<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1996
REGISTRATION NO. 333-16235
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BE AEROSPACE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3728 06-1209796
(I.R.S. EMPLOYER IDENTIFICATION
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL NUMBER)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
------------------------
BE AEROSPACE, INC.
1400 CORPORATE CENTER WAY
WELLINGTON, FLORIDA 33414
(561) 791-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
AMIN J. KHOURY
CHAIRMAN OF THE BOARD
BE AEROSPACE, INC.
1400 CORPORATE CENTER WAY
WELLINGTON, FLORIDA 33414
(561) 791-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE FOR THE REGISTRANT)
------------------------
COPIES TO:
<TABLE>
<S> <C>
C. DEAN DUSSEAULT, ESQ. ROHAN S. WEERASINGHE, ESQ.
ROPES & GRAY SHEARMAN & STERLING
ONE INTERNATIONAL PLACE 599 LEXINGTON AVENUE
BOSTON, MASSACHUSETTS 02110 NEW YORK, NEW YORK 10022
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
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 THE SECURITIES DESCRIBED HEREIN, NOR
SHALL THERE BE ANY SALE OF SUCH SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
PROSPECTUS (Subject to Completion)
Issued December 12, 1996
4,000,000 Shares
BE Aerospace, Inc.
COMMON STOCK
------------------------
ALL OF THE SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OFFERED HEREBY ARE
BEING SOLD BY THE COMPANY. THE COMMON STOCK IS QUOTED ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "BEAV." ON DECEMBER 11, 1996,
THE REPORTED LAST SALE PRICE OF THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET WAS $25 1/2.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 HEREOF FOR INFORMATION
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.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Per Share................... $ $ $
Total(3).................... $ $ $
</TABLE>
- ------------
(1) The Company and certain stockholders of the Company (the "Selling
Stockholders") have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company and the Selling Stockholders have granted the Underwriters
an option, exercisable within 30 days of the date hereof, to purchase up
to an aggregate of 535,000 and 65,000 additional Shares of Common Stock,
respectively, at the price to public less underwriting discounts and
commissions, for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions, proceeds to Company and proceeds
to the Selling Stockholders will be $ , $ , $ and
$ , respectively. See "Underwriters."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Shearman & Sterling, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1996, at the
offices of Morgan Stanley & Co. Incorporated, New York, New York, against
payment therefor in immediately available funds.
------------------------
MORGAN STANLEY & CO.
Incorporated
CS FIRST BOSTON
PAINEWEBBER INCORPORATED
, 1996
<PAGE> 3
[LOGO] B/E Aerospace is the world's leading manufacturer of
commercial aircraft cabin interior products.
In-Flight Entertainment [PHOTO OF INDIVIDUAL
ENTERTAINMENT SYSTEM]
[PHOTO OF INDIVIDUAL
ENTERTAINMENT SYSTEM]
[PHOTO OF PERSON IN AIRLINE SEAT]
[PHOTO OF AIRLINE SEATS] Seating [PHOTO OF AIRLINE SEATS]
Galley Products
[PHOTO OF COFFEE [PHOTO OF GALLEY [PHOTO OF
MAKER] STRUCTURE] BEVERAGE CHILLER]
<PAGE> 4
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR
BY ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY AND THE
UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO
THE OFFERING OF THE COMMON STOCK AND THE DISTRIBUTION OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 2
Risk Factors.......................... 7
The Company........................... 10
Use of Proceeds....................... 10
Capitalization........................ 10
Price Range of Common Stock........... 11
Dividend Policy....................... 11
Selected Financial Data............... 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 20
<CAPTION>
PAGE
----
<S> <C>
Management............................ 32
Security Ownership of Certain
Beneficial Owners and Management.... 35
Description of Capital Stock.......... 37
Underwriters.......................... 39
Legal Matters......................... 40
Experts............................... 40
Available Information................. 40
Incorporation of Certain Documents by
Reference........................... 41
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT"). SEE "UNDERWRITERS."
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10B-6,
10B-7, AND 10B-8 UNDER THE EXCHANGE ACT.
------------------------
The following trademarks are mentioned in this Prospectus: Silhouette(TM)
and Combi(TM) are registered trademarks of BE Aerospace, Inc.; Nintendo(@) is a
registered trademark of Nintendo of America, Inc.; and Sega(@) is a registered
trademark of Sega Enterprises, Ltd.
<PAGE> 5
PROSPECTUS 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
this Prospectus, unless the context otherwise requires, the "Company," "B/E
Aerospace" or "B/E" refers to BE Aerospace, Inc., a Delaware corporation.
References herein to a fiscal year end relate to a year ending on the last
Saturday in February (for example, fiscal 1996 refers to the Company's fiscal
year ended February 24, 1996). Unless otherwise indicated, the information in
this Prospectus assumes that the Underwriters' over-allotment option will not be
exercised. Market share information presented herein does not include markets in
the former Soviet Union and will vary, sometimes significantly, from year to
year. Investors should carefully consider the information set forth under the
heading "Risk Factors."
THE COMPANY
B/E Aerospace is the world's largest manufacturer of commercial aircraft
cabin interior products, serving virtually all major airlines with a broad line
of products, including aircraft seats, a full line of food and beverage
preparation and storage equipment, galley structures and in-flight entertainment
systems. In addition, B/E provides upgrade, maintenance and repair services for
the products which it manufactures as well as for those supplied by other
manufacturers.
Management believes that the Company has achieved the leading global market
position in each of its major product categories. B/E is the largest
manufacturer of airline seats in the world, offering an extensive line of first
class, business class, tourist class and commuter seats. The Company is also the
world's largest manufacturer of galley equipment for both narrow- and wide-body
aircraft, including a wide selection of coffee and beverage makers, water
boilers, ovens, liquid containers, refrigeration equipment and galley
structures. In addition, the Company is the leading manufacturer of passenger
entertainment and service systems, including passenger control systems and
individual passenger in-flight entertainment systems. The Company believes that
individual passenger in-flight entertainment systems will be one of the fastest
growing and among the largest product categories in the commercial aircraft
cabin interior products industry in the future.
As of August 31, 1996, B/E's backlog was at a record $480 million
(excluding any additional backlog attributable to United Airlines from the
matters described under "Recent Developments") and, during the six months ended
August 31, 1996, the Company has experienced significant growth in revenues and
operating earnings.
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, 90% in coffee makers, 90% in
refrigeration equipment and 50% in ovens, in each case based on unit sales for
the six months ended August 31, 1996, and 33% in individual passenger
in-flight entertainment systems, determined on the basis of installed base as
of August 31, 1996. The Company believes these market shares provide it with
significant competitive advantages in serving its customers, including
economies of scale and the ability to commit greater product development,
global product support and marketing resources. Furthermore, because of
economies of scale, in part attributable to its large market shares and its
approximate $2.6 billion installed base of cabin interior equipment (valued at
replacement prices as of August 31, 1996), the Company believes it is among
the lowest cost producers in the cabin interior products industry. The Company
also believes that its large installed base provides B/E with a significant
advantage over competitors in obtaining orders for retrofit and refurbishment
programs, principally because airlines tend to purchase equipment 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.
2
<PAGE> 6
- - Broadest Product Line in the Industry. Management believes the Company offers
more technologically advanced 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 play a leading
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.
- - Technological Leadership/New Product Development. Management believes that
the Company is a technological leader in its industry, with the largest R&D
organization in the industry currently comprised of 319 engineers. The Company
believes that its R&D effort and its on-site engineers at both the airlines
and airframe manufacturers enable B/E to consistently introduce innovative
products and thereby gain early entrant advantages and substantial market
shares. Examples of such product development include: the Company's family of
in-flight entertainment systems, which it believes to be superior to existing
operational systems in terms of performance, reliability, weight, heat
generation and flexibility to adapt to changing technology; a
cappuccino/espresso maker; a quick chill wine cooling system; and a
constant-pressure, steam cooking oven, which the Company believes
substantially improves the appearance, aroma and taste of airline food.
GROWTH OPPORTUNITIES
B/E believes that it is benefiting from three major growth trends occurring
in the commercial aircraft cabin interior products industry:
- - Increase in Refurbishment and Upgrade Orders. B/E's substantial installed
base provides significant ongoing revenues from replacements, upgrades,
repairs and spare parts. Approximately two-thirds of B/E's revenues and
operating earnings for the six months ended August 31, 1996 were derived from
refurbishment and upgrade orders. In the late 1980s and early 1990s, the
airline industry suffered a significant downturn, which resulted in a deferral
of cabin interior maintenance expenditures. Since early 1994, the airlines
have experienced a turnaround in operating results, leading the domestic
airline industry to record operating earnings during 1995 and 1996 to date.
Deterioration of cabin interior product functionality and aesthetics within
the commercial airline fleets during the industry downturn has encouraged
airlines to increase spending on refurbishments and upgrades. The Company
believes that it is well positioned to benefit over the next several years as
a result of the airlines' dramatically improved financial condition and
liquidity and the need to refurbish and upgrade cabin interiors. The Company's
recent growth in backlog, revenues and operating earnings has been almost
entirely from refurbishment and upgrade programs, and the Company is currently
experiencing a high level of new order quote activity related to such
programs.
- - Expansion of Worldwide Fleet and Shift Toward Wide-Body Aircraft. Industry
sources report that the airlines are experiencing extremely high load factors
and that a significant number of new aircraft will be purchased to meet
projected growth in worldwide air travel, which is expected to nearly double
by 2005. According to the Current Market Outlook published by the Boeing
Commercial Airplane Group in 1996 (the "Boeing Report"), the worldwide fleet
of commercial passenger aircraft is projected to expand from approximately
11,000 at the end of 1995 to approximately 16,000 by the end of 2005. The
Company believes that growth in aircraft interior product shipments related to
new aircraft deliveries will begin in 1997. For example, Boeing has indicated
that it plans to ship 215 aircraft in 1996 as compared with 340, 385, and 380,
respectively, in each of the subsequent years through 1999. The Company
generally receives orders related to new aircraft deliveries approximately six
months before the delivery date. Furthermore, according to the July 1996
Airline Monitor, the percentage of new Boeing aircraft deliveries projected to
be wide-body aircraft for 1996 through 1998 is 43%, as compared to 32% for the
three-year period ended December 31, 1995. This shift toward wide-body
aircraft is significant to the Company since these aircraft require
substantially more seats, galley equipment and in-flight entertainment
products per aircraft than do narrow-body aircraft.
3
<PAGE> 7
- - Emergence of Individual Passenger In-flight Entertainment Systems as a Major
New Product Category. Airlines increasingly are demanding individual passenger
in-flight entertainment systems as a method to attract and retain customers,
as the availability of such service affects passengers' decisions on airline
selection. These systems also provide the airlines with the opportunity to
generate increased revenues, without raising ticket prices, by charging
passengers for the services used. The Company expects that individual
passenger in-flight entertainment systems will be one of the fastest growing
and among the largest product categories in the commercial aircraft cabin
interior products industry in the future.
The Company has developed a number of individual in-flight entertainment
systems that are designed to meet the varying technological and price
specifications of the airlines. The Company's three current systems are the
B/E 2000, a system that provides non-interactive video programming; the B/E
2000M, which offers similar functionality to the B/E 2000 but is fully
upgradable to the Company's Multimedia Digital Distribution System ("MDDS")
product; and the MDDS product itself. The MDDS product is a fully interactive
entertainment system with the capacity to provide movies on demand,
telecommunications, gaming and other services. As of August 31, 1996, B/E had
entered into contracts to supply individual passenger entertainment systems to
a number of airlines, including British Airways, Air France and KLM. As of
August 31, 1996 B/E had an in-flight entertainment systems backlog of
approximately $152 million (excluding any additional backlog attributable to
United Airlines from the matters described under "Recent Developments").
RECENT DEVELOPMENTS
On November 15, 1996, the Company announced that United Airlines had
selected B/E as a supplier of individual in-flight entertainment systems for its
B777, B747-400 and B767-300 aircraft. While such selection is subject to
negotiation of definitive documentation, the Company expects an initial order of
approximately $60 million of the B/E 2000M system, to be installed on 54 United
Airlines aircraft. If United Airlines decides to upgrade its B/E 2000M
entertainment systems to full MDDS interactive functionality, significant
additional orders would follow. Pending the negotiation of the final contract,
United Airlines has authorized the Company to proceed with necessary engineering
and other long lead time items. The Company also announced on the same date that
it had been selected, in a program valued at $70 million, to supply all of
United Airlines' seating requirements for its Premiere Connoisseur Class
services, including business class on all of its wide-body fleet, and first
class on all of its narrow-body fleet. On November 6, 1996, B/E announced that
the MDDS (including the B/E 2000M) is now being offered by Boeing to its
customers as a line fit option for both the B777 and the B747 aircraft, allowing
airlines to specify the MDDS as their in-flight entertainment system choice on
these Boeing aircraft. Prior to this announcement, the MDDS could only be
installed as a retrofit option after the airlines took initial delivery of new
aircraft.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company.................. 4,000,000 shares
Common Stock to be Outstanding after the Offering.... 21,704,275 shares(1)
Use of Proceeds...................................... To repay amounts currently outstanding
under certain of the Company's existing
bank credit facilities and for general
corporate purposes, including working
capital requirements to support increased
sales and possible investments in
strategic acquisitions. See "Use of
Proceeds."
NASDAQ Symbol........................................ BEAV
</TABLE>
- ---------------
(1) As of November 30, 1996 and does not include 2,489,825 shares of Common
Stock issuable upon exercise of outstanding stock options on the date
hereof, including 1,503,577 shares issuable pursuant to options which are
currently exercisable.
4
<PAGE> 8
SUMMARY FINANCIAL DATA
The financial data as of and for the fiscal years ended February 24, 1996,
February 25, 1995, and February 26, 1994, except backlog, have been derived from
financial statements which have been audited by B/E's independent auditors. The
financial data as of and for the six months ended August 31, 1996 and August 26,
1995 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
six months ended August 31, 1996 and August 26, 1995 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 B/E 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>
SIX MONTHS ENDED FISCAL YEAR ENDED
--------------------------- --------------------------------------
AUGUST 31, AUGUST 26, FEB. 24, FEB. 25, FEB. 26,
1996(A) 1995 1996(A) 1995 1994
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS:
Net sales....................................... $200,328 $113,045 $232,582 $229,347 $203,364
Cost of sales................................... 133,342 75,925 160,031 154,863 136,307
-------- -------- -------- -------- --------
Gross profit.................................. 66,986 37,120 72,551 74,484 67,057
Operating expenses:
Selling, general and administrative........... 24,254 16,743 42,000 31,787 28,164
Research, development and engineering......... 19,157 24,774(c) 58,327(c) 12,860 9,876
Amortization expenses......................... 5,514 4,650 9,499 9,954 7,599
Other expenses................................ -- -- 4,170(b) 23,736(b) --
-------- -------- -------- -------- --------
Operating earnings (loss)....................... 18,061 (9,047) (41,445) (3,853) 21,418
Interest expense, net........................... 14,399 8,149 18,636 15,019 12,581
-------- -------- -------- -------- --------
Earnings (loss) before income taxes (benefit)
and cumulative effect of accounting change.... 3,662 (17,196) (60,081) (18,872) 8,837
Income taxes (benefit).......................... 366 -- -- (6,806) 3,481
-------- -------- -------- -------- --------
Earnings (loss) before cumulative effect of
accounting change............................. 3,296 (17,196) (60,081) (12,066) 5,356
Cumulative effect of accounting change.......... -- (23,332)(c) (23,332)(c) -- --
-------- -------- -------- -------- --------
Net earnings (loss)............................. $ 3,296 $(40,528) $(83,413) $(12,066) $ 5,356
======== ======== ======== ======== ========
Earnings (loss) per common share:
Earnings (loss) before cumulative effect of
accounting change............................. $ 0.19 $ (1.07) $ (3.71) $ (0.75) $ 0.35
Cumulative effect of accounting change.......... -- (1.45)(c) (1.44)(c) -- --
-------- -------- -------- -------- --------
Net earnings (loss)............................. $ 0.19 $ (2.52) $ (5.15) $ (0.75) $ 0.35
======== ======== ======== ======== ========
Common and common equivalent shares............. 17,446 16,108 16,158 16,021 15,438
OTHER DATA:
Depreciation and amortization................... $ 11,840 $ 8,413 $ 18,435 $ 16,146 $ 13,115
Capital expenditures............................ 7,065 8,168 13,656 12,172 11,002
Backlog, at period end.......................... 480,000 345,000 450,000 331,000 241,000
</TABLE>
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1996
---------------------------
ACTUAL AS ADJUSTED(D)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................................................... $ 62,282 $ 94,452
Total assets............................................................................ 443,340 475,510
Long-term debt.......................................................................... 282,058 225,000
Stockholders' equity.................................................................... 52,144 141,914
</TABLE>
5
<PAGE> 9
SUMMARY FINANCIAL DATA (CONTINUED)
FOOTNOTES TO TABLE
(a) On January 24, 1996, the Company acquired all of the stock of Burns
Aerospace Corporation ("Burns"), an industry leader in commercial aircraft
seating. The acquisition of Burns was accounted for as a purchase, and the
results of Burns are included in B/E's historical financial data from the
date of acquisition.
(b) In fiscal 1996, in conjunction with the Company's rationalization of its
seating business and as a result of the Burns acquisition, the Company
recorded a charge to earnings of $4.2 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.
(c) In fiscal 1996, the Company changed its method of accounting relating to the
capitalization of pre-contract engineering costs that were previously
included as a component of inventories and amortized to earnings as the
product was shipped. Effective February 26, 1995, such costs have been
charged to research and development and expensed as incurred, and, as a
result, periods prior to fiscal 1996 are not comparable. In connection with
such change in accounting, the Company recorded a charge to earnings of
$23.3 million. See Note 2 of Notes to Consolidated Financial Statements.
(d) Adjusted to reflect the sale of 4,000,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $23 7/8 per share
and the application of $57.6 million of net proceeds to reduce indebtedness
as described in "Use of Proceeds."
6
<PAGE> 10
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider carefully the following factors in evaluating the
Company and its business before purchasing the shares of Common Stock offered
hereby.
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 1980s and
early 1990s, 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 has experienced an economic turnaround and the levels of airline
spending on refurbishment and new aircraft purchases have expanded. However, due
to the volatility of the airline industry there can be no assurance that the
current 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.
NEW PRODUCT INTRODUCTIONS AND TECHNOLOGICAL CHANGE
Airlines currently are 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 increasingly are seeking sophisticated in-flight entertainment
systems, such as the MDDS interactive individual passenger in-flight
entertainment system developed by B/E, which the Company expects will provide a
significant percentage of its future revenues. Development of the MDDS required
substantial investment by the Company and third parties in research, development
and engineering. MDDS is not yet in commercial production. The future success of
the Company will depend, to a significant extent, on its ability to manufacture
successfully and deliver, on a timely basis, its MDDS product and to have the
MDDS perform at the level expected by B/E's customers and their passengers, as
well as the Company's ability to continue to develop, profitably manufacture and
deliver, on a timely basis, other technologically advanced, reliable high-
quality products which can be readily integrated into complex cabin interior
configurations. See "Business -- Products and Services."
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
Company's primary competitor in the market for new passenger entertainment
products, including individual seat video and in-flight entertainment and cabin
management systems, Matsushita Electronics, has significantly greater
technological capabilities and financial and marketing resources than the
Company. See "Business -- Competition."
7
<PAGE> 11
ADVERSE CONSEQUENCES OF FINANCIAL LEVERAGE
Following the Offering, the Company will continue to have substantial
indebtedness and, as a result, significant debt service obligations. As of
August 31, 1996, after giving effect to the Offering and the application of the
net proceeds therefrom, the Company would have had approximately $230 million
aggregate amount of indebtedness outstanding, representing 62% of total
capitalization. See "Use of Proceeds" and "Capitalization."
The degree of the Company's leverage could have important consequences to
purchasers of the shares of Common Stock offered hereby, 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;
and (iii) increasing the Company's vulnerability to adverse economic and
industry conditions. In addition, since any borrowings under the Company's bank
credit facilities 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 Company's Senior Subordinated Notes due 2006 (the
"Senior Subordinated Notes"), the indenture governing the Company's Senior Notes
due 2003 (the "Senior Notes") and the Company's bank credit facilities. 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 Company's bank credit facilities and the indentures governing the
Senior Notes and the Senior Subordinated Notes 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. The Company's bank credit facilities also
require the Company to meet certain financial ratios and tests. A failure to
comply with the obligations contained in the Company's bank credit facilities,
or the indentures governing the Senior Notes and the Senior Subordinated Notes,
could result in an event of default under the Company's bank credit facilities,
or the aforementioned indentures, which could permit acceleration of the related
debt and acceleration of debt under other instruments that may contain
cross-acceleration or cross-default provisions.
ABILITY TO INTEGRATE ACQUIRED BUSINESSES
Since 1992, B/E has acquired nine companies. The Company intends to
consider future strategic 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
integrate effectively any future acquisition, and to achieve cost efficiencies.
Although B/E has been successful in the past in doing so, there can be no
assurance that it will continue to be successful.
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."
8
<PAGE> 12
CERTAIN LEGAL PROCEEDING
In July 1995, B/E became aware 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 B/E 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. B/E 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.
9
<PAGE> 13
THE COMPANY
B/E 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 in-flight
entertainment systems. B/E's executive offices are located at 1400 Corporate
Center Way, Wellington, Florida 33414, and its telephone number is (561)
791-5000.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
4,000,000 shares of Common Stock offered hereby are approximately $89.8 million
($101.8 million if the Underwriters' overallotment option is exercised in full;
the Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders pursuant to any exercise of the Underwriters' overallotment
option). The Company intends to use approximately $57.6 million of the net
proceeds from the Offering to repay the outstanding balances under certain B/E
bank credit facilities. The bank indebtedness which the Company intends to repay
accrued interest at a weighted average rate of 7.56% per annum as of August 31,
1996 and had maturities extending through March 2003. A portion of such debt to
be repaid was incurred within the past year for working capital purposes.
Assuming such repayment, the Company would have available under its bank credit
facilities approximately $97.0 million for subsequent borrowings. The remainder
of the net proceeds will be used for general corporate purposes, including
working capital requirements to support increased sales, and possible
investments in strategic acquisitions. The Company currently has no agreements,
commitments or understandings with respect to any acquisitions. Pending
application as described above, the net proceeds of the Offering will be
invested in short-term investments.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
August 31, 1996 and as adjusted to give effect to the sale of the 4,000,000
shares of Common Stock offered by the Company hereby after deducting estimated
underwriting discounts, commissions and other offering expenses, and the
application of the net proceeds of the Offering as described in "Use of
Proceeds." The table should be read in conjunction with the financial
statements, including notes thereto, included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
AS OF AUGUST 31, 1996
---------------------------
ACTUAL AS ADJUSTED(A)
-------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of long-term debt.... $ 5,459 $ 4,917
-------- --------
Long-term debt, excluding current maturities:
Bank indebtedness................................................ 57,058 --
Senior Notes..................................................... 125,000 125,000
Senior Subordinated Notes........................................ 100,000 100,000
-------- --------
Total long-term debt.......................................... 282,058 225,000
-------- --------
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;
16,877,867 shares issued and outstanding (20,877,867 shares,
as adjusted)(b)............................................... 169 209
Additional paid-in capital....................................... 125,730 215,460
Retained earnings................................................ (72,699) (72,699)
Currency translation adjustment.................................. (1,056) (1,056)
-------- --------
Total stockholders' equity.................................... 52,144 141,914
-------- --------
Total capitalization..................................... $339,661 $371,831
======== ========
</TABLE>
- ---------------
(a) Adjusted to reflect the sale of 4,000,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $23 7/8 per share.
The Company intends to use approximately $57.6 million of the net proceeds
from the Offering to repay certain outstanding bank indebtedness, which
accrued interest at a weighted average of 7.56% per annum as of August 31,
1996. Assuming such repayment, the Company would have available under its
various bank credit facilities approximately $97.0 million for subsequent
borrowings.
(b) Excludes 746,500 shares of Common Stock issued pursuant to stock options
exercised after August 31, 1996. Also excludes 3,214,512 shares of Common
Stock reserved for issuance under the Company's various stock options plans,
including 1,503,577 options which are currently exercisable.
