<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1998
REGISTRATION STATEMENT NO. 333-47649
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
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
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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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 WAY
WELLINGTON FLORIDA 33414
(561) 791-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
WITH COPIES TO:
ROHAN S. WEERASINGHE
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 848-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities registered on this form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [ ]
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
OFFER TO EXCHANGE
ALL OUTSTANDING 8% SENIOR
SUBORDINATED NOTES DUE 2008
($250,000,000 AGGREGATE PRINCIPAL
AMOUNT OUTSTANDING)
FOR
LOGO 8% SERIES B SENIOR SUBORDINATED
NOTES DUE 2008 OF
BE AEROSPACE, INC.
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON MAY 20, 1998, UNLESS EXTENDED
BE Aerospace, Inc., a Delaware corporation ("B/E" or the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal"), to exchange $1,000 principal amount of its 8% Series B Senior
Subordinated Notes due March 1, 2008, (the "New Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for each $1,000 principal amount of the
outstanding 8% Senior Subordinated Notes due March 1, 2008 (the "Old Notes") of
the Company of which $250,000,000 aggregate principal amount is outstanding. The
New Notes and the Old Notes are collectively referred to herein as the "Notes."
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be May 20, 1998, unless the Exchange Offer is extended
(the "Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the business day prior to the Expiration
Date, unless previously accepted for payment. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain conditions which may
be waived by the Company and to the terms and provisions of the Registration
Rights Agreement (as defined herein). See "The Exchange Offer." Old Notes may be
tendered only in denominations of $1,000 and integral multiples thereof. The
Company has agreed to pay the expenses of the Exchange Offer.
The New Notes will be obligations of the Company entitled to the benefits
of the Indenture (as defined herein) relating to the Old Notes. The form and
terms of the New Notes are identical in all material respects to the form and
terms of the Old Notes except that the New Notes have been registered under the
Securities Act. Following the completion of the Exchange Offer, none of the
Notes will be entitled to the benefits of the Registration Rights Agreement (as
defined herein) relating to contingent increases in the interest rates provided
for pursuant thereto. See "The Exchange Offer."
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN MATTERS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS APRIL 20, 1998.
<PAGE> 3
The New Notes will bear interest from February 13, 1998. Holders of Old
Notes whose Old Notes are accepted for exchange will be deemed to have waived
the right to receive any payment in respect of interest on the Old Notes accrued
from February 13, 1998 to the date of the issuance of the New Notes. Interest on
the New Notes is payable semiannually on March 1 and September 1 of each year,
commencing September 1, 1998, accruing from February 13, 1998 at a rate of 8%
per annum.
The New Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after March 1, 2003 at the redemption prices set
forth herein, together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to March 1, 2001, the Company
may redeem up to 35% of the aggregate principal amount of the Notes originally
issued with the net proceeds of one or more Equity Offerings (as defined
herein), at 108% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption; provided that at least 65% of the
aggregate principal amount of the Notes originally issued remains outstanding
after such redemption. Upon a Change of Control (as defined herein), each holder
of the New Notes may require the Company to repurchase all or a portion of such
holder's Notes at 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of such purchase.
The Company used approximately $111.9 million of the net proceeds from the
offering of the Old Notes (the "Offering") to acquire approximately $101.8
million aggregate principal amount (plus accrued and unpaid interest) of the
Company's outstanding 9 3/4% Senior Notes due 2003 (the "9 3/4% Notes") tendered
pursuant to the Company's tender offer for all outstanding 9 3/4% Notes, which
commenced on January 28, 1998 and expired at 12:00 midnight, New York City time,
on February 25, 1998 (the "Tender Offer"), and to pay a consent fee in
connection with the Tender Offer to holders of the 9 3/4% Notes who consented to
the adoption of certain amendments to the indenture pursuant to which the 9 3/4%
Notes were issued. The Company used an additional $24.4 million of the net
proceeds of the Offering to redeem the remaining $23.2 million aggregate
principal amount (plus accrued and unpaid interest) of outstanding 9 3/4% Notes
that were not tendered in the Tender Offer on March 16, 1998 at a redemption
price equal to 104.875% of the principal amount of such 9 3/4% Notes (the
"Redemption"). The balance of the net proceeds from the Offering will be used
for general corporate purposes including potential strategic acquisitions. On
April 14, 1998, the Company completed the acquisition of Puritan-Bennett Aero
Systems Co. for $69.7 million and, on April 16, 1998, the Company entered into a
definitive agreement to acquire Aircraft Modular Products for a purchase price
of $117.3 million. See "Recent Developments." The Company incurred a $9.0
million extraordinary charge for unamortized debt issuance costs, tender and
redemption premiums and fees and expenses in connection with the Tender Offer
and the Redemption.
The New Notes will be unsecured senior subordinated obligations of B/E and
will be subordinated in right of payment to all existing and future Senior
Indebtedness (as defined herein) of B/E, including indebtedness under its Bank
Credit Facility (as defined herein). The New Notes will rank pari passu with the
Company's 9 7/8% Notes (as defined herein). In addition, the New Notes will be
effectively subordinated to the obligations of B/E's subsidiaries. As of
November 29, 1997, after giving pro forma effect to the Offering and the
application of the net proceeds therefrom, the aggregate outstanding amount of
Senior Indebtedness of B/E would have been approximately $7.2 million, the
aggregate outstanding amount of the 9 7/8% Notes would have been $100 million
and the aggregate outstanding amount of indebtedness of B/E's subsidiaries would
have been approximately $7.2 million.
The ability of the Company to incur additional Indebtedness in the future
is limited by the provisions of the Indenture relating to the Notes. See
"Description of New Notes -- Certain Covenants -- Limitation on Indebtedness."
Old Notes initially purchased by qualified institutional buyers, as defined
pursuant to Rule 144A under the Securities Act ("Qualified Institutional
Buyers"), were initially represented by four global Notes in registered form,
registered in the name of a nominee of The Depository Trust Company ("DTC"), as
depository. The New Notes exchanged for Old Notes represented by the global
Notes will be represented by up to four global New Notes in registered form,
registered in the name of the nominee of DTC, unless the beneficial holders
thereof request otherwise. The global New Notes will be exchangeable for New
Notes in
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<PAGE> 4
registered form, in denomination of $1,000 and integral multiples thereof. See
"Description of the New Notes -- Book-Entry Delivery and Form."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for resale, resold and otherwise transferred by any holder
thereof (other than (i) a broker-dealer who purchased such Old Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holder is acquiring the New Notes in its
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Notes. Holders of Old Notes wishing to accept the Exchange Offer must represent
to the Company that such conditions have been met. In the event that the
Company's belief is inaccurate, holders of New Notes who transfer New Notes in
violation of the prospectus delivery provisions of the Securities Act and
without an exemption from registration thereunder may incur liability under the
Securities Act. The Company does not assume or indemnify holders against such
liability, although the Company does not believe any such liability should
exist.
Each broker-dealer that receives New Notes in exchange for Old Notes held
for its own account, as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by such broker-dealer in connection with resales of New Notes received in
exchange for Old Notes. The Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus and any amendment or
supplement to this Prospectus available to any such broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
The Company believes that no registered holder of the Old Notes is an
affiliate (as such term is defined in Rule 405 under the Securities Act) of the
Company.
The Company will not receive any proceeds from the Exchange Offer, and no
underwriter is being utilized in connection with the Exchange Offer.
Upon completion of the Exchange Offer, Old Notes which have not been
exchanged for New Notes will remain outstanding. See "Risk Factors --
Consequences of Failure to Exchange."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
Prior to the Exchange Offer, there has been no public market for the Old
Notes or New Notes. If a market for the New Notes should develop, the New Notes
could trade at a discount from their principal amount. The Company does not
intend to list the New Notes on a national securities exchange or to apply for
quotation of the New Notes through the National Association of Securities
Dealers Automated Quotation System. There can be no assurance that an active
public market for the New Notes will develop.
The Company has been advised by Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BT Alex. Brown Incorporated, Chase Securities Inc., Credit Suisse
First Boston Corporation and Morgan Stanley & Co. Incorporated, the initial
purchasers (the "Initial Purchasers") of the Old Notes, that, following
completion of the Exchange Offer, they intend to make a market in the New Notes;
however, such entities are under no obligation to do so and any market
activities with respect to the New Notes may be discontinued at any time.
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<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files periodic reports, proxy statements and
other information with the Commission. Reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Suite
1400, Northwestern Atrium Center, 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed rates
by writing to the Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such information may also be accessed electronically by
means of the Commission's web page on the Internet at http://www.sec.gov, which
contains reports, proxy statements and other information regarding registrants,
including the Company, that file electronically with the Commission.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the securities offered
hereby. Statements contained herein concerning the provisions of any documents
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
The Indenture (as defined herein) provides that the Company will furnish
copies of the periodic reports required to be filed with the Commission under
the Exchange Act to the holders of the Notes. If the Company is not subject to
the periodic reporting and informational requirements of the Exchange Act, it
will, to the extent such filings are accepted by the Commission, and whether or
not the Company has a class of securities registered under the Exchange Act,
file with the Commission, and provide the Trustee and the holders of the Notes
within 15 days after such filings with, annual reports containing the
information required to be contained in Form 10-K promulgated under the Exchange
Act, quarterly reports containing the information required to be contained in
Form 10-Q promulgated under the Exchange Act and from time to time such other
information as is required to be contained in Form 8-K promulgated under the
Exchange Act. If filing such reports with the Commission is not accepted by the
Commission or prohibited by the Exchange Act, the Company will also provide
copies of such reports, at its cost, to prospective purchasers of the Notes
promptly upon written request.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents or information filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
February 22, 1997 filed May 9, 1997 (the "Form 10-K");
(b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 29, 1997 filed December 23, 1997 (the "November 10-Q");
(c) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended August 30, 1997 filed October 7, 1997 (the "August 10-Q");
(d) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended May 31, 1997 filed June 30, 1997 (the "May 10-Q"); and
(e) all documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act of 1934, as amended (the "Exchange
Act") subsequent to the date of the Registration
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<PAGE> 6
Statement of which this Prospectus is part and prior to the effectiveness
thereof or subsequent to the date of this Prospectus and prior to the
termination of the offering made hereby.
Any statement contained herein or in any documents incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for the purpose of this Prospectus to the extent that a subsequent
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST FROM THOMAS P. MCCAFFREY, CHIEF FINANCIAL OFFICER OF THE
COMPANY AT THE COMPANY'S PRINCIPAL EXECUTIVE OFFICES LOCATED AT 1400 CORPORATE
CENTER WAY, WELLINGTON, FLORIDA 33414, TELEPHONE NUMBER (561) 791-5000.
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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" 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 1997 refers to the Company's fiscal year ended February 22,
1997). 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 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, 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 leading global market
positions 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
in-flight entertainment systems, including the emerging live broadcast
television market for domestic narrow-body aircraft, will be one of the fastest
growing and among the largest product categories in the commercial aircraft
cabin interior products industry.
As of November 29, 1997, B/E's backlog was approximately $560 million and,
during the nine months ended November 29, 1997, the Company had revenues of
$362.7 million and EBITDA of $64.1 million, an increase of 17.7% and 38.2%,
respectively, over the nine months ended November 30, 1996. The Company's common
stock is listed on the Nasdaq National Market, and based on the closing price of
$34.375 per share on April 17, 1998, the Company had a total equity market
capitalization of approximately $795 million.
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 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, based on dollar
sales for the nine months ended November 29, 1997, and 37% in individual
passenger in-flight entertainment systems, determined on the basis of
installed base as of November 29, 1997. 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 $3.3 billion installed base of
cabin interior equipment (valued at replacement prices as of November 29,
1997), 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
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addition, because of the need for compatible spare parts at airline
maintenance depots and the desire of airlines to maximize fleet
commonality, a single vendor is typically used for all aircraft of the
same type operated by a particular airline.
- Broadest Product Line in the Industry. Management believes the Company
offers the broadest and the most technologically advanced line of
products for the cabin interiors of commercial aircraft. 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 comprised of approximately 500
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 introduction of several premium and main cabin
class seats, which the Company believes provide greater comfort and are
lighter in weight as a result of their ergonomic design and
pre-engineered individual passenger comfort features; 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.
- Proven Track Record of Integration. The Company has demonstrated the
ability to make strategic acquisitions and successfully integrate such
acquired businesses by identifying opportunities to consolidate
engineering, manufacturing and marketing activities, as well as
rationalizing product lines. The Company has purchased nine businesses
over the last nine years, for an aggregate purchase price of
approximately $290 million. Since 1989, the Company has integrated each
of its acquisitions by reducing the number of operating facilities
acquired from 20 to 9 and consolidating personnel at the acquired
businesses, resulting in headcount reductions of approximately 1,300
employees.
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 60% of B/E's revenues
for the nine months ended November 29, 1997 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
calendar years 1995 through 1997. Deterioration of cabin interior product
functionality and aesthetics occurred within the commercial airline
fleets during the industry downturn because of maintenance deferrals.
Since the turnaround began, the airlines have experienced greater
utilization resulting from higher load factors, which 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. A significant portion of the Company's recent growth in
backlog, revenues and operating earnings has been from refurbishment and
upgrade programs, and the Company is currently experiencing a high level
of new order quote activity related to such programs.
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- Expansion of Worldwide Fleet and Shift Toward Wide-Body Aircraft.
Airlines have recently been purchasing a significant number of new
aircraft in part due to current high load factors and the projected
growth in worldwide air travel. According to the Current Market Outlook
published by the Boeing Commercial Airplane Group in 1997 (the "Boeing
Report"), worldwide air travel is projected to increase by 75% by
calendar 2006 and the worldwide fleet of commercial passenger aircraft is
projected to expand from approximately 10,300 at the end of 1996 to
approximately 15,300 by the end of 2006 and to more than 21,200 by 2016.
