCC - Secretary of State
(i) Hewlett Packard Company, Finance and Remarketing Division, filed
February 14, 1989, file number 89032824. Certain leased computer
equipment.
(ii) Hewlett Packard Company, filed September 11, 1989, file number
89240841. Certain leased computer equipment.
(iii) Hewlett Packard Company, filed February 9, 1990, file number
89240841 (Amendment).
(iv) Leasefirst, filed June 19, 1993, file number 90155785. Certain
leased computer equipment.
(v) Hewlett Packard Company/Finance & Remarketing Division, filed on
March 11, 1991, file number 91053748. Certain leased computer
equipment.
(vi) Lease America Corporation, filed November 22, 1991, file number
91250205. Certain leased copier equipment.
<PAGE>
(vii) NEC America, Inc., filed January 31, 1992, file number 92020999.
Certain leased telephone equipment.
(viii) NEC America, Inc., filed April 27, 1992, file number 92083995.
Certain leased telephone equipment.
(ix) The Bank of California, N.A., filed August 30, 1992, file number
93177146. Security interest in general intangibles to secure a
Letter of Credit to Self-Insurance Plans, State of California, in
the aggregate principal amount of $962,809.
(x) Hewlett Packard Company/Finance & Remarketing Division, filed
November 12, 1992, file number 92243227. Certain leased computer
equipment.
Flight Equipment and Engineering Limited
- ----------------------------------------
The Indebtedness of FEEL identified in Section 2 or Part A of this
Schedule I is cross-collateralized in the U.K. by the following:
1. A Debenture over the assets of FEEL on Barclays' standard form dated
19th November 1982.
2. A charge over the leasehold, Nashleigh Works, Nashleigh Hill, Chesham,
on Barclays' standard form dated 11th May 1985.
3. A charge over the freehold Asheridge Road, Chesham, on Barclays' standard
form dated 7th July 1975.
4. A charge over the freehold property on the Northwest side of Grovebury
Road, Leighton Buzzard, on Barclays' standard form dated 2nd March 1993.
5. A charge over the leasehold property, Nissen House, Grovebury Road,
Leighton Buzzard, on Barclays' standard form dated 2nd March 1993.
6. A charge over the leasehold property lying on the East of the Grand
Union Canal, Leighton Buzzard on Barclays' standard form dated 3rd
March 1993.
7. A charge over the Guardian Assurance Life Policy on the life of
John Branham on Barclays' standard form dated 24th September 1991.
<PAGE>
8. A charge over the life policy on the life of John Tcheng to be charged on
Barclays' standard form.
9. A charge over the life policy on life of David Boulter to be charged on
Barclays' standard form.
10. The AFL guarantee referred to in Section 4 of Part A of this Schedule I.
11. A debenture over the assets of AFL on Barclays' standard form granted as of
March 1, 1993.
12. The Company's guarantee referred to in Section 3 of Part A of this
Schedule I.
13. A Letter of Set Off allowing Barclays' to combine any account, Sterling or
Currency dated 24th September 1991.
In addition, FEEL and AFL have capitalized lease obligations outstanding
for machinery and equipment in the aggregate amount of $945,000.
Royal Inventum B.V.
- ------------------
The Indebtedness of Royal Inventum B.V. identified in Section 5 of Part A
of this Schedule I is secured by a charge over the assets of Royal Inventum B.V.
by ING Bank.
BE Aerospace (UK) Limited
- -------------------------
1. Guarantee (Unlimited) on Barclays' standard form given by Aircraft
Furnishing Limited (now known as Fort Hill Aircraft Limited) for the
benefit of Flight Equipment and Engineering Limited (now BE Aerospace (UK)
Limited). [No date, but believed to be dated 24 February 1993. We believe
that it was given to guarantee a medium term loan agreement dated 28
February 1993.]
2. Guarantee (Foreign) on Barclays' standard form given by BE Aerospace, Inc.
for (Pounds)2.25 million for the benefit of BE Aerospace (UK) Limited),
dated 24 February 1993. It appears to cover a medium term loan agreement
dated 28 February 1993.
3. Legal charge over Nashleigh Works, Nashleigh Hill, Chesham,
Buckinghamshire, dated 11 May 1995.
In addition, there may be other liens securing indebtedness of amounts less
than $1,000,000.
<PAGE>
SCHEDULE II
Hazardous Materials
-------------------
1. Litchfield, CT, facility historically did not have state or federal clean
Water Act permits authorizing discharge of wastewater to the Bantam River.
The discharge has been substantially eliminated as of this date.
2. Litchfield, CT, facility may not have required air permits for air
emissions associated with paint booths and adhesive operations. A request
for determination of the need for permits has been made to the state
officials.
3. In 1992, the Garden Grove, CA, facility paid a $45,000 penalty for
violation of air pollution regulations.
4. The Route 209 facility of Pullman in Bantam, CT, is an interim status
facility under RCRA. There appears to be documentary evidence that waste
from the Route 209 facility may have been transshipped through the
Litchfield, CT, facility, raising potential issues of RCRA compliance
relating to the Litchfield, CT facility.
5. Asbestos-containing materials may be present in the Litchfield, CT,
facility. A preliminary investigation has been completed and does not
indicate any large-scale concerns.
6. Hazardous Materials have been detected in the soils and groundwater at the
Litchfield, CT facility. A groundwater assessment is ongoing under the
supervision of the CTDEP. The latest groundwater monitoring reports show
that contaminant levels in groundwater meet applicable standards.
7. Certain sites to which the Company and its Subsidiaries may have sent waste
which are listed on CERCLIS, or any similar state or local list or are
under investigation by governmental agencies are set forth in Exhibits 3-2,
3-3, 3-4 and 3-5 of the ICF Kaiser, Engineers report entitled
"Environmental Assessment of PTC Aerospace and Aircraft Products Companies
Final Report" dated February 14, 1992 and, with respect to the Burns
Aerospace facility, in a report entitled "Phase I Environmental Due
Diligence Examination of the Burns Aerospace Corporation, Winston-Salem,
North Carolina, dated January 1994, prepared by ENSR Consulting and
Engineering".
8. The Litchfield, CT, facility has two utility-owned transformers, one
contains less than 50 ppm PCBs. The other contains 63 ppm PCBs.
<PAGE>
9. Hazardous waste from the Altamonte Springs, Florida facility was sent to
the Chemical Conservation Corporation landfill in Valdosta, Georgia which
is on the CERCLIS list.
10. Hazardous waste from the Altamonte Springs, Florida site may have been
disposed of at the Seaboard Chemical site in North Carolina, which is being
remediated under consent order with the State of North Carolina.
11. Certain wells upgradient of the Anaheim, California site have been impacted
by dichlorodifluoromethane (refrigerant) and trichloroethane (degreaser),
both of which are believed to have been used by the predecessor of Acurex.
12. At a facility in Santa Ana, California which EECO Incorporated, a former
owner of part of the BE Avionics business, owned and later leased, there
may have been some seepage into the soil of toxic materials involved in
metal plating, including arsenic. The Company purchased the BE Avionics
business from EECO in a 1989 asset acquisition, and EECO has subsequently
filed for bankruptcy protection and is no longer in operation. The BE
Avionics business was never conducted in the affected facility.
13. Certain of the ovens manufactured by Nordskog prior to 1981 contain
asbestos.
14. Hazardous waste originating from the Burns Aerospace, Winston-Salem, North
Carolina facility may have been shipped to the Seaboard Chemical site in
North Carolina which is listed on CERCLIS. In 1991, a letter was received
from the North Carolina Department of Environment, Health and National
Resources indicating that Fairchild Burns Company was a de minimis
contributor of waste in that site. By letter dated February 26, 1992 Burns
Aerospace Corporation notified Fairchild Industries, from whom it had
acquired the Winston-Salem facility, that Fairchild Industries was
responsible for that liability.
15. In May, 1994, the Company received notice that it was considered a de
minimis PRP with respect to the Frontier Chemical Site in Niagara Falls, NY
relating to a shipment of waste from the Litchfield, CT facility in 1992.
The Company joined a group of de minimis PRPs that performed certain
actions under an Administrative Consent Order with EPA. The Company
believes that it has fully settled its liability with respect to the site
through payment to the group.
16. The roof at the Chesham, UK facility may contain asbestos cement-root
sheeting.
<PAGE>
Compliance Issues
- -----------------
PTC Aerospace, Litchfield, CT
- -----------------------------
(1) Facility is listed on the CERCLIS Data Base.
(2) Pursuant to a Notice of Violation issued by the Connecticut DEP in March,
1992, the Facility has implemented a RCRA closure plan and has upgraded
record keeping and training functions.
PTC Aerospace, Garden Grove, CA
- -------------------------------
(1) Oily compressor blowdown is discharged directly to the ground.
(2) Facility does not comply with state RCRA regulations governing generators
of less than 1,000 kilograms of hazardous waste pr month.
(3) Facility does not comply with state OSHA requirements governing a written
respiratory protection program, personnel training and recordkeeping,
personnel medical monitoring, and other worker safety and health
requirements.
(4) Facility may require NPDES stormwater discharge permit.
Aircraft Products Company, Delray Beach, FL
- -------------------------------------------
(1) Facility has not applied for an air emissions permit or conditional
exemption from the State for its air emission sources.
(2) Paint booth filters, empty drums, and solvent-contaminated rags are
disposed of as nonhazardous solid wastes.
(3) Not all hazardous waste drums were properly labeled.
(4) Unused chemicals are stored onsite that are no longer used in the
production process and should be disposed of as hazardous waste.
(5) Plant does not have a written respiratory protection program or a hearing
conservation program, although such protection is provided to employees.
(6) Plant may require an NPDES stormwater discharge permit.
<PAGE>
Aircraft Products Company, Jacksonville, FL
- -------------------------------------------
(1) Facility has no data to indicate that its nonhazardous solid wastes, which
include solvent-contaminated rags, are properly disposed of as
nonhazardous waste.
(2) The facility qualifies currently as a large quantity generator of
regulated hazardous wastes but does not comply with the RCRA requirements
applicable to these generators or to the storage of wastes onsite for
less than 90 days.
(3) Unused chemicals are stored onsite that are no longer used in the
production process and should be disposed of as nonhazardous waste.
(4) Areas designed for hazardous waste drum storage are not posted as such or
signs are obscured.
(5) Plant personnel with responsibility to handle hazardous wastes have not
received the requisite health and safety training.
(6) Containers of hazardous materials are not consistently labeled as to the
hazards they may present to worker health and safety.
(7) Plant does not have a written respiratory protection program nor are
employees fit tested to wear respirators as required by OSHA.
(8) Plant may require an NPDES stormwater discharge permit.
Nordskog Industries, Inc. Van Nuys, CA
- --------------------------------------
(1) Several facilities to which hazardous waste may have been shipped for
disposal are on the CERCLIS data base, as noted in Table 1 of the June 4,
1993 Draft Phase I Environmental Site Assessment.
(2) There may be a compliance issue concerning the mixing of hazardous and
non-hazardous wastes prior to 1984.
(3) The facility has had historical problems meeting effluent standards for
metal finishing. Wastewater is treated in an on-site clarifier prior to
discharge to the municipal sewer.
(4) Nordskog received a Notice to Comply dated July 21, 1993 from the South
Coast Air Quality Management District requiring Nordskog to (i) keep more
detailed usage records as required by Rule 109, including all "VOC" and
vapor pressure information.
<PAGE>
(ii) use only HLVP or 65% efficient spray equipment, (iii) use only closed
containers for all solvents, and (iv) use only Rule 1171 and 1124
compliance cleaning solvents.
Status of mountain View, CA Property
- ------------------------------------
The Prudential Insurance Company of America ("Prudential") is the owner of
property known as 485 Clyde Avenue (Building 1), Mountain View, California (the
"Property"). Acurex Corporation ("Acurex") owned the Property in the early 1970s
and then entered into a sale-leaseback arrangement with Prudential in connection
with the Property. The Property itself sits on part of a very large
contamination plume said to result from discharges into the soil and groundwater
from a nearby Hewlett Packard manufacturing facility. As of the date hereof, the
Company believes that the municipal authorities in Mountain View do not intend
to commence an environmental clean-up in connection with the plume and do not
intend to permit any owner of property on or contiguous with the plume to
commence a clean-up of such owner's property.