10
<PAGE> 14
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is quoted on the NASDAQ National Market System
under the symbol "BEAV." The following table sets forth, for the periods
indicated, the range of high and low per share sale prices for the Common Stock
as reported by NASDAQ:
<TABLE>
<CAPTION>
HIGH LOW
----- ----
<S> <C> <C>
FISCAL YEAR ENDED FEBRUARY 26, 1994:
First Quarter....................................................... 12 1/2 8 3/
Second Quarter...................................................... 15 1/4 12 1/4
Third Quarter....................................................... 15 10
Fourth Quarter...................................................... 12 8 3/
FISCAL YEAR ENDED FEBRUARY 25, 1995:
First Quarter....................................................... 11 1/2 7 7/
Second Quarter...................................................... 9 1/2 7 3/
Third Quarter....................................................... 9 1/4 7 1/
Fourth Quarter...................................................... 8 1/2 5 3/
FISCAL YEAR ENDED FEBRUARY 24, 1996:
First Quarter....................................................... 8 5/8 5 1/
Second Quarter...................................................... 9 1/4 7 1/
Third Quarter....................................................... 9 9/1 7 1/
Fourth Quarter...................................................... 13 5/8 8 7/
FISCAL YEAR ENDED FEBRUARY 22, 1997:
First Quarter....................................................... 16 1/4 9 7/
Second Quarter...................................................... 16 3/4 12 3/8
Third Quarter....................................................... 24 1/2 15 7/8
Fourth Quarter (through December 11, 1996).......................... 25 1/2 22 7/8
</TABLE>
As of November 30, 1996, the Company had 278 shareholders of record, and
management estimates that there were approximately 3,300 beneficial owners of
the Company's Common Stock. A recent last sale price of the Common Stock as
reported by NASDAQ is set forth on the cover page of this Prospectus.
DIVIDEND POLICY
The Company has never paid a cash dividend and does not plan to pay cash
dividends on its Common Stock in the foreseeable future. It is the current
policy of the Company's Board of Directors to retain any future earnings for use
in the business of the Company. In addition, terms of the Company's Senior
Notes, Senior Subordinated Notes and bank credit facilities place restrictions
on the amount of dividends which may be declared.
11
<PAGE> 15
SELECTED FINANCIAL DATA
On February 28, 1992, B/E 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, B/E acquired the stock of Flight Equipment Engineering Limited
("FEEL"). During fiscal 1994, B/E completed the following acquisitions: (a) on
April 29, 1993, B/E acquired all of the stock of Royal Inventum, B.V.
("Inventum"); (b) on August 23, 1993, B/E acquired all of the stock of Nordskog
Industries ("Nordskog"); (c) on August 26, 1993, B/E acquired all of the stock
of Acurex Corporation ("Acurex"); and (d) on October 13, 1993, B/E acquired
substantially all of the assets of Philips Airvision ("Airvision"). On January
24, 1996, the Company acquired all of the stock of Burns Aerospace Corporation
("Burns"), an industry leader in commercial aircraft seating. The financial data
as of and for the fiscal years ended February 24, 1996, February 25, 1995,
February 26, 1994 and February 27, 1993, the seven months ended February 29,
1992 and the fiscal year ended July 28, 1991 have been derived from financial
statements which have been audited by B/E's independent auditors. The financial
data as of and for the six months ended August 31, 1996 and August 26, 1995 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 six months
ended August 31, 1996 and August 26, 1995 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 B/E 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>
SIX MONTHS ENDED FISCAL YEAR ENDED SEVEN MONTHS FISCAL YEAR
---------------------- ------------------------------------------------------ ENDED ENDED
AUGUST 31, AUGUST 26, FEBRUARY 24, FEBRUARY 25, FEBRUARY 26, FEBRUARY 27, FEBRUARY 29, JULY 28,
1996(A) 1995 1996(A) 1995 1994 1993 1992 1991
---------- ---------- ------------ ------------ ------------ ------------ ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS:
Net sales........... $200,328 $113,045 $232,582 $229,347 $203,364 $198,019 $ 12,192 $24,278
Cost of sales....... 133,342 75,925 160,031 154,863 136,307 137,690 5,626 10,645
-------- -------- -------- -------- -------- -------- -------- -------
Gross
profit.... 66,986 37,120 72,551 74,484 67,057 60,329 6,566 13,633
Operating expenses:
Selling, general
and
administrative... 24,254 16,743 42,000 31,787 28,164 21,698 4,871(e) 4,855
Research,
development and
engineering..... 19,157 24,774(c) 58,327(c) 12,860 9,876 11,299 1,324 1,809
Amortization
expense......... 5,514 4,650 9,499 9,954 7,599 4,551 3,707(e) --
Other expenses.... -- -- 4,170(b) 23,736(b) -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------
Operating earnings
(loss)............ 18,061 (9,047) (41,445) (3,853) 21,418 22,781 (3,336) 6,969
Interest (income)
expense, net...... 14,399 8,149 18,636 15,019 12,581 3,955 (743) (211)
-------- -------- -------- -------- -------- -------- -------- -------
Earnings (loss)
before income
taxes (benefit),
extraordinary item
and cumulative
effect of
accounting
change............ 3,662 (17,196) (60,081) (18,872) 8,837 18,826 (2,593) 7,180
Income taxes
(benefit)......... 366 -- -- (6,806) 3,481 6,676 (860) 2,478
-------- -------- -------- -------- -------- -------- -------- -------
Earnings (loss)
before
extraordinary item
and cumulative
effect of
accounting
change............ 3,296 (17,196) (60,081) (12,066) 5,356 12,150 (1,733) 4,702
Extraordinary item,
net of tax
effect............ -- -- -- -- -- (522)(d) -- --
Cumulative effect of
accounting
change............ -- (23,332)(c) (23,332)(c) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------
Net earnings
(loss)............ $ 3,296 $(40,528) $(83,413) $(12,066) $ 5,356 $ 11,628 $ (1,733) $ 4,702
======== ======== ======== ======== ======== ======== ======== =======
Earnings (loss) per
common share:
Earnings (loss)
before
cumulative
effect of
accounting
change.......... $ 0.19 $ (1.07) $ (3.71) $ (0.75) $ 0.35 $ 1.03 $ (0.18) $ 0.65
Cumulative effect
of accounting
change.......... -- (1.45)(c) (1.44)(c) -- -- (0.05)(d) -- --
-------- -------- -------- -------- -------- -------- -------- -------
Net earnings
(loss)............ $ 0.19 $ (2.52) $ (5.15) $ (0.75) $ 0.35 $ 0.98 $ (0.18) $ 0.65
======== ======== ======== ======== ======== ======== ======== =======
Common and common
equivalent
shares............ 17,446 16,108 16,158 16,021 15,438 11,847 9,604 7,248
Supplemental
earnings (loss)
per common
share:(f)
Earnings (loss)
before
cumulative
effect of
accounting
change.......... $ 0.26 $ (2.98)
Cumulative effect
of accounting
change.......... -- (1.25)
-------- --------
Net earnings
(loss).......... $ 0.26 $ (4.23)
======== ========
BALANCE SHEET DATA
(END OF PERIOD):
Working capital..... $ 62,282 $ 53,022 $ 41,824 $ 76,563 $ 76,874 $133,661 $ 27,367 $13,500
Total assets........ 443,340 355,125 433,586 379,954 375,009 314,055 135,330 26,034
Long-term debt...... 282,058 188,435 273,192 172,693 159,170 127,743 40,500 --
Shareholders'
equity............ 52,144 86,630 44,157 125,331 133,993 107,974 57,057 22,467
</TABLE>
12
<PAGE> 16
SELECTED FINANCIAL DATA (CONTINUED)
FOOTNOTES TO TABLE
(a) On January 24, 1996, the Company acquired all of the stock of Burns, an
industry leader in commercial aircraft seating. The acquisition of Burns
was accounted for as a purchase, and the results of Burns are included in
B/E's historical financial data from the date of acquisition.
(b) In fiscal 1996, in conjunction with the Company's rationalization of its
seating business and as a result of the Burns acquisition, the Company
recorded a charge to earnings of $4.2 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.
(c) In fiscal 1996, the Company changed its method of accounting relating to the
capitalization of pre-contract engineering costs that were previously
included as a component of inventories and amortized to earnings as the
product was shipped. Effective February 24, 1995, such costs have been
charged to research and development and expensed as incurred and, as a
result, periods prior to fiscal 1996 are not comparable. In connection with
such change in accounting, the Company recorded a charge to earnings of
$23.3 million. See Note 2 of Notes to Consolidated Financial Statements.
(d) 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.
(e) During the seven months ended February 29, 1992, approximately $3.1 million
of non-recurring expenses related to 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.
(f) As required by APB 15, the Supplemental earnings (loss) per common share
data adjust the Statement of Operations data and Common and common
equivalent shares to give effect to: (i) the assumed issuance of 2,566,559
shares of Common Stock by the Company which would be necessary to generate
proceeds (using an assumed share price of $23 7/8), net of estimated
offering costs, sufficient to repay $57.6 million of indebtedness; and (ii)
the elimination of interest expense related to such borrowings for each
period, net of tax. The supplemental data do not give effect to the
issuance of an additional 1,433,441 shares of Common Stock offered by the
Company, the proceeds of which will be used as set forth under "Use of
Proceeds".
13
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
INTRODUCTION
B/E has become the world's leading manufacturer of commercial aircraft
interior products through the strategic acquisitions of seating, in-flight
passenger entertainment and services systems and galley products businesses.
B/E's products include an extensive line of first, business, tourist class and
commuter seats, a broad range of galley products including coffee and beverage
makers, ovens, liquid containers, refrigeration equipment and galley structures,
as well as a line of in-flight entertainment products including the MDDS
interactive video system. B/E markets and sells its products to its customers,
the airlines, through an integrated worldwide approach, focused by airline and
encompassing B/E's entire product line.
B/E's revenues are generally derived from two primary sources:
refurbishment or upgrade programs for the airlines' existing worldwide fleets,
and new aircraft deliveries. B/E believes its large installed base of products,
estimated to be approximately $2.6 billion as of August 31, 1996 (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, B/E'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,
B/E'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, B/E
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, B/E 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 1995 and 1996 to date. Consequently, during fiscal 1996 and the
six months ended August 31, 1996, B/E has experienced significant growth in
backlog of seating and galley products, and, during the six months ended August
31, 1996, has experienced significant growth in revenues and operating earnings.
This growth is a 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.
B/E 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, B/E completed the following acquisitions: (a) 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; (b)
on August 23, 1993, the Company acquired all of the capital stock of Nordskog,
an industry pioneer in galley structures and inserts; (c) on August 26, 1993,
the Company acquired all of the capital stock of Acurex, the leading worldwide
supplier of commercial aircraft refrigeration products; and (d) on October 13,
1993, the Company acquired substantially all of the assets and certain of the
liabilities of Airvision, a manufacturer of in-flight entertainment equipment.
On January 24, 1996, the Company acquired all of the stock of Burns, an industry
leader in commercial aircraft seating. 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.
The Burns acquisition has had a significant impact on B/E's results of
operations. Burns was one of the three leading North American suppliers of
commercial aircraft passenger seats, with a base of airline customers that was
largely complementary to that of B/E. B/E's and Burns' approximate share of the
14
<PAGE> 18
worldwide seating products market at the time of acquisition were 30% and 20%,
respectively, based on fiscal 1995 unit sales. By consolidating engineering,
marketing, administration and manufacturing operations of the two companies, B/E
has been able to reduce fixed costs, thereby enhancing its low-cost position.
B/E's business strategy is to maintain its market leadership position
through various initiatives, including new product development. In fiscal 1996,
research, development and engineering expenses totaled $58,327, or 25% of net
sales, primarily consisting of costs related to the development of the MDDS,
with the balance attributable to its seating products and galley businesses.
During the six months ended August 31, 1996, primarily as a result of the
substantial completion of the engineering associated with the development of the
MDDS, such expenses were $19,157, or 10% of net sales. The Company expects that
its research, development and engineering expenses will increase in fiscal 1998
as a result of the introduction of the MDDS as a line fit option on the Boeing
B777 and B747 aircraft. See "Prospectus Summary -- Recent Developments."
RESULTS OF OPERATIONS -- SIX MONTHS ENDED AUGUST 31, 1996
COMPARED TO THE SIX MONTHS ENDED AUGUST 26, 1995
Sales for the six months ended August 31, 1996 were $200,328, or 77% higher
than sales of $113,045 for the comparable period in the prior year. The increase
in sales is attributable to substantially higher unit volume shipments of all
the Company's products as a result of improving industry conditions. Of the
$87,283 increase in sales for the six-month period, $56,129 was due to increased
seating revenues directly related to the acquisition of Burns. Excluding the
effect of the Burns acquisition, sales increased 28% from the comparable period
in the prior year.
At August 31, 1996, the Company's backlog was approximately $480,000, up
from $450,000 at February 24, 1996. New order bookings in the six months ended
August 31, 1996 of $230,000 were $112,000 greater than new order bookings of
$118,000 for the comparable period in the prior year. Management estimates that
approximately 36% of its backlog is deliverable during the balance of fiscal
1997.
Gross profit was $66,986, or 33.4% of sales, for the six months ended
August 31, 1996 and was $29,866 higher than gross profit for the comparable
period in the prior year of $37,120, which represented 32.8% of sales. The
increase in gross profit is primarily the result of the higher sales volumes.
Selling, general and administrative expenses were $24,254, or 12.1% of
sales, for the six months ended August 31, 1996. This was $7,511 higher than
selling, general and administrative expenses for the comparable period in the
prior year of $16,743, or 14.8% of sales, principally due to the substantial
increases in revenues and the acquisition of Burns.
Research, development and engineering expenses were $19,157, or 9.6% of
sales, for the six months ended August 31, 1996. For the comparable period in
the prior year, research and development expense was $24,774, or 21.9% of sales.
The decrease in expenses during the current year is the result of a decrease in
the level of activity associated with the MDDS, offset somewhat by an increase
in product development activity in the Seating Products Division.
Amortization expense for the six months ended August 31, 1996 of $5,514 was
$864 more than the amount recorded in the first half of fiscal 1996 as a result
of the Burns acquisition.
Net interest expense was $14,399 for the six months ended August 31, 1996,
or $6,250 higher than the net interest expense of $8,149 recorded for the
comparable period in the prior year, and is due to the increase in the Company's
long-term debt outstanding as a result of the Burns acquisition and the upturn
in the Company's business.
Earnings before income taxes of $3,662 for the six months ended August 31,
1996 were $20,858 more than the loss before income taxes of $(17,196) in the
prior period.
Income taxes for the six months ended August 31, 1996 were $366, or 10% of
earnings before income taxes, as compared to no tax provision in the first half
of fiscal 1996.
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<PAGE> 19
Net earnings were $3,296, or $.19 per share, for the six months ended
August 31, 1996 as compared to a net loss of $(40,528) or $(2.52) per share for
the comparable period in the prior year, which included the cumulative effect of
an accounting change of $23,332.
RESULTS OF OPERATIONS -- YEAR ENDED FEBRUARY 24, 1996 COMPARED WITH YEAR ENDED
FEBRUARY 25, 1995
Sales for the year ended February 24, 1996 were $232,582, or 1% greater
than sales of $229,347 in the prior year. This increase in sales is primarily
related to the inclusion of results of operations of Burns, which was acquired
during the fourth quarter of fiscal 1996. Offsetting this increase in revenues
was the negative impact of the ten-week strike at Boeing, which ended December
14, 1995.
At February 24, 1996, the Company's backlog stood at approximately
$450,000, up from $331,000 at February 25, 1995. The increase in backlog is
attributable to the acquisition of Burns, along with solid growth from orders
placed by the airlines. During the year ended February 24, 1996, and 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.
Gross profit was $72,551, or 31.3% of sales, for the year ended February
24, 1996 and was $1,933 less than gross profit for the prior year of $74,484,
which represented 32.5% of sales. The decrease in gross profit during the year
ended February 24, 1996 is primarily the result of the mix of products sold.
Selling, general and administrative expenses were $42,000, or 18.1% of
sales, for the year ended February 24, 1996. This was $10,213 higher than
selling, general and administrative expenses in the prior year of $31,787, or
13.9% of sales, principally due to costs associated with the Burns acquisition
and related organizational changes brought about by this acquisition, higher
promotional and selling costs associated with B/E's participation in industry
trade shows, and higher medical benefits and legal costs during fiscal 1996.
Effective as of the beginning of fiscal 1996, the Company changed its
method of accounting for pre-contract engineering expenditures associated with
customer orders. These expenditures, which previously were carried in inventory
for amortization over future deliveries, are now expensed as incurred. As a
result of this change in accounting method, research, development and
engineering expenses for the year ended February 24, 1996 increased by $45,467
to $58,327, as compared to $12,860 in the prior year.
Amortization expense for the year ended February 24, 1996 of $9,499 was
$455 less than the amount recorded in the prior year, and is due to the lower
level of intangible assets being amortized during fiscal 1996.
Other expenses were $4,170 for the year ended February 24, 1996 and relate
to costs associated with the integration and consolidation of the Company's
European seating business. Other expenses for the year ended February 25, 1995
were $23,736 and related primarily to a charge associated with B/E's earlier
generations of passenger entertainment systems.
Net interest expense was $18,636 for the year ended February 24, 1996, or
$3,617 higher than net interest expense of $15,019 recorded in the prior year.
This increase is the result of an increase in the amount of the Company's
long-term debt outstanding, as well as higher interest rates.
No income tax benefit was provided for the year ended February 24, 1996 as
compared to a tax benefit of $(6,806), or 36% of the loss before income taxes,
for the prior year.
The Company recorded the cumulative effect of an accounting change of
$23,332 during the year ended February 24, 1996. Such amount represents the
total amount of capitalized pre-contract engineering costs which were included
in inventories as of February 25, 1995.
The net loss for fiscal 1996 was $(83,413), or $(5.15) per share, as
compared to a net loss of $(12,066), or $(.75) per share, in the prior year.
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<PAGE> 20
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, or 13% higher
than sales of $203,364 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, B/E's backlog stood at $331,000, up from $241,000 at
February 26, 1994. Substantially all of the growth in backlog was attributable
to B/E's in-flight entertainment products; backlog for B/E'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, or 32% of sales, for the year ended February 25,
1995 and was $7,427, or 11%, greater than the prior year's gross profit of
$67,057, 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, or 14% of sales,
for the year ended February 25, 1995. This was $3,623, or 13%, higher than the
selling, general and administrative expenses in the prior year of $28,164, or
14% of sales, principally due to the acquisitions completed during fiscal 1995.
Research, development and engineering expenses were $12,860, or 6% of
sales, for the fiscal year ended February 25, 1995. For the prior year, research
and development expenses were $9,876, or 5% of sales. The increase in research,
development and engineering expense was attributable to B/E's ongoing new
product development programs.
Amortization expense for the fiscal year ended February 25, 1995 of $9,954,
was $2,355, 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, related primarily to
intangible assets and inventories associated with B/E's earlier generations of
passenger entertainment systems. The introduction of B/E's MDDS, which B/E
expects to become the industry's standard for in-flight passenger and service
entertainment, has captured the dominant market share with it receiving contract
awards from major airlines totaling more than $150,000 during the fiscal year
ended February 25, 1995. The MDDS also caused major carriers to convert programs
for earlier products of B/E to the MDDS and has resulted in two of B/E's
principal competitors offering to develop for the airlines systems similar to
B/E's MDDS. These events caused the in-flight entertainment industry to
reevaluate its product offerings and, in the process, have impaired the value of
certain of its assets. As a result, B/E has written down certain of its assets
principally related to its earlier systems.
Principally due to the other expenses described above, B/E recorded a net
operating loss of ($3,853) for the fiscal year ended February 25, 1995, as
compared to operating earnings of $21,418 in the prior year. Operating earnings
for the period before the special charge mentioned above were $19,883.
Net interest expense of $15,019 for the fiscal year ended February 25, 1995
was $2,438, or 19%, higher than net interest expense of $12,581 in the prior
year. This increase was the result of an increase in the amount of B/E's
long-term debt outstanding, as well as higher interest rates.
An income tax benefit of $(6,806), or 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 25, 1994 was $3,481, or 39% of
earnings before income taxes.
The net loss for fiscal 1995 was $(12,066) or $(.75) per share as compared
to net earnings of $5,356, or $.35 per share in the prior year, principally due
to the charge.
17
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working capital
needs and scheduled payments of interest on its indebtedness. As a result of the
Burns acquisition, the Company has significantly increased cash requirements for
the payment of interest on its outstanding borrowings.
B/E's primary requirements for working capital have been directly related
to increased accounts receivable and inventory levels as a result of revenue
growth. B/E's working capital was $62,282 as of August 31, 1996, compared to
$41,824 as of February 24, 1996.
In January 1996 the Company amended its existing credit facilities with The
Chase Manhattan Bank by increasing the aggregate principal amount that may be
borrowed thereunder to $100,000 (the "Bank Credit Facility"). The Bank Credit
Facility consists of a $25,000 Reducing Revolver and a $75,000 Revolving
Facility. The amount of the Reducing Revolver will be reduced automatically by
12.5% on April 19, 1999 and on each of the seven succeeding quarterly
anniversaries of such date. The Reducing Revolver is collateralized by all of
the issued and outstanding capital stock of Acurex, a wholly owned subsidiary,
and has a five year maturity 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. At November 15, 1996 indebtedness in an aggregate
principal amount of approximately $47,000, plus letters of credit amounting to
approximately $5,000, were outstanding under the Bank Credit Facility. The
Company intends to use approximately $57,600 of the net proceeds from the
Offering to repay the outstanding balances under certain B/E bank credit
facilities. Assuming such repayment, the Company would have available under its
bank credit facilities approximately $97,000 for subsequent borrowings.
The Senior Notes and Senior Subordinated Notes are due March 1, 2003 and
February 1, 2006, respectively.
At August 31, 1996, the Company's cash and cash equivalents were $14,188 as
compared to $15,376 at February 24, 1996. Cash used in operating activities
during the six months ended August 31, 1996 was $(4,022), and cash used in
operating activities in fiscal 1996 was $(8,296). The primary source of cash
during the six months ended August 31, 1996 was net earnings of $3,296, non-cash
charges for depreciation and amortization of $11,840 and approximately $3,900
from the issuance of Common Stock pursuant to stock option exercises and
employee benefit plans, offset by a use of cash of $19,158 principally due to
increases in receivables and inventories, as well as decreases in current
liabilities. The primary source of cash during the year ended Feburary 24, 1996
was non-cash charges for depreciation and amortization of $18,435 and the
cumulative effect of the accounting change of $23,332 which was offset by a use
of cash for research, development and engineering of $58,327 and for inventory
of $11,929.
The Company's capital expenditures were $7,065 and $8,168 during the six
months ended August 31, 1996 and August 26, 1995, respectively, and $13,656,
$12,172, and $11,002 in fiscal 1996, 1995, and 1994, respectively.
The Company believes that cash flow from operations and availability under
the Bank Credit Facility will provide adequate funds for its working capital
needs, planned capital expenditures and debt service 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.
INDUSTRY CONDITIONS
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
commercial airline industry. In the late 1980s and early 1990s the world airline
industry suffered a severe downturn which resulted in record losses and several
air carriers
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<PAGE> 22
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. Over the last two years, the airline industry has experienced an
economic turnaround, with significantly improved results, and a number of the
world's airlines have placed significant orders for new aircraft over the past
12 months. Industry sources are now predicting that new aircraft deliveries will
increase over the next several years. 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.
The foregoing statements include forward-looking statements which involve
risks and uncertainties. The Company's actual experience may differ materially
from that discussed above. Factors that might cause such a difference include,
but are not limited to, those discussed in "Risk Factors," as well as future
events that have the effect of reducing the Company's operating income and
available cash balances, such as unexpected operating losses or delays in the
integration of the Company's seating business, the delivery of the MDDS
interactive video system, new or expected refurbishments, or cash expenditures
related to possible future acquisitions.