Related growth in aircraft interior product shipments associated with new
aircraft deliveries began during calendar 1996. In 1997, Boeing shipped
375 aircraft versus 218 in 1996. In addition Boeing has stated plans to
ship 550 aircraft in each of calendar years 1998 and 1999. The Company
generally receives orders related to new aircraft deliveries
approximately six months before the delivery date. Furthermore, according
to the July 1997 Airline Monitor, the percentage of new Boeing aircraft
deliveries projected to be wide-body aircraft for 1997 through 2001 is
39% as compared to 33% for the five year period ended December 31, 1996.
This shift toward wide-body aircraft is significant to the Company since
these aircraft require as much as seven times the dollar value of cabin
interior products as narrow-body aircraft, including substantially more
seats, galley equipment and in-flight entertainment products.
- 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. In
June 1997, the Company announced a joint venture with Harris Corporation
to develop and deliver live broadcast television (LiveTV(TM)) to domestic
narrow-body commercial aircraft. The Company expects that in-flight
entertainment systems, including the new technology designed to deliver
live broadcast television on domestic narrow-body aircraft, will be one
of the fastest growing and among the largest product categories in the
commercial aircraft cabin interior products industry.
- 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 two current systems are (i)
the B/E 2000, with an installed base of approximately 28,000 units, which
is a system that provides non-interactive video programming and (ii) the
B/E 2000M, with an installed base of approximately 6,000 units, which
offers similar functionality to the B/E 2000 but can be upgraded to the
Company's Multimedia Digital Distribution System ("MDDS") product. The
MDDS product, which is in its final development stage, is a fully
interactive entertainment system with the capacity to provide movies on
demand, telecommunications, gaming and other services. The Company has
completed the initial development and testing of the MDDS product and
anticipates delivery of the first MDDS product to its launch customer,
Japan Airlines ("JAL"), in 1998. The Company also anticipates completing
the engineering necessary to enable installation of the MDDS as a line
fit (standard) option on Boeing aircraft in 1998. As of November 29, 1997
B/E had an in-flight entertainment systems backlog of approximately $139
million.
BUSINESS STRATEGY
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.
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RECENT DEVELOPMENTS
On April 14, 1998 the Company acquired Puritan-Bennett Aero Systems Co.
("PBASCO"), a wholly owned subsidiary of Nellcor Puritan Bennett Inc. for $69.7
million. PBASCO is a leading manufacturer of commercial aircraft oxygen delivery
systems and passenger service unit components and systems (PSU) and is a major
supplier of air valves, overhead lights and switches for both commercial and
general aviation aircraft.
On April 16, 1998 the Company entered into a definitive agreement to
acquire Aircraft Modular Products ("AMP") for a purchase price of $117.3
million. AMP is a leading manufacturer of cabin interior products for the
business jet market and also participates in the customization of both general
aviation and commercial type VIP aircraft.
On April 14, 1998, the Company announced that it had further amended its
Bank Credit Facility by increasing the aggregate principal amount that may be
borrowed to $200 million.
On April 15, 1998, the Company announced its financial results for the
fourth quarter and fiscal year ended February 28, 1998. See "Recent
Developments."
9
<PAGE> 11
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $250 million aggregate
principal amount of Old Notes for an equal aggregate principal amount of New
Notes. The New Notes will be obligations of the Company entitled to the benefits
of the Indenture (as defined herein) relating to the Old Notes. The form and
terms of the New Notes are identical in all material respects to the form and
terms of the Old Notes except that the New Notes have been registered under the
Securities Act, and therefore are not entitled to the benefits of the
registration rights (the "Registration Rights") granted under the registration
rights agreement dated February 13, 1998 among the Company and the Initial
Purchasers (the "Registration Rights Agreement") relating to the contingent
increases in the interest rates provided for pursuant thereto.
The Exchange Offer......... $1,000 principal amount of New Notes will be issued
in exchange for each $1,000 principal amount of Old
Notes validly tendered pursuant to the Exchange
Offer. As of the date hereof, $250 million in
aggregate principal amount of Old Notes are
outstanding. The Company will issue the New Notes
to tendering holders of Old Notes on or promptly
after the Expiration Date.
Resale of the New Notes.... Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, including "Exxon Capital Holdings
Corporation" (available May 13, 1988), "Morgan
Stanley & Co. Incorporated" (available June 5,
1991), "Mary Kay Cosmetics, Inc." (available June
5, 1991) and "Warnaco, Inc." (available October 11,
1991), the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than (i) a broker-dealer who purchased such Old
Notes directly from the Company for resale pursuant
to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of
the Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that the holder is acquiring the New Notes in its
ordinary course of business and is not
participating, and has no arrangement or
understanding with any person to participate, in
the distribution of the New Notes. In the event
that the Company's belief is inaccurate, holders of
New Notes who transfer New Notes in violation of
the prospectus delivery provisions of the
Securities Act and without an exemption from
registration thereunder may incur liability under
the Securities Act. The Company does not assume or
indemnify holders against such liability, although
the Company does not believe that any such
liability should exist.
Each broker-dealer that receives New Notes in
exchange for Old Notes held for its own account, as
a result of market-making activities or other
trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a
prospectus, such broker-dealer will not be deemed
to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to
time, may be used by such broker-dealer in
connection with resales of New Notes received in
exchange for Old Notes. The Company has agreed
that, for a period of 180 days after the date of
this Prospectus, it will make this Prospectus and
any amendment or supplement to this Prospectus
available to any such broker-dealer for use in
connection with any such resales. See "Plan
10
<PAGE> 12
of Distribution." The Company believes that no
registered holder of the Old Notes is an affiliate
(as such term is defined in Rule 405 of the
Securities Act) of the Company.
The Exchange Offer is not being made to, nor will
the Company accept surrenders for exchange from,
holders of Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance thereof would
not be in compliance with the securities or blue
sky laws of such jurisdiction.
Expiration of Exchange
Offer...................... 5:00 p.m., New York City time, on May 20, 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended. See "The Exchange Offer -- Expiration
Date; Extension; Amendments."
Accrued Interest on the New
Notes and the Old
Notes.................... The New Notes will bear interest from February 13,
1998. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived
the right to receive any payment in respect of
interest on such Old Notes accrued from February
13, 1998 to the date of the issuance of the New
Notes. Consequently, holders who exchange their Old
Notes for New Notes will receive the same interest
payment on September 1, 1998 (the first interest
payment date with respect to the Old Notes and the
New Notes) that they would have received had they
not accepted the Exchange Offer. See "The Exchange
Offer -- Interest on the New Notes."
Termination of the Exchange
Offer.................... The Company may terminate the Exchange Offer if it
determines that its ability to proceed with the
Exchange Offer could be materially impaired due to
any legal or governmental action, new law, statute,
rule or regulation or any interpretation of the
staff of the Commission of any existing law,
statute, rule or regulation. The Company does not
expect any of the foregoing conditions to occur,
although there can be no assurance that such
conditions will not occur. Holders of Old Notes
will have certain rights against the Company under
the Registration Rights Agreement should the
Company fail to consummate the Exchange Offer. See
"The Exchange Offer -- Termination."
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes to be exchanged and any other
required documentation to United States Trust
Company of New York, as Exchange Agent, at the
address set forth herein and therein or effect a
tender of Old Notes pursuant to the procedures for
book-entry transfer as provided for herein. See
"The Exchange Offer -- Procedures for Tendering."
By executing the Letter of Transmittal, each holder
will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New
Notes, whether or not such person is the holder,
(ii) neither the holder nor any such other person
11
<PAGE> 13
has an arrangement or understanding with any person
to participate in the distribution of such New
Notes and (iii) neither the holder nor any such
other person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company.
Special Procedures for
Beneficial Holders......... Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender in the Exchange Offer should
contact such registered holder promptly and
instruct such registered holder to tender on its
behalf. If such beneficial holder wishes to tender
on his own behalf, such beneficial holder must,
prior to completing and executing the Letter of
Transmittal and delivering its Old Notes, either
make appropriate arrangements to register ownership
of the Old Notes in such holder's name or obtain a
properly completed bond power from the registered
holder. The transfer of record ownership may take
considerable time. See "The Exchange Offer --
Procedures for Tendering."
Guaranteed Deliver
Procedures................. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes (or
who cannot complete the procedure for book-entry
transfer on a timely basis) and a properly
completed Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date may
tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders of Old Notes may be withdraw at any time
prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date, unless
previously accepted for exchange. See "The Exchange
Offer -- Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of New Notes.... Subject to certain conditions (as summarized above
in "Termination of the Exchange Offer" and
described more fully under the "The Exchange
Offer -- Termination"), the Company will accept for
exchange any and all Old Notes which are properly
tendered in the Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer -- General."
Certain Tax
Consideration.............. The exchange pursuant to the Exchange Offer will
generally not be a taxable event for federal income
tax purposes. See "The Exchange Offer -- Certain
Income Tax Consequences."
Exchange Agent............. United States Trust Company of New York, the
Trustee under the Indenture, is serving as exchange
agent (the "Exchange Agent") in connection with the
Exchange Offer. The address of the Exchange Agent
is: United States Trust Company of New York, 114
West 47th Street, New York, NY 10036, Attention:
Margaret Ciesmelewski. For information with respect
to the Exchange Offer, the telephone number for the
Exchange Agent is (800) 548-6565 and the facsimile
number for the Exchange Agent is (212) 420-6152.
Use of Proceeds............ There will be no cash proceeds payable to the
Company from the issuance of the New Notes pursuant
to the Exchange Offer. The
12
<PAGE> 14
proceeds to the Company from the sale of the Old
Notes were approximately $241.8 million, net of the
Initial Purchasers' discount and certain fees and
expenses relating to the offering of the Old Notes.
The Company used approximately $111.9 million of
such net proceeds to acquire the Company's
outstanding 9 3/4% Senior Notes (including accrued
and unpaid interest) tendered pursuant to the
Tender Offer and to pay a consent fee in connection
with the Tender Offer to holders of 9 3/4% Notes
who consented to certain amendments to the
indenture pursuant to which the 9 3/4% Notes were
issued. The Company used an additional $24.4
million of such net proceeds to redeem the
remaining $23.2 million aggregate principal amount
(plus accrued and unpaid interest) of outstanding
9 3/4% Notes that were not tendered in the Tender
Offer on March 16, 1998 in the Redemption. The
balance of the net proceeds from the Offering will
be used for general corporate purposes including
potential strategic acquisitions. On April 14, 1998
the Company completed the acquisition of PBASCO for
$69.7 million and, on April 16, 1998, the Company
entered into a definitive agreement to acquire AMP
for a purchase price of $117.3 million. See "Use of
Proceeds" and "Recent Developments."
13
<PAGE> 15
SUMMARY DESCRIPTION OF THE NEW NOTES
Notes Offered.............. $250 million principal amount of 8% Senior
Subordinated Notes due 2008.
Maturity Date.............. March 1, 2008.
Interest Payment Dates..... March 1 and September 1 of each year, commencing
September 1, 1998.
Optional Redemption........ The Notes are redeemable at the option of the
Company, in whole or in part, on or after March 1,
2003 at the redemption prices set forth herein,
together with accrued and unpaid interest to the
date of redemption. In addition, at any time on or
prior to March 1, 2001, the Company may redeem up
to 35% of the aggregate principal amount of the
Notes originally issued with the net proceeds of
one or more Equity Offerings at 108% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption;
provided that at least 65% of the aggregate
principal amount of the Notes originally issued
remains outstanding after such redemption. See
"Description of the New Notes -- Optional
Redemption."
Mandatory Redemption....... None.
Change of Control.......... Upon the occurrence of a Change of Control, each
holder of the Notes shall have the option to
require the Company to repurchase such holder Notes
at a redemption price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest to the date of redemption, pursuant to a
Change of Control offer to be made by the Company.
See "Description of the New Notes -- Certain
Definitions" for the definition of a Change of
Control.
Ranking.................... The Notes will be unsecured senior subordinated
obligations of the Company and will be subordinated
to all existing and future Senior Indebtedness of
the Company, including indebtedness under the Bank
Credit Facility. The Notes will rank pari passu
with the Company's 9 7/8% Senior Subordinated Notes
due 2006 (the "9 7/8% Notes"). As of November 29,
1997, after giving pro forma effect to the Offering
and the application of the net proceeds therefrom,
the aggregate outstanding principal amount of
Senior Indebtedness of the Company would have been
approximately $7.2 million. As of November 29,
1997, after giving pro forma effect to the Offering
and the application of the net proceeds therefrom,
the aggregate outstanding amount of the 9 7/8%
Notes would have been $100 million. In addition,
the Notes will be effectively subordinated to the
obligations of the Company's subsidiaries. As of
November 29, 1997, after giving pro forma effect to
the Offering and the application of the net
proceeds therefrom, the Company's subsidiaries
would have had approximately $7.2 million of
indebtedness outstanding. Subject to certain
limitations, the Company and its Restricted
Subsidiaries may incur additional indebtedness in
the future. See "Risk Factors -- Adverse
Consequences of Financial Leverage," "Description
of the New Notes -- Subordination -- Limitation on
Indebtedness, and -- Limitation on Other Senior
Subordinated Indebtedness."
Certain Covenants.......... The Indenture contains certain covenants, including
without limitation, covenants with respect to the
following matters: (i) limitation on indebtedness;
(ii) limitation on other senior subordinated
indebtedness; (iii) limitation on restricted
payments; (iv) limitation on issuances and
14
<PAGE> 16
sales of restricted subsidiary stock; (v)
limitation on transactions with affiliates; (vi)
limitation on liens securing pari passu or
subordinated indebtedness; (vii) limitation on
disposition of proceeds of asset sales; (viii)
limitation on guarantees of indebtedness by
restricted subsidiaries; (ix) limitation on
dividends and other payment restrictions affecting
restricted subsidiaries; and (x) restrictions on
mergers and certain transfers of assets. See
"Description of the New Notes -- Certain
Covenants."