In 1992, pursuant to an Amended and Restated Agreement and Plan of Merger
(the "Merger Agreement") among Acurex, Xeruea, Inc. and others, the lease was
assigned from Acurex to Xeruca. The Merger Agreement included an indemnity from
Xeruca to Acurex for, among other things, those liabilities associated with the
Property. In connection with the expiration of the lease for the Property on
July 13, 1993, Prudential requested that Acurex execute an indemnification
agreement whereby Xeruca would agree to clean-up the Property (if and when
permitted by the municipal authorities) and provide a general indemnity for
matters related to the clean-up while Acurex would agree to guarantee Xeruca's
performance and indemnify Prudential for Xeruca's failure to perform its
obligations. Acurex refused to enter into this agreement, and Prudential
threatened to sue Acurex to compel it to acknowledge such alleged
indemnification obligations.
This dispute between Acurex and Prudential was resolved by an Agreement
made as of August 27, 1993 (the "Settlement Agreement") among Prudential, Xeruca
and Acurex. Pursuant to the Settlement Agreement, Xeruca agreed to indemnify
Prudential with respect to environmental claims related to the Property. In
addition, Acurex assigned to Prudential the benefit of the indemnification
provisions from Xeruca under the Merger Agreement with respect to environmental
claims related to the Property. As a result of the Settlement Agreement, Acurex
is now a co-beneficiary with Prudential of Xeruca's indemnification obligations
and Prudential has released and forever discharged Acurex from any and all
claims that Acurex is obligated to sign an indemnification agreement with
Prudential.
No lawsuit is currently pending or threatened against Acurex in connection
with the Property.
<PAGE>
SCHEDULE III
Subsidiaries and Investments
----------------------------
Part A - Subsidiaries
------------
Jurisdiction of Percentage of
Subsidiary Organization Owners Ownership
- ---------- ------------ ------ ---------
BE Aerospace Barbados BEA 100%
International, Ltd.
BE Aerospace (UK) England BEA 100%
Limited ("BEA-UK")
Flight Equipment and England BEA-UK 100%
Engineering Limited
BE Aerospace England BEA-UK 100%
(Services), Limited
Aircraft Furnishing England AFL 99.00%
Limited ("AFL") 1.00%
Fort Hill Aircraft Northern Ireland AFL 100%
Limited
AFI Holdings Northern Ireland AFL 100%
Limited
BE Aerospace France BEA 98.00%
(France) S.A.R.L. K.A.D. 1.00%
Companies, Inc. 1.00%
Mare Leveille
(director)
BE Aerospace Delaware BEA 100%
(U.S.A.), Inc.
BE Aerospace Netherlands BEA 90%
(Netherlands) B.V. BEA (U.S.A.) 10%
Royal Inventum B.V. Netherlands BEA (Neth.) 99.60%
<PAGE>
Acurex Corporation Delaware BEA 100%
Nordskog Industries, California BEA 100%
Inc.
- --------------------
* The balance of these shares were lost prior to the sale of the shares of this
entity to BEA.
<PAGE>
SCHEDULE III
Part B - Investments
-----------
In addition to the Investments set forth in Part A above, as of the
date hereof the Company has the following outstanding Investments:
a. an Investment in a Middle East sales office in an amount not to exceed
$400,000;
b. an Investment in a residential property in San Clemente, California in
an amount of approximately $600,000;
c. a PaineWebber Money Market Fund in the amount, as of January 18, 1996,
of approximately $2,598,000.
Finally, each of the matters described in Items 3, 4, 6, 12 and 13 of
part A of Schedule I constitutes an Investment in or by FEEL, AFL and the
Company, as the case may be.
<PAGE>
SCHEDULE IV
Approvals and Compliance
------------------------
None, except compliance with certain Environmental Laws disclosed in
the materials set forth in Schedule II hereto.
Schedule IV to Credit Agreement
-------------------------------
<PAGE>
SCHEDULE V
Existing Letters of Credit
--------------------------
<TABLE>
<CAPTION>
Letter of Credit No. Amount Outstanding Expiry Date
- ---------------------- ------------------ -----------
<S> <C> <C>
624634047961211 $534,000.00 12/11/96
624751178960228 $307,817.00 02/28/96
624753306960501 $827,553.00 05/01/96
624754546970110 $800,000.00 01/10/97
624754750960316 $505,000.00 03/16/96
</TABLE>
Schedule V to Credit Agreement
------------------------------
<PAGE>
SCHEDULE VI
Taxes
-----
None.
Schedule VI to Credit Agreement
-------------------------------
<PAGE>
SCHEDULE VII
Transactions with Affiliates
----------------------------
Under a Supply Agreement dated April 17, 1990 with Applied Extrusion
Technologies, Inc., a Delaware corporation ("AET"), the Company purchases from
AET its requirements of injection-molded plastic parts for use in the
manufacture of passenger control units and other products for installation in
commercial aircraft for the period ending March 31, 1998. Under that agreement,
AET has agreed to use its best efforts at all times to maintain available and in
good working order a sufficient number and variety of injection molding machines
to satisfy the Company's orders as received and to use its best efforts to
initiate production within three days of receipt of an order or, in emergency
situations, on the date on which the order is received. The price to be paid by
the Company to AET for products purchased under the Supply Agreement is an
amount which results in a 33-1/3% gross margin to AET, after including in AET's
standard cost for such products, all direct and indirect costs of labor,
materials, equipment and overhead. Purchases by the Company under this
agreement for the first three fiscal quarters of the Company's 1995 fiscal year
through and including November 25, 1995 were approximately $1,041,000. Mr. Amin
J. Khoury is a director and significant stockholder of AET and serves as its
Chairman and Chief Executive Officer. Messrs. Paul W. Marshall, Richard G.
Hamermesh, Joseph J. O'Donnell and Hansjoerg Wyss, directors of BE Aerospace,
Inc. are also directors of AET.
Schedule VII to Credit Agreement
--------------------------------
<PAGE>
EXHIBIT A-1
[FORM OF SERIES A NOTE]
PROMISSORY NOTE
$______________ January 19, 1996
New York, New York
FOR VALUE RECEIVED, BE AEROSPACE, INC., a Delaware corporation (the
"Company"), hereby promises to pay to __________________ (the "Lender"), for
- -------- ------
account of its respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase Manhattan Bank
(National Association) at 1 Chase Manhattan Plaza, New York, New York 10081, the
principal sum of _______________ Dollars (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Series A Loans made by the Lender
to the Company under the Credit Agreement), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Series A Loan, at such office, in like money and
funds, for the period commencing on the date of such Series A Loan until such
Series A Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Series A Loan made by the Lender to the Company, and
each payment made on account of the principal thereof, shall be recorded by the
Lender on its books provided that the failure of the Lender to make any such
--------
recordation shall not affect the obligations of the Company to make a payment
when due of any amount owing under the Credit Agreement or hereunder in respect
of the Series A Loans made by the Lender.
This Note is one of the Series A Notes referred to in the Second
Amended and Restated Credit Agreement dated as of October 29, 1993 amended and
restated as of January 19, 1996 (as modified and supplemented and in effect from
time to time, the "Credit Agreement") between the Company, the lenders named
----------------
therein and The Chase Manhattan Bank (National Association), as Administrative
Agent, and evidences Series A Loans made by the Lender thereunder. Terms used
but not defined in this Note have the respective meanings assigned to them in
the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
Series A Note
-------------
<PAGE>
- 2 -
Except as permitted by Section 11.06(b) of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with,
the law of the State of New York.
BE AEROSPACE, INC.
By_________________________
Name:
Title:
Series A Note
-------------
<PAGE>
- 3 -
SCHEDULE OF SERIES A LOANS
This Note evidences Series A Loans made, Continued or Converted under
the within-described Credit Agreement to the Company, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Prin- Paid,
Date Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ --------
Series A Note
-------------
<PAGE>
EXHIBIT A-2
[FORM OF SERIES B NOTE]
PROMISSORY NOTE
$_______________ January 19, 1996
New York, New York
FOR VALUE RECEIVED, BE AEROSPACE, INC., a Delaware corporation (the
"Company"), hereby promises to pay to __________________ (the "Bank"), for
- -------- ----
account of its respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase Manhattan Bank
(National Association) at 1 Chase Manhattan Plaza, New York, New York 10081, the
principal sum of _______________ Dollars (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Series B Loans made by the Bank to
the Company under the Credit Agreement), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Series B Loan, at such office, in like money and
funds, for the period commencing on the date of such Series B Loan until such
Series B Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Series B Loan made by the Bank to the Company, and each
payment made on account of the principal thereof, shall be recorded by the Bank
on its books, and, prior to any transfer of this Note, endorsed by the Bank on
the schedule attached hereto or any continuation thereof, provided that the
--------
failure of the Bank to make any such recordation or endorsement shall not affect
the obligations of the Company to make a payment when due of any amount owing
under the Credit Agreement or hereunder in respect of the Series B Loans made by
the Bank.
This Note is one of the Series B Notes referred to in the Second
Amended and Restated Credit Agreement dated as of October 29, 1993 amended and
restated as of January 19, 1996 (as modified and supplemented and in effect from
time to time, the "Credit Agreement") between the Company, the lenders named
----------------
therein and The Chase Manhattan Bank (National Association), as Administrative
Agent, and evidences Series B Loans made by the Bank thereunder. Terms used but
not defined in this Note have the respective meanings assigned to them in the
Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events
Series B Note
-------------
<PAGE>
- 2 -
and for prepayments of Series B Loans upon the terms and conditions specified
therein.
Except as permitted by Section 11.06(b) of the Credit Agreement, this
Note may not be assigned by the Bank to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
BE AEROSPACE, INC.
By_________________________
Name:
Title:
Series B Note
-------------
<PAGE>
- 3 -
SCHEDULE OF SERIES B LOANS
This Note evidences Series B Loans made, Continued or Converted under
the within-described Credit Agreement to the Company, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
<TABLE>
<CAPTION>
Amount
Date Prin- Paid,
Made, cipal Prepaid, Unpaid
Continued Amount Type Continued Prin-
or of of Interest or cipal Notation
Converted Loan Loan Rate Converted Amount Made by
- --------- ------ ---- -------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Series B Note
-------------
<PAGE>
CONFORMED COPY
EXHIBIT B-1
REVOLVING CREDIT SECURITY AGREEMENT
REVOLVING CREDIT SECURITY AGREEMENT dated as of October 29, 1993
between BE AEROSPACE, INC., a corporation duly organized and validly existing
under the laws of Delaware (the "Company"); and THE CHASE MANHATTAN BANK
-------
(NATIONAL ASSOCIATION), as agent for certain lenders or other financial
institutions or entities party, as lenders, to the Credit Agreement referred to
below (in such capacity, together with its successors in such capacity, the
"Agent").
- ------
The Company, certain lenders and the Agent are parties to a Credit
Agreement dated as of October 29, 1993 (as modified and supplemented and in
effect from time to time, the "Credit Agreement"), providing, subject to the
----------------
terms and conditions thereof, for extensions of credit (by making of loans and
issuing letters of credit) to be made by said lenders to the Company in an
aggregate principal or face amount not exceeding $85,000,000.
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company has agreed
to pledge and grant a security interest in the Revolving Credit Collateral (as
hereinafter defined) as security for the Revolving Credit Secured Obligations
(as so defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are
-----------
used herein as defined therein. In addition, as used herein:
"Accounts" shall have the meaning ascribed thereto in Section 3(d)
--------
hereof.
"Collateral Account" shall have the meaning ascribed thereto in
------------------
Section 4.01 hereof.
"Copyright Collateral" shall mean all Copyrights, whether now owned or
-------------------
hereafter acquired by the Company, including each Copyright identified in
Annex 2 hereto.