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<PAGE> 23
BUSINESS
INTRODUCTION
B/E Aerospace is the world's largest manufacturer of commercial aircraft
cabin interior products, serving virtually all major airlines with a broad line
of products, including aircraft seats, a full line of food and beverage
preparation and storage equipment, galley structures and in-flight entertainment
systems. In addition, B/E provides upgrade, maintenance and repair services for
the products which it manufactures as well as for those supplied by other
manufacturers.
Management believes that the Company has achieved the leading global market
position in each of its major product categories. B/E is the largest
manufacturer of airline seats in the world, offering an extensive line of first
class, business class, tourist class and commuter seats. The Company is also the
world's largest manufacturer of galley equipment for both narrow- and wide-body
aircraft, including a wide selection of coffee and beverage makers, water
boilers, ovens, liquid containers, refrigeration equipment and galley
structures. In addition, the Company is the leading manufacturer of passenger
entertainment and service systems, including passenger control systems and
individual passenger in-flight entertainment systems. The Company believes that
individual passenger in-flight entertainment systems will be one of the fastest
growing and among the largest product categories in the commercial aircraft
cabin interior products industry in the future.
As of August 31, 1996, B/E's backlog was at a record $480 million
(excluding any additional backlog attributable to United Airlines from the
matters described under "Prospectus Summary -- Recent Developments") and, during
the six months ended August 31, 1996, the Company has experienced significant
growth in revenues and operating earnings.
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 1996.
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 during the industry downturn, these periods
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 $1,150 to $10,000 per seat. Management
estimates that the aggregate size of the worldwide aircraft seat market
(including spare parts) during fiscal 1996, which still reflected
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 ten companies
worldwide, including the Company, supply aircraft seats, although the
Company (which has an approximately 50% market share) and two other
competitors share approximately 90% of the market.
- Passenger Entertainment and Service Systems ("PESS"). This product
category includes individual seat video systems, overhead video
projection systems, audio distribution systems, passenger control
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<PAGE> 24
units ("PCUs") and related wiring and harness assemblies and
sophisticated interactive telecommunications and entertainment systems.
Prices for PCUs range from $18,000 to $115,000 per aircraft. Individual
passenger in-flight entertainment systems currently range in price from
approximately $3,000 to $8,000 per seat. Management estimates that the
aggregate size of the worldwide PESS market was approximately $250
million during fiscal 1996. Industry sources expect the PESS market to
increase substantially in the near term as individual passenger
entertainment systems become standard in-flight entertainment equipment
in first, business and tourist classes on wide-body, and with the further
development of live broadcast in-flight television, many narrow-body
aircraft. PESS products are currently supplied by approximately five
companies worldwide. The Company has a market share of approximately 33%
in individual passenger in-flight entertainment systems, determined on
the basis of installed units as of August 31, 1996.
- 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 $14,500 to
$28,500. 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 1996 was in excess of $250 million and has ranged as
high as approximately $300 million during the past five years. The
majority of the Company's sales of galley products have been associated
with deliveries of new aircraft to the airlines (particularly galley
structures and refrigeration equipment). While there are approximately 22
companies worldwide who supply galley equipment to the airline industry,
the Company is the only manufacturer with a complete line of galley
equipment.
The Company operates in the commercial aircraft cabin interior products
segment of the commercial airlines supplier industry. Revenues for similar
classes of products or services within this business segment for the six months
ended August 1996 and 1995, and for the three most recent fiscal years are
presented below:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED AUGUST FISCAL YEAR
------------- ----------------------
1996 1995 1996 1995 1994
---- ---- ---- ---- ----
(UNAUDITED; DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Seating products...................................... $105 $ 48 $ 97 $100 $ 99
Galley products....................................... 47 39 79 81 59
Passenger entertainment and service systems........... 23 15 33 34 36
Services.............................................. 25 11 24 14 9
---- ---- ---- ---- ----
Total revenues...................................... $200 $113 $233 $229 $203
==== ==== ==== ==== ====
</TABLE>
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 calendar 1995, and have started to restore their
balance sheets since then through cash generated from operations and debt and
equity placements. Further, throughout calendar 1996, the aircraft manufacturers
began experiencing 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 Boeing Report, the world
commercial passenger aircraft fleet, as of the end of 1995, consisted of
11,066 aircraft, including 3,281 aircraft with fewer than 120 seats,
4,930 aircraft with between 120 and 240 seats and 2,855 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 $7.9
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<PAGE> 25
billion at the end of 1995. 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 2015, increasing annual revenue passenger miles
from approximately 1.4 trillion in 1993 to approximately 4.3 trillion by
2015. Industry sources report that the airlines are experiencing
extremely high load factors and that a significant number of new aircraft
will be purchased to meet the growth in worldwide air travel, which is
expected to nearly double by 2005. According to the Boeing Report, the
worldwide fleet of commercial passenger aircraft is projected to expand
from approximately 11,000 at the end of 1995 to approximately 16,000 by
the end of 2005. The Company believes that growth in aircraft interior
product shipments related to new aircraft deliveries will begin in 1997.
For example, Boeing has indicated that it plans to ship 215 aircraft in
1996 as compared with 340, 385, and 380, respectively, in each of the
subsequent years through 1999. The Company generally receives orders
related to new deliveries approximately six months before an aircraft is
delivered. According to Airbus Industrie Global Market Forecast published
in March 1995 (the "Airbus Industrie Report"), the worldwide installed
seat base, which management considers to be a good indicator for
potential growth in the aircraft cabin interior products industry, is
expected to increase from approximately 1.6 million passenger seats at
the end of 1994 to approximately 3.9 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. According to
the July 1996 Airline Monitor, the percentage of Boeing aircraft
deliveries projected to be wide-body aircraft for 1996 through 1998 is
43%, as compared to 32% for the three-year period ended December 31,
1995. 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 passenger in-flight
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 in-flight
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 in-flight
entertainment systems will be installed on essentially all wide-body
aircraft and, with the further development of live broadcast in-flight
television, many narrow-body planes.
- 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.
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<PAGE> 26
- 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, 90% in coffee makers,
90% in refrigeration equipment and 50% in ovens, in each case based on
unit sales for the six months ended August 31, 1996, and 33% in
individual passenger in-flight entertainment systems, determined on the
basis of installed base as of August 31, 1996. The Company believes these
market shares provide it with significant competitive advantages in
serving its customers, including economies of scale and the ability to
commit greater product development, global product support and marketing
resources. Furthermore, because of economies of scale, in part
attributable to its large market shares and its approximate $2.6 billion
installed base of cabin interior equipment (valued at replacement prices
as of August 31, 1996), the Company believes it is among the lowest cost
producers in the cabin interior products industry. The Company also
believes that its large installed base provides B/E with a significant
advantage over competitors in obtaining orders for retrofit and
refurbishment programs, principally because airlines tend to purchase
equipment 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.
Finally, B/E is better positioned to obtain any on-going upgrade,
maintenance, inspection and repair service contracts due to the size of
its installed base.
- Broadest Product Line in the Industry. Management believes the Company
offers more technologically advanced 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 play a leading 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.
- Technological Leadership/New Product Development. Management believes
that the Company is a technological leader in its industry, with the
largest R&D organization in the industry currently comprised of 319
engineers. The Company believes that its R&D effort and its on-site
engineers at both the airlines and airframe manufacturers enable B/E to
consistently introduce innovative products and thereby gain early entrant
advantages and substantial market shares. Examples of such product
development include: the Company's family of in-flight entertainment
systems, which it believes to be superior to existing operational systems
in terms of performance, reliability, weight, heat generation and
flexibility to adapt to changing technology; a cappuccino/espresso maker;
a quick chill wine cooling system; and a constant-pressure, steam cooking
oven, which the Company believes substantially improves the appearance,
aroma and taste of airline food.
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<PAGE> 27
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 in-flight 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.
GROWTH OPPORTUNITIES
B/E believes that it is benefiting from three major growth trends occurring
in the commercial aircraft cabin interior products industry:
- Increase in Refurbishment and Upgrade Orders. B/E's substantial
installed base provides significant ongoing revenues from replacements,
upgrades, repairs and spare parts. Approximately two-thirds of B/E's
revenues and operating earnings for the six months ended August 31, 1996
were derived from refurbishment and upgrade orders. In the late 1980s and
early 1990s, the airline industry suffered a significant downturn, which
resulted in a deferral of cabin interior maintenance expenditures. Since
early 1994, the airlines have experienced a turnaround in operating
results, leading the domestic airline industry to record operating
earnings during 1995 and 1996 to date. Deterioration of cabin interior
product functionality and aesthetics within the commercial airline fleets
during the industry downturn has encouraged airlines to increase spending
on refurbishments and upgrades. The Company believes that it is well
positioned to benefit over the next several years as a result of the
airlines' dramatically improved financial condition and liquidity and the
need to refurbish and upgrade cabin interiors. The Company's recent
growth in backlog, revenues and operating earnings has been almost
entirely from refurbishment and upgrade programs, and the Company is
currently experiencing a high level of new order quote activity related
to such programs.
- Expansion of Worldwide Fleet and Shift Toward Wide-Body Aircraft. B/E
will benefit from the significant number of new aircraft which will need
to be purchased to meet projected growth in worldwide air travel in three
ways: (a) shipments of interior products to equip these new aircraft; (b)
expansion in the overall fleet, leading to more potential refurbishment
and upgrade revenues; and (c) a shift in new aircraft shipments toward
wide-body aircraft, which require substantially more seats, galley
equipment and in-flight entertainment products per aircraft than do
narrow-body aircraft. Due to the time lag in significantly increasing
production rates of new aircraft at the airframe manufacturers, the
Company does not expect the impact of new aircraft deliveries to be felt
in the commercial aircraft cabin interior product industry until calendar
1997. See "-- Recent Industry Conditions."
- Emergence of Individual Passenger In-flight Entertainment Systems as a
Major New Product Category. Airlines increasingly are demanding
individual passenger in-flight entertainment systems as a method to
attract and retain customers, as the availability of such service affects
passengers' decisions on airline selection. These systems also provide
the airlines with the opportunity to generate increased revenues, without
raising ticket prices, by charging passengers for the services used. The
Company expects that individual passenger in-flight entertainment systems
will be one of the fastest growing and among the largest product
categories in the commercial aircraft cabin interior products industry in
the future.
PRODUCTS AND SERVICES
Seating Products
The Company is the world's leading manufacturer 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
in-flight entertainment systems, oxygen masks and telephones. Management
estimates that the Company has an aggregate installed
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<PAGE> 28
base as of August 31, 1996 of aircraft seats, valued at replacement prices, of
approximately $1.25 billion comprised of more than 735,000 seats.
- Tourist Class. The Company is the leading manufacturer of tourist class
seats in both the U.S. and worldwide markets. B/E 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 manufacturer 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.
Passenger Entertainment and Service Systems
Management estimates that the Company has the largest installed base of
PESS products in the world, which, valued at replacement prices, is
approximately $290 million. The Company has the leading share of the market for
PCUs and related wiring and harness assemblies, and 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. The
Company believes that it is a market leader in individual passenger in-flight
entertainment systems and that this product category will be one of the fastest
growing and among the largest product categories in the commercial aircraft
cabin interior products industry in the future.
- Individual Passenger Entertainment. The Company has developed a number
of in-flight entertainment systems that are designed to meet the
technological and price specifications of the airlines:
B/E 2000. The 2000, introduced in 1991, is the Company's
first-generation individual in-flight video system and offers
centralized electronic distribution of a limited range of programming.
Since its introduction, the Company has sold approximately 13,500 units
of the B/E 2000 to 10 airlines.
MDDS Family. The Company has developed a family of next-generation,
individual passenger in-flight entertainment products, which includes
the 2000M and the MDDS:
B/E 2000M -- The 2000M is an in-flight entertainment system that
offers similar functionality to the 2000 but is designed to be
upgradeable to the Company's fully interactive MDDS. Since its
introduction in 1994, the Company has sold approximately 3,600
units of the 2000M to 5 airlines. On November 15, 1996, the
Company announced that United Airlines had selected B/E as a
supplier of individual in-flight entertainment systems for its
B777, B747-400, and B767-300 aircraft. While such selection is
subject to negotiation of definitive documentation, the Company
expects an initial order of approximately $60 million of the B/E
2000M system, to be installed on 54 United Airlines aircraft. If
United Airlines decides to upgrade its B/E 2000M entertainment
systems to full MDDS interactive functionality, significant
additional orders would follow. Pending the negotiation of the
final contract, United Airlines has authorized the Company to
proceed with necessary engineering and other long lead time
items.
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<PAGE> 29
MDDS -- B/E's MDDS is a state-of-the-art, fully interactive
individual passenger in-flight entertainment system which has
the capacity to offer numerous movies on demand,
telecommunications, gaming, Nintendo(@), Sega(@) and PC-based
games, in-flight shopping and, in the future, live television,
among other services. The system was first installed, on a
limited basis, on a British Airways Boeing 747-400 in November
1995 and, upon successful completion of live tests, is expected
to be installed in all classes of service on approximately 90
aircraft. MDDS is not yet in commercial production. On November
6, 1996, B/E announced that the MDDS (including the B/E 2000M)
is now being offered by Boeing to its customers as a line fit
option for both the B777 and B747 aircraft, allowing airlines to
specify the MDDS as their in-flight entertainment system of
choice on these Boeing aircraft. Prior to this announcement, the
MDDS could only be installed as a retrofit option after the
airlines took initial delivery of new aircraft.
As of August 31, 1996, B/E had entered into contracts to supply
individual passenger entertainment systems to a number of airlines,
including Air France, British Airways and KLM, and had an in-flight
entertainment systems backlog of approximately $152 million (excluding
any additional backlog attributable to United Airlines from the matters
described under "Prospectus Summary -- Recent Developments").
- 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 Equipment and Structures
The Company is the world's largest manufacturer of galley equipment for
both narrow- and wide-body aircraft, offering a wide selection of coffee and
beverage makers, water boilers, ovens, liquid containers, refrigeration
equipment and other galley components as well as galley structures. Management
estimates that the Company has an aggregate installed base of galley equipment
and structures, valued at replacement prices, of approximately $1.0 billion.
- 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 recently 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 in-flight 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.
- 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
26
<PAGE> 30
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.
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, DEVELOPMENT AND ENGINEERING
The Company works closely with commercial airlines to improve existing
products and identify customers' emerging needs. B/E's expenditures in research,
development and engineering totaled $19.2 million, $58.3 million, $12.9 million,
and $9.9 million for the six months ended August 31, 1996 and the fiscal years
ended February 24, 1996, February 25, 1995, and February 26, 1994, respectively.
B/E employs 319 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 software, electronic, 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. B/E has a sales and marketing organization of 83
persons, along with 15 independent sales representatives. B/E sales to non-US
airlines were $112.5 million, $124.5 million, $114.5 million, and $85.2 million
for the six months ended August 31, 1996, and the fiscal years ended February
24, 1996, February 25, 1995, and February 26, 1994, respectively, or
approximately 56%, 54%, 50%, and 42%, 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. B/E 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.
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 B/E senior executive, teams representing each
product line serve designated airlines which together account for approximately
60%
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<PAGE> 31
of the purchases of products manufactured by B/E. These airline customer teams
have developed customer specific strategies to meet each airline's 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. 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 B/E's revenues in the six months
ended August 31, 1996 or during the fiscal years ended February 24, 1996,
February 25, 1995 or February 26, 1994. 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 B/E's backlog at August 31, 1996 was
approximately $480 million, approximately 36% of which management believes to be
deliverable during the remainder of fiscal 1997, compared with a backlog of $450
million on February 24, 1996. A significant portion of the Company's backlog
represents MDDS orders from British Airways which were placed in fiscal 1995.
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.
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 U.S. 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
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<PAGE> 32
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 as to PCUs, and MAS as to
individual seat video systems. The Company's primary competitors for galley
products 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.
PATENTS
B/E currently holds 48 United States patents and 50 international patents,
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
In July 1995, B/E became aware 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 B/E 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. B/E
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<PAGE> 33
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 October 31, 1996, B/E had approximately 2,693 employees.
Approximately 74% of these employees are engaged in manufacturing, 12% in
engineering, research and development, and 14% in sales, marketing, product
support and general administration. Approximately 18% of the employees are
represented by a union. B/E considers its employee relations to be good.
PROPERTIES
As of August 31, 1996, B/E had 18 principal facilities, where it leased or
owned an aggregate of approximately 1,122,950 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
- ---------------------------------- -------------------------------------- ---------- ---------
<S> <C> <C> <C>
CORPORATE:
Wellington, Florida Corporate headquarters, finance,
marketing and sales................... 17,700 Owned
Longwood, Florida Administration........................ 1,300 Leased
SEATING PRODUCTS:
Litchfield, Connecticut Manufacturing, service and
warehousing........................... 147,700 Owned
Winston-Salem, North Carolina Seating products division
headquarters, research and
development, finance, marketing, sales
and manufacturing..................... 264,800 Owned
Leighton Buzzard, England Manufacturing, service, research and
development, sales support, finance
and warehousing....................... 114,000 Owned(a)
Kilkeel, Northern Ireland Manufacturing, sales support
and warehousing....................... 64,500 Leased/Owned(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
</TABLE>
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<PAGE> 34
<TABLE>
<CAPTION>
FACILITY
SIZE
LOCATION PRODUCTS AND FUNCTION (SQ. FEET) OWNERSHIP
- ---------------------------------- -------------------------------------- ---------- ---------
<S> <C> <C> <C>
PESS PRODUCTS:
Irvine, California Manufacturing, service, research and
development, sales support, finance
and warehousing; in-flight
entertainment division headquarters... 106,700 Leased
SERVICES:
Orange, California Upgrade, maintenance, inspection and
repair, finance, sales support and
warehousing; service division
headquarters.......................... 106,300 Leased
Longwood, Florida Upgrade, maintenance, inspection and
repair................................ 19,200 Leased
Longwood, Florida Upgrade, maintenance, inspection and
repair................................ 5,300 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............................ 5,350 Leased
Chesham, England Upgrade, maintenance, inspection
and repair............................ 34,000 Owned(a)
</TABLE>
- ---------------
(a) B/E's owned properties in England are mortgaged to Barclays Bank PLC to
collateralize credit facilities of FEEL in aggregate amounts of up to
approximately L7.0 million.
(b) Approximately 38,500 square feet of the Kilkeel, Northern Ireland facilities
are owned with the balance leased.
The Company believes that its facilities are suitable for their present
intended purposes and adequate for the Company's present and anticipated level
of operations. As a result of recent conditions in the airline industry as
described in "Recent Industry Conditions," B/E's facilities have been
substantially underutilized for the past several years. The Company believes
that its ongoing facility integration program, together with anticipated
continued growth in airline profitability, should result in significant
improvement in the degree of utilization in the Company's facilities.
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<PAGE> 35
MANAGEMENT
The following table sets forth information regarding the directors and
executive officers of the Company. Officers of the Company are elected annually
by the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Amin J. Khoury............... 57 Chairman of the Board
Robert J. Khoury............. 54 Vice Chairman of the Board and Chief Executive Officer
Paul E. Fulchino............. 50 President, Chief Operating Officer and Director
Marco C. Lanza............... 40 Executive Vice President, Marketing and Product Development
Vice President, Chief Financial Officer and Assistant
Thomas P. McCaffrey.......... 42 Secretary
Edmund J. Moriarty........... 51 Vice President, General Counsel and Secretary
Jeffrey P. Holtzman.......... 41 Vice President, Treasurer and Assistant Secretary
G. Bernard Jewell............ 55 President, Seating Products Division
E. Ernest Schwartz........... 60 President, Galley Products Division
Arthur H. Lipton............. 58 President, In-flight Entertainment Division
Jim C. Cowart+............... 45 Director
Richard G. Hamermesh*+....... 48 Director
Brian H. Rowe................ 65 Director
Hansjoerg Wyss*.............. 61 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 three Class I Directors (Brian H. Rowe, Jim C. Cowart and
Paul E. Fulchino), 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
nonmanagement 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 of the Company since July
1987 and was Chief Executive Officer until April 1, 1996. Since 1986, Mr. Khoury
has also been the Managing Director of The K.A.D. Companies, Inc., an
investment, venture capital and consulting firm. 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 Electronics, Inc., a
leading provider of parts support services to computer service organizations.
Mr. Khoury is employed by the Company pursuant to an Employment Agreement which
expires in 2002. Mr. Khoury is the brother of Robert J. Khoury.
Robert J. Khoury has been a Director of the Company since July 1987. Mr.
Khoury was elected Vice Chairman and Chief Executive Officer effective April 1,
1996; from July 1987 until that date, Mr. Khoury served as the Company's
President and Chief Operating Officer. From 1986 to 1987, Mr. Khoury was Vice
President of The K.A.D. Companies, Inc. The Company has entered into an
Employment Agreement with Mr. Khoury which expires in 2001. Mr. Khoury is the
brother of Amin J. Khoury.
Paul E. Fulchino was elected a Director and President and Chief Operating
Officer of the Company effective April 1, 1996. From 1990 to 1996, Mr. Fulchino
served as President and Vice Chairman of Mercer Management Consulting, Inc.
("Mercer"), a general management consulting firm with over 1,100 employees.
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<PAGE> 36
In addition to his management responsibilities as President of Mercer, Mr.
Fulchino also had responsibility for advising clients throughout the world,
particularly with respect to the transportation industry, including a number of
major airlines. The Company has entered into an Employment Agreement with Mr.
Fulchino extending through March 31, 1999.
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 In-flight Entertainment Division of the Company. From 1987
through February 1992, Mr. Lanza was Vice President, Marketing and Product
Development, of the Company. The Company has entered into an Employment
Agreement with Mr. Lanza extending through December 31, 1999.
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 an Employment Agreement with Mr. McCaffrey extending through
December 31, 1999 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 and Vice
President since November 1996. 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 Seating Products
Division since March 1996. From February 1994 through February 1996, Mr. Jewell
was President, Services Division of the Company. 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
Corporation, 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 In-flight Entertainment
Division since July 1995. From 1990 to 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 EOS Capital, 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
33
<PAGE> 37
served as Chairman from September 1993 through January 1995 and as President
from 1979 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 October 1995,
Mr. Rowe has been a Director of Cincinnati Bell Inc., a communications services
company. Since December 1995, Mr. Rowe has also been a Director of Stewart &
Stevenson Services, Inc., a custom packager of engine systems, and Textron Inc.,
a manufacturer of mechanical devices for aircraft and other applications. Since
January 1996, Mr. Rowe has served as Executive Vice Chairman of American
Regional Aircraft Industries, Inc.
Hansjoerg Wyss has been a Director of the Company since October 1989. Since
1977, Mr. Wyss has been a Director and the Chairman 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.
34
<PAGE> 38
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 November
30, 1996, and as adjusted to reflect the sale of the shares offered hereby, 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 1996 (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>
PERCENT OF TOTAL(A)
---------------------
NUMBER OF PRIOR TO AFTER
NAMES SHARES OFFERING OFFERING
- --------------------------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Wellington Management Company.................................. 2,210,600 11.9% 9.8%
75 State Street
Boston, MA 02109
Frank Russell Co. Inc. ........................................ 998,200 5.4 4.4
909 A Street
Tacoma, WA 98401
Amin J. Khoury+*............................................... 270,300(b) 1.4 1.2
Marco C. Lanza+................................................ 203,285(c) 1.1 0.9
Hansjoerg Wyss*................................................ 193,609(d) 1.0 0.9
Robert J. Khoury+*............................................. 110,164(e) 0.6 0.5
Jim C. Cowart*................................................. 100,500(f) 0.5 0.4
Thomas P. McCaffrey+........................................... 70,784(g) 0.4 0.3
Richard G. Hamermesh*.......................................... 43,301(h) 0.2 0.2
E. Ernest Schwartz+............................................ 24,750(i) 0.1 0.1
Paul E. Fulchino*.............................................. 12,768(j) 0.1 0.1
Brian H. Rowe*................................................. 10,000(k) 0.1 **
All Directors and Named Executives Officers as a group (14
persons)..................................................... 1,163,528(l) 6.2 5.1
</TABLE>
- ---------------
+ Named Executive Officer
* Director of the Company
** Less than 0.1%
(a) The number of shares of Common Stock deemed outstanding includes: (i)
17,704,275 shares outstanding as of November 30, 1996; 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, 1996).