Registration Rights........ In connection with the sale of the Old Notes, the
Company agreed in the Registration Rights Agreement
to use its best efforts to (i) file within 30 days,
and cause to become effective within 90 days, of
the date of the original issues of the Old Notes, a
registration statement (the "Registration
Statement") of which this Prospectus is a part with
respect to a registered offer to exchange the Old
Notes for the New Notes with terms identical in all
material respects to the Old Notes and (ii) cause
the Exchange Offer to be consummated within 120
days of the original issue of the Old Notes.
In the event that any changes in law or the
applicable interpretations of the staff of the
Commission do not permit the Company to effect the
Exchange Offer, or if for any other reason the
Exchange Offer is not consummated within 120 days
following the date of the original issue of the Old
Notes, or if any holder of the Old Notes (other
than the Initial Purchasers) is not eligible to
participate in the Exchange Offer, or upon the
request of any Initial Purchaser under certain
circumstances, the Company will use its best
efforts to cause to become effective by the 120th
day after the original issue of the Old Notes a
shelf registration statement pursuant to the
Securities Act with respect to the resale of the
Old Notes (the "Shelf Registration Statement") and
to keep the Shelf Registration Statement effective
until three years after the effective date thereof
(or until one year after such effective date if
such Shelf Registration Statement is filed at the
request of the Initial Purchasers under certain
circumstances).
In the event that either (i) the Registration
Statement is not filed with the Commission on or
prior to the 30th calendar day following the date
of original issue of the Old Notes, (ii) the
Registration Statement is not declared effective on
or prior to the 90th calendar day following the
date of original issue of the Old Notes or (iii)
the Exchange Offer is not consummated or a Shelf
Registration Statement with respect to the Old
Notes is not declared effective on or prior to the
120th calendar day following the date of original
issue of the Old Notes, the interest rate borne by
the Old Notes shall be increased by one-half of one
percent per annum following such 30-day period in
the case of clause (i) above, following such 90-day
period in the case of clause (ii) above, or
following such 120-day period in the case of clause
(iii) above. The aggregate amount of such increase
from the original interest rate pursuant to these
provisions will in no event exceed one-half of one
percent per annum. Upon (x) the filing of the
registration statement for the Exchange Offer after
the 30-day period described in clause (i) above,
(y) the effectiveness of the Registration Statement
after the 90-day period described in clause (ii)
above, or (z) the consummation of the Exchange
Offer or the effectiveness of a Shelf Registration
Statement as
15
<PAGE> 17
the case may be, after the 120-day period described
in clause (iii) above, the interest rate borne by
the Old Notes from the date of such filing,
effectiveness or the day before the date of
consummation, as the case may be, will be reduced
to the original interest rate if the Company is
otherwise in compliance with such requirements. See
"Exchange Offer."
Common Stock Listing....... The Company's common stock is listed on the Nasdaq
National Market (Symbol: BEAV) and, based on the
closing price of 34.375 per share on April 17,
1998, the Company had a total equity market
capitalization of approximately $795 million.
Risk Factors............... See "Risk Factors" for a discussion of certain
factors which should be considered by prospective
investors in evaluating an investment in the New
Notes.
16
<PAGE> 18
SUMMARY FINANCIAL DATA
The financial data as of and for the fiscal years ended February 22, 1997,
February 24, 1996, and February 25, 1995, except backlog and pro forma
information, have been derived from financial statements which have been audited
by B/E's independent auditors. The financial data as of and for the nine months
ended November 29, 1997 and November 30, 1996 have been derived from financial
statements which are unaudited, but, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations for such
periods. Operating results for the nine months ended November 29, 1997 and
November 30, 1996 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, B/E's financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NINE MONTHS ENDED
----------------------------------------------------- ------------------------------
FEB. 25, 1995 FEB. 24, 1996(A) FEB. 22, 1997(A) NOV. 30, 1996 NOV. 29, 1997
------------- ---------------- ---------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net sales....................... $229,347 $ 232,582 $412,379 $308,151 $362,687
Cost of sales................... 154,863 160,031 270,557 204,655 230,825
-------- --------- -------- -------- --------
Gross profit.................... 74,484 72,551 141,822 103,496 131,862
Operating expenses:
Selling, general and
administrative.............. 31,787 42,000 51,734 37,619 43,017
Research, development and
engineering................. 12,860 58,327(b) 37,083 27,759 34,988
Amortization expenses......... 9,954 9,499 10,607 8,021 8,195
Other expenses................ 23,736(c) 4,170(c) -- -- --
-------- --------- -------- -------- --------
Operating earnings (loss)....... (3,853) (41,445) 42,398 30,097 45,662
Interest expense, net........... 15,019 18,636 27,167 21,845 16,899
-------- --------- -------- -------- --------
Earnings (loss) before income
taxes (benefit) and cumulative
effect of accounting change... (18,872) (60,081) 15,231 8,252 28,763
Income taxes (benefit).......... (6,806) -- 1,522 825 4,311
-------- --------- -------- -------- --------
Earnings (loss) before
cumulative effect of
accounting change............. (12,066) (60,081) 13,709 7,427 24,452
Cumulative effect of accounting
change........................ -- (23,332)(b) -- -- --
-------- --------- -------- -------- --------
Net earnings (loss)............. $(12,066) $ (83,413) $ 13,709 $ 7,427 $ 24,452
======== ========= ======== ======== ========
OTHER DATA:
Gross margin.................... 32.5% 31.2% 34.4% 33.6% 36.4%
EBITDA(d)....................... $ 36,029 $ (18,840) $ 66,545 $ 46,422 $ 64,144
Depreciation and amortization... 16,146 18,435 24,147 16,325 18,482
Capital expenditures............ 12,172 13,656 14,471 8,675 21,099
Ratio of earnings to
fixed charges(e).............. NM(f) NM(f) 1.6x 1.4x 2.7x
Ratio of EBITDA to interest
expense, net.................. 2.4x NM 2.4x 2.1x 3.8x
Ratio of EBITDA to pro forma
interest expense(g)........... -- -- -- -- 2.8x
Backlog, at period end.......... $221,000(h) $ 340,000(h) $415,000(h) $420,000(h) $560,000
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 29, 1997
--------------------------
CONSOLIDATED BALANCE SHEET DATA ACTUAL As Adjusted(i)
(END OF PERIOD): -------- --------------
<S> <C> <C>
Working capital............................................. $153,282 $263,532
Total assets................................................ 546,711 662,976
Long-term debt.............................................. 225,339 349,789
Stockholders' equity........................................ 200,200 191,244
</TABLE>
(footnotes
on following page)
17
<PAGE> 19
(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, 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 the Consolidated Financial Statements.
(c) 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.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(d) EBITDA represents net earnings before deducting extraordinary items, income
tax expenses, interest expense, net, other expenses and depreciation and
amortization expense. EBITDA is not a measurement in accordance with GAAP
and is presented to facilitate a further analysis of B/E's financial
condition. These data are not intended to be a substitute for net income
(loss) or operating cash flow as a measure of B/E's profitability.
(e) For purposes of computing this ratio, earnings consist of earnings before
extraordinary items, income taxes and fixed charges. Fixed charges consist
of interest expense, capitalized interest and amortization of deferred debt
issuance costs.
(f) Earnings were insufficient to cover fixed charges by approximately $18.0
million and $59.7 million for the fiscal years ended February 25, 1995 and
February 24, 1996, respectively.
(g) The ratio of EBITDA to pro forma interest expense is computed on a pro forma
basis giving effect to the Offering and use of proceeds therefrom as if the
Offering had occurred as of February 23, 1997. The ratio of EBITDA to pro
forma interest expense, net, would have been 3.5x had interest earned on any
unused net proceeds of the Offering been taken into account. See
"Capitalization."
(h) As adjusted on a similar basis to exclude certain backlog which was debooked
in August 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Bookings and Backlog Information."
(i) As adjusted to reflect the application of the net proceeds from the Offering
to acquire the 9 3/4% Notes pursuant to the Tender Offer and the Redemption,
related costs associated with the issuance of the Notes and a $9.0 million
extraordinary charge for unamortized debt issuance costs, tender and
redemption premiums and fees and expenses.
18
<PAGE> 20
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 Notes offered hereby.
ADVERSE CONSEQUENCES OF FINANCIAL LEVERAGE
As of November 29, 1997, after giving pro forma effect to the Offering and
the application of the net proceeds therefrom, the Company would have had
approximately $357.0 million aggregate amount of indebtedness outstanding,
representing 65.1% of total capitalization. See "Use of Proceeds" and
"Capitalization."
The degree of the Company's leverage could have important consequences to
purchasers of the Notes, including: (i) limiting the Company's ability to obtain
additional financing to fund future working capital requirements, capital
expenditures, acquisitions or other general corporate requirements; (ii)
requiring a substantial portion of the Company's cash flow from operations to be
dedicated to debt service requirements, thereby reducing the funds available for
operations and further business opportunities; 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, the indenture
governing the 9 7/8% 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, the indenture governing the 9 7/8%
Notes and the Indenture contain numerous financial and operating covenants that
will limit the discretion of the Company's management with respect to certain
business matters. These covenants will place significant restrictions on, among
other things, the ability of the Company to incur additional indebtedness, to
create liens or other encumbrances, to make certain payments and investments,
and to sell or otherwise dispose of assets and merge or consolidate with other
entities. 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 indenture governing
the 9 7/8% Notes and the Indenture, could result in an event of default under
the Company's bank credit facilities, or such 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. See
"Description of Certain Indebtedness."
SUBORDINATION OF THE NOTES; ASSETS ENCUMBRANCES; CHANGE OF CONTROL OFFER
The Notes will be subordinated in right of payment in full to all existing
and future Senior Indebtedness of the Company, which includes all indebtedness
under the Bank Credit Facility. As of November 29, 1997, on a pro forma basis
after giving effect to the Offering and the application of the net proceeds
therefrom, the aggregate amount of Senior Indebtedness of the Company would have
been approximately $7.2 million. In addition, upon consummation of the Offering,
approximately $120 million was available under the Bank Credit Facility which,
if borrowed, would be included as Senior Indebtedness. Further, the Notes will
be effectively subordinated to indebtedness of the Company's subsidiaries. As of
November 29, 1997, on a pro forma basis after giving effect to the Offering and
the application of the net proceeds therefrom, the aggregate amount of
indebtedness of the Company's subsidiaries would have been approximately $7.2
million. See "Description of Certain Indebtedness."
In the event of the liquidation, dissolution, reorganization or any similar
proceeding regarding the Company, the assets of the Company will be available to
pay obligations on the Notes only after Senior Indebtedness of the Company has
been paid in full, and there may not be sufficient assets remaining to pay
amounts due on all or any of the Notes. In addition, the Company may not pay
principal of, premium, if any, or interest on the Notes or purchase, redeem or
otherwise retire the Notes, if any principal, premium, if any, or
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interest on any Designated Senior Indebtedness (as defined) is not paid when due
(whether at final maturity, upon scheduled installment, acceleration or
otherwise) unless such default has been cured or waived or such Designated
Senior Indebtedness has been repaid in full. In addition, under certain
circumstances, if any non-payment default exists with respect to Designated
Senior Indebtedness, the Company may not make any payments on the Notes for a
specified period of time, unless such default is cured or waived or such
Designated Senior Indebtedness has been repaid in full. See "Description of the
New Notes -- Subordination."
In addition to being subordinated to all existing and future Senior
Indebtedness of the Company, the Notes will not be secured by any of the
Company's assets. The obligations of the Company under the Bank Credit Facility
are secured by substantially all the Company's assets. If the Company becomes
insolvent or is liquidated, or if payment under the Bank Credit Facility is
accelerated, the lenders under the Bank Credit Facility would be entitled to
exercise the remedies available to a secured lender under applicable law and
pursuant to such agreement. Accordingly, such lenders will have a prior claim
with respect to such assets. See "Description of Certain Indebtedness."
Upon a Change of Control (as defined), the Company is required to offer to
purchase all outstanding Notes. The ability of the Company to purchase the Notes
upon a Change of Control is restricted by the terms of the indenture governing
the 9 7/8% Notes and the terms of the Bank Credit Facility. The Company, in such
circumstance, may be required immediately to repay the outstanding principal of,
and pay any accrued interest on, the loans made under the Bank Credit Facility
and the 9 7/8% Notes and pay any other amounts owed by the Company thereunder.
In the case of any such offer to purchase the outstanding Notes, there can be no
assurance that the Company would be able to repay amounts outstanding under the
Bank Credit Facility and the 9 7/8% Notes or obtain necessary consents
thereunder in order to consummate such purchase. In addition, upon a Change of
Control, the Company will be required to offer to purchase all of the 9 7/8%
Notes. Any requirement to offer to purchase outstanding Notes may result in the
Company having to refinance the indebtedness outstanding under these agreements.
There can be no assurance that the Company would be able to refinance such
indebtedness or, if such refinancing were to occur, that such refinancing would
be on terms favorable to the Company. See "Description of the New Notes" and
"Description of Certain Indebtedness."
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 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
now experienced five consecutive years of profitability including record
profitability in each of the last three calendar years. This financial
turnaround has, in part, been driven by record load factors, rising fare prices
and declining fuel costs. The airlines have substantially restored their balance
sheets through cash generated from operations and debt and equity placements. As
a result, 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.
Recently, turbulence in the financial and currency markets of many Pacific
Rim countries has led to uncertainty with respect to the economic outlook for
these countries. Of the Company's $560 million of
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backlog at November 29, 1997, the Company had $69 million with Asian carriers
deliverable in fiscal 1999 and a further $74 million deliverable in subsequent
fiscal years. Of such Asian carrier backlog, approximately $48 million was with
JAL, Singapore Airlines and Cathay Pacific. Although not all Asian carriers have
been affected by the current economic events in the Pacific Rim, certain
carriers could cancel or defer their existing orders and future orders from
airlines in these countries for the Company's cabin interior products may be
adversely affected.