"Copyrights" shall mean all copyrights, copyright registrations and
----------
applications for copyright registrations, including, without limitation,
all renewals and extensions thereof, the right to recover for all past,
present and future infringements thereof, and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 2 -
"Documents" shall have the meaning ascribed thereto in Section 3(j)
---------
hereof.
"Equipment" shall have the meaning ascribed thereto in Section 3(h)
---------
hereof.
"Instruments" shall have the meaning ascribed thereto in Section 3(e)
-----------
hereof.
"Intellectual Property" shall mean all Copyright Collateral, all
---------------------
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information, know-
how and trade secrets; (b) all licenses or user or other agreements granted
to the Company with respect to any of the foregoing, in each case whether
now or hereafter owned or used including, without limitation, the licenses
or other agreements with respect to the Copyright Collateral, the Patent
Collateral or the Trademark Collateral, listed in Annex 5 hereto; (c) all
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, computer and automatic
machinery software and programs; (d) all field repair data, sales data and
other information relating to sales or service of products now or hereafter
manufactured; (e) all accounting information and all media in which or on
which any information or knowledge or data or records may be recorded or
stored and all computer programs used for the compilation or printout of
such information, knowledge, records or data; (f) all licenses, consents,
permits, variances, certifications and approvals of governmental agencies
now or hereafter held by the Company; and (g) all causes of action, claims
and warranties now or hereafter owned or acquired by the Company in respect
of any of the items listed above.
"Inventory" shall have the meaning ascribed thereto in Section 3(f)
---------
hereof.
"Issuers" shall mean, collectively, (a) the respective corporations
-------
identified on Annex 1 hereto under the caption "Issuer" and (b) to the
------
extent not otherwise identified on Annex 1 hereto, each other Subsidiary
of the Company.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
--------------
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 3 -
"Patent Collateral" shall mean all Patents, whether now owned or
-----------------
hereafter acquired by the Company, including each Patent identified in
Annex 3 hereto.
"Patents" shall mean all patents and patent applications, including,
-------
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties,
damages and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding thereto
throughout the world.
"Pledged Stock" shall have the meaning ascribed thereto in Section
-------------
3(a) hereof.
"Revolving Credit Collateral" shall have the meaning ascribed thereto
---------------------------
in Section 3 hereof.
"Revolving Credit Secured Obligations" shall mean, collectively, (a)
------------------------------------
the principal of and interest on the Revolving Credit Loans made by the
Revolving Credit Lenders to, and the Revolving Credit Note(s) held by each
Revolving Credit Lender of, the Company and all other amounts from time to
time owing to the Revolving Credit Lenders or the Agent by the Company
under the Basic Documents including, without limitation, all Reimbursement
Obligations and interest thereon and (b) all obligations of the Company to
the Revolving Credit Lenders and the Agent hereunder.
"Stock Collateral" shall mean, collectively, the Revolving Credit
----------------
Collateral described in clauses (a) through (c) of Section 3 hereof and the
proceeds of and to any such property and, to the extent related to any such
property or such proceeds, all books, correspondence, credit files,
records, invoices and other papers.
"Term Loan Collateral" shall have the meaning assigned to such term
--------------------
in the Term Loan Security Agreement.
"Trademark Collateral" shall mean all Trademarks, whether now owned or
--------------------
hereafter acquired by the Company, including each Trademark identified in
Annex 4 hereto. Notwithstanding the foregoing, the Trademark Collateral
does not and shall not include any Trademark which would be rendered
invalid, abandoned, void or unenforceable by reason of its being included
as part of the Trademark Collateral.
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 4 -
"Trademarks" shall mean all trade names, trademarks and service marks,
----------
logos, trademark and service mark registrations, and applications for
trademark and service mark registrations, including, without limitation,
all renewals of trademark and service mark registrations, all rights
corresponding thereto throughout the world, the right to recover for all
past, present and future infringements thereof, all other rights of any
kind whatsoever accruing thereunder or pertaining thereto, together, in
each case, with the product lines and goodwill of the business connected
with the use of, and symbolized by, each such trade name, trademark and
service mark.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. The Company represents
------------------------------
and warrants to the Revolving Credit Lenders and the Agent that:
(a) The Company is the sole beneficial owner of the Revolving Credit
Collateral and no Lien exists or will exist upon the Revolving Credit
Collateral at any time (and no right or option to acquire the same exists
in favor of any other Person), except for Liens permitted under Section
8.06 of the Credit Agreement and except for the pledge and security
interest in favor of the Agent for the benefit of the Revolving Credit
Lenders created or provided for herein, which pledge and security interest
constitute a first priority perfected pledge and security interest in and
to all of the Revolving Credit Collateral (other than Intellectual Property
registered or otherwise located outside of the United States of America).
(b) The Pledged Stock represented by the certificates identified in
Annex 1 hereto is, and all other Pledged Stock in which the Company shall
hereafter grant a security interest pursuant to Section 3 hereof will be,
duly authorized, validly existing, fully paid and non-assessable and none
of such Pledged Stock is or will be subject to any contractual restriction,
or any restriction under the charter or by-laws of the respective Issuer,
upon the transfer of such Pledged Stock (except for any such restriction
contained herein or in the Credit Agreement).
(c) The Pledged Stock represented by the certificates identified in
Annex 1 hereto constitutes at least 65% of the issued and outstanding
shares of capital stock of any class
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 5 -
of the Issuers beneficially owned by the Company on the date hereof
(whether or not registered in the name of the Company) and said Annex 1
correctly identifies, as at the date hereof, the respective Issuers of such
Pledged Stock, the respective class and par value of the shares comprising
such Pledged Stock and the respective number of shares (and registered
owners thereof) represented by each such certificate.
(d) Annex 2, 3 and 4 hereto set forth a complete and correct list of
all Copyrights, Patents and Trademarks owned by the Company on the date
hereof; except pursuant to licenses and other user agreements entered into
by the Company in the ordinary course of business, which are listed in
Annex 5 hereto, the Company owns and possesses the right to use, and has
done nothing to authorize or enable any other Person to use, any Copyright,
Patent or Trademark listed in said Annex 2, 3 and 4, and all registrations
listed in said Annex 2, 3 and 4 are valid and in full force and effect;
except as may be set forth in said Annex 5, the owns and possesses the
right to use all Copyrights, Patents and Trademarks.
(e) Annex 5 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property on
the date hereof.
(f) To the Company's knowledge, (i) except as set forth in Annex 5
hereto, there is no violation by others of any right of the Company with
respect to any Copyright, Patent or Trademark listed in Annex 2, 3 and 4
hereto and (ii) the Company is not infringing in any respect upon any
Copyright, Patent or Trademark of any other Person; and no proceedings have
been instituted or are pending against the Company or, to the Company's
knowledge, threatened, and no claim against the Company has been received
by the Company, alleging any such violation, except as may be set forth in
said Annex 5.
(g) The Company does not own any Trademarks registered in the United
States of America to which the last sentence of the definition of Trademark
Collateral applies.
(h) Any goods now or hereafter produced by the Company or any of its
Subsidiaries included in the Revolving Credit Collateral have been and will
be produced in compliance with the requirements of the Fair Labor Standards
Act, as amended.
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 6 -
Section 3. Revolving Credit Collateral. As collateral security for
---------------------------
the prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) of the Revolving Credit Secured Obligations, the Company hereby
pledges and grants to the Agent, for the benefit of the Revolving Credit Lenders
as hereinafter provided, a security interest in all of the Company's right,
title and interest in the following property, whether now owned by the Company
or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as "Revolving Credit
----------------
Collateral"):
- ----------
(a) the shares of capital stock of the Issuers represented by the
certificates identified in Annex 1 hereto and, subject to the limitation
set forth in Section 5.04(a)(1) hereof, all other shares of capital stock
of whatever class of the Issuers, now or hereafter owned by the Company, in
each case together with the certificates evidencing the same (collectively,
the "Pledged Stock");
-------------
(b) all shares, securities, moneys or property representing a dividend
on any of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from a split-
up, revision, reclassification or other like change of the Pledged Stock or
otherwise received in exchange therefor, and any subscription warrants,
rights or options issued to the holders of, or otherwise in respect of, the
Pledged Stock;
(c) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which the Issuer is not the
surviving corporation, all shares of each class of the capital stock of the
successor corporation formed by or resulting from such consolidation or
merger (the Pledged Stock, together with all other certificates, shares,
securities, properties or moneys as may from time to time be pledged
hereunder pursuant to clause (a) or (b) above and this clause (c) being
herein collectively called the "Stock Collateral");
----------------
(d) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Company constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to the Company in respect of any loans or advances or for
Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to the Company
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 7 -
under any guarantee (not including a letter of credit) of the purchase
price of Inventory or Equipment sold by the Company and all tax refunds
(such accounts, general intangibles and moneys due and to become due being
herein called collectively "Accounts");
--------
(e) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Company evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called "Instruments");
-----------
(f) all inventory (as defined in the Uniform Commercial Code) of the
Company, including Motor Vehicles held by the Company for lease (including
lease to Subsidiaries of the Company), fuel, tires and other spare parts,
all goods obtained by the Company in exchange for such inventory, and any
products made or processed from such inventory including all substances, if
any, commingled therewith or added thereto (herein collectively called
"Inventory");
---------
(g) all Intellectual Property and all other accounts or general
intangibles of the Company not constituting Intellectual Property or
Accounts;
(h) all equipment (as defined in the Uniform Commercial Code) of the
Company, including all Motor Vehicles (herein collectively called
"Equipment");
---------
(i) each contract and other agreement of the Company relating to the
sale or other disposition of Inventory or Equipment;
(j) all documents of title (as defined in the Uniform Commercial Code)
or other receipts of the Company covering, evidencing or representing
Inventory or Equipment (herein collectively called "Documents");
---------
(k) all rights, claims and benefits of the Company against any Person
arising out of, relating to or in connection with Inventory or Equipment
purchased by the Company, including, without limitation, any such rights,
claims or benefits against any Person storing or transporting such
Inventory or Equipment;
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 8 -
(l) the balance from time to time in the Collateral Account;
(m) all other tangible and intangible property of the Company (other
than Term Loan Collateral), including, without limitation, all proceeds,
products, offspring, accessions, rents, profits, income, benefits,
substitutions and replacements of and to any of the property of the Company
described in the preceding clauses of this Section 3 (including, without
limitation, any proceeds of insurance thereon) and, to the extent related
to any property described in said clauses or such proceeds, products and
accessions, all books, correspondence, credit files, records, invoices and
other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of
the Company or any computer bureau or service company from time to time
acting for the Company.
Section 4. Cash Proceeds of Revolving Credit Collateral.
--------------------------------------------
4.01 Collateral Account. The Agent may establish with Chase a cash
------------------
collateral account (the "Collateral Account") in the name and under the control
------------------
of the Agent into which there shall be deposited from time to time the cash
proceeds of any of the Revolving Credit Collateral (including proceeds of
insurance thereon) required to be delivered to the Agent pursuant hereto and
into which the Company may from time to time deposit any additional amounts
which it wishes to pledge to the Agent for the benefit of the Revolving Credit
Lenders as additional collateral security hereunder. The balance from time to
time in the Collateral Account shall constitute part of the Revolving Credit
Collateral hereunder and shall not constitute payment of the Revolving Credit
Secured Obligations until applied as hereinafter provided. Except as expressly
provided in the next sentence, the Agent shall remit the collected balance
outstanding to the credit of the Collateral Account to or upon the order of the
Company as the Company shall from time to time instruct; provided that the Net
--------
Available Proceeds from Dispositions deposited in the Collateral Account (but
not the investment earnings thereof) shall remain in the Collateral Account
until withdrawn as permitted or required by Section 2.10(c) of the Credit
Agreement. However, at any time following the occurrence and during the
continuance of an Event of Default, the Agent may (and, if instructed by the
Revolving Credit Lenders as specified in Section 10.03 of the Credit Agreement,
shall) in its (or their) discretion apply or cause to be applied (subject to
collection) the balance from time to time outstanding to the credit of the
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 9 -
Collateral Account to the payment of the Revolving Credit Secured Obligations in
the manner specified in Section 5.09 hereof. The balance from time to time in
the Collateral Account shall be subject to withdrawal only as provided herein
and in Section 2.10(c) of the Credit Agreement.