(b) Represents shares issuable upon the exercise of stock options exercisable in
the next sixty days.
(c) Includes 181,250 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan.
(d) Includes 52,500 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.
(e) Includes 107,500 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 52,500 shares of Common Stock
which are not exercisable in the next sixty days.
(f) Includes 20,000 shares acquired by a profit sharing plan in which Mr.
Cowart has a fifty percent interest and 77,500 shares issuable upon the
exercise of stock options exercisable in the next sixty days. Excludes
options to purchase 12,500 shares of Common Stock which are not exercisable
in the next sixty days.
35
<PAGE> 39
(g) Includes 65,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 50,000
shares of Common Stock which are not exercisable in the next sixty days.
(h) 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
32,500 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.
(i) Includes 23,750 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 31,250
shares of Common Stock which are not exercisable in the next sixty days.
(j) Excludes 187,500 shares issuable upon the exercise of stock options not
exercisable in the next sixty days.
(k) Includes 10,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 30,000
shares of Common Stock which are not exercisable in the next sixty days.
(l) Includes 946,800 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 557,500
shares of Common Stock which are not exercisable in the next sixty days.
SELLING STOCKHOLDERS
Pursuant to the Underwriting Agreement, the Underwriters have been granted
an option to purchase up to an aggregate of 600,000 shares of Common Stock from
the Company and the Selling Stockholders for the purpose of covering
overallotments, if any. The Selling Stockholders, Sheila L. Palandjian, the PAP
Stock Trust (for the benefit of Peter A. Palandjian), the PLP Stock Trust (for
the benefit of Paul L. Palandjian) and the LP Stock Trust (for the benefit of
Leon Palandjian), who respectively owned options to purchase 35,000, 46,666,
46,667 and 46,667 shares of Common Stock before the Offering, have granted such
overallotment option to the Underwriters with respect to 35,000, 10,000, 10,000
and 10,000 shares of Common Stock, respectively, and will own options to
purchase 0, 36,666, 36,667 and 36,667 shares of Common Stock, respectively, if
the overallotment option is exercised in full with respect to the Selling
Stockholders' shares. The Selling Stockholders are the surviving spouse and
trusts for the benefit of the children of Petros A. Palandjian, a former
director of the Company who died in August, 1996.
If the Underwriters exercise their overallotment option, the shares of
Common Stock purchased thereunder will first be purchased from the Selling
Stockholders on a pro rata basis (based upon the aggregate number of shares that
may be purchased from the Selling Stockholders) until all such shares of Common
Stock to be sold by the Selling Stockholders have been purchased, and the
remaining shares, if any, will be purchased from the Company.
36
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue 30,000,000 shares of Common Stock, $0.01
par value, of which 16,877,867 shares were outstanding as of August 31, 1996,
and held by approximately 242 stockholders of record. Holders of Common Stock
are entitled to one vote per share on all matters to be voted upon by the
stockholders and to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor. The indentures relating to
the Company's Senior Notes and Senior Subordinated Notes and the Bank Credit
Agreement, however, currently restrict dividend payments by the Company to its
stockholders. In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock have the right to a ratable portion of the
assets remaining after payment of liabilities. Holders of Common Stock do not
have cumulative voting, preemptive, redemption or conversion rights. All
outstanding shares of Common Stock are, and the shares to be sold in this
offering will be, fully paid and non-assessable.
PREFERRED STOCK
The Company's Restated Certificate of Incorporation (the "Certificate")
provides, among other things, for the authorization of 1,000,000 shares of
Preferred Stock, $0.01 par value (the "Preferred Stock"). The shares of
Preferred Stock may be issued from time to time at the discretion of the Board
of Directors without stockholder approval. The Board of Directors is authorized
to issue these shares in different classes and series and, with respect to each
class or series, to determine the dividend rate, the redemption provisions,
conversion provisions, liquidation preference and other rights and privileges
not in conflict with the Certificate. No shares of Preferred Stock are
outstanding, and the Company has no immediate plans to issue any Preferred
Stock. While issuance of Preferred Stock could provide needed flexibility in
connection with possible acquisitions and other corporate purposes, such
issuance could also make it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company or discourage an attempt
to gain control of the Company. In addition, the Board of Directors, without
stockholder approval, can issue shares of Preferred Stock with voting and
conversion rights which could adversely affect the voting power and other rights
of the holders of Common Stock.
DIRECTORS' EXCULPATION AND INDEMNIFICATION
The Certificate provides that no director of the Company shall be liable to
the Company or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except to the extent otherwise required by the Delaware
General Corporation Law (the "DGCL"). The effect of this provision of the
Certificate is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of a fiduciary duty of care as a
director. This provision does not limit or eliminate the rights of the Company
or any stockholder to seek non-monetary relief, such as an injunction or
rescission in the event of a breach of a director's duty of care. In addition,
the Certificate provides that, if the DGCL is amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
the directors shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended. These provisions will not alter the liability of
directors under federal or state securities laws. The Certificate also includes
provisions for the indemnification of the Company's directors and officers to
the fullest extent permitted by Section 145 of the DGCL.
ELECTION AND REMOVAL OF DIRECTORS
The Certificate classifies the board of directors into three classes, as
nearly equal in number as possible, so that each director will serve for three
years, with one class of directors being elected each year. The Certificate also
provides that directors may be removed for cause only with the approval of the
holders of at least two-thirds of the voting power of the Company's shares
entitled to vote generally in the election of directors at an annual meeting or
special meeting called for such purpose. In addition, the Certificate requires
at least two-thirds of the voting power of the Company's shares entitled to vote
generally in the election of
37
<PAGE> 41
directors at an annual meeting or special meeting called for such purpose to
alter, amend or repeal the provisions relating to the classified board and
removal of directors described above.
Management believes that the Certificate provisions described in the
preceding paragraph (the "Provisions"), taken together, reduce the possibility
that a third party could effect a change in the composition of the Company's
board of directors without the support of the incumbent board. The Provisions,
however, may have significant effects on the ability of stockholders of the
Company to change the composition of the incumbent board, to benefit from
transactions which are opposed by the incumbent board, to assume control of the
Company or effect a fundamental corporate transaction such as a merger.
Nevertheless, although the Company has not experienced any problems in the past
with the continuity or stability of the board, management believes that the
Provisions help assure the continuity and stability of the Company's policies in
the future, since the majority of the directors at any time will have prior
experience as directors of the Company.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of DGCL. That
section provides, with certain exceptions, that a Delaware corporation may not
engage in any of a broad range of business combinations with a person or
affiliate, or associate of such person, who is an "interested stockholder" for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person becoming an
interested stockholder, or the business combination, is approved by the board of
directors of the corporation before the person becomes an interested
stockholder; (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation in the same transaction that makes
it an interested stockholder (excluding shares owned by persons who are both
officers and directors of the corporation, and shares held by certain employee
stock ownership plans); or (iii) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. An "interested
stockholder" is defined as any person that is (i) the owner of 15% or more of
the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within the three-year period
immediately prior to the date on which it is sought to be determined whether
such person is an interested stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is The
First National Bank of Boston, 100 Federal Street, Boston, Massachusetts 02110.
38
<PAGE> 42
UNDERWRITERS
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the Underwriters named
below (the "Underwriters") have severally agreed to purchase, and the Company
has agreed to sell to them, severally, the respective number of shares of the
Company's Common Stock set forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
------------------------------------------------------------------------- ---------
<S> <C>
Morgan Stanley & Co. Incorporated......................................
CS First Boston Corporation............................................
PaineWebber Incorporated...............................................
-------
Total..................................................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
taken.
The Underwriters propose to offer part of the Common Stock directly to the
public at the Price to Public set forth on the cover page hereof and part to
certain dealers at a price which represents a concession not in excess of
$ per share under the public offering price. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ a share to other
Underwriters or to certain dealers.
Pursuant to the Underwriting Agreement, the Company and the Selling
Stockholders have granted to the Underwriters an option, exercisable for 30 days
from the date of the Prospectus, to purchase up to 535,000 and 65,000 additional
shares of Common Stock, respectively, at the Price to Public set forth on the
cover page hereof, less underwriting discounts and commissions. The Underwriters
may exercise such option to purchase solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
Common Stock offered hereby. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to the total
number of shares as offered hereby.
The Company and directors and executive officers of the Company have agreed
with certain exceptions, not to (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise, except
for the shares to be sold in the offering, for a period of at least 90 days from
the date of this Prospectus without the prior written consent of Morgan Stanley
& Co. Incorporated, on behalf of the several Underwriters. If any such consent
is given it would not necessarily be preceded or followed by a public
announcement thereof.
39
<PAGE> 43
In connection with the offering of Common Stock hereby, the Underwriters
may engage in passive market making transactions in the Company's Common Stock
on the Nasdaq National Market immediately prior to the commencement of the sale
of shares in this offering, in accordance with Rule 10b-6A under the Exchange
Act. Passive market making consists of displaying bids on the Nasdaq National
Market limited by the bid prices of market makers not connected with this
offering and purchases limited by such prices and effected in response to order
flow. Net purchases by a passive market maker on each day are limited in amount
to 30% of the passive market maker's average daily trading volume in the Common
Stock during the period of the two full consecutive calendar months prior to the
filing with the Commission of the Registration Statement of which this
Prospectus is a part and must be discontinued when such limit is reached.
Passive market making may stabilize the market price of the Common Stock at a
level above that which might otherwise prevail and, if commenced, may be
discontinued at any time.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
Chase Securities Inc., one of the Underwriters, is an affiliate of The
Chase Manhattan Bank which is the agent and a lender under the Bank Credit
Facility. The Company intends to use a portion of the net proceeds of the
offering to repay outstanding amounts under the Bank Credit Facility and The
Chase Manhattan Bank will receive its proportionate share of such repayment. See
"Use of Proceeds." Because more than 10% of the net offering proceeds will be
paid to an affiliate of a member of the National Association of Securities
Dealers, Inc. (the "NASD"), the Offering is being conducted in accordance with
Rule 2710(c)(8) of the Conduct Rules of the NASD.
LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby will be
passed upon for the Company by Ropes & Gray, Boston, Massachusetts. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Shearman & Sterling, New York, New York.
EXPERTS
The financial statements and the related financial statement schedule of BE
Aerospace, Inc. as of February 24, 1996 and February 25, 1995, and for each of
the three fiscal years in the period ended February 24, 1996, appearing in this
Prospectus and the Registration Statement referred to below, have been audited
by Deloitte & Touche L.L.P., independent auditors, as set forth in their report
dated April 19, 1996, appearing elsewhere herein and in the Registration
Statement and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The audited financial statements of Burns Aerospace, Inc. as of December
31, 1994 and December 31, 1993, and for each of the three years in the period
ended December 31, 1994, incorporated by reference in this Prospectus and the
Registration Statement referred to below, have been audited by Arthur Andersen
LLP, independent public accountants, as set forth in their report dated November
27, 1995, incorporated by reference herein and in the Registration Statement and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements, and other information filed by the Company with the
Commission pursuant to the informational requirements of the Exchange Act 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,
40
<PAGE> 44
New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can be obtained at
prescribed rates by writing to the Commission, Public Reference Section, 450
Fifth Street N.W., Washington, D.C. 20549. The Company's Common Stock is listed
on the NASDAQ National Market System, and such reports, proxy and information
statements, and other information can also be inspected at the offices of NASDAQ
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended, with respect to the Common
Stock offered hereby (the "Registration Statement"). This Prospectus does not
contain all the information set forth in the Registration Statement and in the
exhibits and schedules thereto. For further information about the Company and
the securities offered hereby, reference is hereby made to the Registration
Statement and to the exhibits and schedules thereto, which may be inspected
without charge at the principal office of the Commission in Washington, D.C. and
copies of all or any part of which may be obtained from the Commission upon
payment of the prescribed fees. Statements contained in this Prospectus as to
the contents of any contract or any other document are not necessarily complete
and in each instance reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), are incorporated by reference in this Prospectus: (i) the
Company's Annual Report on Form 10-K for the fiscal year ended February 24,
1996; (ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended
on May 25, 1996 and August 31, 1996; (iii) the Company's Current Report on Form
8-K dated April 5, 1996; (iv) the Company's Current Report on Form 8-K dated
November 14, 1996; and (v) the description of the Company's Common Stock
contained in the Company's Registration Statement on Form 8-A filed under
Section 12 of the Exchange Act, including any amendment or report updating such
description.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, after the initial filing of the
Registration Statement and prior to the termination of this offering shall be
deemed to be incorporated by reference herein and to be a part hereof from the
respective dates of the filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other 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.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of any such person, a
copy of any and all of such documents (other than exhibits to such documents
which are not specifically incorporated by reference into such documents).
Requests for such copies should be directed to the Chief Financial Officer, BE
Aerospace, Inc., 1400 Corporate Center Way, Wellington, Florida 33414 (telephone
number (561) 791-5000).
41
<PAGE> 45
BE AEROSPACE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SIX MONTHS ENDED AUGUST 31, 1996 AND AUGUST 26, 1995
Consolidated Balance Sheet, August 31, 1996 (Unaudited).......................... F-2
Consolidated Statements of Operations for the Six Months Ended August 31, 1996
and
August 26, 1995 (Unaudited).................................................... F-3
Consolidated Statements of Cash Flows for the Six Months Ended August 31, 1996
and August 26, 1995 (Unaudited)................................................. F-4
Notes to Consolidated Financial Statements for the Six Months Ended August 31,
1996 and August 26, 1995 (Unaudited)............................................ F-5
FISCAL YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
Independent Auditors' Report..................................................... F-6
Consolidated Balance Sheets, February 24, 1996 and February 25, 1995............. F-7
Consolidated Statements of Operations for the Years Ended February 24, 1996,
February 25, 1995 and February 26, 1994......................................... F-8
Consolidated Statements of Stockholders' Equity for the Years Ended February 24,
1996, February 25, 1995, and February 26, 1994.................................. F-9
Consolidated Statements of Cash Flows for the Years Ended February 24, 1996,
February 25, 1995 and February 26, 1994......................................... F-10
Notes to Consolidated Financial Statements for the Years Ended February 24, 1996,
February 25, 1995, and February 26, 1994....................................... F-12
Schedule II - Valuation and Qualifying Accounts for the Years Ended February 24,
1996, February 25, 1995, and February 26, 1994.................................. F-26
</TABLE>
F-1
<PAGE> 46
BE AEROSPACE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FEBRUARY 24,
1996
AUGUST 31, ------------
1996
----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................ $ 14,188 $ 15,376
Receivables -- trade, less allowance for doubtful accounts of
$4,562 (August 31, 1996) and $4,973 (February 24, 1996)......... 59,935 54,242
Inventories, net................................................. 77,518 72,569
Other current assets............................................. 8,138 7,621
-------- --------
Total current assets........................................ 159,779 149,808
Property and Equipment, net........................................... 86,887 86,357
Intangibles and Other Assets, net..................................... 196,674 197,421
-------- --------
$ 443,340 $433,586
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................................. $ 41,867 $ 45,102
Accrued expenses................................................. 50,171 56,400
Current portion of long-term debt................................ 5,459 6,482
-------- --------
Total current liabilities................................... 97,497 107,984
Long-Term Debt........................................................ 282,058 273,192
Deferred Income Taxes................................................. 1,923 1,257
Other Liabilities..................................................... 9,718 6,996
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;
16,877,867 (August 31, 1996) 16,392,994 (February 24, 1996)
issued.......................................................... 169 164
Additional paid-in capital....................................... 125,730 121,366
Retained deficit................................................. (72,699) (75,995)
Cumulative foreign exchange translation adjustment............... (1,056) (1,378)
-------- --------
Total stockholders' equity.................................. 52,144 44,157
-------- --------
$ 443,340 $433,586
======== ========
</TABLE>
F-2
<PAGE> 47
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
AUGUST 31, AUGUST 26,
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net Sales.............................................................. $ 200,328 $ 113,045
Cost of Sales.......................................................... 133,342 75,925
-------- --------
Gross Profit........................................................... 66,986 37,120
Operating Expenses:
Selling, general and administrative............................... 24,254 16,743
Research, development and engineering............................. 19,157 24,774
Amortization expense.............................................. 5,514 4,650
-------- --------
Total operating expenses..................................... 48,925 46,167
Operating Earnings (Loss).............................................. 18,061 (9,047)
Interest Expense, net.................................................. 14,399 8,149
-------- --------
Earnings (Loss) Before Income Taxes and Cumulative Effect of Change in
Accounting Principle................................................. 3,662 (17,196)
Income Taxes........................................................... 366 --
-------- --------
Earnings (Loss) Before Cumulative Effect of Change in Accounting
Principle............................................................ 3,296 (17,196)
Cumulative Effect of Change in Accounting Principle.................... -- (23,332)
-------- --------
Net Earnings (Loss).................................................... $ 3,296 $ (40,528)
======== ========
Earnings (Loss) Per Common Share:
Earnings (Loss) Before Cumulative Effect of Change in Accounting
Principle............................................................ $ .19 $ (1.07)
Cumulative Effect of Change in Accounting Principle.................... -- (1.45)
-------- --------
Net Earnings (Loss) Per Common Share................................... $ .19 $ (2.52)
======== ========
Common and Common Equivalent Shares.................................... 17,446 16,108
======== ========
</TABLE>
F-3
<PAGE> 48
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
AUGUST 31, AUGUST 26,
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss)........................................... $ 3,296 $(40,528)
Adjustments to reconcile net loss to net cash flows provided
by operating activities:
Depreciation and amortization............................ 11,840 8,413
Cumulative effect of change in accounting principle...... -- 23,332
Deferred income taxes.................................... 524 948
Non cash employee benefit plan contributions............. 442 683
Changes in operating assets and liabilities:
Accounts receivable................................. (5,596) 4,306
Inventories......................................... (4,693) (3,813)
Other current assets................................ (512) 120
Accounts payable.................................... (3,724) 3,555
Other liabilities................................... (5,599) (5,312)
---------- ----------
Net cash flows used in operating activities................... (4,022) (8,296)
---------- ----------
Cash Flows from Investing Activities:
Capital expenditures.......................................... (7,065) (8,168)
Change in intangibles and other assets -- net................. (4,591) (2,095)
---------- ----------
Net cash flows used in investing activities................... (11,656) (10,263)
---------- ----------
Cash Flows from Financing Activities:
Net borrowings under revolving lines of credit................ 10,576 17,665
Proceeds from issuances of stock.............................. 3,927 153
---------- ----------
Net cash flows provided by financing activities............... 14,503 17,818
---------- ----------
Effect of exchange rate changes on cash flows...................... (13) (88)
---------- ----------
Net decrease in cash and cash equivalents.......................... (1,188) (829)
Cash and cash equivalents, beginning of period..................... 15,376 8,319
---------- ----------
Cash and cash equivalents, end of period........................... $ 14,188 $ 7,490
---------- ----------
Supplemental disclosures of cash flow information:
Cash paid during period for interest.......................... $ 13,336 $ 8,510
Cash paid during period for income taxes, net................. $ 309 --
</TABLE>
F-4
<PAGE> 49
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 1996 AND AUGUST 26, 1995
NOTE 1. BASIS OF PRESENTATION:
The information set forth in these consolidated financial statements as of
August 31, 1996 and for the six-month periods ended August 31, 1996 and August
26, 1995 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. for the periods
indicated. Results of operations for the interim periods ended August 31, 1996
and August 26, 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 24, 1996.
The accompanying consolidated financial statements consolidate all of the
Company's subsidiaries.
Certain information normally included in footnote disclosures to the annual
financial statements has been condensed or omitted in accordance with the rules
and regulations of the Securities and Exchange Commission.
F-5
<PAGE> 50
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 24, 1996 and February 25, 1995,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended February 24, 1996.
Our audits also included the financial statement schedule on page F-26. 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 24, 1996 and February 25, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended February 24, 1996, 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.
As discussed in Note 2 to the consolidated financial statements, in the
year ended February 24, 1996 the Company changed its method of accounting for
engineering expenditures.
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 19, 1996
F-6
<PAGE> 51
BE AEROSPACE, INC.
CONSOLIDATED BALANCE SHEETS, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................ $ 15,376 $ 8,319
Accounts receivable -- trade, less allowance for doubtful
accounts
of $4,973 (1996) and $4,034 (1995)............................. 54,242 48,915
Inventories, net................................................. 72,569 71,347
Deferred income taxes............................................ -- 6,502
Income tax refund receivable..................................... -- 1,019
Other current assets............................................. 7,621 6,415
-------- --------
Total current assets........................................ 149,808 142,517
-------- --------
Property and Equipment, net........................................... 86,357 60,304
Intangibles and Other Assets, net..................................... 197,421 177,133
-------- --------
$433,586 $379,954
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................................. $ 45,102 $ 35,164
Accrued liabilities.............................................. 56,400 26,123
Current portion of long-term debt................................ 6,482 4,667
-------- --------
Total current liabilities................................... 107,984 65,954
-------- --------
Long-Term Debt........................................................ 273,192 172,693
Deferred Income Taxes................................................. 1,257 11,212
Other Liabilities..................................................... 6,996 4,764
Commitments and Contingencies
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;
16,392,994 (1996) and 16,095,790 (1995) shares issued and
outstanding..................................................... 164 160
Additional paid-in capital....................................... 121,366 119,209
Retained earnings (deficit)...................................... (75,995) 7,418
Cumulative foreign exchange translation adjustment............... (1,378) (1,456)
-------- --------
Total stockholders' equity.................................. 44,157 125,331
-------- --------
$433,586 $379,954
======== ========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 52
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
FEBRUARY 24, FEBRUARY 25, FEBRUARY 26,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales............................................... $232,582 $229,347 $203,364
Cost of Sales........................................... 160,031 154,863 136,307
-------- -------- --------
Gross Profit............................................ 72,551 74,484 67,057
Operating Expenses:
Selling, general and administrative................ 42,000 31,787 28,164
Research, development and engineering.............. 58,327 12,860 9,876
Amortization of intangible assets.................. 9,499 9,954 7,599
Other expenses..................................... 4,170 23,736 --
-------- -------- --------
Total operating expenses...................... 113,996 78,337 45,639
-------- -------- --------
Operating Earnings (Loss)............................... (41,445) (3,853) 21,418
Interest Expense, net................................... 18,636 15,019 12,581
-------- -------- --------
Earnings (Loss) Before Income Taxes (Benefit) and
Cumulative Effect of Change in Accounting Principle... (60,081) (18,872) 8,837
Income Taxes (Benefit).................................. -- (6,806) 3,481
-------- -------- --------
Earnings (Loss) Before Cumulative Effect of Change in
Accounting Principle.................................. (60,081) (12,066) 5,356
Cumulative Effect of Change in Accounting Principle..... (23,332) -- --
-------- -------- --------
Net Earnings (Loss)..................................... $(83,413) $(12,066) $ 5,356
======== ======== ========
Earnings (Loss) per Common Share:
Earnings (loss) before cumulative effect of change
in accounting principle.......................... $ (3.71) $ (0.75) $ 0.35
Cumulative effect of change in accounting
principle........................................ (1.44) -- --
-------- -------- --------
Net earnings (loss)................................ $ (5.15) $ (0.75) $ 0.35
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 53
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED CURRENCY TOTAL
---------------- PAID-IN EARNINGS TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT EQUITY
------ ------ ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
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
Sale of stock under employee
stock purchase plan........... 74 1 403 -- -- 404
Exercise of stock options....... 121 2 896 -- -- 898
Employee benefit plan matching
contribution.................. 102 1 858 -- -- 859
Net loss........................ -- -- -- (83,413) -- (83,413)
Foreign currency translation
adjustment.................... -- -- -- -- 78 78
------ ---- -------- -------- ------- --------
BALANCE, FEBRUARY 24, 1996...... 16,393 $164 $ 121,366 $(75,995) $ (1,378) $ 44,157
====== ==== ======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE> 54
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss)...................................... $(83,413) $(12,066) $ 5,356
Adjustments to reconcile net earnings (loss) to net
cash flows (used in) provided by operating
activities:
Cumulative effect of accounting change.............. 23,332 -- --
Depreciation and amortization....................... 18,435 16,146 13,115
Change in intangible assets......................... -- 8,588 --
Deferred income taxes............................... (3,453) (6,764) 1,657
Non cash employee benefit plan contributions........ 859 721 --
Changes in operating assets and liabilities, net of
effects from acquisitions:
Accounts receivable.............................. 6,068 6,226 (3,188)
Inventories...................................... (11,929) (16,863) (4,153)
Income tax refunds receivable.................... 1,019 915 (1,934)
Other current assets............................. (1,657) (1,500) (2,047)
Accounts payable................................. 3,008 7,295 6,056
Other liabilities................................ 13,169 (642) (9,071)
-------- -------- --------
Net cash flows (used in) provided by operating (34,562) 2,056 5,791
activities...............................................