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 being developed by B/E. The Company expects that in-flight
entertainment systems, including live broadcast television on narrow-body
aircraft, will provide a significant percentage of its future revenues.
Development of the MDDS and related in-flight entertainment systems 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 may depend, to a significant extent, on its ability to manufacture
successfully and deliver, on a timely basis, in-flight entertainment products
and to have the these products 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 "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Bookings and Backlog
Information" and "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 having its products 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.
The Company's primary competitors in the market for new passenger
entertainment products, including individual seat video and in-flight
entertainment and cabin management systems are Matsushita Electronics ("MAS")
and Rockwell Collins, each of which has significantly greater technological
capabilities and financial and marketing resources than the Company. See
"Business -- Competition."
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."
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ABSENCE OF A PUBLIC MARKET FOR THE NOTES
The Notes are new securities for which there currently is no trading market
and there can be no assurance as to the liquidity of any market for the Notes
that may develop, the ability of holders of the Notes to sell their Notes, or
the prices at which holders of the Notes would be able to sell their Notes. If
such markets were to exist, the Notes could trade at prices higher or lower than
their initial purchase prices depending on many factors, including prevailing
interest rates, the Company's operating results and the market for similar
securities. Although the Initial Purchasers have informed the Company that they
currently intend to make a market in the Notes and, if issued, the Exchange
Notes, the Initial Purchasers are not obligated to do so, and any such market
making may be discontinued at any time without notice. Accordingly, there can be
no assurance as to the development or liquidity of any market for the Notes and,
if issued, the Exchange Notes. The Notes are eligible for trading in the Private
offerings, Resale and Trading through Automatic Linkages (PORTAL) market. The
Company does not intend to apply for listing of the Notes on any securities
exchange or for quotation on the National Association of Securities Dealers
Automated Quotation System.
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered Old Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will remain restricted securities. Old Notes will continue to be
subject to the following restrictions on transfer: (i) Old Notes may be resold
only if registered pursuant to the Securities Act, if an exemption from
registration is available thereunder, or if neither such registration nor such
exemption is required by law, (ii) Old Notes shall bear a legend restricting
transfer in the absence of registration or an exemption therefrom and (iii) a
holder of Old Notes who desires to sell or otherwise dispose of all or any part
of its Old Notes under an exemption from registration under the Securities Act,
if requested by the Company, must deliver to the Company an opinion of
independent counsel experienced in Securities Act matters, reasonably
satisfactory in form and substance to the Company, that such exemption is
available.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere, including statements regarding the
business strategy of the Company; potential strategic acquisitions; the products
which the Company expects to offer; anticipated development and marketing
expenditures and regulatory reform; the intent, belief or current expectations
of the Company, its directors or its officers, primarily with respect to the
future operating performance of the Company; and other statements contained
herein regarding matters that are not historical facts, are "forward-looking"
statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995). In addition, when used in this Prospectus, the words "believe,"
"anticipate," "expect," "intend" and similar expressions are intended to
identify forward-looking statements. Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements include, but are not limited to, the factors set
forth in "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
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<PAGE> 24
THE COMPANY
The Company 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 the Company from the sale of the Old Notes were
approximately $241.8 million, net of Initial Purchasers' discount and certain
fees and expenses relating to the Offering. The Company used approximately
$111.9 million of the net proceeds from the Offering to acquire approximately
$101.8 million aggregate principal amount (plus accrued and unpaid interest) of
the 9 3/4% Notes tendered pursuant to the Tender Offer and to pay a consent fee
in connection with the Tender Offer to holders of the 9 3/4% Notes who consented
to the adoption of certain amendments to the indenture pursuant to which the
9 3/4% Notes were issued. The Company used an additional $24.4 million of the
net proceeds of the Offering to redeem the remaining $23.2 million aggregate
principal amount (plus accrued and unpaid interest) of outstanding 9 3/4% Notes
that were not tendered in the Tender Offer on March 16, 1998 in the Redemption.
The 9 3/4% Notes bear interest at the rate of 9 3/4% and mature on March 1,
2003. 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. Pending application as described
above, the net proceeds of the Offering will be invested in short-term, fixed
income investments. On April 14, 1998 the Company completed the acquisition of
PBASCO for $69.7 million and, on April 16, 1998, the Company entered into a
definitive agreement to acquire AMP for a purchase price of $117.3 million. See
"Recent Developments." The Company incurred a $9.0 million extraordinary charge
for unamortized debt issuance costs, tender and redemption premiums and fees and
expenses in connection with the Tender Offer and the Redemption.
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights. Pursuant to the
Registration Rights Agreement, the Company agreed to (i) file within 30 days,
and cause to become effective within 90 days of the date of original issue of
the Old Notes, the Registration Statement of which this Prospectus is a part
with respect to the exchange of the Old Notes for the New Notes and (ii) cause
the Exchange Offer to be consummated within 120 days of the original issue of
the Old Notes. The New Notes have terms identical in all material respects to
the terms of the Old Notes. However, in the event that any changes in law or
applicable interpretation of the staff of the Commission do not permit the
Company to effect the Exchange Offer, or if for any other reason the Exchange
Offer is not consummated within 120 days following the date of the original
issue of the Old Notes, or if any holder of the Old Notes (other than the
Initial Purchasers) is not eligible to participate in the Exchange Offer, or
upon the request of any Initial Purchaser under certain circumstances, the
Company has agreed to use its best efforts to cause to become effective the
120th day after the original issue of the Old Notes, a Shelf Registration
Statement with respect to the resale of the Old Notes and to keep the Shelf
Registration Statement effective until three years after the effective date
thereof (or until one year after such effective date if such Shelf Registration
Statement is filed at the request of the Initial Purchasers under certain
circumstances). The Company also had agreed that in the event that either (i)
the Registration Statement is not filed with the Commission on or prior to the
30th calendar day following the date of the original issue of the Old Notes or
(ii) the Registration Statement is not declared effective on or prior to the
90th calendar day following the date of the original issue of the Old Notes or
(iii) the Exchange Offer is not consummated or a Shelf Registration Statement is
not declared effective on or prior to the 120th calendar day following the
original issue of the Old Notes, the interest rate borne by the Old Notes shall
be increased by one-half of one percent per annum after such 30-day period in
the case of clause (i) above after such 90-day period in the case of clause (ii)
above or after such 120-day period in the case of clause (iii) above. The
aggregate amount of such increase from the original interest rate pursuant to
those provisions will in no event exceed one-half of one percent per annum.
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<PAGE> 25
Upon (x) the effectiveness of the Registration Statement after the 90-day period
in clause (ii) above or (y) the consummation of the Exchange Offer or the
effectiveness of a Shelf Registration Statement, as the case may be, after the
120-day period outlined in clause (iii) above, the interest rate borne by the
Old Notes from the date of such filing or effectiveness or the day before the
date of consummation, as the case may be, will be reduced to the original
interest rate if the Company is otherwise in compliance with such requirements.
In the event the Exchange Offer is consummated, the Company will not be
required to file a Shelf Registration Statement relating to any outstanding Old
Notes other than those held by persons not eligible to participate in the
Exchange Offer, and the interest rate on such Old Notes will remain at its
initial level of 8%. The Exchange Offer shall be deemed to have been consummated
upon the earlier to occur of (i) the Company having exchanged New Notes for all
outstanding Old Notes (other than Old Notes held by persons not eligible to
participate in the Exchange Offer) pursuant to the Exchange Offer and (ii) the
Company having exchanged, pursuant to the Exchange Offer, New Notes for all Old
Notes that have been tendered and not withdrawn on the Expiration Date. Upon
consummation, holders of Old Notes seeking liquidity in their investment would
have to rely on exemptions to registration requirements under the securities
laws, including the Securities Act. See "Risk Factors -- Consequences of Failure
to Exchange."
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all Old
Notes validly tendered prior to 5:00 p.m., New York City time, on the Expiration
Date. The Company will issue $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of outstanding Old Notes accepted in the
Exchange Offer. Holders may tender some or all of their Old Notes pursuant to
the Exchange Offer in denominations of $1,000 and integral multiples thereof.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than (i) a broker-dealer who purchased
such Old Notes directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that the holder is acquiring the
New Notes in its ordinary course of business and is not participating, and has
no arrangements or understanding with any person to participate, in the
distribution of the New Notes. Holders of Old Notes wishing to accept the
Exchange Offer must represent to the Company that such conditions have been met.
Each broker-dealer that receives New Notes in exchange for Old Notes held
for its own account, as a result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, such broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. The Prospectus,
as it may be amended or supplemented from time to time, may be used by such
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus and any amendment or supplement to
this Prospectus available to any such broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
As of the date of this Prospectus, $250 million aggregate principal amount
of the Old Notes is outstanding. In connection with the issuance of the Old
Notes, the Company arranged for the Old Notes initially purchased by Qualified
Institutional Buyers to be issued and transferable in book-entry form through
the facilities of DTC, acting as depositary. The New Notes will also be issuable
and transferable in book-entry form through DTC.
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of April 15, 1998 (the "Record Date").
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<PAGE> 26
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. See "-- Exchange Agent." The Exchange Agent will act as agent
for the tendering holders of Old Notes for the purpose of receiving New Notes
from the Company and delivering New Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Old Notes will be returned, without
expenses, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
EXPIRATION DATES; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean May 20, 1998 unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old Notes, to
extend the Exchange Offer or to terminate the Exchange Offer and to refuse to
accept Old Notes not previously accepted, if any of the conditions set forth
herein under "-- Termination" shall have occurred and shall not have been waived
by the Company (if permitted to be waived by the Company), by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
and (ii) to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Old Notes. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform the
holders of the Old Notes of such amendment.
Without limiting the manner by which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones New Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from February 13, 1998, payable
semiannually on March 1 and September 1 of each year commencing on September 1,
1998, at the rate of 8% per annum. Holders of Old Notes whose Old Notes are
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of interest on the Old Notes accrued from February 13, 1998
until the date of the issuance of the New Notes. Consequently, holders who
exchange their Old Notes for New Notes will receive the same interest payment on
September 1, 1998 (the first interest payment date with respect to the Old Notes
and the New Notes) that they would have received had they not accepted the
Exchange Offer.
PROCEDURE FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes (unless such
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tender is being effected pursuant to the procedure for book-entry transfer
described below) and any other required documents, to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the Exchange Agent at its
addresses set forth herein under "-- Exchange Agent" prior to 5:00 p.m., New
York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN
ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also requests that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Old Notes and the Letters of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company.
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose Old Notes are held of record by DTC who desires to deliver such
Old Notes by book-entry transfer at DTC.
Any beneficial holder whose Old Notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering his Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such holder's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office of correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers which authorize such person
to tender the Old Notes on behalf of the registered holder, in either case
signed as the name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
All the questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which
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determinations will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not validly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable flowing the
Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date, or, as set forth under "Termination," to terminate the
Exchange Offer and (b) to the extent permitted by applicable law, purchase Old
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.
By tendering, each holder of Old Notes will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder, that neither the Holder nor
any other person has an arrangement or understanding with any person to
participate in the distribution of the New Notes and that neither the holder nor
any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act.
GUARANTEED DELIVERY PROCEDURE
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal, or any other required documents to the Exchange Agent prior to the
Expiration Date, or if such Holder cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Notes, the
certificate number or numbers of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby, and
guaranteeing that, [within five business days after the Expiration Date],
the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Old Notes to be tendered in proper form for
transfer and any other documents required by the Letter of Transmittal,
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date, unless previously accepted for exchange.
27
<PAGE> 29
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the business day prior to the Expiration Date and prior to acceptance for
exchange thereof by the Company. Any such notice of withdrawal must (i) specify
the name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii) be
signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfers
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Depositor withdrawing the tender
and (iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) for such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly tendered. Any Old
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be tendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for, any Old Notes not
therefore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes if: (i) any action or
proceeding is instituted or threatened in any court or by or before any
governmental agency with respect to the Exchange Offer, which, in the Company's
judgment, might materially impair the Company's ability to proceed with the
Exchange Offer or (ii) any law, statute, rule or regulation is proposed, adopted
or enacted, or any existing law, statute rule or regulation is interpreted by
the staff of the Commission or court of competent jurisdiction in a manner,
which, in the Company's judgment, might materially impair the Company's ability
to proceed with the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period.
EXCHANGE AGENT
United States Trust Company of New York, the Trustee under the Indenture,
has been appointed as Exchange Agent for the Exchange Offer. Questions and
requests for assistance and requests for additional copies of this Prospectus or
of the Letter of Transmittal should be directed to the Exchange Agent addressed
as follows:
By Mail or Hand Delivery: United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Services
Facsimile Transmission: (212) 420-6152
Confirm by Telephone: (800) 548-6565
28
<PAGE> 30
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Old Notes and in handling or
forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizing the federal income tax consequences of
the Exchange Offer reflects the opinion of Shearman & Sterling, counsel to the
Company, as to material federal income tax consequences expected to result from
the Exchange Offer. An opinion of counsel is not binding on the Internal Revenue
Service ("IRS") or the courts, and there can be no assurances that the IRS will
not take, and that a court would not sustain, a position to the contrary to that
described below. Moreover, the following discussion does not constitute
comprehensive tax advice to any particular Holder of Old Notes. The summary is
based on the current provisions of the Internal Revenue Code of 1986, as
amended, and applicable Treasure regulations, judicial authority and
administrative pronouncements. The tax consequences described below could be
modified by future changes in the relevant law, which could have retroactive
effect. Each Holder of Old Notes should consult its own tax advisor as to these
and any other federal income tax consequences of the Exchange Offer as well as
any tax consequences to it under foreign, state, local or other law.