4.02 Proceeds of Accounts. At any time after the occurrence and
--------------------
during the continuance of an Event of Default, the Company shall, upon the
request of the Agent, instruct all account debtors and other Persons obligated
in respect of all Accounts to make all payments in respect of the Accounts
either (a) directly to the Agent (by instructing that such payments be remitted
to a post office box which shall be in the name and under the control of the
Agent) or (b) to one or more other banks in the United States of America (by
instructing that such payments be remitted to a post office box which shall be
in the name and under the control of the Agent) under arrangements, in form and
substance satisfactory to the Agent pursuant to which the Company shall have
irrevocably instructed such other bank (and such other bank shall have agreed)
to remit all proceeds of such payments directly to the Agent for deposit into
the Collateral Account. All payments made to the Agent, as provided in the
preceding sentence, shall be immediately deposited in the Collateral Account.
In addition to the foregoing, the Company agrees that, at any time after the
occurrence and during the continuance of an Event of Default, if the proceeds of
any Revolving Credit Collateral hereunder (including the payments made in
respect of Accounts) shall be received by it, the Company shall as promptly as
possible deposit such proceeds into the Collateral Account. Until so deposited,
all such proceeds shall be held in trust by the Company for and as the property
of the Agent and shall not be commingled with any other funds or property of the
Company.
4.03 Investment of Balance in Collateral Account. Amounts on deposit
-------------------------------------------
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the Company (or, after the occurrence and during the continuance
of a Default, the Agent) shall determine, which Permitted Investments shall be
held in the name and be under the control of the Agent, provided that (i) at any
--------
time after the occurrence and during the continuance of an Event of Default, the
Agent may (and, if instructed by the Revolving Credit Lenders as specified in
Section 10.03 of the Credit Agreement, shall) in its (or their) discretion at
any time and from time to time elect to liquidate any such Permitted Investments
and to apply or cause to be applied the proceeds thereof to the payment of the
Revolving Credit Secured Obligations in the manner specified in Section 5.09
hereof and (ii) if requested by the Company, such Permitted Investments may be
held in the name and under the
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 10 -
control of one or more of the Revolving Credit Lenders (and in that connection
each Revolving Credit Lender, pursuant to Section 10.10 of the Credit Agreement,
has agreed that such Permitted Investments shall be held by such Revolving
Credit Lender as a collateral sub-agent for the Agent hereunder).
4.04 Cover for Letter of Credit Liabilities. Amounts deposited into
--------------------------------------
the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 2.10(f) or Section 9 thereof shall be held
by the Agent in a separate sub-account (designated "Letter of Credit Liabilities
Sub-Account") and all amounts held in such sub-account shall constitute
collateral security first for the Letter of Credit Liabilities outstanding from
-----
time to time and second as collateral security for the other Revolving Credit
------
Secured Obligations hereunder.
Section 5. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, the Company
hereby agrees with each Revolving Credit Lender and the Agent as follows:
5.01 Delivery and Other Perfection. The Company shall:
-----------------------------
(a) subject to Section 5.04(a)(1) hereof, if any of the above-
described shares, securities, moneys or property required to be pledged by
the Company under clauses (a), (b) and (c) of Section 3 hereof are received
by the Company, forthwith either (x) transfer and deliver to the Agent such
shares or securities so received by the Company (together with the
certificates for any such shares and securities duly endorsed in blank or
accompanied by undated stock powers duly executed in blank), all of which
thereafter shall be held by the Agent, pursuant to the terms of this
Agreement, as part of the Revolving Credit Collateral or (y) take such
other action as the Agent shall deem necessary or appropriate to duly
record the Lien created hereunder in such shares, securities, moneys or
property in said clauses (a), (b) and (c);
(b) deliver and pledge to the Agent any and all Instruments, endorsed
and/or accompanied by such instruments of assignment and transfer in such
form and substance as the Agent may request; provided, that so long as no
--------
Default shall have occurred and be continuing, the Company may retain for
collection in the ordinary course any Instruments received by the Company
in the ordinary course of business and the Agent shall, promptly upon
request of the Company,
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 11 -
make appropriate arrangements for making any other Instrument pledged by
the Company available to the Company for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent
deemed appropriate by the Agent, against trust receipt or like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate the security interest granted pursuant hereto
or to enable the Agent to exercise and enforce its rights hereunder with
respect to such pledge and security interest, including, without
limitation, causing any or all of the Stock Collateral to be transferred of
record into the name of the Agent or its nominee (and the Agent agrees that
if any Stock Collateral is transferred into its name or the name of its
nominee, the Agent will thereafter promptly give to the Company copies of
any notices and communications received by it with respect to the Stock
Collateral), provided that notices to account debtors in respect of any
--------
Accounts or Instruments shall be subject to the provisions of clause (i)
below;
(d) from time to time as requested by any Revolving Credit Lender,
cause the Agent to be listed as the lienholder of any Equipment covered by
a certificate of title or ownership and within 120 days of such request
deliver evidence of the same to the Agent;
(e) keep full and accurate books and records relating to the Revolving
Credit Collateral, and stamp or otherwise mark such books and records in
such manner as the Agent may reasonably require in order to reflect the
security interests granted by this Agreement;
(f) furnish to the Agent from time to time (but, unless a Default
shall have occurred and be continuing, no more frequently than quarterly)
statements and schedules further identifying and describing the Copyright
Collateral, the Patent Collateral and the Trademark Collateral and such
other reports in connection with the Copyright Collateral, the Patent
Collateral and the Trademark Collateral, as the Agent may reasonably
request, all in reasonable detail;
(g) promptly upon request of the Agent, following receipt by the Agent
of any statements, schedules or reports pursuant to clause (f) above,
modify this Agreement by amending Annex 2, 3 and/or 4 hereto to include any
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 12 -
Copyright, Patent or Trademark which becomes part of the Revolving Credit
Collateral under this Agreement;
(h) permit representatives of the Agent, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from
its books and records pertaining to the Revolving Credit Collateral, and
permit representatives of the Agent to be present at the Company's place of
business to receive copies of all communications and remittances relating
to the Revolving Credit Collateral, and forward copies of any notices or
communications received by the Company with respect to the Revolving Credit
Collateral, all in such manner as the Agent may require;
(i) upon the occurrence and during the continuance of any Event of
Default, upon request of the Agent, promptly notify (and the Company hereby
authorizes the Agent so to notify) each account debtor in respect of any
Accounts or Instruments that such Revolving Credit Collateral has been
assigned to the Agent hereunder, and that any payments due or to become due
in respect of such Revolving Credit Collateral are to be made directly to
the Agent.
5.02 Other Financing Statements and Liens. Except as otherwise
------------------------------------
permitted under Section 8.06 of the Credit Agreement, without the prior written
consent of the Agent (granted with the authorization of the Revolving Credit
Lenders as specified in Section 10.09 of the Credit Agreement), the Company
shall not file or suffer to be on file, or authorize or permit to be filed or to
be on file, in any jurisdiction, any financing statement or like instrument with
respect to the Revolving Credit Collateral in which the Agent is not named as
the sole secured party for the benefit of the Revolving Credit Lenders.
5.03 Preservation of Rights. The Agent shall not be required to take
----------------------
steps necessary to preserve any rights against prior parties to any of the
Revolving Credit Collateral.
5.04 Special Provisions Relating to Certain Revolving Credit
-------------------------------------------------------
Collateral.
- ----------
(a) Stock Collateral.
----------------
(1) The Company will cause the Stock Collateral to constitute at all
times 100% of the total number of shares of each class of capital stock of each
Issuer then outstanding; provided that if any such Issuer is organized under the
--------
laws of jurisdiction other than the United States of America or a State thereof,
the Company need only cause the Stock Collateral of such
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 13 -
Issuer to constitute 65% of the total number of shares of each class of capital
stock of such Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, provided that the Company agrees that it will not vote the Stock
--------
Collateral in any manner that is inconsistent with the terms of this Agreement,
the Credit Agreement, the Notes or any such other instrument or agreement; and
the Agent shall execute and deliver to the Company or cause to be executed and
delivered to the Company all such proxies, powers of attorney, dividend and
other orders, and all such instruments, without recourse, as the Company may
reasonably request for the purpose of enabling the Company to exercise the
rights and powers which it is entitled to exercise pursuant to this Section
5.04(a)(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends on
the Stock Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Agent or any Revolving
Credit Lender exercises any available right to declare any Revolving Credit
Secured Obligations due and payable or seeks or pursues any other relief or
remedy available to it under applicable law or under this Agreement, the Credit
Agreement, the Notes or any other agreement relating to such Revolving Credit
Secured Obligations, all dividends and other distributions on the Stock
Collateral shall be paid directly to the Agent and retained by it in the
Collateral Account as part of the Stock Collateral, subject to the terms of this
Agreement, and, if the Agent shall so request in writing, the Company agrees to
execute and deliver to the Agent appropriate additional dividend, distribution
and other orders and documents to that end, provided that if such Event of
--------
Default is cured, any such dividend or distribution theretofore paid to the
Agent shall, upon request of the Company (except to the extent theretofore
applied to the Revolving Credit Secured Obligations), be returned by the Agent
to the Company.
(b) Intellectual Property.
---------------------
(1) For the purpose of enabling the Agent to exercise rights and
remedies under Section 5.05 hereof at such time as the Agent shall be lawfully
entitled to exercise such rights and
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 14 -
remedies, and for no other purpose, the Company hereby grants to the Agent, to
the extent assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to the Company) to use, assign,
license or sublicense any of the Intellectual Property now owned or hereafter
acquired by the Company, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof.
(2) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 8.05 of the Credit Agreement which limit
the right of the Company to dispose of its property, so long as no Event of
Default shall have occurred and be continuing, the Company will be permitted to
exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or
take other actions with respect to the Intellectual Property in the ordinary
course of the business of the Company. In furtherance of the foregoing, unless
an Event of Default shall have occurred and be continuing the Agent shall from
time to time, upon the request of the Company, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
the Company shall have certified are appropriate (in its judgment) to allow it
to take any action permitted above (including relinquishment of the license
provided pursuant to clause (1) immediately above as to any specific
Intellectual Property). Further, upon the payment in full of all of the
Revolving Credit Secured Obligations and cancellation or termination of the
Revolving Credit Commitments and Letter of Credit Liabilities or earlier
expiration of this Agreement or release of the Revolving Credit Collateral, the
Agent shall grant back to the Company the license granted pursuant to clause (1)
immediately above. The exercise of rights and remedies under Section 5.05
hereof by the Agent shall not terminate the rights of the holders of any
licenses or sublicenses theretofore granted by the Company in accordance with
the first sentence of this clause (2).
5.05 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) the Company shall, at the request of the Agent, assemble the
Revolving Credit Collateral owned by it at such place or places, reasonably
convenient to both the Agent and the Company, designated in the Agent's
request;
(b) the Agent may make any reasonable compromise or settlement deemed
desirable with respect to any of the Revolving Credit Collateral and may
extend the time of
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 15 -
payment, arrange for payment in installments, or otherwise modify the terms
of, any of the Revolving Credit Collateral;
(c) the Agent shall have all of the rights and remedies with respect
to the Revolving Credit Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the jurisdiction
where the rights and remedies are asserted) and such additional rights and
remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Revolving Credit Collateral as if the Agent were the sole
and absolute owner thereof (and the Company agrees to take all such action
as may be appropriate to give effect to such right);
(d) the Agent in its discretion may, in its name or in the name of
the Company or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Revolving Credit Collateral, but shall be under no obligation to
do so; and
(e) the Agent may, upon ten Business Days' prior written notice to
the Company of the time and place, with respect to the Revolving Credit
Collateral or any part thereof which shall then be or shall thereafter come
into the possession, custody or control of the Agent, the Revolving Credit
Lenders or any of their respective agents, sell, lease, assign or otherwise
dispose of all or any part of such Revolving Credit Collateral, at such
place or places as the Agent deems best, and for cash or for credit or for
future delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute and cannot be waived),
and the Agent or any Revolving Credit Lender or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the Revolving
Credit Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Company, any
such demand, notice and right or equity being hereby expressly waived and
released. In the event of any sale, assignment, or other disposition of any
of the Trademark Collateral, the goodwill connected with and
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 16 -
symbolized by the Trademark Collateral subject to such disposition shall be
included, and the Company shall supply to the Agent or its designee, for
inclusion in such sale, assignment or other disposition, all Intellectual
Property relating to such Trademark Collateral. The Agent may, without
notice or publication, adjourn any public or private sale or cause the same
to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which
the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05, including by virtue of the exercise of the license granted to the Agent in
Section 5.04(b) hereof, shall be applied in accordance with Section 5.09 hereof.