-------- -------- --------
Cash Flows from Investing Activities:
Payments for purchase of property and equipment.......... (13,656) (12,172) (11,002)
Change in other assets................................... (5,914) (8,610) (5,077)
Acquisitions............................................. (42,500) -- (107,506)
-------- -------- --------
Net cash flows used in investing activities................ (62,070) (20,782) (123,585)
-------- -------- --------
Cash Flows from Financing Activities:
Net borrowings under revolving lines of credit........... 2,000 9,080 --
Proceeds from issuance of stock, net of repurchases...... 1,302 132 964
Principal payments on long-term debt..................... (942) -- (13,514)
Proceeds from long-term debt............................. 101,252 3,873 130,010
-------- -------- --------
Net cash flow provided by financing activities............. 103,612 13,085 117,460
-------- -------- --------
Effect of exchange rate changes on cash flows.............. 77 222 (198)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents....... 7,057 (5,419) (532)
Cash and cash equivalents, beginning of year............... 8,319 13,738 14,270
-------- -------- --------
Cash and cash equivalents, end of year..................... $ 15,376 $ 8,319 $ 13,738
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE> 55
BE AEROSPACE, INC.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cash paid (received) during year for:
Interest................................................. $16,967 $16,664 $ 7,524
Income taxes -- net...................................... (3,292) (1,096) 2,918
Schedule of Noncash Transactions:
Tax benefit upon exercise of nonstatutory stock
options................................................ -- -- 158
Liabilities assumed and accrued acquisition costs
incurred in connection with the acquisitions........... 27,532 -- 19,954
Liabilities incurred in connection with purchase of land
and buildings.......................................... -- 4,000 4,932
Common stock issued in connection with the
acquisitions........................................... -- -- 19,100
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 56
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(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") operates in a single business segment
and 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. 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
commercial airline industry.
As described in Note 3, 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. On January 24, 1996, the Company acquired all of the
outstanding stock of Burns Aerospace Corporation, a Delaware 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.
Use of Estimates --
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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
F-12
<PAGE> 57
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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.
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 annually 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 16, 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 during the year ended February 25, 1995.
Research and Development --
Research and development expenditures are expensed as incurred.
Stock-Based Compensation --
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation, which will be effective for the Company beginning February 25,
1996. SFAS 123 requires extended disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply Accounting Principle
Board Opinion No. 25 (APB 25), which recognizes compensation cost based on the
intrinsic value of the equity instrument awarded. The Company will continue to
apply APB 25 to its stock-based compensation awards to employees and will
disclose the required pro forma effect on net income and earnings per share
beginning in fiscal 1997.
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 16,185,000, 16,021,000, and 15,438,000 for
the years ended February 24, 1996, February 25, 1995, and February 26, 1994.
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
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.
F-13
<PAGE> 58
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2. ACCOUNTING CHANGE
The Company undertook a comprehensive review of the engineering
capitalization policies followed by its competitors and others in its industry
peer group. The results of this study and an evaluation of the Company's policy
led the Company to conclude that it should adopt the accounting method that it
believes is followed by most of its competitors and certain members of its
industry peer group. Previously, the Company had capitalized pre-contract
engineering costs as a component of inventories, which were then amortized to
earnings as the product was shipped. The Company now expenses such costs as they
are incurred. While the accounting policy for pre-contract engineering
expenditures previously followed by the Company was in accordance with generally
accepted accounting principles, the changed policy is preferable.
The effect of this change in accounting for periods through February 25,
1995 was a charge of $23,332 ($1.44 per share); the effect of expensing
engineering costs for the year ended February 24, 1996 was a charge of $42,114
($2.60). The following table summarizes the pro forma net earnings (loss) and
per share amounts for each period presented. Primarily as a result of this
accounting change, inventories decreased by approximately $65,446 as of February
24, 1996.
Pro forma amounts assuming the change in application of accounting
principle applied retroactively (unaudited):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
FEBRUARY 24, FEBRUARY 25, FEBRUARY 26,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net (loss) earnings...................... $(60,081) $(35,398) $688
Net (loss) earnings per share............ $ (3.71) $ (2.20) $.04
</TABLE>
3. ACQUISITIONS
The Company completed a number of acquisitions during the years ended
February 24, 1996 (1996 Acquisition) and February 26, 1994 (1994 Acquisitions)
which are described below. Funds for the 1996 and 1994 Acquisitions were
obtained from proceeds of the long-term debt issuance described in Note 8.
1996 ACQUISITION
Burns -- On January 24, 1996 the Company acquired all of the outstanding
capital stock of Burns Aerospace Corporation which designs, manufactures, sells
and services aircraft seating products to commercial airlines worldwide. The
aggregate acquisition cost of $70,032 includes the payment of $42,500 to the
seller, the assumption of approximately $27,532 of liabilities, including
related acquisition costs, and certain purchase accounting reserves.
The aggregate purchase price for the Burns acquisition has been allocated
to the net assets acquired based on appraisals and management's estimates as
follows:
<TABLE>
<S> <C>
Receivables.......................................................... $11,396
Inventories.......................................................... 12,624
Other current assets................................................. 806
Property and equipment............................................... 21,695
Intangible and other assets.......................................... 23,511
-------
$70,032
=======
</TABLE>
F-14
<PAGE> 59
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table presents unaudited pro forma operating results for the
fiscal years ended February 1996 and 1995, respectively, as if the 1996
acquisition had occurred on February 27, 1994:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net sales............................................... $327,073 $322,841
Net loss................................................ $(88,113) $(15,061)
-------- --------
Net loss per share...................................... $ (5.44) $ (.94)
======== ========
</TABLE>
None of the above proforma amounts reflect the anticipated cost savings
associated with the Burns business integration plan.
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 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>
F-15
<PAGE> 60
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. INVENTORIES
Inventories are valued at the lower of cost or market using the weighted
average cost method. Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Raw materials............................................. $28,252 $23,675
Work-in-process........................................... 39,045 39,131
Finished goods............................................ 5,272 8,541
------- -------
$72,569 $71,347
======= =======
</TABLE>
Inventories at February 25, 1995 included $23,332 of capitalized
pre-contract engineering costs. As described in Note 2, during fiscal 1996, the
Company changed its method of accounting for such costs.
5. 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>
YEARS 1996 1995
----- -------- --------
<S> <C> <C> <C>
Land, buildings and improvements................ 15-20 $ 39,979 $ 31,920
Machinery....................................... 5-12 46,374 29,743
Tooling......................................... 3-5 14,819 10,324
Furniture and equipment......................... 3-5 12,758 7,075
-------- --------
113,930 79,062
Less accumulated depreciation and
amortization.................................. (27,573) (18,758)
-------- --------
$ 86,357 $ 60,304
======== ========
</TABLE>
6. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
STRAIGHT-LINE
AMORTIZATION
PERIOD (YEARS) 1996 1995
-------------- -------- --------
<S> <C> <C> <C>
Covenants not-to-compete.................. 14 $ 10,198 $ 9,198
Product technology, production plans and
drawings................................ 7-20 60,201 56,774
Replacement parts annuity................. 20 29,416 26,042
Product approvals and technical manuals... 20 18,529 13,909
Goodwill.................................. 30 77,256 68,651
Debt issue costs.......................... 10 12,592 5,662
Trademarks and patents.................... 20 10,470 9,114
Other..................................... 11,761 9,482
-------- --------
230,423 198,832
Less accumulated amortization........ (33,002) (21,699)
-------- --------
$197,421 $177,133
======== ========
</TABLE>
F-16
<PAGE> 61
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Accrued product warranties.............................. $ 3,455 $ 2,969
Accrued salaries, vacation and related benefits......... 10,479 5,502
Accrued acquisition expenses............................ 11,105 2,507
Accrued interest........................................ 7,449 6,694
Customer advances....................................... 5,940 --
Accrued income taxes.................................... 7,315 1,642
Other accrued liabilities............................... 10,657 6,809
-------- -------
$ 56,400 $26,123
======== =======
</TABLE>
8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Senior notes............................................. $124,313 $124,215
Senior subordinated notes................................ 100,000 --
Revolving lines of credit................................ 38,000 36,000
Term loan................................................ 16,665 16,577
Other long-term debt..................................... 696 568
-------- --------
279,674 177,360
Less current portion of long-term debt................... (6,482) (4,667)
-------- --------
$273,192 $172,693
======== ========
</TABLE>
In January 1996, the Company amended its existing credit facilities by
increasing the aggregate principal amount that may be borrowed thereunder to
$100,000 (the "Bank Credit Facility"). The Bank Credit Facility consists of a
$25,000 Reducing Revolver and a $75,000 Revolving Facility. The amount of the
Reducing Revolver will be reduced automatically by 12.5% on April 19, 1999 and
on each of the seven succeeding quarterly anniversaries of such date. 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. 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, all of which were met
by the Company as of February 24, 1996. Borrowings under the Bank Credit
Facility were used to refinance the remaining borrowings under the Company's
then outstanding credit facility.
Borrowings under the Bank Credit Facility currently bear interest at LIBOR
plus 1.75% or prime (as defined) plus 1/2%. The interest to be charged on the
Bank Credit Facility can increase or decrease based upon specified operating
performance criteria set forth in the Bank Credit Facility Agreement. Amounts
may be borrowed or repaid in $1,000 increments. At February 24, 1996,
approximately $5,800 of letters of credit were outstanding, reducing the
aggregate Bank Credit Facility availability to approximately $56,200.
On January 24, 1996, the Company sold $100,000 of 9 7/8% Senior
Subordinated Notes (the "Senior Subordinated Notes"). The proceeds from the
Senior Subordinated Notes were utilized to acquire Burns and refinance the
Company's then outstanding Bank credit facilities.
F-17
<PAGE> 62
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Senior Subordinated Notes are unsecured senior subordinated obligations
of the Company and are subordinated to all senior indebtedness of the Company
and mature on February 1, 2006. Interest on the Senior Subordinated Notes is
payable semi-annually in arrears February 1 and August 1 of each year. The
Senior Subordinated Notes are redeemable at the option of the Company, in whole
or in part, at any time after February 1, 2001 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 Subordinated
Notes may require the Company to repurchase such holder's Senior Subordinated
Notes at 101% of the principal amount thereof, plus accrued and unpaid interest
to the date of such purchase. The Senior Subordinated Notes contain certain
restrictive covenants, all of which were met by the Company as of February 24,
1996, including limitations on future indebtedness, restricted payments,
transactions with affiliates, liens, dividends, mergers and transfers of assets.
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 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 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 24,
1996, 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 Senior Notes. The Bank
Credit Facility also contains restrictions on the cumulative amount of dividends
that may be paid. As of February 24, 1996, no cash dividends could have been
declared by the Company.
The Company has a U.K. revolving line of credit and term loan facility
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 or waived as of February 24, 1996. Aggregate
borrowings outstanding under the FEEL Credit Agreement were approximately
$12,815 as of February 24, 1996. Such borrowings will be repaid in pounds
sterling.
The Company also has a Netherlands 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 24, 1996. There were no borrowings outstanding under the Inventum
Credit Agreement as of February 24, 1996.
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
F-18
<PAGE> 63
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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 24, 1996.
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Fiscal year ending February:
1997........................................................... $ 6,482
1998........................................................... 1,591
1999........................................................... 1,424
2000........................................................... 1,357
2001........................................................... 39,358
Thereafter.......................................................... 229,462
--------
$279,674
========
</TABLE>
9. INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Current:
Federal..................................... $ 1,972 $ (786) $1,408
State....................................... 818 105 139
Foreign..................................... 663 639 277
------- ------- ------
$ 3,453 $ (42) $1,824
======= ======= ======
Deferred:
Federal..................................... $(2,635) $(5,146) $ 155
State....................................... (818) (904) 266
Foreign..................................... -- (714) 1,236
(3,453) (6,764) 1,657
------- ------- ------
$ -0- $(6,806) $3,481
======= ======= ======
</TABLE>
The difference between income tax expense (benefit) and the amount computed
by applying the statutory U.S. federal income tax rate (35%) to the pretax
earnings before change in accounting principle consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- ------
<S> <C> <C> <C>
Statutory U.S. federal income tax expense
(benefit)..................................... $(21,028) $(6,605) $3,093
Operating loss without tax benefit.............. 14,569 -- --
Foreign tax rate differential................... 3,324 -- --
State income taxes, net......................... -- (519) 264
Goodwill amortization........................... 558 708 290
Research and development credit................. -- (600) --
Foreign Sales Corporation tax benefit........... -- (353) (281)
Other, net...................................... 2,577 563 115
-------- ------- ------
$ -0- $(6,806) $3,481
======== ======= ======
</TABLE>
F-19
<PAGE> 64
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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>
1996 1995
-------- --------
<S> <C> <C>
Engineering costs...................................... $ 22,182 $ --
Inventory reserves..................................... 5,164 2,396
Acquisition reserves................................... 991 855
Inventory costs capitalized for tax purposes........... 815 815
Bad debt reserves...................................... 658 1,415
Other.................................................. 1,611 1,021
-------- --------
Net current deferred income tax assets................. $ 31,421 $ 6,502
======== ========
Intangible assets...................................... (14,701) (16,421)
Depreciation........................................... (1,556) (1,904)
Net operating loss carryforward........................ 9,254 3,708
Research credit carryforward........................... 600 600
Other.................................................. 1,137 2,805
-------- --------
Net noncurrent deferred income tax liabilities......... (5,266) (11,212)
-------- --------
Valuation allowance.................................... (27,412) --
-------- --------
Net deferred tax liabilities........................... $ (1,257) $ (4,710)
======== ========
</TABLE>
Due to uncertainty surrounding the realization of the benefits of its net
deferred tax asset, the Company has established a valuation allowance of $27,412
against its otherwise recognizable net deferred tax asset.
As of February 24, 1996, the Company had approximately $22,816 of federal
operating loss carryforwards which expire at various dates through 2011, federal
research credit carryforwards of $600 which expire at various dates through
2011, 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 $2,855 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.
The Company's federal tax returns for the years ended February 26, 1994 and
February 27, 1993 are currently under examination by the Internal Revenue
Service. Management believes that the resolution of this examination will not
have a material adverse effect on the Company's results of operations or its
financial condition.
F-20
<PAGE> 65
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
10. 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 1996, 1995, and 1994 was approximately $2,943,
$2,276 and $2,091, respectively. Future payments under leases with terms
currently greater than one year are as follows:
<TABLE>
<S> <C>
Year ending February:
1997........................................................... $ 5,308
1998........................................................... 4,318
1999........................................................... 2,567
2000........................................................... 1,460
2001........................................................... 1,257
Thereafter.......................................................... 3,063
-------
$17,973
=======
</TABLE>
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
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.
The Company is also a defendant in various other 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 statements.
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 $450 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 $450, 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 April
28, 1996, the Company is obligated to pay the officer annually, as deferred
compensation, an amount equal to 100% of the officer's annual salary (as
defined) for a period of ten years from the date of termination. Such deferred
compensation has been accrued at the present value of the obligation at February
24, 1996.
The Company has other employment agreements with certain key members of
management that provide for aggregate minimum annual base compensation of
$1,660, expiring on various dates through 1999.
F-21
<PAGE> 66
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND 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 24, 1996, February 25, 1995, and February 26, 1994 were $1,301, $984,
$1,040, respectively.
11. 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 $859, $757, and $585 related
to this plan for the years ended February 24, 1996, February 25, 1995 and
February 26, 1994, respectively.
12. STOCKHOLDERS' EQUITY
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.
In August 1995, 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 540,800 options with exercise prices ranging from $9.25 to $11.75 per
share to $7.625 per share, which was the fair market value as of that date.
The following table sets forth options granted, cancelled, forfeited and
outstanding:
<TABLE>
<CAPTION>
FEBRUARY 26, 1996 FEBRUARY 25, 1995 FEBRUARY 26, 1994
-------------------------- -------------------------- --------------------------
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.... 2,871,287 $ .81 - $13.00 2,493,162 $ .81 - $13.00 2,215,112 $ .81 - $14.00
Options granted..................... 731,925 $7.37 - $10.37 484,500 $7.44 - $ 8.75 404,500 $8.75 - $11.75
Options exercised................... (139,750) $ .81 - $ 8.75 (375) $ .81 (106,450) $8.75 - $ 9.50
Options forfeited................... (743,112) $7.00 - $13.00 (106,000) $8.25 - $11.75 (20,000) $8.75 - $12.25
--------- --------- ---------
Outstanding, end of period.......... 2,720,350 $ .81 - $13.00 2,871,287 $ .81 - $13.00 2,493,162 $ .81 - $13.00
========= ========= =========
</TABLE>
13. EMPLOYEE STOCK PURCHASE PLAN
The Company has established a qualified Employee Stock Purchase Plan, 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 73,544 and 15,065 shares of
stock during fiscal 1996 and 1995 (none in fiscal 1994) pursuant to this plan at
a price per share of $5.50 and $7.01, respectively.
F-22
<PAGE> 67
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. 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
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. A member of the Company's Board of Directors is a part owner
of Aurora.
15. EXPORT SALES AND MAJOR CUSTOMERS
Export sales from the United States to customers in foreign countries
amounted to approximately $61,717 $61,645, and $44,058 in fiscal 1996, 1995, and
1994, respectively. Total sales to all customers in foreign countries amounted
to approximately $124,469, $114,511 and $85,239 in fiscal 1996, 1995 and 1994,
respectively. Total sales to Europe amounted to 18%, 22% and 28% in fiscal 1996,
1995 and 1994, respectively. Total sales to Asia amounted to 20%, 19% and 21% 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. There were no major customers in fiscal 1996, 1995 or 1994.
16. OTHER EXPENSES
Other expenses for the year ended February 24, 1996 relate to costs
associated with the integration and consolidation of the Company's European
seating business. Other expenses for the year ended February 25, 1995 consisted
of a charge related primarily to intangible assets ($10,835) and inventories
($11,216) 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 year ended February
24, 1996. 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.
17. FOREIGN OPERATIONS
Geographic Area --
The Company operated principally in two geographic areas, the United States
and Europe during the years ended February 24, 1996, February 25, 1995, and
February 26, 1994. 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.
F-23
<PAGE> 68
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table presents operating results for the years ended February
24, 1996, February 25, 1995, and February 26, 1994 and identifiable assets as of
February 24, 1996, February 25, 1995, and February 26, 1994 by geographic area.
<TABLE>
<CAPTION>
UNITED
1996 STATES EUROPE CONSOLIDATED
------------------------------------------- -------- -------- ------------
<S> <C> <C> <C>
Sales to unaffiliated customers............ $169,830 $ 62,752 $232,582
Gross profit............................... 53,772 18,779 72,551
Selling, general and administrative and
amortization expenses.................... 39,833 11,666 51,499
Research, development and engineering...... 49,574 8,753 58,327
Other expenses............................. 187 3,983 4,170
Interest expense, net...................... 17,600 1,036 18,636
Loss before income taxes and cumulative
effect of accounting change.............. (53,422) (6,659) (60,081)
Identifiable assets........................ 332,832 100,754 433,586
</TABLE>
<TABLE>
<CAPTION>
UNITED
1995 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, development and engineering...... 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
</TABLE>
<TABLE>
<CAPTION>
UNITED
1994 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, development and engineering...... 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>
18. FAIR VALUE INFORMATION
The following disclosure of the estimated fair value of financial
instruments at February 24, 1996 and February 25, 1995 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 and Senior
F-24
<PAGE> 69
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Subordinated Notes at February 24, 1996, the Company's Senior Notes have a
carrying value of $124,313 and fair value of $130,625, while the Company's
Senior Subordinated Notes have a carrying value of $100,000 and fair value of
$102,750. The carrying amount of other 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 24, 1996. 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.
19. SELECTED QUARTERLY DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 1996 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 24, 1996
----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
As previously reported:
Sales............................................. $55,594 $57,451 $55,188 $64,349
Gross profit...................................... 18,401 17,573 17,519 17,664
Selling, general & administrative................. 8,300 8,443 8,504 16,692
Research, development and engineering............. 3.547 4,433 3,611 21,071
Operating earnings (loss)......................... 4,221 3,337 (1,113) (22,617)
Net earnings (loss)............................... 33 (375) (3,368) (28,864)
Net earnings (loss) per share..................... 0.00 (0.02) (0.21) (1.92)
As restated due to accounting change:
Sales............................................. $55,594 $57,451 $55,188 $64,349
Gross profit...................................... 18,401 18,719 17,726 17,664
Selling, general & administrative................. 8,300 8,443 8,504 16,692
Research, development & engineering............... 13,303 11,471 12,483 21,071
Operating (loss).................................. (5,494) (3,553) (9,782) (22,617)
Net (loss) before cumulative effect of accounting (9,682) (7,514) (14,021) (28,864)
change..........................................
Cumulative effect of accounting change............ (23,332) -- -- --
Net loss.......................................... (33,014) (7,514) (14,021) (28,864)
Loss per common share:
Net loss per share:
Before cumulative effect of accounting change..... $ (0.60) $ (0.45) $ (0.74) $ (1.92)
Cumulative effect of accounting change............ (1.44) -- -- --
------- ------- ------- -------
Net loss per share................................ $ (2.04) $ (0.45) $ (0.74) $ (1.92)
</TABLE>
Selling, general and administrative expense and research, development and
engineering expense for the fourth quarter reflect a significant increase
primarily attributable to the Burns acquisition.
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-25
<PAGE> 70
SCHEDULE II
BE AEROSPACE, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED FEBRUARY 24, 1996, FEBRUARY 25, 1995 AND FEBRUARY 26, 1994
(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 accounts:
1996.............................. $ 4,034 $ 162 $1,449 (1) $ 672 $ 4,973
1995.............................. 2,208 3,119 -- 1,293 4,034
1994.............................. 1,304 774 650 (2) 520 2,208
Reserve for obsolete inventories:
1996.............................. $ 10,664 $6,022 $5,840 (1) $2,741 $19,785
1995.............................. 7,557 2,787 2,754 (2) 2,434 10,664
1994.............................. 2,885 1,880 4,452 (2) 1,660 7,557
Included In Liabilities:
Accrued product warranties:
1996.............................. $ 2,969 $2,758 $ 936 (1) $3,208 $ 3,455
1995.............................. 2,388 2,544 666 (2) 2,629 2,969
1994.............................. 1,856 1,926 (184 ) 1,210 2,388
</TABLE>
- ---------------
(1) Burns acquisition
(2) 1994 acquisitions
F-26
<PAGE> 71
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimates of the various expenses to be
borne by the Company in connection with the offering of the securities being
hereby registered.
<TABLE>
<CAPTION>
ITEM COST
-------------------------------------------------------------------------- --------
<S> <C>
SEC Registration Fee...................................................... $ 33,277
NASD Filing Fee........................................................... 11,483
Nasdaq National Market Listing Fee........................................ 17,500
Blue Sky Fees and Expenses................................................ 15,000
Transfer Agent and Registrar Fees......................................... 5,000
Accounting Fees and Expenses.............................................. 200,000
Legal Fees and Expenses................................................... 225,000
Printing and Mailing Expenses............................................. 300,000
Miscellaneous............................................................. 17,740
--------
TOTAL........................................................... $825,000
</TABLE>
ITEM 15. 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
II-1
<PAGE> 72
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.
ITEM 16. EXHIBITS
The following is a list of exhibits filed as a part of this registration
statement.