In the opinion of Shearman & Sterling, exchanges of Old Notes for New Notes
pursuant to the Exchange Offer will be treated as a modification of the Old
Notes that does not constitute a material change in their terms, and the Company
intends to treat the exchanges in that manner. Therefore an exchanging Holder,
will not recognize any gain or loss, in respect of an exchange of an Old Note
for a New Note, and such Holder's basis and holding period in the New Note will
be the same as such Holder's basis and holding period in the Old Note. The
Exchange Offer will result in no federal income tax consequences to a
non-exchanging Holder.
29
<PAGE> 31
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 29, 1997 and as adjusted to give effect to the sale of the Notes after
deducting 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 NOVEMBER 29, 1997
--------------------------
ACTUAL As Adjusted(a)
-------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt, including current maturities of long-term
debt...................................................... $ 7,222 $ 7,222
Long-term debt, excluding current maturities:
9 3/4% Senior Notes due 2003.............................. 124,925 --
9 7/8 Senior Subordinated Notes due 2006.................. 100,000 100,000
8% Senior Subordinated Notes due 2008..................... -- 249,375
Other..................................................... 414 414
-------- --------
Total long-term debt.............................. 225,339 349,789
Stockholders' equity
Preferred Stock, $.01 par value, 1,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common Stock, $.01 par value, 50,000,000 shares
authorized; 22,792,892 shares issued and outstanding... 228 228
Additional paid-in capital................................ 238,578 238,578
Accumulated deficit....................................... (37,834) (46,790)(b)
Currency translation adjustment........................... (772) (772)
-------- --------
Total stockholders' equity............................. 200,200 191,244
-------- --------
Total capitalization.............................. $432,761 $548,255
======== ========
</TABLE>
- ---------------
(a) Adjusted to reflect the sale the Notes. The Company used approximately
$111.9 million of the net proceeds from the Offering to acquire
approximately $101.8 million aggregate principal amount (plus accrued and
unpaid interest) of the Company's outstanding 9 3/4% Notes tendered pursuant
to the Tender Offer, and to pay a consent fee in connection with the Tender
Offer to holders of the 9 3/4% Notes who consented to the adoption of
certain amendments to the indenture pursuant to which the 9 3/4% Notes were
issued. The Company used an additional $24.4 million of the net proceeds of
the Offering to redeem the remaining $23.2 million aggregate principal
amount (plus accrued and unpaid interest) of outstanding 9 3/4% Notes that
were not tendered in the Tender Offer on March 16, 1998 in the Redemption.
Immediately following the Offering, the Company had available under its Bank
Credit Facility approximately $120 million for subsequent borrowings. On
April 14, 1998 the Company announced that it had amended its credit
facilities by increasing the aggregate principal amount that may be borrowed
thereunder from $125 million to $200 million. Subsequent to the Offering,
the Company has completed one and entered into a definitive agreement to
make another strategic acquisition. The Company intends to finance the
PBASCO and AMP acquisitions with the remaining proceeds of the Offering,
cash from operations and borrowings under its Bank Credit Facility. See
"Recent Developments."
(b) Reflects the effect of a $9.0 million extraordinary charge for unamortized
debt issuance costs, tender and redemption premiums and fees and expenses in
connection with the Tender Offer and the Redemption.
30
<PAGE> 32
RECENT DEVELOPMENTS
RECENT ACQUISITIONS
Subsequent to the Offering, the Company has completed one strategic
acquisition and entered into a definitive agreement to make another strategic
acquisition, both of which it intends to fund with the remaining proceeds of the
Offering, cash from operations and borrowings under its Bank Credit Facility as
follows:
- Acquisition of Puritan-Bennett Aero Systems Co. On April 14, 1998, the
Company acquired PBASCO for a cash purchase price of $69.7 million.
PBASCO, which is headquartered in Lenexa, Kansas, is a leading
manufacturer of commercial aircraft oxygen delivery systems and passenger
service unit components and systems (PSU) and is a major supplier of air
valves, overhead lights and switches for both commercial and general
aviation aircraft. PBASCO oxygen and PSU equipment is approved for use
not only on all Airbus and Boeing aircraft, but also may be found on
numerous general aviation aircraft as well.
- Acquisition of Aircraft Modular Products. On April 16, 1998, the Company
entered into a definitive agreement to acquire AMP for a purchase price
of $117.3 million in cash.
AMP, headquartered in Miami, Florida, is a leading manufacturer of cabin
interior products for the business jet market and also participates in
the customization of both general aviation and commercial type VIP
aircraft. AMP designs, manufactures and sells a broad line of executive
aircraft interior components, including seating, cabinetry (side wall
ledges, bulkheads, credenzas, closets, galley structures, lavatories and
tables) and spare parts. The company serves four major customer segments:
aircraft OEMs, aircraft modification centers, business jet
owner/operators and commercial airlines.
BANK CREDIT FACILITY
On April 14, 1998, the Company announced that it had further amended it
existing credit facilities by increasing the aggregate principal amount that may
be borrowed thereunder from $125 million to $200 million. The amended Bank
Credit Facility consists of a $100 million acquisition term loan (the
"Acquisition Facility"), amortizable over five years beginning in April 1999,
and a $100 million working capital revolving facility (the "Revolving Facility"
and, together with the Acquisition Facility, the "Facilities"), up to $25
million of which may be available for acquisition purposes, which expires in
April 2004. The Facilities are collateralized by (i) substantially all of the
issued and outstanding capital stock of the subsidiaries of the Company and (ii)
security interests in and liens upon substantially all of the Company's
inventory, receivables and other personal property. The Bank Credit Facility
contains customary affirmative covenants, negative covenants and conditions of
borrowing. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Description of
Certain Indebtedness."
FOURTH QUARTER AND 1998 YEAR END RESULTS
On April 16, 1998, the Company announced certain operating results for the
fourth quarter and fiscal year ended February 28, 1998. The following summarizes
such operating results.
For the fiscal 1998 fourth quarter, B/E had revenues of $125.3 million, up
20% versus fiscal 1997 fourth quarter sales of $104.2 million. Fourth quarter
1998 operating earnings of $13.0 million included the effect of a nonrecurring
charge of $4.7 million related to the Company's settlement with the U.S.
government of a dispute over export sales to Iran Air between 1992 and 1995.
This charge reduced net earnings and earnings per share on a diluted basis by
$4.0 million and 17 cents per share, respectively. See "Business -- Legal
Proceedings." Also, during the 1998 fourth quarter, the Company recorded an
extraordinary item of $9.0 million, or 38 cents per share on a diluted basis,
related to costs associated with the early retirement in February of the
Company's 9 3/4% Notes in the Tender Offer. See "Use of Proceeds." As a result
of the nonrecurring charges, B/E reported a net loss for the period of $(2.9)
million, or (12) cents per share on a diluted basis, versus earnings of $6.3
million of 29 cents per share on a diluted basis, for the year-earlier final
three months. Common and common equivalent shares of 23.4 million shares rose
seven percent year to year.
31
<PAGE> 33
Sales of the full fiscal year ended February 28, 1998 reached $488.0
million, up 18% from the prior year's sales level of $412.4 million. Gross
profit for fiscal 1998 of $178.9 million was up 26% year to year, reflecting
both the substantial increase in revenues as well as a year-over-year increase
in gross margin of 36.7% versus the year-earlier level of 34.4%. As a result of
the higher level of revenues and gross profit, B/E reported record operating
earnings of $58.7 million in fiscal 1998, up 38% from the prior fiscal year.
Fiscal 1998 net earnings were $21.6 million, even after the two nonrecurring
charges.
Although complete financials for the fourth quarter of fiscal 1998 are not
yet available, the following table sets forth consolidated financial results of
the Company for the three months (unaudited) and fiscal year ended February 22,
1997 and unaudited consolidated financial results for the Company for the three
months and fiscal year ended February 28, 1998. The following summary fourth
quarter and fiscal year end financial data should be read in conjunction with
"Capitalization," "Selected Financial Data," B/E's financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
32
<PAGE> 34
BE AEROSPACE, INC.
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
--------------------------- ---------------------------
FEBRUARY 22, FEBRUARY 28, FEBRUARY 22, FEBRUARY 28,
1997 1998 1997 1998
------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................................ $412,379 $487,999 $104,228 $125,312
Cost of sales.................................... 270,557 309,094 65,902 78,269
-------- -------- -------- --------
Gross Profit..................................... 141,822 178,905 38,326 47,043
Operating Expenses:
Selling, general and administrative............ 51,734 58,622 14,115 15,605
Research, development and engineering.......... 37,083 45,685 9,324 10,697
Amortization................................... 10,607 11,265 2,586 3,070
Other.......................................... -- 4,664 -- 4,664
-------- -------- -------- --------
Total Operating Expenses............... 99,424 120,236 26,025 34,036
-------- -------- -------- --------
Operating earnings............................... 42,398 58,669 12,301 13,007
Interest expense, net............................ 27,167 22,765 5,322 5,866
-------- -------- -------- --------
Earnings before income taxes and extraordinary
item........................................... 15,231 35,904 6,979 7,141
Income taxes..................................... 1,522 5,386 697 1,075
-------- -------- -------- --------
Earnings before extraordinary item............... 13,709 30,518 6,282 6,066
Extraordinary item............................... -- (8,956) -- (8,956)
-------- -------- -------- --------
Net earnings (loss).............................. $ 13,709 $ 21,562 $ 6,282 $ (2,890)
======== ======== ======== ========
</TABLE>
33
<PAGE> 35
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 22, 1997, February 24, 1996,
February 25, 1995, February 26, 1994 and February 27, 1993, have been derived
from financial statements which have been audited by B/E's independent auditors.
The financial data as of and for the nine months ended November 29, 1997 and
November 30, 1996 have been derived from financial statements which are
unaudited, but, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for such
periods. Operating results for the nine months ended November 29, 1997 and
November 30, 1996 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, B/E's financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------------------------- -------------------
FEB. 27, FEB. 26, FEB. 25, FEB. 24, FEB. 22, NOV. 30, NOV. 29,
1993 1994 1995 1996(a) 1997(a) 1996 1997
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales............................... $198,019 $203,364 $229,347 $232,582 $412,379 $308,151 $362,687
Cost of sales........................... 137,690 136,307 154,863 160,031 270,557 204,655 230,825
-------- -------- -------- -------- -------- -------- --------
Gross profit............................ 60,329 67,057 74,484 72,551 141,822 103,496 131,862
Operating expenses:
Selling, general and administrative... 21,698 28,164 31,787 42,000 51,734 37,619 43,017
Research, development and
engineering......................... 11,299 9,876 12,860 58,327(b) 37,083 27,759 34,988
Amortization expense.................. 4,551 7,599 9,954 9,499 10,607 8,021 8,195
Other expenses........................ -- -- 23,736(c) 4,170(c) -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating earnings (loss)............... 22,781 21,418 (3,853) (41,445) 42,398 30,097 45,662
Interest expense, net................... 3,955 12,581 15,019 18,636 27,167 21,845 16,899
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before income taxes
(benefit), extraordinary item and
cumulative effect of accounting
change................................ 18,826 8,837 (18,872) (60,081) 15,231 8,252 28,763
Income taxes (benefit).................. 6,676 3,481 (6,806) -- 1,522 825 4,311
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before extraordinary
item and cumulative effect of
accounting change..................... 12,150 5,356 (12,066) (60,081) 13,709 7,427 24,452
Extraordinary item, net of tax effect... (522)(d) -- -- -- -- -- --
Cumulative effect of accounting
change................................ -- -- -- (23,332)(b) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)..................... $ 11,628 $ 5,356 $(12,066) $(83,413) $ 13,709 $ 7,427 $ 24,452
======== ======== ======== ======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Earnings (loss) before cumulative effect
of accounting change.................. $ 1.03 $ 0.35 $ (0.75) $ (3.71) $ 0.72 $ 0.42 $ 1.04
Extraordinary item, net of tax effect... (0.05)(d) -- -- -- -- -- --
Cumulative effect of accounting
change................................ -- -- -- (1.44)(b) -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)..................... $ 0.98 $ 0.35 $ (0.75) $ (5.15) $ 0.72 $ 0.42 $ 1.04
======== ======== ======== ======== ======== ======== ========
Common and common equivalent shares..... 11,847 15,438 16,021 16,185 19,107 17,786 23,414
</TABLE>
(continued on following page)
34
<PAGE> 36
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NINE MONTHS ENDED
--------------------------------------------------- -----------------------------
FEB. 25, 1995 FEB. 24, 1996(A) FEB. 22, 1997(A) NOV. 30, 1996 NOV. 29, 1997
------------- ---------------- ---------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Gross margin.............................. 32.5% 31.2% 34.4% 33.6% 36.4%
EBITDA(e)................................. $ 36,029 $(18,840) $ 66,545 $ 46,422 $ 64,144
Depreciation and amortization............. 16,146 18,435 24,147 16,325 18,482
Capital expenditures...................... 12,172 13,656 14,471 8,675 21,099
Ratio of earnings to fixed charges(f)..... NM(g) NM(g) 1.6x 1.4x 2.7x
Ratio of EBITDA to interest expense,
net..................................... 2.4x NM 2.4x 2.1x 3.8x
Ratio of EBITDA to pro forma interest
expense(h).............................. -- -- -- -- 2.8x
Backlog, at period end.................... $221,000(i) $340,000(i) $415,000(i) $420,000(i) $560,000
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 29, 1997
--------------------------
ACTUAL AS ADJUSTED(J)
-------- --------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA (END OF
PERIOD):
Working capital........................... $153,282 $263,532
Total assets.............................. 546,711 662,976
Long-term debt............................ 225,339 349,789
Stockholders' equity...................... 200,200 191,244
</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, the Company changed its method of accounting relating to the
capitalization of precontract 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 the Consolidated Financial Statements.