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all or
any part of the Revolving Credit Collateral, to limit purchasers to those who
will agree, among other things, to acquire the Revolving Credit Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof. The Company acknowledges that any such private sales may be at
prices and on terms less favorable to the Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Agent shall have no obligation to
engage in public sales and no obligation to delay the sale of any Revolving
Credit Collateral for the period of time necessary to permit the Agent or issuer
thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Revolving Credit Collateral pursuant to Section 5.05
hereof are insufficient to cover the costs and expenses of such realization and
the payment in full of the Revolving Credit Secured Obligations, the Company
shall remain liable for any deficiency.
5.07 Removals, Etc. Without at least 30 days' prior written notice
-------------
to the Agent, the Company shall not (i) maintain any of its books and records
with respect to the Revolving Credit Collateral at any office or maintain its
principal place of business at any place, or permit any Inventory or Equipment
to be located anywhere, other than at the address indicated beneath the
signature of the Company to the Credit Agreement or at one of the locations
identified in Part A of Annex 6 hereto or in transit from one of such locations
to another or (ii) change its name, or
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 17 -
the name under which it does business, from the name shown on the signature
pages hereto; provided, however, that the Company may do business in the states
-------- -------
and under the names specified in Part B of Annex 6 hereto.
5.08 Private Sale. The Agent and the Revolving Credit Lenders shall
------------
incur no liability as a result of the sale of the Revolving Credit Collateral,
or any part thereof, at any private sale pursuant to Section 5.05 hereof
conducted in a commercially reasonable manner. The Company hereby waives any
claims against the Agent or any Revolving Credit Lender arising by reason of the
fact that the price at which the Revolving Credit Collateral may have been sold
at such a private sale was less than the price which might have been obtained at
a public sale or was less than the aggregate amount of the Revolving Credit
Secured Obligations, even if the Agent accepts the first offer received and does
not offer the Revolving Credit Collateral to more than one offeree.
5.09 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 5.09, the proceeds of any
collection, sale or other realization of all or any part of the Revolving Credit
Collateral pursuant hereto, and any other cash at the time held by the Agent
under Section 4 hereof or this Section 5, shall be applied by the Agent:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Agent and the reasonable fees and expenses of its agents
and counsel, and all reasonable expenses incurred and advances made by the
Agent in connection therewith;
Next, to the payment in full of the Revolving Credit Secured
-----
Obligations, in each case equally and ratably in accordance with the
respective amounts thereof then due and owing or as the Revolving Credit
Lenders holding the same may otherwise agree; and
Finally, to the payment to the Company, or its successors or assigns,
-------
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.04 hereof shall be applied first to the Letter of Credit
-----
Liabilities outstanding from time to time and second to the other Revolving
------
Credit Secured Obligations in the manner provided above in this Section 5.09.
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 18 -
As used in this Section 5, "proceeds" of Revolving Credit Collateral shall mean
--------
cash, securities and other property realized in respect of, and distributions in
kind of, Revolving Credit Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of the Company or any issuer
of or obligor on any of the Revolving Credit Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to the Agent while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Agent is hereby appointed the attorney-in-fact of the Company for
the purpose of carrying out the provisions of this Section 5 and taking any
action and executing any instruments which the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment as attorney-in-
fact is irrevocable and coupled with an interest. Without limiting the
generality of the foregoing, so long as the Agent shall be entitled under this
Section 5 to make collections in respect of the Revolving Credit Collateral, the
Agent shall have the right and power to receive, endorse and collect all checks
made payable to the order of the Company representing any dividend, payment or
other distribution in respect of the Revolving Credit Collateral or any part
thereof and to give full discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, the Company shall (i) file such financing statements
and other documents in such offices as the Agent may request to perfect the
security interests granted by Section 3 of this Agreement, (ii) cause the Agent
(to the extent requested by any Revolving Credit Lender) to be listed as the
lienholder on all certificates of title or ownership relating to Motor Vehicles
owned by the Company and (iii) deliver to the Agent all certificates identified
in Annex 1 hereto, accompanied by undated stock powers duly executed in blank.
5.12 Termination. When all Revolving Credit Secured Obligations
-----------
shall have been paid in full and the Revolving Credit Commitments of the
Revolving Credit Lenders under the Credit Agreement and all Letter of Credit
Liabilities shall have expired or been terminated, this Agreement shall
terminate, and the Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Revolving Credit Collateral and money received in
respect thereof, to or on the order of the Company and to be released and
canceled all licenses and rights referred to in Section 5.04(b) hereof. The
Agent shall also execute and deliver to the Company upon such
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 19 -
termination such Uniform Commercial Code termination statements, certificates
for terminating the Liens on the Motor Vehicles and such other documentation as
shall be reasonably requested by the Company to effect the termination and
release of the Liens on the Revolving Credit Collateral.
5.13 Expenses. The Company agrees to pay to the Agent all reasonable
--------
out-of-pocket expenses (including reasonable expenses for legal services of
every kind) of, or incident to, the enforcement of any of the provisions of this
Section 5, or performance by the Agent of any obligations of the Company in
respect of the Revolving Credit Collateral which the Company has failed or
refused to perform, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement in respect of any of the
Revolving Credit Collateral, and for the care of the Revolving Credit Collateral
and defending or asserting rights and claims of the Agent in respect thereof, by
litigation or otherwise, including expenses of insurance, and all such expenses
shall be Revolving Credit Secured Obligations to the Agent secured under Section
3 hereof.
5.14 Further Assurances. The Company agrees that, from time to time
------------------
upon the written request of the Agent, the Company will execute and deliver such
further documents and do such other acts and things as the Agent may reasonably
request in order fully to effect the purposes of this Agreement.
5.15 Release of Motor Vehicles. So long as no Event of Default shall
-------------------------
have occurred and be continuing, upon the request of the Company, the Agent
shall execute and deliver to the Company such instruments as the Company shall
reasonably request to remove the notation of the Agent as lienholder on any
certificate of title for any Motor Vehicle; provided that any such instruments
--------
shall be delivered, and the release effective only upon receipt by the Agent of
a certificate from the Company stating that the Motor Vehicle the lien on which
is to be released is to be sold or has suffered a casualty loss (with title
thereto passing to the casualty insurance company therefor in settlement of the
claim for such loss).
Section 6. Miscellaneous.
-------------
6.01 No Waiver. No failure on the part of the Agent or any of its
---------
agents to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent or any of its
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right,
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 20 -
power or remedy. The remedies herein are cumulative and are not exclusive of
any remedies provided by law.
6.02 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the law of the State of New York.
6.03 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telexed, telecopied or delivered to the intended
recipient at its "Address for Notices" specified pursuant to Section 11.02 of
the Credit Agreement and shall be deemed to have been given at the times
specified in said Section 11.02.
6.04 Waivers, Etc. The terms of this Agreement may be waived,
------------
altered or amended only by an instrument in writing duly executed by the Company
and the Agent (with the consent of the Revolving Credit Lenders as specified in
Section 10.09 of the Credit Agreement). Any such amendment or waiver shall be
binding upon the Agent and each Revolving Credit Lender, each holder of any of
the Revolving Credit Secured Obligations and the Company.
6.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective successors and assigns of the
Company, the Agent, the Revolving Credit Lenders and each holder of any of the
Revolving Credit Secured Obligations (provided, however, that the Company shall
--------
not assign or transfer its rights hereunder without the prior written consent of
the Agent).
6.06 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
6.07 Agents. The Agent may employ agents and attorneys-in-fact in
------
connection herewith and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
6.08 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent and the
Revolving Credit Lenders in order to carry out the intentions of the parties
hereto as nearly as may be possible and (ii) the invalidity or unenforceability
of any provision hereof in any
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
- 21 -
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving
Credit Security Agreement to be duly executed and delivered as of the day and
year first above written.
BE AEROSPACE, INC.
By /s/ Thomas P. McCaffrey
-----------------------
Title: Secretary
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By /s/ Matthew H. Massie
----------------------
Title: Vice President
Revolving Credit Security Agreement
-----------------------------------
<PAGE>
ANNEX 1
PLEDGED STOCK
-------------
[See Section 2(b) and (c).]
<TABLE>
<CAPTION>
Certificate Registered
Issuer Nos. Owner Number of Shares
- -------------------- ----------- ------------------ -----------------
<S> <C> <C> <C>
Flight Equipment
and Engineering
Limited _______ ________ _______ shares of
[common/preferred]
stock, [no] par
value [$________]
BE Aerospace
(Netherlands) B.V. _______ ________ _______ shares of
[common/preferred]
stock, [no] par
value [$________]
BE Aerospace
(USA) Inc. _______ ________ _______ shares of
[common/preferred]
stock, [no] par
value [$________]
</TABLE>
Annex 1 to Revolving Credit Security Agreement
----------------------------------------------
<PAGE>
ANNEX 2
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
[See Section 2(d).]
Title Date Filed Registration No. Effective Date
---------------------------------------------------------------------
Annex 2 to Revolving Credit Security Agreement
----------------------------------------------
<PAGE>
ANNEX 3
LIST OF PATENTS AND PATENT APPLICATIONS
[See Section 2(d).]
File Patent Country Registration No. Date
-------------------------------------------------------------------------
Annex 3 to Revolving Credit Security Agreement
----------------------------------------------
<PAGE>
ANNEX 4
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
[See Section 2(d).]
U.S. TRADEMARKS
---------------
Application (A)
Registration (R) Registration
Mark or Series No. (S) or Filing Date
-------------------------------------------------------------
Annex 4 to Revolving Credit Security Agreement
----------------------------------------------
<PAGE>
- 2 -
FOREIGN TRADEMARKS
------------------
Application (A) Registration or
Mark Registration (R) Country Filing Date (F)
---------------------------------------------------------------------------
Annex 4 to Revolving Credit Security Agreement
----------------------------------------------
<PAGE>
ANNEX 5
LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS
[See Section 2(d), (e) and (f).]
Annex 5 to Revolving Credit Security Agreement
----------------------------------------------
<PAGE>
ANNEX 6
LIST OF LOCATIONS AND TRADE NAMES
[See Section 5.07.]
Part A - List of Locations
- ------
Part B - Trade Names/State
- ------
Annex 6 to Revolving Credit Security Agreement
----------------------------------------------
<PAGE>
CONFORMED COPY
EXHIBIT B-2
TERM LOAN SECURITY AGREEMENT
TERM LOAN SECURITY AGREEMENT dated as of October 29, 1993 between BE
AEROSPACE, INC., a corporation duly organized and validly existing under the
laws of Delaware (the "Company"); and THE CHASE MANHATTAN BANK (NATIONAL
-------
ASSOCIATION), as agent for certain lenders or other financial institutions or
entities party to the Credit Agreement referred to below (in such capacity,
together with its successors in such capacity, the "Agent").
-----
The Company, certain lenders and the Agent are parties to a Credit
Agreement dated as of October 29, 1993 (as modified and supplemented and in
effect from time to time, the "Credit Agreement"), providing, subject to the
----------------
terms and conditions thereof, for extensions of credit (by making of loans and
issuing letters of credit) to be made by said lenders to the Company in an
aggregate principal or face amount not exceeding $85,000,000.