<TABLE>
<C> <S> <C>
1.1 Form of Underwriting Agreement*
4.1 Specimen Common Stock Certificate(1)
Certificate of Amendment of the Restated Certificate of
4.2 Incorporation (2)
4.3 Amended and Restated By-laws (3)
4.4 Form of Power of Attorney and Custody Agreement*
5.1 Opinion of Ropes & Gray*
23.1 Consent of Deloitte & Touche LLP*
23.2 Consent of Arthur Andersen LLP*
23.3 Consent of Ropes & Gray (included in Exhibit 5.1)*
24 Power of Attorney**
</TABLE>
- ---------------
(1) Incorporated by reference from Registrant's Registration Statement on Form
S-1, as amended (No. 33-33689), filed with the Commission on March 7, 1990.
(2) Incorporated by reference from Registrant's Registration Statement on Form
S-1, as amended (No. 33-54146), filed with the Commission on November 3,
1992.
(3) Incorporated by reference from Registrant's Current Report on Form 8-K dated
March 6, 1992.
* Filed herewith.
** Previously filed.
ITEM 17. 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 provisions described under "Item 15
- -- Indemnification of Directors and Officers" above, 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 Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 73
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
II-3
<PAGE> 74
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Wellington, Florida, on this 12th day
of December, 1996.
BE AEROSPACE, INC.
By: /s/ AMIN J. KHOURY
------------------------------------
Amin J. Khoury
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by Amin J. Khoury as
attorney-in-fact for the specific persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ---------------------------------- ------------------
<S> <C> <C>
/s/ AMIN J. KHOURY Chairman of the Board of Directors December 12, 1996
- -----------------------------------
Amin J. Khoury
* Vice Chairman of the Board of December 12, 1996
- ----------------------------------- Directors and Chief Executive
Robert J. Khoury Officer (principal executive
officer)
* President, Director and Chief December 12, 1996
- ----------------------------------- Operating Officer
Paul E. Fulchino
* Vice President, Chief Financial December 12, 1996
- ----------------------------------- Officer and Assistant Secretary
Thomas P. McCaffrey (principal financial and
accounting officer)
* Director December 12, 1996
- -----------------------------------
Jim C. Cowart
* Director December 12, 1996
- -----------------------------------
Richard G. Hamermesh
* Director December 12, 1996
- -----------------------------------
Brian H. Rowe
* Director December 12, 1996
- -----------------------------------
Hansjoerg Wyss
*By: /s/ AMIN J. KHOURY
- -----------------------------------
Amin J. Khoury
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 75
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ----- -------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement*...........................................
4.1 Specimen Common Stock Certificate(1)......................................
4.2 Certificate of Amendment of the Restated Certificate of
Incorporation(2)..........................................................
4.3 Amended and Restated By-laws(3)...........................................
4.4 Form of Power of Attorney and Custody Agreement*..........................
5.1 Opinion of Ropes & Gray*..................................................
23.1 Consent of Deloitte & Touche LLP*.........................................
23.2 Consent of Arthur Andersen LLP*...........................................
23.3 Consent of Ropes & Gray (included in Exhibit 5.1)*........................
24 Power of Attorney**.......................................................
</TABLE>
- ---------------
(1) Incorporated by reference from Registrant's Registration Statement on Form
S-1, as amended (No. 33-33689), filed with the Commission on March 7, 1990.
(2) Incorporated by reference from Registrant's Registration Statement on Form
S-1, as amended (No. 33-54146), filed with the Commission on November 3,
1992.
(3) Incorporated by reference from Registrant's Current Report on Form 8-K dated
March 6, 1992.
* Filed herewith.
** Previously filed.
<PAGE> 1
EXHIBIT 1.1
4,000,000 Shares
BE AEROSPACE, INC.
Common Stock (par value $.01 per share)
UNDERWRITING AGREEMENT
___________, 1996
<PAGE> 2
_____________, 1996
Morgan Stanley & Co.
Incorporated
CS First Boston Corporation
PaineWebber Incorporated
c/o 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 the several Underwriters named in Schedule I hereto (the
"Underwriters") 4,000,000 shares of its Common Stock, par value $.01 (the "Firm
Shares").
The Company and certain shareholders of the Company (the "Selling
Shareholders") named in Schedule III hereto also propose to issue and sell to
the several Underwriters not more than an additional 600,000 shares of the
Company's Common Stock, par value $.01 (the "Additional Shares"), if and to the
extent that you shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 4 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares." The shares of Common
Stock, par value $.01, of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "Common Stock."
The Company and the Selling Shareholders are hereinafter collectively referred
to as the "Sellers."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (Registration No. 333-16235),
including a prospectus, relating to the Shares. The registration statement as
amended at the time it becomes effective, including the exhibits thereto, the
documents incorporated by reference therein and the exhibits thereto and the
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the "Securities Act"), together with any registration statement the
Company may file pursuant to Rule 462(b) under the Securities Act, which would
become effective upon filing with the Commission (a "Rule 462(b) Registration
Statement"), is hereinafter referred to as the "Registration Statement"; the
prospectus in the form first used to confirm sales of Shares, including the
documents filed by the Company
<PAGE> 3
2
with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that are incorporated by reference therein, is hereinafter
referred to as the "Prospectus."
1. Representation and Warranties of the Company. The Company represents
and warrants to each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to
the knowledge of the Company, threatened by the Commission.
(b) (i) Each part of the Registration Statement, when such
part became effective, did not contain and each such part, as amended
or supplemented, if applicable, will not contain any 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) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this paragraph
1(b) do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(c) The documents incorporated by reference in the Prospectus,
at the time they were filed with the Commission, complied in all
material respects with the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder (the "Exchange Act
Regulations") and, when read together with the other information in the
Prospectus, do not and will not, on the date hereof and on the Closing
Date, include 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, in light of the circumstances under which they were
made, not misleading.
(d) The accountants who have audited certain financial
statements and related notes included in the Registration Statement and
the Prospectus are independent public accountants as required by the
provisions of the Securities Act and the rules and regulations of the
Commission thereunder.
<PAGE> 4
3
(e) The financial statements included in the Registration
Statement and the Prospectus present fairly the financial position of
the Company and its subsidiaries on a consolidated basis as of the
dates indicated and the results of operations and cash flows of the
Company and its subsidiaries on a consolidated basis for the periods
specified, subject, in the case of unaudited financial statements of
the Company, to normal year-end adjustments which shall not be
materially adverse to the condition (financial or otherwise), earnings,
business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise. 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
Registration Statement and the Prospectus present fairly the
information required to be stated therein. The selected financial data
included in the Registration Statement and the Prospectus 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 Registration Statement and the Prospectus.
(f) 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
Prospectus; and the Company 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.
(g) 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"),
<PAGE> 5
4
Acurex Corporation, a Delaware corporation ("Acurex"), and BE Aerospace
(France) S.A.R.L., a company incorporated under the laws of France
("BEA France") (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. 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, director's
qualifying shares, 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, 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 Chase Manhattan
Bank (National Association) ("Chase") under the Amended Bank Credit
Agreement dated as of January 24, 1996 (the "Amended Bank Credit
Agreement"), (2) 65% of the issued and outstanding capital stock of BEA
Netherlands is pledged to Chase under the Amended Bank Credit
Agreement, (3) the outstanding capital stock of each of BEA USA and
Acurex is pledged to Chase 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 (pound)69,541 and a note
from BEA Netherlands in the principal amount of Dfls. 49,385,000.
(h) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(i) The Company had, at the date indicated in the Prospectus,
a duly authorized, issued and outstanding capitalization as set forth
in the Prospectus under the caption "Capitalization."
<PAGE> 6
5
(j) The shares of capital stock of the Company outstanding
prior to the issuance of the Shares 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 Prospectus.
(k) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights.
(l) This Agreement has been duly authorized, executed and
delivered by the Company.
(m) 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 and the compliance by the Company with
the terms of this 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 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.
(n) No authorization, approval, consent or license of any
government, governmental instrumentality or court, domestic or foreign
(other than the securities
<PAGE> 7
6
or "blue sky" laws of the various states), is required for the
execution, delivery or performance by the Company of this Agreement, or
for the consummation by the Company of the transactions contemplated in
this Agreement except such of the foregoing as will be obtained prior
to the Closing Date.
(o) Since the respective dates as of which information is
given in the Prospectus, except as otherwise stated therein, there has
not been (A) any material adverse change, or any development involving
a prospective change, in the condition, (financial or otherwise), or in
the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, 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 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.
(p) Except as disclosed in the Prospectus, 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 aggregate of all
pending legal or governmental proceedings that are not described in the
Prospectus 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; there are
no legal or governmental proceedings pending or, to the knowledge of
the Company, threatened to which the Company or any of its subsidiaries
is a party or to which any of the properties of the Company or any of
its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(q) The Company and each of the Subsidiaries has good and
marketable title to all properties and assets described in the
Prospectus as owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as (i) are
<PAGE> 8
7
described in the Prospectus or (ii) are neither material in amount nor
materially significant in relation to the business of the Company and
its 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 Prospectus, 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.
(r) The Company and each of the Subsidiaries 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.
(s) The Company and each of the Subsidiaries 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.
(t) 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.
<PAGE> 9
8
(u) 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 Common Stock.
(v) The Shares have been approved for quotation on the Nasdaq
National Market System ("Nasdaq") by the National Association of
Securities Dealers, Inc.
(w) 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 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.
(x) 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
<PAGE> 10
9
applicable law, regulation or rule or that would be required to be
disclosed in the Prospectus or Registration Statement.
(y) 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
Securities Act and such registration rights of Mr. Branham will not be
triggered by the transactions contemplated by this Agreement.
(z) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the rules and regulations of the Commission thereunder.
(aa) 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.
(ab) Except as disclosed in the Prospectus 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
<PAGE> 11
10
noncompliance or violation, investigations or proceedings relating in
any way to any Environmental Law.
2. Representations and Warranties of the Selling Shareholders. Each of
the Selling Shareholders represents and warrants to and agrees with each of the
Underwriters that:
(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Shareholder.
(b) The execution and delivery by such Selling Shareholder of,
and the performance by such Selling Shareholder of its obligations
under, this Agreement and the Irrevocable Power of Attorney and Custody
Agreement signed by such Selling Shareholder, the Company, as
Custodian, and _____________, relating to the deposit of the Options
(as hereinafter defined) and, upon exercise of the Options, the deposit
of the Shares to be sold by such Selling Shareholder with the Custodian
and appointing ____________ as such Selling Shareholder's
attorney-in-fact to the extent set forth therein, relating to the
transactions contemplated hereby and by the Registration Statement (the
"Irrevocable Power of Attorney and Custody Agreement"), will not
contravene any provision of applicable law or any agreement or other
instrument binding upon such Selling Shareholder or any judgment, order
or decree of any governmental body, agency or court having jurisdiction
over such Selling Shareholder, and no consent, approval, authorization
or order of, or qualification with, any governmental body or agency is
required for the performance by such Selling Shareholder of its
obligations under this Agreement or the Irrevocable Power of Attorney
and Custody Agreement, except such as may be required by the securities
or Blue Sky laws of the various states in connection with the offer and
sale of the Shares.
(c) Each of the Selling Shareholders has, and on the Option
Closing Date (as hereinafter defined) will have, valid and marketable
title, free and clear of all security interests, claims, liens,
equities and other encumbrances, to options (the "Options") which are
exercisable into no less than the number of shares of Common Stock set
forth next to such Selling Shareholder's name in Schedule III hereto
(such shares of Common Stock constituting the Shares to be sold by such
Selling Shareholder pursuant to this Agreement) and on the Option
Closing Date such Selling Shareholder will, upon exercise of the
Options on the Option Closing Date, have valid and marketable title,
free and clear of all security interests, claims, liens, equities and
other encumbrances, to such Shares, and the legal right and power, and
all authorization and approval required by law, to enter into this
Agreement and the Irrevocable Power of Attorney and Custody Agreement
and to sell, transfer and deliver the Shares to be sold by such Selling
Shareholder.
<PAGE> 12
11
(d) At the Option Closing Date, the Shares to be sold by such
Selling Shareholder pursuant to this Agreement will have been duly
authorized and will be validly issued, fully paid and non-assessable.
(e) The Irrevocable Power of Attorney and Custody Agreement
has been duly authorized, executed and delivered by such Selling
Shareholder and is a valid and binding agreement of such Selling
Shareholder, enforceable in accordance with its terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable
principles of general applicability.
(f) Delivery of the Shares to be sold by such Selling
Shareholder pursuant to this Agreement will pass title to such Shares
free and clear of any security interests, claims, liens, equities and
other encumbrances.
(g) All information furnished to the Company by or on behalf
of such Selling Shareholder expressly for use in the Registration
Statement and Prospectus is, and on the Closing Date (as hereinafter
defined) will be, true, correct and complete, and does not, and on the
Closing Date will not, contain any untrue statement of material fact or
omit to state any material fact necessary to make such information not
misleading.
(h) Such Selling Shareholder has not taken and will not 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 Common Stock (provided that such
Selling Shareholder does not make any representation as to any actions
that may be taken by any Underwriter); and such Selling Shareholder has
not distributed and will not distribute any prospectus or other
offering material in connection with the offering and sale of the
Shares other than any preliminary prospectus supplement filed with the
Commission or the Prospectus or other material permitted by the
Securities Act.
(i) Such Selling Shareholder has no direct or indirect
association or affiliation with any National Association of Securities
Dealers, Inc. members and has had no arrangements, dealings or
affiliation with, and is not aware of any information relating to
underwriting compensation payable to or for the benefit of, any member
of the National Association of Securities Dealers, Inc., person
associated with a member or any Underwriter, relating to the offering
of Shares that has not been disclosed in the Registration Statement.
3. Certificates. Any certificate signed by any officer of the Company
or any Subsidiary and delivered to the Underwriters or to counsel for the
Underwriters shall be
<PAGE> 13
12
deemed a representation and warranty by the Company to the Underwriters as to
the matters covered thereby.
4. Agreements to Sell and Purchase. The Company hereby agrees to sell
to the several Underwriters, and the Underwriters, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agree, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite their names at $____ a share -- the purchase price.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company and the Selling
Shareholders agree to sell to the Underwriters the Additional Shares, and the
Underwriters shall have a one-time right to purchase, severally and not jointly,
up to 600,000 Additional Shares at the purchase price. Additional Shares may be
purchased from the Company and the Selling Shareholders (in such amounts as are
set forth in Schedule III hereto) and as provided in Section 6 hereof solely for
the purpose of covering overallotments made in connection with the offering of
the Firm Shares. If any Additional Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of Firm Shares set forth in Schedule I
hereto opposite the name of such Underwriter bears to the total number of Firm
Shares. If any Additional Shares are to be purchased, such Additional Shares
shall first be purchased from the Selling Shareholders on a pro rata basis
(based upon the aggregate number of Additional Shares that may be purchased from
the Selling Shareholders) until all such Additional Shares to be sold by the
Selling Shareholders, as set forth in Schedule III hereto, have been purchased,
and the remaining Additional Shares, if any, shall be purchased from the
Company.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated, it will not (A) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (B) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (A) or (B) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise for a period of 90 days after the date of the Prospectus, other than
(i) the Shares to be sold hereunder, (ii) the issuance by the Company of shares
of Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and described in the Prospectus or (iii)
the issuance by the Company of shares of Common Stock or options pursuant to
stock
<PAGE> 14
13
option or employee benefit plans of the Company as such plans are in effect on
the date of the Prospectus.
5. Terms of Public Offering. The Sellers have been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Sellers have been further
advised by you that the Shares are to be offered to the public initially at
$____ a share (the public offering price) and to certain dealers selected by you
at a price that represents a concession not in excess of $____ a share under the
public offering price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of $____ a share, to any Underwriter or to
certain other dealers.
6. Payment and Delivery. Payment for the Firm Shares shall be made by
wire transfer in immediately available funds to the Company at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York, at 9:00 A.M., New
York City time, the third (fourth, if the pricing occurs after 4:30 P.M., New
York City time, on any given day) full business day after the date hereof
(unless postponed pursuant to Section 12), or at such other time not more than
ten full business days thereafter as you and the Company shall determine. The
time and date of such payment are hereinafter referred to as the Closing Date.
Payment for any Additional Shares shall be made by wire transfer in
immediately available funds to the Company or the Selling Shareholders, as the
case may be, at the offices of Shearman & Sterling, 599 Lexington Avenue, New
York, New York, at 9:00 A.M., local time, on such date (which may be the same as
the Closing Date but shall in no event be earlier than the Closing Date nor
later than ten business days after the giving of the notice hereinafter referred
to) as shall be designated in a written notice from you to the Sellers of their
determination, on behalf of the Underwriters, to purchase a number, specified in
said notice, of Additional Shares, or on such other date, in any event not later
than 40 days after the date hereof, as shall be designated in writing by you.
The time and date of such payment are hereinafter referred to as the Option
Closing Date. The notice of the determination to exercise the option to purchase
Additional Shares and of the Option Closing Date may be given at any time within
30 days after the date of this Agreement.
Certificates for the Firm Shares and Additional Shares, if any, to be
purchased by the Underwriters shall be in definitive form and registered in such
names and in such denominations as you shall request in writing not later than
two full business days prior to the Closing Date or the Option Closing Date, as
the case may be. The certificates evidencing the Firm Shares and Additional
Shares, if any, will be made available in New York City for examination and
packaging by you not later than 10:00 A.M., New York City time, on the business
day prior to the Closing Date or Option Closing Date, as the case may
<PAGE> 15
14
be. The certificates evidencing the Firm Shares and Additional Shares, if any,
shall be delivered to you on the Closing Date or the Option Closing Date, as the
case may be, for the respective accounts of the several Underwriters, with any
transfer taxes payable in connection with the transfer of the Shares to the
Underwriters duly paid, against payment of the purchase price therefor.
7. Conditions to the Underwriters' Obligations. The obligations of the
Sellers and the several obligations of the Underwriters hereunder are subject to
the condition that the Registration Statement shall have become effective not
later than the date hereof.
The several obligations of the Underwriters hereunder are subject to
the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading,
nor shall any notice have been given of any intended or
potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change,
in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the
Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations, of the Company and its subsidiaries, taken as a
whole, from that set forth in the Registration Statement,
that, in your judgment, is material and adverse and makes it,
in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect that the representations and warranties
of the Company contained in this Agreement are true and correct as of
the Closing Date, that there has not occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities as described in Section 7(a)(i) and
that the Company has complied with all of the agreements and satisfied
all of the conditions on its part to be performed or satisfied
hereunder on or before the Closing Date.
<PAGE> 16
15
The officer signing and delivering such certificate may rely
upon the best of his knowledge as to proceedings threatened.
(c) No stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose shall be pending before or, to the knowledge of the Company,
threatened by the Commission.
(d) You shall have received on the Closing Date an opinion of
Ropes & Gray, counsel for the Company, dated the Closing Date, in the
form attached hereto as Exhibit A.
(e) You shall have received on the Closing Date an opinion of
Lovell White Durrant, counsel to BEA UK and FEEL, dated the Closing
Date, in the form attached hereto as Exhibit B.
(f) You shall have received on the Closing Date an opinion of
Trenite Van Doorne, counsel to Royal Inventum, dated the Closing Date
in the form attached hereto as Exhibit C.
(g) You shall have received on the Closing Date an opinion of
James Bradley, counsel to the Selling Shareholders, dated the Closing
Date in the form attached hereto as Exhibit D.
(h) You shall have received on the Closing Date an opinion of
Shearman & Sterling, counsel for the Underwriters, dated the Closing
Date, with respect to the Registration Statement and the Prospectus and
such other related matters as you may reasonably request, and such
counsel shall have received such documents and information as they may
reasonably request to enable them to pass upon such matters.
(i) You shall have received, on each of the date hereof and
the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to you, from
Deloitte & Touche L.L.P., independent public accountants, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(j) The "lock-up" agreements, in the form attached hereto as
Exhibit E, between you and the officers and directors of the Company
named in Schedule II hereto and delivered to you on or before the date
hereof, shall be in full force and effect on the Closing Date.
<PAGE> 17
16
(k) The Shares shall have been approved for quotation on the
Nasdaq National Market by the National Association of Securities
Dealers, Inc.
(l) You shall have received on the Closing Date certificates
dated the Closing Date and signed by each of the Selling Shareholders
or by the attorney-in-fact of the Selling Shareholders, to the effect
that the representations and warranties of each such Selling
Shareholder contained in this Agreement are true and correct as of the
Closing Date and that each such Selling Shareholder has complied with
all of the agreements and satisfied all of the conditions on its part
to be performed or satisfied hereunder on or before the Closing Date.
(m) The Company shall have complied with the provisions of
Section 8(a) hereof with respect to the furnishing of Prospectuses on
the business day next succeeding the date of this Agreement, in such
quantities as you shall have reasonably requested.
(n) You shall have received such other documents and
certificates as are reasonably requested by you or your counsel.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as they may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
8. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants as follows:
(a) To furnish to you, without charge, four signed copies of
the Registration Statement (including exhibits thereto) and for
delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits thereto) and to furnish to you in New York
City, without charge, prior to 10:00 A.M. New York City time on the
business day next succeeding the date of this Agreement and during the
period mentioned in paragraph (c) below, as many copies of the
Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and to file no such proposed amendment
or supplement to which you reasonably object.
<PAGE> 18
17
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of your counsel the Prospectus
is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of your counsel, it is necessary to
amend or supplement the Prospectus to comply with law, forthwith to
prepare, file with the Commission and furnish, at its own expense, to
the Underwriters and to the dealers (whose names and addresses you will
furnish to the Company) to which Shares may have been sold by you on
behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the
statements in the Prospectus as so amended or supplemented will not, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request and to pay all expenses (including fees and
disbursements of counsel) in connection with such qualification and in
connection with any review of the offering of the Shares by the
National Association of Securities Dealers, Inc, 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.
(e) If the Company elects to rely on Rule 462(b) under the
Securities Act, the Company shall file a Rule 462(b) Registration
Statement with the Commission in compliance with Rule 462(b) under the
Securities Act no later than the earlier of (i) 3:00 P.M. New York City
time on the date hereof and (ii) the time confirmations are sent or
given, as specified by Rule 462(b)(2) under the Securities Act, and
shall pay the applicable fees in accordance with Rule 111 under the
Securities Act.
(f) To make generally available to the Company's security
holders and to you, as soon as practicable but not later than 60 days
after the end of the twelve-month period beginning at the end of the
Company's fiscal quarter during which the effective date of the
Registration Statement occurs, an earning statement of the Company
covering such twelve-month period that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of
the Commission thereunder.
<PAGE> 19
18
(g) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid the following: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in
connection with the registration and delivery of the Shares under the
Securities Act and all other fees or expenses in connection with the
preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and
dealers, in the quantities hereinabove specified, (ii) all costs and
expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon,
(iii) the cost of printing or producing any Blue Sky or Legal
Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with
the qualification of the Shares for offer and sale under state
securities laws as provided in paragraph (d) above, including filing
fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection
with the Blue Sky or Legal Investment memorandum, (iv) all filing fees
and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering by the National
Association of Securities Dealers, Inc., (v) all costs and expenses
incidental to listing the Shares on Nasdaq, (vi) the cost of printing
certificates representing the Shares, (vii) the costs and charges of
any transfer agent, registrar or depositary, (viii) the costs and
expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of the offering,
including, without limitation, expenses associated with the production
of road show slides and graphics, fees and expenses of any consultants
engaged in connection with the road show presentations with the prior
approval of the Company, travel and lodging expense of the
representatives and officers of the Company and any such consultants,
and the cost of any aircraft chartered in connection with the road show
and (ix) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not
otherwise made in this paragraph. It is understood, however, that
except as provided in this Section , Section 8 and the third paragraph
of Section 10 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Shares by them, and any
advertising expenses connected with any offers they may make.
9. Covenants of the Selling Shareholders. In further consideration of
the agreements of the Underwriters herein contained, each of the Selling
Shareholders severally and not jointly covenants as follows:
<PAGE> 20
19
(a) Whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, to pay or cause to be paid
(i) all taxes, if any, on the transfer and sale of the Shares being
sold by such Selling Shareholder and (ii) the fees, disbursements and
expenses of counsel for such Selling Shareholder.
(b) Such Selling Shareholder has carefully reviewed the
Registration Statement and will carefully review, promptly upon
receipt, each amendment thereto provided to such Selling Shareholder.