(c) 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.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(d) As a result of the sale of 9 3/4% Notes in 1993, the Company wrote off the
unamortized portion of certain debt issuance costs related to its prior
credit agreement.
(e) EBITDA represents net earnings before deducting extraordinary items, income
tax expenses, interest expense, net, other expenses and depreciation and
amortization expense. EBITDA is not a measurement in accordance with GAAP
and is presented to facilitate a further analysis of B/E's financial
condition. These data are not intended to be a substitute for net income
(loss) or operating cash flow as a measure of B/E's profitability.
(f) For purposes of computing this ratio, earnings consist of earnings before
extraordinary items, income taxes and fixed charges. Fixed charges consist
of interest expense, capitalized interest and amortization of deferred debt
issuance costs.
(g) Earnings were insufficient to cover fixed charges by approximately $18.0
million and $59.7 million for the fiscal years ended February 25, 1995 and
February 24, 1996, respectively.
(h) The ratio of EBITDA to pro forma interest expense is computed on a pro forma
basis giving effect to the Offering and use of proceeds therefrom as if the
Offering had occurred as of February 23, 1997. The ratio of EBITDA to pro
forma interest expense, net, would have been 3.5x had interest earned on any
unused net proceeds of the Offering been taken into account. See
"Capitalization."
(i) As adjusted on a similar basis to exclude certain backlog which was debooked
in August 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Bookings and Backlog Information."
(j) As adjusted to reflect the application of the net proceeds from the Offering
to acquire the 9 3/4% Notes pursuant to the Tender Offer and the Redemption,
related costs associated with the issuance of the Notes and a $9.0 million
extraordinary charge for unamortized debt issuance costs, tender and
redemption premiums and fees and expenses.
35
<PAGE> 37
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 class, business class, 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 broad line of in-flight entertainment products
including both non-interactive and interactive entertainment systems, as well as
passenger control service systems. 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 $3.3 billion as of November 29, 1997 (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 calendar years 1995 through 1997. Consequently, during fiscal
1997 and the nine months ended November 29, 1997, B/E has experienced
significant growth in backlog of seating and galley products, and, during the
nine months ended November 29, 1997 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.
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<PAGE> 38
The Burns acquisition has had a significant impact on B/E's results of
operations. Burns, with calendar 1995 revenues of $99,800, was one of the three
leading North American suppliers of commercial aircraft passenger seats and had
a base of airline customers that was largely complementary to that of B/E. B/E's
and Burns' approximate share of the 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.
Over the last two fiscal years, the Company's gross margins have improved
substantially, increasing from 31.2% in fiscal 1996 to 34.4% in fiscal 1997 and
to 36.4% for the nine months ended November 29, 1997. The primary reasons for
the improvement in gross margins include: (a) shift in product mix in all
divisions toward higher margin products; (b) higher unit volumes; and (c) a
company-wide re-engineering program which has resulted in higher employee
productivity and better manufacturing efficiency.
B/E's business strategy is to maintain its market leadership position
through various initiatives, including new product development. In fiscal 1997,
research, development and engineering expenses totaled $37,083 or 9% of net
sales, primarily consisting of costs related to the development of the MDDS,
with the balance attributable to its seating and galley products businesses.
During the nine months ended November 29, 1997, primarily as a result of the
substantial completion of the engineering associated with the development of the
MDDS and related Boeing line fit expenditures, such expenses were $34,988, or
10% of net sales.
The Company has two subsidiaries that are "Unrestricted Subsidiaries" as
defined under the Indenture, one of which holds the Company's in-flight
entertainment business and the other of which is a start-up company that holds
assets unrelated to the Company's core business. Under the terms of the
Indenture, Unrestricted Subsidiaries are not restricted by the terms of the
covenants. These two subsidiaries had net assets of approximately $18,000 as of
November 29, 1997.
In January 1998, the Company resolved a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran, which resulted in a
charge of $4,664 in its fourth quarter, which ended February 28, 1998. See
"Business -- Legal Proceedings."
RESULTS OF OPERATIONS -- NINE MONTHS ENDED NOVEMBER 29, 1997 COMPARED TO THE
NINE MONTHS ENDED NOVEMBER 30, 1996
Sales for the nine months ended November 29, 1997 were $362,687, or 18%
higher than sales of $308,151 for the comparable period in the prior year and
reflected a 26% increase in product sales, offset by a $14,790 decline in
service revenues. The increase in sales is attributable to substantially higher
unit volume shipments of all the Company's products.
Gross profit was $131,862 (36.4% of sales) for the nine months ended
November 29, 1997 and was $28,366 or 27.4% greater than the comparable period in
the prior year of $103,496, which represented 33.6% of sales. The increase in
gross profit, while primarily the result of the higher sales volume, was also
positively impacted by the improved gross margin.
At November 29, 1997 the Company's backlog was approximately $560,000, up
33% from backlog of $420,000 at November 30, 1996. Backlog at both dates have
been adjusted on a similar basis to exclude backlog debooked in August 1997. See
"-- Bookings and Backlog Information."
Selling, general and administrative and other expenses were $43,017 or
11.9% of sales for the nine months ended November 29, 1997. This was $5,398
higher than selling, general and administrative expenses for the comparable
period in the prior year of $37,619, or 12.2% of sales, and is primarily due to
the higher level of sales and quotation activity as well as a higher level of
customer service, product support and information technology activities.
Research, development and engineering expenses were $34,988, or 9.6% of
sales, for the nine months ended November 29, 1997. For the comparable period in
the prior year, research and development expense was $27,759 or 9.0% of sales.
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<PAGE> 39
Amortization expense of $8,195 for the nine months ended November 29, 1997
was $174 more than the amount recorded in the comparable period for fiscal 1996.
Net interest expense was $16,899 for the nine months ended November 29,
1997, or $4,946 less than the net interest expense of $21,845 recorded for the
comparable period in the prior year, and is due to the decrease in the Company's
long-term debt.
The increase in gross profit offset by somewhat higher operating expenses
and lower interest expense in the current year resulted in earnings before
income taxes of $28,763, an increase of $20,511 over the comparable period in
the prior year.
Income taxes for the nine months ended November 29, 1997 were $4,311, or
15% of earnings before income taxes as compared to $825 or 10% of earnings
before income taxes in the prior year.
Net earnings were $24,452, or $1.04 per share for the nine months ended
November 29, 1997 as compared to $7,427 or $.42 per share for the comparable
period in the prior year.
RESULTS OF OPERATIONS -- YEAR ENDED FEBRUARY 22, 1997 COMPARED TO YEAR ENDED
FEBRUARY 24, 1996
Sales for the year ended February 22, 1997 were $412,379, or 77% higher
than sales of $232,582 for the comparable period in the prior year. The increase
in sales is attributable to substantially higher volume shipments of all the
Company's products and services as a result of improving industry conditions. Of
the $179,797 increase in sales for the year, $103,800 was due to increased
seating and services revenues directly related to the acquisition of Burns.
Excluding the effect of the Burns acquisition, sales increased 33% year over
year.
At February 22, 1997, the Company's backlog was approximately $570,000, up
from $450,000 at February 24, 1996. New order bookings in the year ended
February 22, 1997 of $532,000 were $305,000 greater than new order bookings of
$227,000 for the comparable period in the prior year. Management estimates that
approximately 44% of its backlog is deliverable during fiscal 1998. See
"-- Bookings and Backlog Information."
Gross profit was $141,822, or 34.4% of sales, for the year ended February
22, 1997 and was $69,271 higher than gross profit for the comparable period in
the prior year of $72,551, which represented 31.2% of sales. The increase in
gross profit is primarily the result of the higher sales volumes and the mix of
products and services sold.
Selling, general and administrative expenses were $51,734, or 12.5% of
sales, for the year ended February 22, 1997. This was $9,734 higher than
selling, general and administrative expenses for the comparable period in the
prior year of $42,000, or 18.1% of sales, principally due to the substantial
increases in revenues and the acquisition of Burns.
Research, development and engineering expenses were $37,083, or 9.0% of
sales, for the year ended February 22, 1997. For the comparable period in the
prior year, research and development expense was $58,327, or 25.1% 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 interactive entertainment system,
offset somewhat by an increase in product development activity in the Seating
Products Group.
Amortization expense for the year ended February 22, 1997 of $10,607 was
$1,108 more than the amount recorded in fiscal 1996 as a result of the Burns
acquisition.
Net interest expense was $27,167 for the year ended February 22, 1997, or
$8,531 higher than the net interest expense of $18,636 recorded for the
comparable period in the prior year, and is due to the increase in the Company's
long-term debt outstanding throughout most of fiscal 1997 as a result of the
9 7/8% Notes issued at the time of the Burns acquisition.
Earnings before income taxes of $15,231 for the year ended February 22,
1997 were $75,312 more than the loss before income taxes of $60,081 in the prior
year.
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<PAGE> 40
Income taxes for the year ended February 22, 1997 were $1,522, or 10% of
earnings before income taxes, as compared to no tax provision in fiscal 1996.
Net earnings were $13,709, or $.72 per share, for the year ended February
22, 1997 as compared to a net loss of ($83,413) or ($5.15) 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 TO 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 a 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. See "-- Bookings and
Backlog Information."
Gross profit was $72,551 or 31.2% 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 (18.1% of sales)
for the year ended February 24, 1996. This was $10,213 higher than the
comparable period in the prior year of $31,787 (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 annual 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 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 fiscal year ended February 25,
1995 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.
Interest expense, net was $18,636 for the year ended February 24, 1996 or
$3,617 higher than 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 (36%) 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> 41
BOOKINGS AND BACKLOG INFORMATION
On September 15, 1997, British Airways ("BA") notified the Company of its
decision not to conduct a flight trial of B/E's MDDS interactive video system.
As a result, the Company believes that BA will ultimately select a competitor's
system for their in-flight entertainment equipment needs.
As a result of BA's decision not to move forward with the interactive
program, as of August 1997, the Company debooked approximately $155,000 of
backlog related to the MDDS program. At November 1997, the Company's backlog,
after debooking the BA backlog, stood at approximately $560,000, which
represents a year-to-year increase of approximately $140,000 or 33% versus the
Company's backlog at the end of its fiscal 1997 third quarter, as similarly
adjusted to exclude the amount then attributable to the BA MDDS backlog.
Although the Company has debooked the BA backlog, the Company is continuing
to complete the initial development and testing of the MDDS product and
anticipates delivery of the first MDDS product to its launch customer, JAL, in
1998. See "Business -- Products and Services."
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working capital
needs and scheduled payments of interest on its indebtedness. 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 $153,282 as of November 29, 1997, compared to $122,174 as of
February 22, 1997.
At November 29, 1997, the Company's cash and cash equivalents were $58,221
as compared to $44,149 at February 22, 1997. Cash provided from operating
activities during the nine months ended November 29, 1997 was $27,792 and cash
used in operating activities in the nine months ended November 30, 1996 was
$10,147. The primary source of cash during the nine months ended November 29,
1997 was net earnings of $24,452, non-cash charges for depreciation and
amortization of $18,482 and increases in accounts payable of $13,638 offset by a
use of cash of $25,671 related to increases in inventories and receivables and
$4,360 related to net decreases in other assets and liabilities.
In May 1997, the Company amended its existing credit facilities with The
Chase Manhattan Bank by increasing the aggregate principal amount that may be
borrowed thereunder to $125,000 (the "Bank Credit Facility"). Following the
Offering, the Bank Credit Facility consisted of a $25,000 Reducing Revolver and
a $100,000 Revolving Facility. The amount of the Reducing Revolver will be
reduced automatically by 12.5% on August 26, 2000 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 a wholly
owned subsidiary and has a five-year maturity. 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 29, 1997
indebtedness under the Bank Credit Facility were letters of credit amounting to
approximately $4,572. Immediately following the Offering, the Company had
approximately $120,000 available for subsequent borrowings under the Bank Credit
Facility. On April 14, 1998 the Company announced that it had amended its credit
facilities by increasing the aggregate principal amount that may be borrowed
thereunder from $125 million to $200 million. Subsequent to the Offering, the
Company has completed one and entered into a definitive agreement to make
another strategic acquisition. The Company intends to finance the PBASCO and AMP
acquisitions with the remaining proceeds of the Offering, cash from operations
and borrowings under its Bank Credit Facility. See "Recent Developments."
Long-term debt consists of the Old Notes and the 9 7/8% Notes which are due
March 1, 2008 and February 1, 2006, respectively. The Company completed the
Tender Offer for all outstanding 9 3/4% Notes on February 25, 1998. The Company
redeemed the remaining outstanding 9 3/4% Notes that were not tendered in the
Tender Offer on March 16, 1998 at a redemption price of 104.875% of the
principal amount in the Redemption. Purchase of the 9 3/4% Notes pursuant to the
Tender Offer and the Redemption was funded with a portion of the proceeds from
the Offering. See "Use of Proceeds." The Company incurred an $8,956
extraordinary charge for unamortized debt issue costs, tender and redemption
premiums and fees and expenses related to the repurchase of the 9 3/4% Notes.
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<PAGE> 42
The Company's capital expenditures were $21,099, and $8,675 during the nine
months ended November 29, 1997, and November 30, 1996, respectively. The
increase in capital expenditures was primarily attributable to (i) the
development of a new management information system to replace the Company's
existing systems, many of which were inherited in acquisitions, and (ii)
expenditures for plant modernization. The management information system is
expected to be installed over the next 18 months and will be year 2000
compliant. The Company anticipates ongoing capital expenditures of approximately
$25,000 per year for the next several years to be in line with expanded growth
in business.