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company has agreed
to pledge and grant a security interest in the Term Loan Collateral (as
hereinafter defined) as security for the Term Loan Secured Obligations (as so
defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are
-----------
used herein as defined therein. In addition, as used herein:
"Issuer" shall mean the corporation identified on Annex 1 hereto under
------
the caption "Issuer".
------
"Pledged Stock" shall have the meaning ascribed thereto in Section
-------------
3(a) hereof.
"Term Loan Collateral" shall have the meaning ascribed thereto in
--------------------
Section 3 hereof.
"Term Loan Secured Obligations" shall mean, collectively, (a) the
-----------------------------
principal of and interest on the Term Loans made by the Term Loan Lenders
to, and the Term Loan Note(s) held by each Term Loan Lender of, the Company
and all other amounts from time to time owing to the Term Loan Lenders or
the Agent by the Company under the Basic Documents and (b) all obligations
of the Company to the Term Loan Lenders and the Agent hereunder.
Term Loan Security Agreement
----------------------------
<PAGE>
- 2 -
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. The Company represents
------------------------------
and warrants to the Term Loan Lenders and the Agent that:
(a) The Company is the sole beneficial owner of the Term Loan
Collateral and no Lien exists or will exist upon the Term Loan Collateral
at any time (and no right or option to acquire the same exists in favor of
any other Person), except for Liens permitted under Section 8.06 of the
Credit Agreement and except for the pledge and security interest in favor
of the Agent for the benefit of the Term Loan Lenders created or provided
for herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of the Term Loan
Collateral.
(b) The Pledged Stock represented by the certificates identified in
Annex 1 hereto is, and all other Pledged Stock in which the Company shall
hereafter grant a security interest pursuant to Section 3 hereof will be,
duly authorized, validly existing, fully paid and non-assessable and none
of such Pledged Stock is or will be subject to any contractual restriction,
or any restriction under the charter or by-laws of the Issuer, upon the
transfer of such Pledged Stock (except for any such restriction contained
herein or in the Credit Agreement).
(c) The Pledged Stock represented by the certificates identified in
Annex 1 hereto constitutes all of the issued and outstanding shares of
capital stock of any class of the Issuer beneficially owned by the Company
on the date hereof (whether or not registered in the name of the Company)
and said Annex 1 correctly identifies, as at the date hereof, the Issuer of
such Pledged Stock, the respective class and par value of the shares
comprising such Pledged Stock and the respective number of shares (and
registered owners thereof) represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Term Loan Secured Obligations, the Company hereby pledges and grants to the
Agent, for the benefit of the Term Loan Lenders as hereinafter provided, a
security interest in all of the Company's right, title and interest in the
following property, whether now owned by the
Term Loan Security Agreement
----------------------------
<PAGE>
- 3 -
Company or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as "Term Loan Collateral"):
--------------------
(a) the shares of capital stock of the Issuer represented by the
certificates identified in Annex 1 hereto and all other shares of capital
stock of whatever class of the Issuer, now or hereafter owned by the
Company, in each case together with the certificates evidencing the same
(collectively, the "Pledged Stock");
--------------
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which the Issuer is not the
surviving corporation, all shares of each class of the capital stock of the
successor corporation formed by or resulting from such consolidation or
merger; and
(d) all proceeds of and to any of the property of the Company
described in the preceding clauses of this Section 3 and, to the extent
related to any property described in said clauses or such proceeds, all
books, correspondence, credit files, records, invoices and other papers.
Section 4. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, the Company
hereby agrees with each Term Loan Lender and the Agent as follows:
4.01 Delivery and Other Perfection. The Company shall:
-----------------------------
(a) if any of the above-described shares, securities, moneys or
property required to be pledged by the Company under clauses (a), (b) and
(c) of Section 3 hereof are received by the Company, forthwith either (x)
transfer and deliver to the Agent such shares or securities so received by
the Company (together with the certificates for any such
Term Loan Security Agreement
----------------------------
<PAGE>
- 4 -
shares and securities duly endorsed in blank or accompanied by undated
stock powers duly executed in blank), all of which thereafter shall be held
by the Agent, pursuant to the terms of this Agreement, as part of the Term
Loan Collateral or (y) take such other action as the Agent shall deem
necessary or appropriate to duly record the Lien created hereunder in such
shares, securities, moneys or property in said clauses (a), (b) and (c);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate the security interest granted pursuant hereto
or to enable the Agent to exercise and enforce its rights hereunder with
respect to such pledge and security interest, including, without
limitation, causing any or all of the Term Loan Collateral to be
transferred of record into the name of the Agent or its nominee (and the
Agent agrees that if any Term Loan Collateral is transferred into its name
or the name of its nominee, the Agent will thereafter promptly give to the
Company copies of any notices and communications received by it with
respect to the Term Loan Collateral);
(c) keep full and accurate books and records relating to the Term Loan
Collateral, and stamp or otherwise mark such books and records in such
manner as the Agent may reasonably require in order to reflect the security
interests granted by this Agreement; and
(d) permit representatives of the Agent, upon reasonable notice, at
any time during normal business hours to inspect and make abstracts from
its books and records pertaining to the Term Loan Collateral, and permit
representatives of the Agent to be present at the Company's place of
business to receive copies of all communications and remittances relating
to the Term Loan Collateral, and forward copies of any notices or
communications received by the Company with respect to the Term Loan
Collateral, all in such manner as the Agent may require.
4.02 Other Financing Statements and Liens. Except as otherwise
------------------------------------
permitted under Section 8.06 of the Credit Agreement, without the prior written
consent of the Agent (granted with the authorization of the Term Loan Lenders as
specified in Section 10.09 of the Credit Agreement), the Company shall not file
or suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to the
Term Loan Collateral in which
Term Loan Security Agreement
----------------------------
<PAGE>
- 5 -
the Agent is not named as the sole secured party for the benefit of the Term
Loan Lenders.
4.03 Preservation of Rights. The Agent shall not be required to take
----------------------
steps necessary to preserve any rights against prior parties to any of the Term
Loan Collateral.
4.04 Term Loan Collateral.
--------------------
(1) The Company will cause the Term Loan Collateral to constitute at
all times 100% of the total number of shares of each class of capital stock of
the Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Term Loan Collateral for all
purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, provided that the Company agrees that it will not vote the Term Loan
--------
Collateral in any manner that is inconsistent with the terms of this Agreement,
the Credit Agreement, the Notes or any such other instrument or agreement; and
the Agent shall execute and deliver to the Company or cause to be executed and
delivered to the Company all such proxies, powers of attorney, dividend and
other orders, and all such instruments, without recourse, as the Company may
reasonably request for the purpose of enabling the Company to exercise the
rights and powers which it is entitled to exercise pursuant to this Section
4.04(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends on
the Term Loan Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Agent or any Term Loan
Lender exercises any available right to declare any Secured Obligation due and
payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Credit Agreement, the Notes or any
other agreement relating to such Secured Obligation, all dividends and other
distributions on the Term Loan Collateral shall be paid directly to the Agent
and retained by it as part of the Term Loan Collateral, subject to the terms of
this Agreement, and, if the Agent shall so request in writing, the Company
agrees to execute and deliver to the Agent appropriate additional dividend,
distribution and other orders and documents to that end, provided that if such
--------
Event of Default is cured, any such dividend or distribution theretofore paid to
the Agent shall,
Term Loan Security Agreement
----------------------------
<PAGE>
- 6 -
upon request of the Company (except to the extent theretofore applied to the
Term Loan Secured Obligations), be returned by the Agent to the Company.
4.05 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) the Agent shall have all of the rights and remedies with respect
to the Term Loan Collateral of a secured party under the Uniform Commercial
Code (whether or not said Code is in effect in the jurisdiction where the
rights and remedies are asserted) and such additional rights and remedies
to which a secured party is entitled under the laws in effect in any
jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Term Loan Collateral as if the Agent were the sole and
absolute owner thereof (and the Company agrees to take all such action as
may be appropriate to give effect to such right);
(b) the Agent in its discretion may, in its name or in the name of the
Company or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for
any of the Term Loan Collateral, but shall be under no obligation to do so;
and
(c) the Agent may, upon ten Business Days' prior written notice to the
Company of the time and place, with respect to the Term Loan Collateral or
any part thereof which shall then be or shall thereafter come into the
possession, custody or control of the Agent, the Term Loan Lenders or any
of their respective agents, sell, lease, assign or otherwise dispose of all
or any part of such Term Loan Collateral, at such place or places as the
Agent deems best, and for cash or for credit or for future delivery
(without thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Agent or any Term Loan Lender or anyone else may be the purchaser, lessee,
assignee or recipient of any or all of the Term Loan Collateral so disposed
of at any public sale (or, to the extent permitted by law, at any private
sale) and thereafter hold the same absolutely, free from any claim or right
of whatsoever kind, including any right or equity of redemption (statutory
or otherwise), of the Company, any such demand,
Term Loan Security Agreement
----------------------------
<PAGE>
- 7 -
notice and right or equity being hereby expressly waived and released. The
Agent may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at
the time and place fixed for the sale, and such sale may be made at any
time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.05 shall be applied in accordance with Section 4.09 hereof.
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all or
any part of the Term Loan Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Term Loan Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. The Company acknowledges that any such private sales may be at prices
and on terms less favorable to the Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Agent shall have no obligation to engage in
public sales and no obligation to delay the sale of any Term Loan Collateral for
the period of time necessary to permit the or issuer thereof to register it for
public sale.
4.06 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Term Loan Collateral pursuant to Section 4.05 hereof
are insufficient to cover the costs and expenses of such realization and the
payment in full of the Term Loan Secured Obligations, the Company shall remain
liable for any deficiency.
4.07 Removals, Etc. Without at least 30 days' prior written notice
-------------
to the Agent, the Company shall not (i) maintain any of its books and records
with respect to the Term Loan Collateral at any office or maintain its principal
place of business at any place other than at the address indicated beneath the
signature of the Company to the Credit Agreement or (ii) change its name, or the
name under which it does business, from the name shown on the signature pages
hereto; provided that the Company may do business in the states and under the
--------
names specified in Annex 2 hereto.
4.08 Private Sale. The Agent and the Term Loan Lenders shall incur
------------
no liability as a result of the sale of the Term Loan Collateral, or any part
thereof, at any private sale
Term Loan Security Agreement
----------------------------
<PAGE>
- 8 -
pursuant to Section 4.05 hereof conducted in a commercially reasonable manner.
The Company hereby waives any claims against the Agent or any Term Loan Lender
arising by reason of the fact that the price at which the Term Loan Collateral
may have been sold at such a private sale was less than the price which might
have been obtained at a public sale or was less than the aggregate amount of the
Term Loan Secured Obligations, even if the Agent accepts the first offer
received and does not offer the Term Loan Collateral to more than one offeree.
4.09 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided, the proceeds of any collection, sale or other realization of all or
any part of the Term Loan Collateral pursuant hereto, and any other cash at the
time held by the Agent under this Section 4, shall be applied by the Agent:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Agent and the reasonable fees and expenses of its agents
and counsel, and all reasonable expenses incurred and advances made by the
Agent in connection therewith;
Next, to the payment in full of the Term Loan Secured Obligations, in
----
each case equally and ratably in accordance with the respective amounts
thereof then due and owing or as the Term Loan Lenders holding the same may
otherwise agree; and
Finally, to the payment to the Company, or its successors or assigns,
-------
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 4, "proceeds" of Term Loan Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Term Loan Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of the Company or any issuer
of or obligor on any of the Term Loan Collateral.
4.10 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to the Agent while no Event of Default has occurred and is
continuing, upon the occurrence and during the continuance of any Event of
Default the Agent is hereby appointed the attorney-in-fact of the Company for
the purpose of carrying out the provisions of this Section 4 and taking any
action and executing any instruments which the Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment as attorney-in-
fact is irrevocable and coupled with an interest. Without limiting the
generality of the
Term Loan Security Agreement
----------------------------
<PAGE>
- 9 -
foregoing, so long as the Agent shall be entitled under this Section 4 to make
collections in respect of the Term Loan Collateral, the Agent shall have the
right and power to receive, endorse and collect all checks made payable to the
order of the Company representing any dividend, payment or other distribution in
respect of the Term Loan Collateral or any part thereof and to give full
discharge for the same.