Such parts of the Registration Statement, including the tables and
notes thereto, that specifically relate to such Selling Shareholder,
and, to the best of the knowledge of such Selling Shareholder, the
other portions of the Registration Statement, do not contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. At any time during the period from
the date hereof through the Closing Date, if there is any change in the
information referred to in the preceding sentence relating to such
Selling Shareholder, such Selling Shareholder will immediately notify
the Company of such change.
(c) Such Selling Shareholder shall cooperate fully with the
Company in supplying such information relating to such Selling
Shareholder and the Shares as the Company may reasonably request for
use in preparation of the Registration Statement and all other
documents reasonably necessary or desirable in connection with the
offering of Shares. In addition, such Selling Shareholder shall furnish
to the Company (or, at the Company's request, to the Underwriters or
other parties) such further certificates and documents confirming the
representations and warranties contained herein, or with respect to
related matters, as the Company may reasonably request.
10. Indemnity and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses,
claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by any Underwriter or any
such controlling person in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the
Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such
<PAGE> 21
20
losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based
upon information relating to any Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use therein.
(b) The Company will indemnify and hold harmless each of the
Selling Shareholders to the same extent that the Company indemnifies
and holds harmless each Underwriter pursuant to the preceding
paragraph; provided, however, the Company shall not be liable under
this paragraph to the extent any losses, claims, damages or liabilities
described in the preceding paragraph arise out of or are based upon an
untrue statement or omission or alleged untrue statement or omission
based upon information relating to such Selling Shareholder furnished
in writing by or on behalf of such Selling Shareholder expressly for
use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) Each Selling Shareholder agrees to indemnify and hold
harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act and each Underwriter and each person,
if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably
incurred in connection with defending or investigating any such action
or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any
amendment thereof, any preliminary prospectus or the Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but
only with reference to information relating to such Selling Shareholder
furnished in writing by or on behalf of such Selling Shareholder
expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
(d) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Selling Shareholders, the
directors of the Company, the officers of the Company who sign the
Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Seller to such Underwriter, but only with reference
to information relating to such Underwriter furnished to the Company in
writing by such Underwriter through
<PAGE> 22
21
you expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
(e) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to subsection (a), (b), (c) or
(d) of this Section 10, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction, be
liable for (i) if the indemnifying party is the Company or a Selling
Shareholder, the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if
any, who control any Underwriter within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act, (ii) if the
indemnifying party is an Underwriter or a Selling Shareholder, the fees
and expenses of more than one separate firm (in addition to any local
counsel) for the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act and (iii) if the indemnifying party is
the Company or an Underwriter, the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Selling
Shareholders and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the
Underwriters and such control persons of Underwriters, such firm shall
be designated in writing by Morgan Stanley & Co. Incorporated. In the
case of any such separate firm for the Company, and such directors,
officers and control persons of the Company, such firm shall be
designated in writing by the Company. In the case of any such separate
firm for the Selling Shareholders, such firm shall be designated in
writing by the person named as attorney-in-fact for the Selling
Shareholders under the Power of Attorney. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, the indemnifying party agrees to
<PAGE> 23
22
indemnify the indemnified party from and against any loss or liability
by reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences
of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of
such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(f) If the indemnification provided for in subsection (a),
(b), (c) or (d) of this Section 10 is unavailable to an indemnified
party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party under
such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party or parties on the other hand from
the offering of the Shares or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party
or parties on the one hand and the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by
the Sellers on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the
same respective proportions as the net proceeds from the offering of
the Shares (before deducting expenses) received by each Seller and the
total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table (and in the
footnotes thereto) on the cover of the Prospectus, bear to the
aggregate public offering price of the Shares. The relative fault of
the Sellers on the one hand and the Underwriters on the other hand
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Sellers or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement
<PAGE> 24
23
or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 10 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
(g) The Sellers and the Underwriters agree that it would not
be just or equitable if contribution pursuant to this Section 10 were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section
10, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds
the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 10 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(h) The indemnity and contribution provisions contained in
this Section 10 and the representations and warranties of the Company
and the Selling Shareholders contained in this Agreement shall remain
operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or
by or on behalf of the Company, its officers or directors or any person
controlling the Company, or by or on behalf of the Selling Shareholders
and (iii) acceptance of and payment for any of the Shares.
11. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York
<PAGE> 25
24
shall have been declared by either Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and (b) in the case of any of the events specified in
clauses (a)(i) through (iv), such event singly or together with any other such
event makes it, in your judgment, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.
12. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the later of (x) execution and delivery hereof by the parties
hereto and (y) release of notification of the effectiveness of the Registration
Statement by the Commission.
If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such nondefaulting Underwriters,
or in such other proportions as you may specify, to purchase the Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the number of Shares that
any Underwriter has agreed to purchase pursuant to Section 4 be increased
pursuant to this Section 12 by an amount in excess of one-ninth of such number
of Shares without the written consent of such Underwriter. If, on the Closing
Date or the Option Closing Date, as the case may be, any Underwriter or
Underwriters shall fail or refuse to purchase Shares and the aggregate number of
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares to be purchased on such date, and arrangements
satisfactory to you, the Company and the Selling Shareholders for the purchase
of such Shares are not made within 36 hours after such default, this Agreement
shall terminate without liability on the part of any non-defaulting Underwriter,
the Company or the Selling Shareholders. In any such case either you, the
Company or (in the case of such a failure on the Option Closing Date) the
Selling Shareholders shall have the right to postpone the Closing Date or the
Option Closing Date, as the case may be, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and in the Prospectus or in any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of any Seller to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason any of the Sellers shall be unable to
<PAGE> 26
25
perform its obligations under this Agreement, the Sellers will reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
13. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
<PAGE> 27
Very truly yours,
BE AEROSPACE, INC.
By______________________________
The Selling Shareholders named in
Schedule III hereto
By_______________________________
Attorney-in-Fact
Accepted as of the date first above written:
MORGAN STANLEY & CO.
INCORPORATED
CS FIRST BOSTON CORPORATION
PAINEWEBBER INCORPORATED
Acting severally on behalf of themselves
and the several Underwriters
named in Schedule I hereto.
By Morgan Stanley & Co.
Incorporated
By__________________________
<PAGE> 28
27
SCHEDULE I
Underwriters
Number of
Firm Shares
Underwriter To Be Purchased
----------- ---------------
Morgan Stanley & Co. Incorporated
CS First Boston Corporation
PaineWebber Incorporated
------------------
Total Shares.................................................
==================
<PAGE> 29
28
SCHEDULE II
Lock-up Agreements
Amin J. Khoury
Robert J. Khoury
Paul E. Fulchino
Marco C. Lanza
Thomas P. McCaffrey
Edmund J. Moriarty
Jeffrey P. Holtzman
G. Bernard Jewell
E. Ernest Schwartz
Arthur H. Lipton
Jim C. Cowart
Richard G. Hamermesh
Brian H. Rowe
Hansjoerg Wyss
<PAGE> 30
29
SCHEDULE III
Selling Shareholders
<TABLE>
<CAPTION>
Number of
Seller Additional Shares
------ -----------------
<S> <C>
Sheila L. Palandjian 35,000
PAP Stock Trust 10,000
PLP Stock Trust 10,000
LP Stock Trust 10,000
======
65,000
</TABLE>
<PAGE> 31
1
EXHIBIT A
FORM OF
OPINION OF ROPES & GRAY
[Ropes & Gray Letterhead]
[Date]
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, NY 10036
CS FIRST BOSTON CORPORATION
11 Madison Avenue
New York, NY 10010
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, NY 10019
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 4,000,000 shares of Common Stock, par value $.01 per share (the
"Shares"). This opinion is furnished to you pursuant to Section 7(d) of the
Underwriting Agreement dated December ___, 1996 (the "Underwriting Agreement")
among the Company, the Selling Shareholders named in Schedule III thereto and
the several Underwriters, including yourselves, named in Schedule I thereto (the
"Underwriters") relating to the issuance and sale of the Shares. Terms defined
in the Underwriting Agreement and not otherwise defined herein are used herein
with the meanings so defined.
We have attended the closing of the sale of Shares held today.
We have examined signed copies of the registration statement on Form S-3
(Registration No. 333- 16235), filed by the Company under the Securities Act of
1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission (the "Commission") on November 15, 1996, and of the amendment thereto
filed by the Company with the Commission on
<PAGE> 32
2
_____________, 1996 and copies of the related prospectuses (the registration
statement as amended at the time when it became effective, including the
information deemed to be part thereof at the time of effectiveness pursuant to
Rule 430A of the rules and regulations of the Commission under the Securities
Act, being hereinafter referred to as the "Registration Statement," and the
final prospectus dated December ___, 1996 in the form in which it was filed
pursuant to Rule 424(b) of the Commission under the Securities Act, being
hereinafter referred to as the "Prospectus"); the documents filed by the Company
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") which
are incorporated by reference in the Registration Statement and the Prospectus
(the "Incorporated Documents"); an executed copy of the Underwriting Agreement;
and such other documents as we have deemed necessary as a basis for the opinions
expressed herein. Additionally, we have relied upon oral advice from the staff
of the Commission to the effect that the Registration Statement became effective
on December ___, 1996. Except as otherwise specified herein, all references to
the Registration Statement or the Prospectus include the Incorporated Documents
and the exhibits and schedules thereto.
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.
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 Underwriting
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 Registration Statement and the Prospectus. With respect to
our opinion set forth in paragraphs 6(ii) and 7(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 Prospectus. The Company has
authority to issue, sell and deliver the Shares, to execute and deliver the
Underwriting Agreement 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, Minnesota, New
Jersey and Washington;
<PAGE> 33
3
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.
2. The authorized, issued and outstanding capital stock of the
Company is as set forth in the Capitalization table in the Prospectus under the
caption "Actual," 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 and the other shares of the Company's common stock,
$.01 par value per share (together, 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
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.
3. The authorized capital stock of the Company conforms to the
description thereof contained in the Prospectus under the caption "Description
of Capital Stock."
4. The statements made (a) in the Prospectus under the
captions "Business- Legal Proceedings," and "Description of Capital Stock" and
(b) in the Registration Statement in Item 15, in each case to the extent that
they constitute matters of law or legal conclusions, have been reviewed by us
and fairly present the information.
5. The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.
6. To the best of our knowledge, (i) neither the Company nor
Acurex 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 or Acurex 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) except as set forth in the Prospectus
under the captions "Risk Factors" and "Business - Legal Proceedings," neither
the Company nor Acurex 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.
<PAGE> 34
4
7. The execution and delivery of the Underwriting Agreement,
the issuance and sale of the Shares and compliance by the Company with the terms
of the Underwriting Agreement 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 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 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 7 as to compliance with the
antifraud provisions of federal and state securities laws.
8. 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 Shares, (ii)
sale of the Shares to you as contemplated by the Underwriting Agreement or (iii)
execution, delivery or performance by the Company of the Underwriting Agreement
other than 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 or the review of the underwriting arrangements pursuant to the
rules of the National Association of Securities Dealers, Inc.
9. 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.
10. The Registration Statement became effective under the
Securities Act on December ___, 1996; any required filing of the Prospectus and
of any supplements thereto pursuant to Rule 424(b) has been made in the manner
and within the time period required by Rule 424(b); and, to the best of our
knowledge, the Registration Statement is still effective, no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or are
contemplated under the Securities Act.
11. The Registration Statement and the Prospectus and each
amendment or supplement thereto, excluding the documents incorporated be
reference therein and except for financial statements and schedules included
therein as to which we express no opinion, as of their respective effective or
issue dates, complied as to form in all material respects with the Securities
Act and the published rules and regulations of the Commission thereunder.
<PAGE> 35
5
12. The Incorporated Documents (except for the financial
statements and schedules included therein as to which we express no opinion), as
of the dates they were filed with the Commission, comply as to form in all
material respects to the requirements of the Exchange Act and the published
rules and regulations of the Commission thereunder.
13. To the best of our knowledge, no legal or governmental
proceedings are pending or threatened to which the Company or Acurex is a party
or to which any of the properties of the Company or Acurex is subject that are
required to be described in the Registration Statement or the Prospectus and are
not so described and there are no statutes, regulations, contracts or other
documents that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that are not
described or filed as required.
We have not independently verified the accuracy, completeness
or fairness of the statements made or the information contained in the
Registration Statement or the Prospectus and, except with respect to the
descriptions referred to in paragraphs 2, 3 and 4 above, we are not passing upon
and do not assume any responsibility therefor. In the course of the preparation
by the Company of the Registration Statement and the Prospectus, 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 Registration Statement and the Prospectus 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
Registration Statement and the Prospectus and our participation in the
discussions referred to above, we have no reason to believe that (i) as of its
effective date, the Registration Statement contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii) the
Prospectus, as of the date hereof, contains any untrue statement of a material
fact 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 Registration Statement or the
Prospectus.
This opinion is furnished by us as counsel for the Company to
you as Underwriters and is solely for the benefit of the Underwriters.
Very truly yours,
Ropes & Gray
<PAGE> 36
EXHIBIT B
FORM OF
OPINION OF LOVELL WHITE DURRANT
[Lovell White Durrant Letterhead]
[Date]
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, NY 10036
CS FIRST BOSTON CORPORATION
11 Madison Avenue
New York, NY 10010
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, NY 10019
Ladies and Gentlemen:
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 4,000,000 shares of Common Stock, par value $.01
per share (the "Shares"). We have been provided with copies of:-
<PAGE> 37
2
(a) the Registration Statement dated _________, 1996, and
amendments thereto dated _________ and _____________,
respectively, related to the Shares;
(b) the Prospectus dated ____________ 1996, related to the Shares;
(c) the underwriting agreement dated as of _________, 1996, among
the Issuer, Morgan Stanley & Co. Incorporated, as
representative of the several underwriters named in Schedule I
thereto and the selling shareholders named in Schedule III
thereto relating to the issue and sale of the Shares (the
"Underwriting Agreement");
2. We understand that this opinion is required by you pursuant to Section
7(e) of the Underwriting 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
(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
<PAGE> 38
3
(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 Underwriting 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 Prospectus at pages ____
(copies of which are annexed hereto marked "B");
(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 (pound)1 each of BEA(UK) and the 380,000 shares issued
cumulative redeemable preference shares of (pound)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
(pound)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
<PAGE> 39
4
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 (pound)1 each in
BEA(UK) and FEEL are fully paid;
(e) the issued cumulative redeemable preference shares of (pound)1
each of BEA(UK) have been duly authorised, validly issued and
fully paid;
(f) the issued cumulative redeemable preference shares of (pound)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
Underwriting Agreement, the consummation by the
Issuer of the transactions therein contemplated and
the compliance by the Issuer with its terms; and
(ii) the issue and delivery by the Issuer of the Shares as
contemplated by the Prospectus;
(h) the matters referred to in paragraph 8(g)(i) and (ii) 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.
<PAGE> 40
5
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 Shares 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> 41
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> 42
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> 43
EXHIBIT C
FORM OF
OPINION OF TRENITE VAN DOORNE
[Trenite van Doorne Letterhead]
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, NY 10036
CS FIRST BOSTON CORPORATION
11 Madison Avenue
New York, NY 10010
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, NY 10019
Rotterdam, [ ] _________ 1996
Ladies and Gentlemen:
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 4,000,000 shares of Common Stock, par value
$.01 per share (the "Shares"). We understand that this opinion is required by
you pursuant to Section 7(f) of the underwriting agreement dated as of
_________, 1996, among the Issuer, Morgan Stanley & Co. Incorporated, as
representative of the several underwriters named in Schedule I thereto and the
selling shareholders named in Schedule III thereto relating to the issue and
sale of the Shares.
For the purposes of this opinion, we have examined and relied only on the
following documents:
<PAGE> 44
2
(a) a copy of the Registration Statement dated _________, 1996, and
amendments thereto dated _________ and _____________, respectively,
related to the Shares;
(b) a copy of the Prospectus dated ____________ 1996, related to the
Shares;
(c) 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");
(d) 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");
(e) a copy of the register of shareholders of BEAN, KFI and BEASS
respectively (the "Shareholders Registers");
(f) an extract dated ____________ 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");
(g) two notarial deeds of transfer of shares in the share capital of BEASS
dated 22 September 1994 (the "Deeds of Transfer");
(h) 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 (h) 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 Documents and Certificates,
the authenticity and completeness of all Documents and Certificates
submitted to us as originals, the completeness and the conformity to
the original documents of all Documents and Certificates submitted to
us as copies and the authenticity of such original documents;
(ii) the legal capacity (handelingsbekwaamheid) of the natural persons
acting on behalf of any of the parties, the due incorporation and valid
existence of, the power, authority and legal rights of, and the due
authorization and execution of each of the Documents by, each of the
parties thereto under any applicable law to execute the Documents to
which it is a party and to perform its obligations thereunder;
<PAGE> 45
3
(iii) the due compliance with all matters of, and the validity, binding
effect and enforceability of each of the Documents under any applicable
law other than Netherlands law;
(iv) 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); and
(v) the due execution by the parties thereto of the Documents, submitted to
and examined by us in draft, in the form of such drafts.
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 and express no opinion as to the law of
any jurisdiction other than The Netherlands, the completenes or accuracy of any
representations or warranties made by the parties to the Documents in relation
to BEAN, KFI or BEASS respectively, 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 representations, warranties and
matters of fact and law are explicitly covered by the opinions below). No
opinion is given on any commercial, accounting or non-legal matters or on the
ability of the parties to the Documents to meet their financial or other
obligations thereunder. We have assumed that any foreign law which may apply
with respect to the Documents or the transactions contemplated thereby and any
document not examined by us does not affect this opinion.
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
<PAGE> 46
4
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. 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. 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.
6. The execution and delivery by the Issuer of the Documents and, where
appropriate, the consummation by the Issuer of the transactions therein
contemplated and the compliance by the Issuer with its terms will not
result in any conflict with rules of Netherlands law or in any breach
of the articles of association of either BEAN or KFI.
The opinions expressed above are subject to the following qualifications:
(A) Our opinions expressed herein are subject to and limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the protection or enforcement of priorities
and creditors' rights generally, including, without limitation, those
governing the avoidance and/or validity of transactions entered into
and securities created at a time when a company is, or may in
consequence thereof become, unable to pay its debts.
(B) 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.
<PAGE> 47
5
(C) 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.
(D) 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. A
holder of shares that has not offered his shares at conversion in order
to be registered as a shareholder, does not forfeit the right to be
registered as a shareholder still after conversion. If such holder(s)
of shares represent(s) less than 5% of the issued share capital, the
shareholder owning title to at least 95% of the issued share capital
has the right to institute a claim against the joined other holders of
shares for transfer of their shares to him pursuant to section 2:201a
of the Dutch Civil Code.
This opinion is 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
<PAGE> 48
EXHIBIT D
FORM OF
OPINION OF JAMES BRADLEY
[ ____________ Letterhead]
[Date]
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, NY 10036
CS FIRST BOSTON CORPORATION
11 Madison Avenue
New York, NY 10010
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, NY 10019
Ladies and Gentlemen:
We have acted as counsel for ______________ (the "Selling
Shareholders") and are rendering this opinion pursuant to Section 7(g) of the
Underwriting Agreement dated ___________ 1996 (the "Underwriting Agreement")
among BE Aerospace, Inc. (the "Company"), the several underwriters (the
"Underwriters") named in Schedule I of the Underwriting Agreement and the
Selling Shareholders. Terms defined in the Underwriting Agreement and not
otherwise defined herein are used herein with the meanings so defined.
In connection with our opinion herein, we have examined copies
of the Underwriting Agreement, each of the Irrevocable Power of Attorney and
Custody Agreements dated _________ 1996 (the "Irrevocable Power of Attorney and
Custody Agreements") between each Selling Shareholder, the Company and
___________, and such other documents as we have deemed necessary as a basis for
the opinions expressed herein.
In such examination, we have assumed the authenticity of all
documents submitted to us as originals, the genuineness of all signatures, the
legal capacity of all natural persons and the conformity with the original
documents of any copies thereof submitted to us for our examination.
<PAGE> 49
2
We express no opinion as to the laws of any jurisdiction other
than __________, the General Corporation Law of the State of Delaware and the
federal laws of the United States of America.
Based upon the foregoing, we are of the opinion that:
(i) the Underwriting Agreement has been duly authorized, executed and
delivered by or on behalf of each of the Selling Shareholders;
(ii) the execution and delivery by each of the Selling Shareholders of,
and the performance by each of the Selling Shareholders of its obligations
under, the Underwriting Agreement and the Irrevocable Power of Attorney and
Custody Agreements will not contravene any provision of applicable law or, to
the best of our knowledge, any agreement or other instrument binding upon such
Selling Shareholder or, to the best of our knowledge, any judgment, order or
decree of any governmental body, agency or court having jurisdiction over such
Selling Shareholder, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by such Selling Shareholder of its obligations under the
Underwriting Agreement or the Irrevocable Power of Attorney and Custody
Agreement, except such as may be required by the securities or Blue Sky laws of
the various states in connection with offer and sale of the Shares;
(iii) each of the Selling Shareholders has valid and marketable title,
free and clear of all security interests, claims, liens, equities and other
encumbrances, to the Options and, upon exercise of the Options on the Option
Closing Date, will have valid and marketable title, free and clear of all
security interests, claims, liens, equities and other encumbrances, to the
Shares to be sold by such Selling Shareholder pursuant to the Underwriting
Agreement;
(iv) the Irrevocable Power of Attorney and Custody Agreements have been
duly authorized, executed and delivered by each of the Selling Shareholders and
are valid and binding agreements of the Selling Shareholders and are enforceable
in accordance with their terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability; and
(v) delivery of the Shares to be sold by each of the Selling
Shareholders pursuant to the Underwriting Agreement will pass title to such
Shares free and clear of any security interests, claims, liens, equities and
other encumbrances.
This opinion is furnished by us as counsel for the Selling
Shareholders to you as Underwriters and is solely for the benefit of the
Underwriters.
<PAGE> 50
3
Very truly yours,
--------------------
<PAGE> 51
EXHIBIT E
FORM OF LOCK-UP AGREEMENT
Lock-up Agreement
December __, 1996
Morgan Stanley & Co. Incorporated
CS First Boston Corporation
PaineWebber Incorporated
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Ladies and Gentlemen:
The undersigned understands that Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), as Representative of the several Underwriters,
proposes to enter into an Underwriting Agreement (the "Underwriting Agreement")
with BE Aerospace, Inc., a Delaware corporation (the "Company") and certain
shareholders of the Company (the "Selling Shareholders") providing for the
public offering (the "Public Offering") by the several Underwriters, including
Morgan Stanley (the "Underwriters"), of shares of the common stock, par value
$0.01 per share, of the Company (the "Common Stock").
To induce the Underwriters that may participate in the Public
Offering to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 90 days after the date of the final prospectus
relating to the Public Offering (the "Prospectus"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (provided that such shares or securities are either now owned by
the undersigned or are hereafter acquired prior to or in connection with the
Public Offering), or (2) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of such shares of Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to the
sale of any Shares to the Underwriter pursuant to the Underwriting Agreement. In
addition, the undersigned agrees that, without the prior
<PAGE> 52
2
written consent of Morgan Stanley on behalf of the Underwriters, it will not,
during the period commencing on the date hereof and ending 90 days after the
date of the Prospectus, make any demand for or exercise any right with respect
to, the registration of any shares of Common Stock or any security convertible
into or exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on
a number of factors, including market conditions. Any Public Offering will only
be made pursuant to an Underwriting Agreement, the terms of which are subject to
agreement between the Company and the Underwriters.
Very truly yours,
--------------------------------
(Name)
--------------------------------
(Address)
<PAGE> 1
EXHIBIT 4.4
IRREVOCABLE POWER OF ATTORNEY AND CUSTODY AGREEMENT
- ---------------------
As Attorney-in-Fact
c/o BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
BE Aerospace, Inc.