The Company believes that cash flow from operations, proceeds from the sale
of the Notes offered hereby 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 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 now experienced five consecutive years
of profitability including record profitability in each of the last three
calendar years. This financial turnaround has, in part, been driven by record
load factors, rising fare prices and declining fuel costs. The airlines have
substantially restored their balance sheets through cash generated from
operations and debt and equity placements. As a result, 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 economics through higher aircraft utilization. Increased
airline competition may also result in airlines seeking to reduce costs by
producing greater price competition from airline cabin interior products
manufacturers, thereby adversely affecting the Company's margins.
Recently, turbulence in the financial and currency markets of many Pacific
Rim Countries has led to uncertainty with respect to the economic outlook for
these countries. Of the Company's $560,000 of backlog at November 29, 1997, the
Company had $69,000 with Asian carriers deliverable in fiscal 1999 and a further
$74,000 deliverable in subsequent fiscal years. Of such existing Asian carrier
backlog, approximately $48,000 is with JAL, Singapore Airlines and Cathay
Pacific. Although not all Asian carriers have been affected by the current
economic events in the Pacific Rim, certain carriers could cancel or defer their
existing orders and future orders from airlines in these countries for the
Company's cabin interior products may be adversely affected.
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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BUSINESS
INTRODUCTION
B/E 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, 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 leading global market
positions 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.
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 $1.5 billion dollars during fiscal 1997.
Historically, revenues in the cabin interior products industry have been
derived from five sources: (i) retrofit programs in which airlines purchase new
components to overhaul completely the interiors of aircraft already in service;
(ii) refurbishment programs in which airlines purchase components and services
to improve the appearance and functionality of certain cabin interior equipment;
(iii) new installation programs in which airlines purchase new equipment to
outfit a newly delivered aircraft; (iv) spare parts; and (v) equipment to
upgrade the functionality or appearance of the aircraft interior. 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. Management estimates that the aggregate size of the
worldwide aircraft seat market (including spare parts) during fiscal 1998
was in excess of $530 million. 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 units ("PCUs") and
related wiring and harness assemblies and sophisticated interactive
telecommunications and entertainment systems. Management estimates that the
aggregate size of the worldwide PESS market was approximately $300 million
during fiscal 1998. 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
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<PAGE> 44
and, with the further development of live broadcast television on many
narrow-body, aircraft. PESS products are currently supplied by
approximately five companies worldwide. The Company has a market share of
approximately 37% in individual passenger in-flight entertainment systems,
determined on the basis of installed units as of November 29, 1997.
- 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. Management estimates that the aggregate size of the worldwide
galley equipment market during fiscal 1998 was in excess of $360 million.
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 20
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 nine months
ended November 1997 and 1996, and for the three most recent fiscal years are
presented below (in millions):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
NOVEMBER FISCAL YEAR
------------ --------------------
1997 1996 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Seating products.............................. $197 $165 $217 $ 97 $100
Galley products............................... 96 75 101 79 81
Passenger entertainment and service systems... 48 32 52 33 34
Services...................................... 22 36 42 23 14
---- ---- ---- ---- ----
Total revenues...................... $363 $308 $412 $232 $229
==== ==== ==== ==== ====
</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 year 1994, and have achieved record operating earnings during
calendar years 1995 through 1997, and have substantially restored their balance
sheets since then through cash generated from operations and debt and equity
placements. This improvement in the airlines' profitability and liquidity has,
in turn, led to an increase in refurbishment and retrofit programs, which
coupled with spares revenues generated approximately 60% of the Company's
revenues for the nine months ended November 1997. Further, throughout calendar
1997, 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 1996, consisted
of 10,300 aircraft, including 3,000 aircraft with fewer than 120 seats,
4,511 aircraft with between 120 and 240 seats and 2,760 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 $9.5 billion at
the end of 1997. 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
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<PAGE> 45
approximately five percent per year through 2016, increasing annual revenue
passenger miles from approximately 1.7 trillion in 1996 to approximately
4.4 trillion by 2016. Airlines have recently been purchasing a significant
number of new aircraft due in part to the current high load factors and the
projected growth in worldwide air travel. According to the Boeing Report,
the worldwide fleet of commercial passenger aircraft is projected to expand
from approximately 10,300 at the end of 1996 to approximately 21,200 by the
end of 2016. Related growth in aircraft interior product shipments
associated with new aircraft deliveries began during calendar 1996. In
1997, Boeing shipped 375 aircraft versus 218 in 1996. In addition, Boeing
has stated plans to ship 550 aircraft in each of calendar years 1998 and
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 1997 (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 1.7 million passenger seats at the end of 1996 to
approximately 4.0 million passenger seats at the end of 2016. 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 1997 Airline Monitor, the percentage of Boeing aircraft deliveries
projected to be wide-body aircraft for 1997 through 2001 is 39%, as
compared to 33% 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, live broadcast television for
narrow-body domestic aircraft, 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. Live TV(TM), a new product line being developed
by a joint venture between the Company and Harris Corporation, will provide
live broadcast television via satellite to narrow-body aircraft allowing
passengers the capability to view up to 48 different channels of television
service. New cabin interior products will generate new installation and
retrofit revenues as well as service revenues from equipment maintenance,
inspection and repair.
- Growing Upgrade, Maintenance, Inspection and Repair Service
Markets. Historically the airlines have relied on their airframe and
engine mechanics to repair or replace cabin interior products that have
become damaged or otherwise non-functional. As cabin interior product
configurations have become
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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
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 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, based on dollar
sales for the nine months ended November 29, 1997, and 37% in individual
passenger in-flight entertainment systems, determined on the basis of
installed base as of November 29, 1997. 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 $3.3 billion installed base of
cabin interior equipment (valued at replacement prices as of November 29,
1997), 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.
- Broadest Product Line in the Industry. Management believes the
Company offers the broadest and the most technologically advanced line of
products for the cabin interiors of commercial aircraft. 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
approximately 500 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 introduction of several premium and main
cabin class seats, which the Company believes provide greater comfort and
are lighter in weight as a result of their ergonomic design and
pre-engineered individual passenger comfort features; 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.
- Proven Track Record of Integration. The Company has demonstrated
the ability to make strategic acquisitions and successfully integrate such
acquired businesses by identifying opportunities to consolidate
engineering, manufacturing and marketing activities, as well as
rationalizing product lines. The Company has purchased nine businesses over
the last nine years, for an aggregate purchase price of approximately $290
million. Since 1989, the Company has integrated each of its acquisitions by
reducing
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the number of operating facilities acquired from 20 to nine and
consolidating personnel at the acquired businesses, resulting in headcount
reductions of approximately 1,300 employees.
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 60% of B/E's revenues for
the nine months ended November 29, 1997 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 calendar years 1995 through
1997. Deterioration of cabin interior product functionality and aesthetics
occurred within the commercial airline fleets during the industry downturn
because of maintenance deferrals. Since the turnaround began, the airlines
have experienced greater utilization resulting from higher load factors,
which 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. A significant portion of the Company's recent growth in
backlog, revenues and operating earnings has been 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. Airlines have recently been purchasing a significant number of
new aircraft in part due to current high load factors and the projected
growth in worldwide air travel. According to the Current Market Outlook
published by the Boeing Commercial Airplane Group in 1997 (the "Boeing
Report"), worldwide air travel is projected to increase by 75% by calendar
2006 and the worldwide fleet of commercial passenger aircraft is projected
to expand from approximately 10,300 at the end of 1996 to approximately
15,300 by the end of 2006 and to more than 21,200 by 2016. Related growth
in aircraft interior product shipments associated with new aircraft
deliveries began during calendar 1996. In 1997, Boeing shipped 375 aircraft
versus 218 in 1996. In addition Boeing has stated plans to ship 550
aircraft in each of calendar years 1998 and 1999. The Company generally
receives orders related to new aircraft deliveries approximately six months
before the delivery date. Furthermore, according to the July 1997 Airline
Monitor, the percentage of new Boeing aircraft deliveries projected to be
wide-body aircraft for 1997 through 2001 is 39% as compared to 33% for the
five year period ended December 31, 1996. This shift toward wide-body
aircraft is significant to the Company since these aircraft require as much
as seven times the dollar value of cabin interior products as narrow-body
aircraft, including substantially more seats, galley equipment and
in-flight entertainment products.
- 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. In
June 1997, the Company announced a joint venture with Harris Corporation to
develop and deliver live broadcast television (LiveTV(TM)) to domestic
narrow-body commercial aircraft. The Company expects that in-flight
entertainment systems, including the new technology designed to deliver
live broadcast television on domestic narrow-body aircraft, will be one of
the fastest growing and among the largest product categories in the
commercial aircraft cabin interior products industry.
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 two current systems
are (i) the B/E 2000, with an installed base of approximately 28,000 units,
which is a
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system that provides non-interactive video programming and (ii) the B/E
2000M, with an installed base of approximately 6,000 units, which offers
similar functionality to the B/E 2000 but can be upgraded to the Company's
Multimedia Digital Distribution System ("MDDS") product. The MDDS product,
which is in its final development stage, is a fully interactive
entertainment system with the capacity to provide movies on demand,
telecommunications, gaming and other services. The Company has completed
the initial development and testing of the MDDS product and anticipates
delivery of the first MDDS product to its launch customer, Japan Airlines
("JAL"), in 1998. The Company also anticipates completing the engineering
necessary to enable installation of the MDDS as a line fit option on Boeing
aircraft in 1998. As of November 29, 1997 B/E had an in-flight
entertainment systems backlog of approximately $139 million.
BUSINESS STRATEGY
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.
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 manufactured and 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 base as of
November 29, 1997 of aircraft seats, valued at replacement prices, of
approximately $1.8 billion comprised of more than 900,000 seats.
- Tourist Class. The Company is the leading worldwide manufacturer of
tourist class seats. 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 tourist class aircraft seats. The
Company's first class seats and certain of its business class seats are
equipped with articulating bottom cushion suspension systems, sophisticated
hydraulic leg-rests, lumbar massage devices, adjustable thigh support
cushions, reading lights, adjustable head and neck supports and large
tables.
- Convertible Seats. The Company has developed two types of seats
which can be converted from tourist class triple-row seats to business
class double-row seats 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.
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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 $340 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 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 B/E 2000, introduced in 1991, is one of the
Company's first-generation individual inflight video systems and offers
centralized electronic distribution of a limited range of programming.
Since its introduction, the Company has installed approximately 28,000
units of the B/E 2000 and earlier generation individual passenger video
systems with 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 B/E 2000M is an in-flight entertainment system
that offers similar functionality to the 2000 but can be upgraded to
the Company's fully interactive MDDS. Since its introduction in 1994,
the Company has installed approximately 6,000 units.
MDDS -- B/E's MDDS is being developed as 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(TM), Sega(TM) and PC-based
games, in-flight shopping and, in the future, live television, among
other services. The Company has completed the initial development and
testing of the MDDS product and anticipates delivery of the first
MDDS product to its launch customer, JAL, in 1998. The Company also
anticipates completing the engineering necessary to enable
installation of the MDDS as a line fit option on Boeing aircraft in
1998.
As of November 29, 1997, B/E had entered into agreements to supply
individual passenger entertainment systems to a number of airlines, including
United Airlines, JAL, Asiana Airlines, Air France and KLM, and had an in-flight
entertainment systems backlog of approximately $139 million.
- LiveTV(TM). In June 1997, the Company announced a joint venture
with Harris Corporation to develop and market a system which will allow
airline passengers to receive in-flight, live broadcast television aboard
narrow-body commercial aircraft at each individual passenger seat. The
Company will control a 51 percent voting interest in the joint venture.
Under the joint venture agreement, B/E will provide its individual-seat
video distribution system as its part of the overall LiveTV(TM) reception
system, while Harris Corporation will provide the specialized aircraft
antenna and receiver system to enable in-the-air reception. The Company
expects to be in a position to commence deliveries to a launch customer for
LiveTV(TM) in 1998.
- 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.
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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 galley
structures, coffee and beverage makers, water boilers, ovens, liquid containers,
refrigeration equipment and other galley components. Management estimates that
the Company has an aggregate installed base of galley equipment and structures,
valued at replacement prices, of approximately $1.1 billion.
- Coffee Makers. The Company is the leading manufacturer of aircraft
coffee makers, with the Company's 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 both
brew coffee and 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 the leading 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' need 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 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.
Services and Specialty Products
The Company is an active participant in the growing service and custom
products markets. Management believes that the Company's broad and integrated
product line and close relationships with its airline and leasing customers
position the Company to become a leading service provider in this market. 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.
- Services. The Company provides a comprehensive compliment of
services for cabin interior products on board aircraft either between
flights or on an overnight basis, or at one of more of seven service
centers in the worldwide service network. The spectrum of services includes
systems check and components repair, parts inventory and management,
refurbishment of seating products, on board surveys regarding status and
product installations, as well as data support functions such as loading
and updating of in-flight systems entertainment software, direct satellite
broadcast systems support and systems integration.
- Specialty Products. The Company manufacturers several specialty
products for the commercial airline industry including flight attendant
seats, observer seats, and custom products in the passenger seating area.
The Company maintains a staff of engineers to design and certify various
modules and kits to accommodate individual passenger video and
telecommunications modules in seat backs and center consoles which were
originally not designed for such applications. The Company believes it is
able to provide products for unique applications more rapidly than original
manufacturers.
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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 $35.0 million, $27.8 million, $37.1 million,
$58.3 million, and $12.9 million for the nine months ended November 29, 1997 and
November 30, 1996 and the fiscal years ended February 22, 1997, February 24,
1996, and February 25, 1995, respectively. The increase in expenses during the
current period is the result of the substantial completion of the Boeing Line
Fit certification activities for MDDS and ongoing product development activity
in the seating and galley products groups. B/E employs approximately 500
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 107
persons, along with 15 independent sales representatives. B/E sales to non-US
airlines were $164.1 million, $152.6 million, $203.4 million, $124.5 million,
and $114.5 million for the nine months ended November 29, 1997 and November 30,
1996 and the fiscal years ended February 22, 1997, February 24, 1996, and
February 25, 1995, respectively, or approximately 45%, 49%, 49%, 54%, 50%,
respectively, of net sales during such periods.