4.11 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, the Company shall deliver to the Agent all
certificates identified in Annex 1 hereto, accompanied by undated stock powers
duly executed in blank.
4.12 Termination. When all Term Loan Secured Obligations shall have
-----------
been paid in full and the Term Loan Commitments of the Term Loan Lenders under
the Credit Agreement shall have expired or been terminated, this Agreement shall
terminate, and the Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Term Loan Collateral and money received in respect
thereof, to or on the order of the Company.
4.13 Expenses. The Company agrees to pay to the Agent all reasonable
--------
out-of-pocket expenses (including reasonable expenses for legal services of
every kind) of, or incident to, the enforcement of any of the provisions of this
Section 4, or performance by the Agent of any obligations of the Company in
respect of the Term Loan Collateral which the Company has failed or refused to
perform, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Term Loan
Collateral, and for the care of the Term Loan Collateral and defending or
asserting rights and claims of the Agent in respect thereof, by litigation or
otherwise, and all such expenses shall be Term Loan Secured Obligations to the
Agent secured under Section 3 hereof.
4.14 Further Assurances. The Company agrees that, from time to time
------------------
upon the written request of the Agent, the Company will execute and deliver such
further documents and do such other acts and things as the Agent may reasonably
request in order fully to effect the purposes of this Agreement.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of the Agent or any of its
---------
agents to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or
Term Loan Security Agreement
----------------------------
<PAGE>
- 10 -
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Agent or any of its agents of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
5.02 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the law of the State of New York.
5.03 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 11.02 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 11.02.
5.04 Waivers, Etc. The terms of this Agreement may be waived,
------------
altered or amended only by an instrument in writing duly executed by the Company
and the Agent (with the consent of the Term Loan Lenders as specified in Section
10.09 of the Credit Agreement). Any such amendment or waiver shall be binding
upon the Agent and each Term Loan Lender, each holder of any of the Term Loan
Secured Obligations and the Company.
5.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective successors and assigns of the
Company, the Agent, the Term Loan Lenders and each holder of any of the Term
Loan Secured Obligations (provided, however, that the Company shall not assign
--------
or transfer its rights hereunder without the prior written consent of the
Agent).
5.06 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
5.07 Agents. The Agent may employ agents and attorneys-in-fact in
------
connection herewith and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
5.08 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Agent and the Term
Loan
Term Loan Security Agreement
----------------------------
<PAGE>
- 11 -
Lenders in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Term Loan
Security Agreement to be duly executed and delivered as of the day and year
first above written.
BE AEROSPACE, INC.
By /s/ Thomas P. McCaffrey
-----------------------
Title: Secretary
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By /s/ Matthew H. Massie
----------------------
Title: Vice President
Term Loan Security Agreement
----------------------------
<PAGE>
ANNEX 1
PLEDGED STOCK
-------------
[See Section 2(b) and (c).]
<TABLE>
<CAPTION>
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ----------- ---------- ----------------
<S> <C> <C> <C>
Acurex
Incorporated _______ ________ _______ shares of
[common/preferred]
stock, [no] par
value [$________]
</TABLE>
Annex 1 to Term Loan Security Agreement
---------------------------------------
<PAGE>
ANNEX 2
TRADE NAMES
[See Section 4.07]
Annex 2 to Term Loan Security Agreement
---------------------------------------
<PAGE>
EXHIBIT C
[Form of Opinion of Counsel to the Company]
January __, 1996
Each of the Lenders party
to the Credit Agreement
referred to below
The Chase Manhattan Bank
(National Association),
as Administrative Agent
for said Lenders
1 Chase Manhattan Plaza
New York, New York 10081
Ladies and Gentlemen:
We have acted as counsel to BE Aerospace, Inc., a Delaware corporation
(the "Company"), in connection with the Second Amended and Restated Credit
-------
Agreement dated as of October 29, 1993 and amended and restated as of January
19, 1996 (as so amended and restated, the "Credit Agreement") among the Company,
----------------
the Lenders party thereto and The Chase Manhattan Bank (National Association),
in its capacity as agent for said Lenders (the "Administrative Agent"),
--------------------
providing for, among other things, the making of loans, and the issuance of or
acquisition of participation interests in letters of credit, by the Lenders in
an aggregate amount not exceeding $100,000,000. All capitalized terms used but
not defined herein have the respective meanings given to such terms in the
Credit Agreement.
In rendering the opinions expressed below, we have examined:
(i) the Credit Agreement;
(ii) the Notes issued on the Amendment Effective Date;
(iii) the Revolving Credit Security Agreement;
(iv) the Term Loan Security Agreement (collectively with the documents
referred to in the foregoing numbered clauses, the "Credit
------
Documents");
---------
(v) certain financing statements, the form of which is attached
hereto as Annex 1 (collectively, the "Financing Statements"); and
--------------------
(vi) such corporate records of the Company and such other documents as
we have deemed necessary as a basis for the opinions expressed
below.
<PAGE>
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
with authentic original documents of all documents submitted to us as copies.
When relevant facts were not independently established, we have relied upon
statements of governmental officials and upon representations made in or
pursuant to the Credit Documents and certificates of appropriate representatives
of the Company.
In rendering the opinions expressed below, we have assumed, with
respect to the Credit Documents, that (except, to the extent set forth in the
opinions expressed below, as to the Company):
(i) the Credit Documents have been duly authorized by, have been duly
executed and delivered by, and constitute legal, valid, binding and
enforceable obligations of, all of the parties to the Credit
Documents;
(ii) all signatories to the Credit Documents have been duly authorized:
(iii) all of the parties to the Credit Documents are duly organized and
validly existing and have the power and authority (corporate or
other) to execute, deliver and perform the Credit Documents; and
(iv) the Credit Documents are legal, valid and binding and enforceable
in accordance with their respective terms under the law of the
State of New York.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
2. The Company has all requisite corporate power to execute and
deliver, and to perform its obligations under, each Credit Document and has
all requisite corporate power to borrow under the Credit Agreement.
3. The execution, delivery and performance by the Company of each
Credit Document, and the borrowings and the application for and assumption
of liability in respect of letters of credit by the Company under the
Credit Agreement, have been duly authorized by all necessary corporate
action on the part of the Company.
- 2 -
<PAGE>
4. Each Credit Document has been duly executed and delivered by the
Company.
5. Each Credit Document (assuming, in the case of the Notes,
execution and delivery thereof for value) constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or transfer
or other similar laws relating to or affecting the rights of creditors
generally and except as the enforceability of the Credit Documents is
subject to the application of general principles of equity (regardless of
whether considered in a proceeding in equity or at law), including, without
limitation, (a) the possible unavailability of specific performance,
injunctive relief or any other equitable remedy and (b) concepts of
materiality, reasonableness, good faith and fair dealing.
6. No authorization, approval or consent of, and no filing or
registration with, any governmental or regulatory authority or agency of
the United States of America is required on the part of the Company for the
execution, delivery or performance by the Company of the Credit Documents
or for any borrowings or the application for and assumption of liability in
respect of any letter of credit by the Company under the Credit Agreement,
except for filings of the Financing Statements in respect of the Liens
created pursuant to the Security Documents.
7. The execution, delivery and performance by the Company of, and the
consummation by the Company of the transactions contemplated by, the Credit
Documents do not and will not (a) violate any provision of the charter or
By-laws of the Company, (b) violate any applicable law, rule or regulation,
(c) violate any order, writ, injunction or decree of any court or
governmental authority or agency or any arbitral award applicable to the
Company or any of its Subsidiaries of which we have knowledge (after due
inquiry of officers of the Company) or (d) result in a breach of,
constitute a default under, require any consent under (other than consents
previously obtained), or result in the acceleration or required prepayment
of any indebtedness pursuant to the terms of, any agreement or instrument
of which we have knowledge (after due inquiry of officers of the Company)
to which the Company or any of its Subsidiaries is a party (including,
without limitation, the Indenture) or by which any of them or their
property is bound or to which any of them is subject, or (except for the
Liens created pursuant to the Security Documents) result in the creation or
imposition of any Lien upon any Property of the Company or any of its
Subsidiaries pursuant to the terms of any such agreement or instrument.
- 3 -
<PAGE>
8. Except as disclosed in the Information Memorandum, we have no
knowledge (after due inquiry of officers of the Company) of any legal or
arbitral proceedings, or any proceedings by or before any governmental or
regulatory authority or agency, now pending or threatened against the
Company or any of its Subsidiaries or any of their respective Properties
that, if adversely determined, could have a Material Adverse Effect.
9. The security interest granted pursuant to the Revolving Credit
Security Agreement in the types of Revolving Credit Collateral (as defined
therein) described below has been perfected as described below:
(a) such security interest in that portion of the Revolving
Credit Collateral consisting of Accounts (as defined in the Revolving
Credit Security Agreement) was, upon the creation of such security
interest, perfected by filing the Financing Statements in the
respective offices listed in Part A of Annex 2 attached hereto;
provided that, if the Company moves its chief executive office to
--------
another jurisdiction, the effectiveness of the Financing Statements
will cease on the expiration of four months after such change;
(b) such security interest in that portion of the Revolving
Credit Collateral consisting of Inventory or Equipment (as defined in
the Revolving Credit Security Agreement) that is (i) located in the
jurisdictions listed on Annex 3 attached hereto or (ii) mobile and of
a type normally used in more than one jurisdiction and, if Inventory,
leased or held for lease to others was, upon the creation of such
security interest, perfected by filing the Financing Statements in the
respective offices listed in Part B of Annex 2 attached hereto; and
(c) anything in this paragraph 9 to the contrary
notwithstanding, compliance with a statute or treaty described in
Section 9-302(3) of the Uniform Commercial Code is required in order
to perfect such security interest in any portion of the Revolving
Credit Collateral that is subject to any such statute or treaty.
The foregoing opinions are subject to the following comments and
qualifications:
A. The enforceability of Section 11.03 of the Credit Agreement may be
limited by laws rendering unenforceable indemnification contrary to Federal
or state securities laws and the public policy underlying such laws.
B. The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or
- 4 -
<PAGE>
modified except in writing may be limited under certain circumstances.
C. We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Lender is located that limit the interest, fees
or other charges such Lender may impose, (ii) Section 4.07(c) of the Credit
Agreement and (iii) the second sentence of Section 11.10 of the Credit
Agreement insofar as such sentence relates to the subject matter
jurisdiction of the United States District Court for the Southern District
of New York to adjudicate any controversy related to the Credit Documents.
D. The effectiveness of the Financing Statements will lapse on the
expiration of a five year period from their date of filing, or (if later)
the date of filing of the most recently properly filed continuation
statements with respect thereto, unless continuation statements are filed
within six months prior to expiration of the applicable five year period,
and, if the Company so changes its name, identity or corporate structure
that the Financing Statements become seriously misleading, the Financing
Statements will be ineffective to perfect a security interest in Revolving
Credit Collateral (as defined in the Revolving Credit Security Agreement)
acquired more than four months after such change.
E. We express no opinion as to the existence of, or the right, title
or interest of the Company in, to or under, any of the Revolving Credit
Collateral (as defined in the Revolving Credit Security Agreement) or Term
Loan Collateral (as defined in the Term Loan Security Agreement).
F. We express no opinion as to any security interest in (or other Lien
on) any Revolving Credit Collateral (as defined in the Revolving Credit
Security Agreement) or Term Loan Collateral (as defined in the Term Loan
Security Agreement) to the extent that, pursuant to Section 9-104 of the
Uniform Commercial Code, Article 9 of the Uniform Commercial Code does not
apply thereto. Except as expressly provided in paragraph 9 above, we
express no opinion as to the creation, perfection or priority of any
security interest in, or other Lien on, the Revolving Credit Collateral (as
defined in the Security Agreement) or the Term Loan Collateral (as defined
in the Term Loan Security Agreement).