As Custodian
1400 Corporate Center Way
Wellington, Florida 33414
Dear Sirs or Mesdames:
The undersigned and certain other persons listed in Appendix A
hereto (the undersigned and such other persons being hereinafter collectively
called the "Selling Shareholders") and BE Aerospace, Inc., a Delaware
corporation (the "Company"), contemplate selling issued and outstanding shares
of the Company's Common Stock, par value $.01 per share ("Common Stock") (which
shares will be acquired by the Selling Shareholders through the exercise of
options ("Options") to purchase shares of Common Stock), to certain underwriters
(the "Underwriters"), pursuant to the Underwriting Agreement referred to below,
in connection with a registered public offering of the Company's Common Stock
including the shares of Common Stock ("Shares") to be issued upon exercise of
the Options (the "Offering"). The undersigned also understands that the Company
has filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form S-3 (the "Registration Statement") (File No.
333-16235) to register the shares of Common Stock to be sold by the Company and
the Shares to be sold by Selling Shareholders in the Offering under the
Securities Act of 1933, as amended (the "Securities Act").
The undersigned, by executing and delivering this Irrevocable
Power of Attorney and Custody Agreement (the "Agreement"), confirms the
undersigned's willingness (i) to deposit with the Company, acting in its
capacity as Custodian hereunder (the "Custodian"), Options exercisable into not
less than the number of Shares set forth next to the undersigned's name on
Appendix A and (ii) upon exercise of the Options (or such lesser number of
Options, as determined by the Attorney-in-Fact in accordance herewith) into
Shares, to sell the Shares to the Underwriters, all as hereinafter provided.
The undersigned hereby acknowledges receipt of (i) a draft of
an underwriting agreement dated December 5, 1996 (the "Underwriting Agreement"),
among the Company, the Selling Shareholders (acting by their Attorney-in-Fact)
and the Underwriters relating to the Offering of Common Stock to be purchased by
the Underwriters from the Company and
<PAGE> 2
2
the Selling Shareholders, and (ii) a conformed copy (without exhibits) of the
original Registration Statement and all amendments thereto through the date of
execution hereof. The undersigned understands that the Underwriting Agreement is
subject to revisions before execution, with such changes as the Attorney-in-Fact
referred to below deems appropriate (including with respect to the number of
Shares to be sold), and that the Registration Statement has not yet become
effective under the Securities Act and is subject to amendment.
To induce the Underwriters to enter into the Underwriting
Agreement with the Company and the Selling Shareholders and to secure their
performance, the undersigned agrees, for the benefit of the other Selling
Shareholders, the Underwriters and the Company, as follows:
(1) Appointment of Attorney-in-Fact, Grant of Authority. For
purposes of effecting the exercise of the Options, payment of the
exercise price (the "Exercise Price") therefor, receipt of the Shares
and the sale of the Shares pursuant to the Underwriting Agreement, the
undersigned hereby irrevocably makes, constitutes and appoints
______________ the true and lawful agent and attorney-in-fact of the
undersigned (the "Attorney-in-Fact"), with full power and authority
(except as provided below) to act hereunder, individually,
collectively, or through a duly appointed successor attorney-in-fact,
in his sole discretion (it being understood and agreed that the
Attorney-in-Fact may duly appoint his successor attorney-in-fact and
delegate to him or her any and all of his powers hereunder), all as
hereinafter provided, in the name of and for and on behalf of the
undersigned, as fully as could the undersigned if present and acting in
person, with respect to all matters in connection with the execution
and delivery of the Underwriting Agreement and the registration and
sale of the Shares in the Offering including, but not limited to, the
power and authority to:
(a) authorize and direct the Custodian and any other
person or entity to take any and all actions as may be
necessary or deemed to be advisable by the Attorney-in-Fact to
effect the exercise of the Options, payment of the Exercise
Price therefor and receipt of the Shares at any time following
the execution of the Underwriting Agreement by or on behalf of
the Selling Shareholders [and prior to the business day
preceding the Option Closing Date (as defined in the
Underwriting Agreement)] and the sale, transfer and
disposition of the Shares in, and in connection with, the
Offering (including without limitation to determine the number
of Shares of the undersigned to be sold (which may differ from
the amount set forth in the drafts of the Registration
Statement and Underwriting Agreement reviewed by the
undersigned) and the price at which such Shares will be sold
to the Underwriters), on such terms and conditions, except as
set forth below, as the Attorney-in-Fact may, in his sole
discretion, determine;
<PAGE> 3
3
(b) execute and deliver the Underwriting Agreement,
substantially in the form of the draft dated December 5, 1996
with such changes therein as the Attorney-in-Fact, in his sole
discretion, except as set forth below, may determine, the
execution and delivery of such Underwriting Agreement by the
Attorney-in-Fact to be conclusive evidence with respect to his
approval thereof, and carry out and comply with each and all
of the provisions of the Underwriting Agreement;
(c) arrange for, prepare or cause to be prepared an
amendment or amendments to the Registration Statement and take
all actions as may be necessary or deemed to be desirable with
respect to the Registration Statement, including, without
limitation, the execution, acknowledgment and delivery of all
such certificates, reports, assurances, documents, letters and
consents, as may be necessary or deemed to be desirable in
connection therewith, and execute, acknowledge and deliver any
and all certificates, assurances, reports, documents, letters
and consents to the Commission, appropriate authorities of
states or other jurisdictions, the Underwriters or legal
counsel, which may be required or appropriate in connection
with the registration of the Shares under the Securities Act
or the securities or blue sky laws of the various states and
jurisdictions or to facilitate sales of the Shares including,
but not limited to (i) a request for acceleration of the
effective date of the Registration Statement and (ii) any
representations to the Commission necessary to facilitate
effectiveness of the Registration Statement;
(d) retain legal counsel, as appropriate, in
connection with any and all matters referred to herein (which
counsel may, but need not, be counsel for the Company) to
represent the Selling Shareholders in connection with the
transactions referred to in the Underwriting Agreement and
this Agreement;
(e) agree with the Company and the other Selling
Shareholders upon the allocation of the expenses of the
Offering, and upon the mutual indemnification of the Company,
the Underwriters and the Selling Shareholders, including the
undersigned and the Attorney-in-Fact as set forth in the
Underwriting Agreement, this Agreement or in any other
agreement or instrument;
(f) endorse (in blank or otherwise) on behalf of the
undersigned (i) the certificates for the Options necessary to
exercise the Options and receive the Shares upon exercise
thereof and payment of the Exercise Price with respect
thereto, (ii) the certificates for Shares to be sold by the
undersigned to the Underwriters, and (iii) any stock power or
stock powers attached to such certificates; and
<PAGE> 4
4
(g) take or cause to be taken any and all further
actions, and execute and deliver, or cause to be executed and
delivered, any and all such agreements (including, but not
limited to, the Underwriting Agreement and any and all
documents, instruments and certificates as may be necessary or
deemed to be advisable in connection therewith), instruments,
documents, certificates and share powers, with such changes as
the Attorney-in-Fact may, in his sole discretion, approve
(such approval to be evidenced by his signature thereof) as
may be necessary or deemed to be desirable by the Attorney-in-
Fact to effectuate, implement and otherwise carry out the
transactions contemplated by the Underwriting Agreement and
this Agreement, or as may be necessary or deemed to be
desirable in connection with the registration of the Shares
pursuant to the Securities Act or the sale of the Shares to
the Underwriters.
(2) Irrevocability. The undersigned has conferred and granted
the power of attorney and all other authority contained herein in
consideration of the Company's, the other Selling Shareholders' and the
Underwriters' proceeding with, and for the purpose of completing, the
transactions contemplated by the Underwriting Agreement. Therefore, the
undersigned hereby agrees that all power and authority hereby conferred
is coupled with an interest and is irrevocable; and to the fullest
extent not prohibited by law shall not be terminated by any act of the
undersigned or by operation of law or by the occurrence of any event
whatsoever, including without limitation, the death, incapacity,
dissolution, liquidation, termination, bankruptcy, dissolution of
marital relationship or insolvency of the undersigned or any similar
event. If, after the execution of this Agreement, any such event shall
occur before the completion of the transactions contemplated by the
Underwriting Agreement and this Agreement, the Attorney-in-Fact and the
Custodian are nevertheless authorized and directed to complete all of
such transactions, including the exercise of the Options, payment of
the Exercise Price therefor and receipt of the Shares in consideration
thereof and the delivery and sale of the certificates for the Shares to
be sold to the Underwriters, as if such event had not occurred and
regardless of notice thereof.
(3) Deposit and Delivery of Shares. The undersigned hereby
appoints the Company as Custodian to hold the Shares, the Options and,
upon execution of the Underwriting Agreement by the Selling
Shareholders, to exercise the Options, pay the Exercise Price therefor,
and to dispose of the Shares in accordance with the instructions of the
Attorney-in-Fact and as set forth herein, with full power in the name
of, and for and on behalf of, the undersigned.
(a) If stock certificates with respect to the Shares
or Options are in the undersigned's possession, the
undersigned hereby agrees to deliver
<PAGE> 5
5
herewith and deposit such certificates with the Custodian,
together with an irrevocable stock power duly executed in
blank.
(b) If any Options or Shares are to be delivered to
the Custodian by someone other than the undersigned, the
undersigned hereby agrees to deliver to and deposit with the
Custodian an irrevocable stock power duly executed in blank.
(c) The undersigned authorizes and directs the
Custodian to deliver to the Underwriters such Shares as may be
designated in written instructions from the Attorney-in-Fact
and to deliver, or cause to be delivered, certificates
representing such Shares to the Underwriters on the Option
Closing Date referred to in the Underwriting Agreement against
receipt of payment (payable to the Custodian) therefor.
(d) The undersigned hereby authorizes and directs the
Attorney-in-Fact and the Custodian to issue appropriate
receipts to the Underwriters, for the full amount of net
proceeds, in the name of the undersigned as payee.
(e) It is understood that the Company and the
Underwriters may determine that it is not practicable to sell
all of such Shares in the Offering. The undersigned authorizes
each Attorney-in-Fact to exercise a number of Options equal to
the number of the undersigned's Shares that the Company and
the Underwriters determine is practicable to sell in the
Offering. In the event that the Company and the Underwriters
determine that it is not practicable to sell in the Offering
all shares issuable upon the exercise of the Options, the
Options will be exercised pro rata (based upon the aggregate
number of Shares listed on Appendix A). Unexercised Options,
if any, will be returned to the undersigned.
(4) The Custodian. The Custodian's execution of this Agreement
shall constitute the acceptance by the Custodian of the agency herein
conferred, and shall evidence its agreement to carry out and perform
its duties under this Agreement in accordance with the provisions
hereof, subject, however, to the following terms and conditions, which
all parties hereto agree shall govern and control the rights, duties
and immunities of the Custodian:
(a) The Custodian shall have no duties except those
expressly set forth herein and shall not be liable except for
commission of gross negligence or willful misconduct in the
performance of such duties of the Custodian as are
specifically set out herein. The Custodian shall not be
responsible for the performance of the powers of attorney
contained herein by any party hereto,
<PAGE> 6
6
or for the interpretation of any of the provisions of such
powers of attorney, or for the failure or inability of any
other party hereto, or anyone else, to deliver moneys or
certificates for Shares, Options or other property to it or
otherwise to honor any provision hereof.
(b) If a controversy arises between two or more of
the parties hereto, or between any of the parties hereto and
any person not a party hereto, as to whether or not or to whom
the Custodian shall deliver the certificates for the Shares,
Options or any funds held by it, or as to any other matter
arising out of or relating hereto or to the property held by
it hereunder, the Custodian shall not be required to determine
the same and need not make any delivery of the property or any
portion thereof but may retain it until the rights of the
parties to the dispute shall have finally been determined by
agreement or by final order of a court of competent
jurisdiction, provided, however, that the time for appeal for
any such final order shall have expired without an appeal
having been made. The Custodian shall deliver the property or
any portion thereof within 15 days after it has received
written notice of any such agreement or final order
(accompanied by an affidavit that the time for appeal has
expired without an appeal having been made). The Custodian
shall be entitled to assume that no such controversy has
arisen unless it has received a written notice that such a
controversy has arisen which refers specifically to this
Agreement and identifies by name and address the adverse
claimants to the controversy.
(c) The Custodian will acknowledge in writing receipt
by physical delivery of any certificates representing any
Shares or Options when such certificates are received.
(5) Representations, Warranties and Agreements. The
undersigned represents warrants and agrees that:
(a) All authorizations and consents, including, but
not limited to, any releases necessary for the execution,
delivery and performance by the undersigned of this Agreement
and for the exercise of the Options, payment of the Exercise
Price therefor and receipt of the Shares in consideration
thereof and the sale and delivery of the Shares to the
Underwriters have been obtained and are in full force and
effect, and the undersigned has full right, power and
authority to enter into and perform the Underwriting Agreement
and this Agreement and to sell, transfer and deliver the
Shares to the Underwriters. This Agreement, upon execution and
delivery by the undersigned, and the Underwriting Agreement,
upon execution and delivery by the undersigned or on behalf of
the undersigned by the Attorney-in-Fact, will constitute valid
and
<PAGE> 7
7
binding agreements of the undersigned in accordance with their
respective terms.
(b) The undersigned has read the draft of the
Underwriting Agreement referred to above and understands the
same, and agrees that the representations and warranties
ascribed to the undersigned as set forth in Section 2 of the
Underwriting Agreement are incorporated by reference herein,
are true and correct on the date hereof and will be true and
correct on the Option Closing Date with respect to the
Offering, and authorizes the Attorney-in-Fact, acting on
behalf of the undersigned, to confirm the truth and accuracy
of such representations and warranties in connection with the
consummation or implementation of the transactions
contemplated by the Underwriting Agreement and this Agreement.
The undersigned acknowledges that the representations,
warranties and obligations made or undertaken by the
undersigned herein shall survive the conclusion of the
Offering and are in addition to, and not in limitation of, the
representations, warranties and obligations made or
undertaken, or to be made or undertaken, on the part of the
undersigned in the Underwriting Agreement, as the same may be
executed, delivered and amended.
(c) The undersigned has not taken and will not take,
directly or indirectly, any action intended to constitute or
which has constituted, or which might reasonably be expected
to cause or result in, stabilization or manipulation of the
price of the Common Stock, and, to assure compliance with Rule
10b-6 under the Securities Exchange Act of 1934, the
undersigned will not make bids for or purchases of, or induce
bids for or purchases of, directly or indirectly, any shares
of Common Stock until the distribution of all Shares being
sold in the public Offering has been completed; the
undersigned has not and will not distribute any prospectus or
other Offering material in connection with the Offering and
sale of the Shares other than the then current prospectus
filed with the Commission or other material permitted by the
Securities Act.
(d) The foregoing representations, warranties and
agreements are for the benefit of and may be relied upon by
the Attorney-in-Fact, the Company, the other Selling
Shareholders, the Underwriters and their respective legal
counsel. The undersigned agrees that the representations,
warranties and agreements herein contained shall also be true
and correct and in full force and effect on the effective date
of the Registration Statement and the Option Closing Date
referred to in the Underwriting Agreement. The undersigned
will immediately notify the Attorney-in-Fact and the Company
of any default under or breach of this Agreement (or of any
event which, with
<PAGE> 8
8
notice or the lapse of time or both, would constitute such a
default or breach), and in the event any representation or
warranty contained herein shall not be true or correct;
provided, however, that nothing contained herein shall in any
way affect the obligations of the undersigned hereunder and
under the Underwriting Agreement to maintain such
representations and warranties as true and correct and in full
force and effect through the Option Closing Date.
(e) The undersigned acknowledges that the success of
the Offering is largely dependent upon factors not within the
Company's control, such as participation and cooperation by
other Selling Shareholders, market conditions, Securities and
Exchange Commission and Blue Sky matters, and other factors
within the discretion of the Underwriters. It is therefore
understood that the Company and the Underwriters shall not be
obligated to complete the Offering, except under such
circumstances as the Company and the Underwriters deem
appropriate and desirable, and neither the Company nor the
Underwriters shall be liable to the undersigned for any
failure to complete the Offering. It is further understood
that the Underwriters shall not be obligated to exercise the
option granted to them under Section 4 of the Underwriting
Agreement, and neither the Company nor the Underwriters shall
be liable to the undersigned for any failure to exercise such
option. This Agreement will terminate in the event that the
Option Closing Date does not occur on or prior to January 21,
1997 unless this Agreement is extended by the parties hereto
in writing.
(6) Payment. The undersigned hereby authorizes and directs the
Attorney-in-Fact to take such action as may be required to provide for
the distribution to the undersigned of the proceeds of the Offering
(net of the Exercise Price with respect to any exercised Options and
the reserve for undersigned's share of expenses of the Offering as
described below) owing to the undersigned in connection therewith, such
payment to be made in immediately available funds or such other manner
as the Attorney-in-Fact shall determine.
Before remitting any proceeds of the sale of the Shares to the
undersigned, the Attorney-in-Fact is authorized and empowered to
reserve from the proceeds allocable to the undersigned in respect of
Shares sold by the undersigned an amount determined by the
Attorney-in-Fact to be sufficient to pay the undersigned's share of all
expenses of the Selling Shareholders. The Selling Shareholders'
expenses shall include those items of expense set forth in Section 9(a)
of the Underwriting Agreement and such other expenses as the
Attorney-in-Fact deem reasonable, and the Attorney-in-Fact is
authorized to pay such expenses from the amount reserved for such
purpose. After payment of any such expenses from the reserve, the
Attorney-in-Fact will prepare a written itemization of the expenses and
remit to the undersigned his proportionate
<PAGE> 9
9
share of the balance, as well as the itemization. To the extent
expenses exceed the amount reserved, the Selling Shareholder shall
remain liable for such expenses.
(7) Ownership. Subject to the terms hereof, until payment of
the purchase price for the Shares being sold by the undersigned
pursuant to the Underwriting Agreement has been made by or for the
account of the Underwriters, the undersigned shall remain the owner of
the Options and the Shares and shall have all rights thereto, including
the right to receive all dividends and distributions thereon, which are
not inconsistent with this Agreement. However, until such payment in
full has been made or until the Underwriting Agreement has been
terminated, the undersigned agrees that the undersigned will not give,
sell, pledge, hypothecate, grant any lien on or security interest in,
transfer, deal with or contract with respect to the Options or the
Shares or any interest therein, except to the Underwriters pursuant to
the Underwriting Agreement.
(8) Release. The undersigned hereby agrees to release the
Attorney-in-Fact and the Custodian from any and all liabilities, joint
or several, to which they may become subject insofar as such
liabilities (or action in respect thereof) arise out of or are based
upon any action taken or omitted to be taken by the Attorney-in-Fact or
the Custodian pursuant hereto, except if such liabilities shall result
from the bad faith of the Attorney-in-Fact or the Custodian. This
paragraph shall survive termination of this Agreement.
(9) Termination. If the Underwriting Agreement shall not be
entered into on behalf of the undersigned, or if it shall not become
effective pursuant to its terms, or if it shall be terminated pursuant
to its terms, or if the Shares agreed to be sold as contemplated by the
Underwriting Agreement are not purchased and paid for by the
Underwriters on or before January 21, 1997, then after such date the
undersigned shall have the power, on written notice to the
Attorney-in-Fact and the Custodian, to terminate this Agreement,
subject, however, (i) to Section (8) hereof, (ii) to the payment of all
expenses incurred by or on behalf of the undersigned, and (iii) to all
lawful action of the Attorney-in-Fact and the Custodian done or
performed pursuant hereto prior to actual receipt of such notice, and
thereafter the Attorney-in-Fact and the Custodian shall have no further
responsibilities or liabilities to the undersigned except to redeliver
to the undersigned the Shares held in custody by book entry or
otherwise.
(10) Notices. Any notice required to be given pursuant to this
Agreement shall be deemed given if in writing and delivered in person,
or if given by telephone or telegraph if subsequently confirmed by
letter, (i) to _______________ as Attorney-in-Fact, c/o BE Aerospace,
Inc., 1400 Corporate Center Way, Wellington, Florida 33414 (ii) BE
Aerospace, Inc., as Custodian, 1400 Corporate Center Way, Wellington,
Florida 33414 or to such other address as the Custodian shall have
specified in a
<PAGE> 10
10
written notice duly given to the undersigned, or (iii) to the
undersigned at the address set forth in the Company's records.
(11) Applicable Law. The validity, enforceability,
interpretation, and construction of this Agreement shall be determined
in accordance with the substantive laws of the state of New York, and
this Agreement shall inure to the benefit of, and shall be binding
upon, the undersigned and the undersigned's heirs, executors,
administrators, successors and assigns, as the case may be.
(12) Counterparts. This Agreement may be signed in any number
of counterparts, each executed counterpart constituting an original but
all together constituting only one instrument.
<PAGE> 11
11
This Irrevocable Power of Attorney and Custody Agreement shall
be effective as of __________________, ___ 1996.
Very truly yours,
Name:
---------------------------
(signature)
When signing as an officer of
a corporation, partner of a
partnership, trustee of a
trust, guardian of a minor
child, or Custodian under the
Uniform Gift to Minors Act,
please indicate title as such
and provide documentation
evidence of the authority of
person signing.
For certificates held by joint
tenants or as community
property, all named holders
must sign.
Notarization required for individuals only:
STATE OF
COUNTY OF
Before me, a notary public, personally appeared the above
named _________________, who acknowledged that he did sign the foregoing
instrument, and that the same is his free act and deed.
In testimony whereof, I have hereunto affixed my name and
official seal at ________________ ______ this __ day of _____________________,
1996.
-------------------------------
Notary Public
[Seal]
<PAGE> 12
12
___________________________ hereby accepts the appointment as
Attorney-in-Fact pursuant to the foregoing Irrevocable Power of Attorney and
Custody Agreement, and agrees to abide by and act in accordance with the terms
of said agreement.
Dated: ________________ ___, 1996
--------------------------------------
BE Aerospace, Inc. hereby agrees to act as Custodian pursuant
to the foregoing Irrevocable Power of Attorney and Custody Agreement, and agrees
to abide by and act in accordance with the terms of said agreement.
Dated: _________________ ___, 1996
BE AEROSPACE, INC.
By:
--------------------------------
<PAGE> 13
APPENDIX A
<TABLE>
<CAPTION>
Number of
Shares
Selling Shareholders To Be Sold
<S> <C>
Sheila L. Palandjian................................................................ 35,000
PAP Stock Trust..................................................................... 10,000
PLP Stock Trust..................................................................... 10,000
LP Stock Trust...................................................................... 10,000
------
Total ..................................................................... 65,000
======
</TABLE>
<PAGE> 1
EX. 5.1
December , 1996
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
Ladies and Gentlemen:
This opinion is furnished to you in connection with a registration
statement on Form S-3 (No. 333-16235) (the "Registration Statement"), filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended, for the registration of 4,600,000 shares of common
stock, $.01 par value per share (the "Shares"), of BE Aerospace, Inc., a
Delaware corporation (the "Company"). The Shares are to be sold pursuant to an
Underwriting Agreement (the "Underwriting Agreement") to be entered into among
the Company, certain stockholders (the "Selling Stockholders") of the Company
and Morgan Stanley & Co. Incorporated, CS First Boston Corporation and
PaineWebber Incorporated as representatives of the several underwriters to be
named on Schedule I thereto.
We have acted as counsel for the Company in connection with the issue
and sale of the Shares. For purposes of this opinion we have examined and
relied upon such documents, records, certificates and other instruments as we
have deemed necessary.
We express no opinion as to the applicability of, compliance with or
effect of federal law or the law of any jurisdiction other than the General
Corporation Law of the State of Delaware.
Based upon the foregoing, we are of the opinion that (i) the Shares
have been duly authorized; (ii) the Shares to be received by the Selling
Stockholders upon exercise of stock options, when issued upon exercise of such
stock options in accordance with their terms, and when sold by the Selling
Stockholders in accordance with the terms of the Underwriting Agreement, will
be validly issued, fully paid and nonassessable; and (iii) when issued and sold
by the Company in accordance with the terms of the Underwriting Agreement, the
Shares being sold by the Company will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as part of the
Registration Statement and to the use of our name therein and in the related
prospectus under the caption "Legal Matters."
Very truly yours,
Ropes & Gray
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Amendment No. 1 to the Registration Statement (No.
333-16235) of BE Aerospace, Inc. on Form S-3 of our report dated April 19,
1996, 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
December 12, 1996
<PAGE> 1
Exhibit 23.2
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 Amendment
No. 1 to Form S-3 registration statement (No. 333-16235).
/s/ ARTHUR ANDERSEN LLP
------------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois,
December 11, 1996