G. Certain provisions of, and some of the remedies provided for in,
the Security Documents may be unenforceable in whole or in part by reason
of certain laws or judicial decisions; however, the inclusion of such
provisions in the Security Documents does not affect the validity of the
other provisions thereof, and the remedies provided for in the Security
Documents, taken as a whole, are adequate for the
- 5 -
<PAGE>
practical realization of the benefits intended to be provided by the
Security Documents.
H. We wish to point out that the acquisition by the Company after the
initial Loans under the Credit Agreement of any interest in any Property
that becomes subject to the Lien of the Security Documents may constitute a
voidable preference under Section 547 of the Bankruptcy Code.
The foregoing opinions are limited to matters involving the Federal laws of
the United States, the Delaware General Corporation Law, and Article 9 of the
Uniform Commercial Code as in effect in the jurisdictions listed in Annex 3
based solely on our review of Article 9 of the Uniform Commercial Codes of such
jurisdictions as they appear in the Secured Transactions Guide published by the
Commerce Clearing House, Inc. updated through December 12, 1995, and we do not
express any opinion as to any other laws.
At the request of our client, this opinion letter is, pursuant to Section
6.01(c) of the Credit Agreement, provided to you by us in our capacity as
counsel to the Company and may not be relied upon by any Person for any purpose
other than in connection with the transactions contemplated by the Credit
Agreement without, in each instance, our prior written consent.
Very truly yours,
Ropes & Gray
- 6 -
<PAGE>
EXHIBIT D
[Form of Opinion of Special New York Counsel to Chase]
January __, 1996
Each of the Lenders party to
the Credit Agreement
referred to below
The Chase Manhattan Bank
(National Association)
as Administrative Agent
for said Lenders
1 Chase Manhattan Plaza
New York, New York 10081
Ladies and Gentlemen:
We have acted as special New York counsel to Chase in connection with
the Second Amended and Restated Credit Agreement dated as of October 29, 1993
and amended and restated as of January 19, 1996 (as so amended and restated, the
"Credit Agreement") among BE Aerospace, Inc. (the "Company"), the lenders party
- ----------------- -------
thereto (the "Lenders") and The Chase Manhattan Bank (National Association), in
-------
its capacity as agent for the Lenders (in such capacity, the "Administrative
--------------
Agent"), providing for, among other things, the making of Loans and the issuance
- -----
of or acquisition of participation interests in Letters of Credit, by the
Lenders in an aggregate amount not exceeding $100,000,000. All capitalized
terms used but not defined herein have the respective meanings given to such
terms in the Credit Agreement and the Security Documents.
In rendering the opinions expressed below, we have examined (a) the
Credit Agreement, the Notes issued on the Amendment Effective Date and the
Security Documents (collectively, the "Credit Documents") and (b) such other
----------------
documents as we have deemed necessary as a basis for the opinions expressed
below. In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with authentic original documents of all documents submitted to us as
copies. When relevant facts were not independently established, we have relied
upon representations made in or pursuant to the Credit Documents.
<PAGE>
- 2 -
In rendering the opinions expressed below, we have assumed that all of
the documents referred to in this opinion have been duly authorized by, have
been or (in the case of the Notes) will be duly executed and delivered by, and
(except, to the extent set forth below, as to the Company) constitute legal,
valid, binding and enforceable obligations of, all of the parties to such
documents, that all signatories to such documents have been duly authorized and
that all such parties are duly organized and validly existing and have the power
and authority (corporate or other) to execute, deliver and perform such
documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. Each Credit Document (assuming, in the case of the Notes, that
value is given therefor) constitutes the legal, valid and binding obligation of
the Company, enforceable against it in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or transfer or other similar laws relating to or affecting the rights
of creditors generally and except as the enforceability of such Credit Document
is subject to the application of general principles of equity (regardless of
whether considered in a proceeding in equity or at law), including, without
limitation, (i) the possible unavailability of specific performance, injunctive
relief or any other equitable remedy and (ii) concepts of materiality,
reasonableness, good faith and fair dealing.
2. The Revolving Credit Security Agreement is effective (together, in
the case of certificated securities within the meaning of Section 8-102 of the
Uniform Commercial Code, the action described in paragraph 4 below) to create in
favor of the Administrative Agent for the benefit of the Revolving Credit
Lenders, a valid security interest under the Uniform Commercial Code in all of
the right, title and interest of the Company in, to and under the Revolving
Credit Collateral (as defined in the Revolving Credit Security Agreement) as
collateral security for the payment of the Revolving Credit Secured Obligations
(as so defined), except that (a) such security interest will continue in the
Revolving Credit Collateral after its sale, exchange or other disposition only
to the extent provided in Sections 9-306 and 9-307 of the Uniform Commercial
Code and (b) the security interest in Revolving Credit Collateral in which the
Company acquires rights after the commencement of a case under the Bankruptcy
Code will be limited by Section 552 of the Bankruptcy Code; provided that we
--------
express no opinion as to the creation of any security interest in (or other Lien
on) any Revolving Credit Collateral to the extent that, pursuant to Section 9-
104 of the Uniform Commercial Code, Article 9 of the Uniform Commercial Code
does not apply thereto. We express no opinion as to the right, title or interest
of the
<PAGE>
- 3 -
Company in any of the Revolving Credit Collateral, or (except to the extent set
forth in paragraphs 4 and 5 below) as to the perfection or priority of such
security interest.
3. The Term Loan Security Agreement is effective (together, in the
case of certificated securities within the meaning of Section 8-102 of the
Uniform Commercial Code, the action described in paragraph 4 below) to create in
favor of the Administrative Agent for the benefit of the Term Loan Lenders, a
valid security interest under the Uniform Commercial Code in all of the right,
title and interest of the Company in, to and under the Term Loan Collateral (as
defined in the Term Loan Security Agreement) as collateral security for the
payment of the Term Loan Secured Obligations (as so defined), except that (a)
such security interest will continue in the Term Loan Collateral after its sale,
exchange or other disposition only to the extent provided in Section 9-306 of
the Uniform Commercial Code and (b) the security interest in Term Loan
Collateral in which the Company acquires rights after the commencement of a case
under the Bankruptcy Code will be limited by Section 552 of the Bankruptcy Code;
provided that we express no opinion as to the creation of any security interest
- --------
in (or other Lien on) any Term Loan Collateral to the extent that, pursuant to
Section 9-104 of the Uniform Commercial Code, Article 9 of the Uniform
Commercial Code does not apply thereto. We express no opinion as to the right,
title or interest of the Company in any of the Term Loan Collateral, or (except
to the extent set forth in paragraph 4 below) as to the perfection or priority
of such security interest.
4. The security interest in the Pledged Stock represented by the stock
certificates identified in Annex 1 to each Security Document was perfected by
the Administrative Agent taking possession of such stock certificates in the
State of New York and will be perfected by the Administrative Agent thereafter
retaining possession in the State of New York.
5. The security interest granted pursuant to the Revolving Credit
Security Agreement in that portion of the Revolving Credit Collateral consisting
of Pledged Stock, Instruments and Documents (as defined in the Revolving Credit
Security Agreement) was, upon the creation of such security interest, perfected
by the Administrative Agent taking possession thereof in the State of New York
and will be perfected by the Administrative Agent thereafter retaining
possession.
The foregoing opinions are also subject to the following comments and
qualifications:
(a) The enforceability of Section 10.05 of the Credit Agreement (and
any similar provisions in any of the other Credit Documents) may be limited by
laws rendering unenforceable (i) indemnification contrary to Federal or state
securities laws and the public policy underlying such laws and (ii) the release
of a party from, or the indemnification of a party against,
<PAGE>
- 4 -
liability for its own wrongful or negligent acts under certain circumstances.
(b) The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or modified except in writing may be limited
under certain circumstances.
(c) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Lender is located (other than New York) that limits
the interest, fees or other charges it may impose, (ii) Section 4.07(c) of the
Credit Agreement, (iii) the second sentence of Section 11.10 of the Credit
Agreement insofar as such sentence relates to the subject matter jurisdiction of
the United States District Court for the Southern District of New York to
adjudicate any controversy related to the Credit Documents and (iv) the waiver
of inconvenient forum set forth in Section 11.10 of the Credit Agreement with
respect to proceedings in the United States District Court for the Southern
District of New York.
(d) We wish to point out that the obligations of the Company under the
Security Documents may be subject to possible limitations upon the exercise of
remedial or procedural provisions contained therein, provided that such
limitations do not, in our opinion, make the remedies and procedures that will
be afforded to the Administrative Agent and the Series A Lenders (in the case of
the Revolving Credit Security Agreement) and the Administrative Agent and the
Series B Lenders (in the case of the Term Loan Security Agreement) inadequate
for the practical realization of the substantive benefits purported to be
provided to the Administrative Agent and the Series A Lenders by the Revolving
Credit Security Agreement or to the Administrative Agent and the Series B
Lenders by the Term Loan Security Agreement, as the case may be.
(e) We wish to point out that the acquisition by the Company after the
initial Loans under the Credit Agreement of any interest in any Property that
becomes subject to the Lien of the Security Documents may constitute a voidable
preference under Section 547 of the Bankruptcy Code.
The foregoing opinions are limited to matters involving the Federal
laws of the United States of America and the laws of the State of New York, and
we do not express any opinion as to the laws of any other jurisdiction.
This opinion letter is provided to you by us pursuant to Section
6.01(d) of the Credit Agreement and may not be relied upon by any other person
for any purpose other than in connection with the transactions contemplated by
the Credit Documents without our prior written consent in each instance.
Very truly yours,
CDP/RJW
<PAGE>
EXHIBIT E
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Second Amended and Restated Credit Agreement dated as of October 29,
1993 and amended and restated as of January 19, 1996 (as so amended
and restated, the "Credit Agreement"), between BE Aerospace, Inc.
----------------
(the "Company"), the lenders named therein and The Chase Manhattan
-------
Bank (National Association), as Administrative Agent.
Ladies and Gentlemen:
As a Lender party to the Credit Agreement, we have agreed with the
Company pursuant to Section 11.12 of the Credit Agreement to use reasonable
precautions to keep confidential, except as otherwise provided therein, all non-
public information identified by the Company as being confidential at the time
the same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 11.12, we are permitted to provide you, as
a prospective [holder of a participation in the Loans (as defined in the Credit
Agreement)] [assignee Lender], with certain of such non-public information
subject to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf
of yourself and each of your affiliates, directors, officers, employees and
representatives) that (A) such information will not be used by you except in
connection with the proposed [participation][assignment] mentioned above and (B)
you shall use reasonable precautions, in accordance with your customary
procedures for handling confidential information and in accordance with safe and
sound banking practices, to keep such information confidential, provided that
--------
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to your
counsel or to counsel for any of the Lenders or the Administrative Agent, (iii)
to bank examiners, auditors or
Confidentiality Agreement
-------------------------
<PAGE>
- 2 -
accountants, (iv) to the Administrative Agent or any other Lender (or to Chase
Securities, Inc.), (v) in connection with any litigation to which you or any one
or more of the Lenders or the Administrative Agent are a party, (vi) to a
subsidiary or affiliate of yours as provided in Section 11.12(a) of the Credit
Agreement or (vii) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first executes and delivers to you a Confidentiality Agreement
substantially in the form hereof; provided, further, that (x) unless
-------- -------
specifically prohibited by applicable law or court order, you agree, prior to
disclosure thereof, to notify the Company of any request for disclosure of any
such non-public information (A) by any governmental agency or representative
thereof (other than any such request in connection with an examination of your
financial condition by such governmental agency) or (B) pursuant to legal
process and (y) that in no event shall you be obligated to return any materials
furnished to you pursuant to this Confidentiality Agreement.
Please indicate your agreement to the foregoing by signing as provided
below the enclosed copy of this Confidentiality Agreement and returning the same
to us.
Very truly yours,
[INSERT NAME OF LENDER]
By_________________________
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By_________________________]
Confidentiality Agreement
-------------------------
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of BE Aerospace, Inc. on
Form S-4 of our report dated April 21, 1995, appearing in the Prospectus, which
is part of this Registration Statement and to the reference to us under the
heading "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Costa Mesa, California
January 25, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our firm included in or made a part of this Form S-4
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 24, 1996