Airlines select manufacturers of cabin interior products primarily on the
basis of custom design capabilities, product quality and performance, on time
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 accounted for
approximately 60% of the purchases of products manufactured by B/E during fiscal
1997. 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 to more efficiently
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.
At the beginning of fiscal 1998, the Company initiated a program management
discipline under which a program manager is assigned for each significant
contract. The program manager is responsible for all aspects of the specific
contract, including management of change orders and negotiation of the related
non-recurring engineering charges, monitoring the progress of the contract
through its scheduled delivery dates, and overall profitability associated with
the contract. The Company believes that it and its customers derive substantial
benefit from its program management approach, including better on-time delivery
and higher service levels. The Company also believes its program management
approach results in better customer satisfaction and higher profitability over
the life of the contract.
During the nine month period ended November 29, 1997, one customer
accounted for approximately 17% of the Company's total revenues, and no other
customer accounted for more than 10% of such revenues.
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Because of differing schedules of various airlines for purchases of new aircraft
and for retrofit and refurbishment of existing aircraft, the portion of the
Company's revenues attributable to particular airlines varies from year to year.
BACKLOG
Management estimates that B/E's backlog at November 29, 1997 was
approximately $560 million, approximately 49% of which management believes to be
deliverable over the next 12 months, compared with a backlog of $420 million on
November 30, 1996 (as similarly adjusted for the debooking of the British
Airways MDDS program in August 1997).
CUSTOMER SERVICE
The Company believes that it provides the highest level of customer service
and product support 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, proposal requests 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 onsite 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 ten 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; and
revisions of such reserves are recognized in the period in which such revisions
are determined.
The Company also 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 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
MAS and Rockwell Collins. The Company's primary competitors for galley products
are JAMCO Limited and Britax, PLC.
MANUFACTURING AND RAW MATERIALS
The Company's manufacturing operations consist of both the in-house
manufacturing of component parts and sub-assemblies and the assembly of Company
specified and designed component parts which are
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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.
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. At November 29, 1997, the Company had
developed eleven different seat models which meet these new seat safety
regulations.
PATENTS
B/E currently holds 43 United States patents and 14 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 Company.
EMPLOYEES
As of November 29, 1997, B/E had approximately 3,481 employees.
Approximately 72% of these employees are engaged in manufacturing, 14% in
engineering, research and development, and 14% in sales, marketing, product
support and general administration. Approximately 19% of the employees are
represented by a union. On April 25, 1997, the Company completed negotiations
with its only domestic union which represents 12% of the Company's employees.
This contract, which covers a period of three years, was ratified by the members
of the union on April 26, 1997. B/E considers its employee relations to be good.
PROPERTY
As of November 29, 1997, B/E had 15 principal facilities, comprising an
aggregate of approximately 1,088,100 square feet of space. The following table
describes the principal facilities and indicates the location, function,
approximate size and ownership status of each:
<TABLE>
<CAPTION>
FACILITY
SIZE
LOCATION PRODUCTS AND FUNCTION (SQ. FEET) OWNERSHIP
-------- --------------------- ---------- ---------
<S> <C> <C> <C>
CORPORATE
Wellington, Florida.................... Corporate headquarters, finance, 17,700 Owned
marketing sales
Longwood, Florida...................... Administration 1,300 Leased
SEATING PRODUCTS
Litchfield, Connecticut................ Manufacturing, service and warehousing 147,700 Owned
</TABLE>
52
<PAGE> 54
<TABLE>
<CAPTION>
FACILITY
SIZE
LOCATION PRODUCTS AND FUNCTION (SQ. FEET) OWNERSHIP
-------- --------------------- ---------- ---------
<S> <C> <C> <C>
Winston-Salem, North Carolina.......... Seating products group headquarters, 264,800 Owned
research and development, finance,
marketing, sales and manufacturing
Leighton Buzzard, England.............. Manufacturing, service, research and 114,000 Owned(a)
development, sales support, finance
and warehousing
Kilkeel, Northern Ireland.............. Manufacturing, sales support and 38,500 Owned
warehousing
GALLEY PRODUCTS:
Anaheim, California.................... Manufacturing, service, research and 57,100 Leased
development, sales support, finance
and warehousing
Delray Beach, Florida.................. Manufacturing, service, research and 52,000 Owned
development, sales support, finance
and warehousing; galley products group
headquarters
Jacksonville, Florida.................. Manufacturing, service, engineering, 75,000 Owned
and warehousing
Nieuwegein, The Netherlands............ Manufacturing, service, research and 39,000 Leased
development, sales support, finance
and warehousing
PESS PRODUCTS:
Irvine, California..................... Manufacturing, service, research and 106,700 Leased
development, sales support, finance
and warehousing; In-flight
entertainment group headquarters
SERVICES:
Orange, California..................... Upgrade, maintenance, inspection and 106,300 Leased
repair, finance, sales support and
warehousing; service group
headquarters
Burnsville, Minnesota.................. Upgrade, maintenance, inspection and 7,200 Leased
repair
Woodville, Washington.................. Upgrade, maintenance, inspection and 26,800 Leased
repair
Chesham, England....................... Upgrade, maintenance, inspection and 34,000 Owned(a)
repair
</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 L5.0 million.
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 "-- Industry Overview" and "-- 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.
LEGAL PROCEEDINGS
The Company is not a party to litigation or other legal proceedings which
the Company believes could reasonably be expected to have a material adverse
effect on the Company's business, financial condition and results of operations.
In January 1998, the Company resolved a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran Air. The dispute
centered on shipments of aircraft seats and related spare parts for five
civilian aircraft operated by Iran. Iran Air purchased the seats in 1992 and
arranged for them to be installed by a contractor in France. At the time, Iran
was not the subject of a U.S. trade embargo. In
53
<PAGE> 55
connection with its sale of seats to Iran Air, B/E applied for and was granted a
validated export license by the U.S. Department of Commerce (the "DOC"). The
dispute with the U.S. Government centered on whether seats were delivered to
Iran Air before the formal license was issued by the DOC, some seven months
after B/E first applied for the license. This action resolved all disputes
between B/E Aerospace and the Department of Justice as well as the DOC's Bureau
of Export Enforcement. As part of the settlement, B/E plead guilty to a
violation of the International Economic Emergency Powers Act and was placed on
probation for a three-year period. In addition, B/E entered into a consent order
with the DOC under which the DOC has agreed to suspend the imposition of a
three-year export denial order on PTC Aerospace, a member of B/E's U.S. Seating
Products Group, provided no further violations of the export laws occur. The
Company recorded a charge of $4.7 million in its fourth quarter of fiscal 1998,
which ended February 28, 1998, related to fines, civil penalties and associated
legal fees arising from the settlement. See "Recent Developments."
54
<PAGE> 56
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............................ 58 Chairman of the Board
Robert J. Khoury.......................... 55 Vice Chairman of the Board and Chief
Executive Officer and Director
Paul E. Fulchino.......................... 51 President, Chief Operating Officer and
Director
Marco C. Lanza............................ 41 Executive Vice President, Marketing and
Product Development
Thomas P. McCaffrey....................... 43 Corporate Senior Vice President of
Administration, Chief Financial Officer
and Assistant Secretary
E. Ernest Schwartz........................ 61 Corporate Senior Vice President,
Development and Planning
Edmund J. Moriarty........................ 54 Corporate Vice President -- Law, General
Counsel and Secretary
Jeffrey P. Holtzman....................... 42 Vice President, Treasurer and Assistant
Secretary
Sam G. Ayoub.............................. 55 Group Vice President and General Manager,
Services Group
G. Bernard Jewell......................... 56 Group Vice President and General Manager,
Seating Products Group
Roman G. Ptakowski........................ 49 Group Vice President and General Manager,
Galley Products Group
Jim C. Cowart............................. 45 Director**
Richard G. Hamermesh...................... 49 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
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. Mr. Khoury is employed by the
Company pursuant to an Employment Agreement extending through December 31, 2001.
Mr. Khoury is the brother of Robert J. Khoury.
55
<PAGE> 57
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 extending through February 28, 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. 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 Vice President and General Manager of the In-flight Entertainment Group 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 Corporate Senior Vice President of
Administration, Chief Financial Officer and Assistant Secretary 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.
E. Ernest Schwartz has been Corporate Senior Vice President -- Development
and Planning since December 1997. From March 1997 through November 1997 was Vice
President and General Manager of the Galley Products Group 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.
Edmund J. Moriarty has been Corporate 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.
Sam G. Ayoub has been Vice President and General Manager of the Company's
Services Group since May 1996 and from November 1994 through April 1996, was
Executive Vice President-Services. From 1984 to 1994 Mr. Ayoub served in several
capacities with AAR Corp. including Corporate Vice President Marketing and
President-Technical Services Division. Prior to that Mr. Ayoub was with United
Airlines for 20 years with his last position being General Manager of their
Cargo Division.
G. Bernard Jewell has been Vice President and General Manager of the
Company's Seating Products Group since March 1996. From February 1994 through
February 1996, Mr. Jewell was Group Vice President, Services Group 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.
Roman G. Ptakowski has been the Vice President and General Manager of the
Galley Products Group since December 1997. From September 1995 through December
1997, Mr. Ptakowski was Vice President, Sales and Marketing of the Galley
Products Group of the Company. From January 1995 through August 1995, Mr.
Ptakowski served as Senior Vice President, Marketing for Farrel Corporation.
Prior to that he was
56
<PAGE> 58
with the ABB Power T&D Company Inc. and Westinghouse Electric Corp. for 25 years
with his last position being General Manager of their Protective Relay Division.
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 executive education consulting company,
and, from December 1986 to August 1987, Dr. Hamermesh was an independent
consultant. Prior to such time, Dr. Hamermesh was on the faculty at the Harvard
Business School. Dr. Hamermesh is also a Director of Applied Extrusion
Technologies, Inc.
Brian H. Rowe has been a Director of the Company since July 1995. Mr. Rowe
is currently Chairman Emeritus of GE Aircraft Engines, a principal business unit
of the General Electric Company, where he also served as Chairman 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 1996,
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.
57
<PAGE> 59
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 January
31, 1998 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 1997 (collectively, the "Named Executive
Officers") and each director of the Company; and (iii) all Named Executive
Officers and directors of the Company as a group. Except as otherwise indicated,
each of the stockholders named below has sole voting and investment power with
respect to the shares of Common Stock beneficially owned:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
------------------------
NUMBER PERCENT OF
OF OUTSTANDING
NAME SHARES SHARES(a)
---- --------- -----------
<S> <C> <C>
Fidelity Management & Research.............................. 3,145,900 13.8%
82 Devonshire Street
Boston, MA 02109
AIM Management Group, Inc. ................................. 1,318,200 5.8
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Hansjorg Wyss*.............................................. 147,359(b) **
Amin J. Khoury+*............................................ 110,000(c) **
Paul E. Fulchino+*.......................................... 106,783(d) **
Thomas P. McCaffrey+........................................ 73,496(e) **
Jim C. Cowart*.............................................. 69,250(f) **
Robert J. Khoury+*.......................................... 61,555(g) **
E. Ernest Schwartz+......................................... 35,000(h) **
Brian H. Rowe*.............................................. 22,500(i) **
Richard G. Hamermesh*....................................... 18,600(j) **
All Directors and Named Executive Officers as a group (15
persons).................................................. 970,667(k) 4.1%
</TABLE>
- ---------------
+ Named Executive Officer
* Director of the Company
** Less than 1 percent
(a) The number of shares of Common Stock deemed outstanding includes: (i)
22,846,399 shares of Common Stock outstanding as of January 31, 1998; 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 January 31, 1998).
(b) Includes 6,250 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 11,250
shares of Common Stock which are not exercisable in the next sixty days.
(c) Represents shares issuable upon the exercise of stock options exercisable
in the next sixty days. Excludes options to purchase 180,000 shares of
Common Stock which are not exercisable in the next sixty days.
(d) Includes 105,000 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 165,000 shares of Common Stock
which are not exercisable in the next sixty days.
(e) Includes 67,500 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 97,500 shares of Common Stock
which are not exercisable in the next sixty days.
58
<PAGE> 60
(f) Includes 20,000 shares acquired by a profit sharing plan in which Mr.
Cowart has a fifty percent interest and 46,250 shares issuable upon the
exercise of stock options exercisable in the next sixty days. Excludes
options to purchase 13,750 shares of Common Stock which are not exercisable
in the next sixty days.
(g) Includes 60,000 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 130,000 shares of Common Stock
which are not exercisable in the next sixty days.
(h) Includes 35,000 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.
(i) Includes 22,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 27,500
shares of Common Stock which are not exercisable in the next sixty days.
(j) 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 10,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 11,250
shares of Common Stock which are not exercisable in the next sixty days.
(k) Includes 749,250 shares issuable upon the exercise of stock options in the
next sixty days. Excludes options to purchase 887,500 shares of Common
Stock which are not exercisable in the next sixty days.
59
<PAGE> 61
DESCRIPTION OF CERTAIN INDEBTEDNESS
Following the Offering, the Company had existing bank credit facilities
aggregating $125 million. The Bank Credit Facility consists of a $25 million
Reducing Revolver and a $100 million Revolving Facility. The amount of the
Reducing Revolver will be reduced automatically by 12.5% on August 26, 2000 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 a wholly owned subsidiary and has a five-year maturity. 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 29, 1997
indebtedness under the Bank Credit Facility were letters of credit amounting to
approximately $4.6 million. Immediately following the Offering, the Company had
approximately $120.4 million available for subsequent borrowings under the Bank
Credit Facility. On April 14, 1998 the Company announced that it had amended its
credit facilities by increasing the aggregate principal amount that may be
borrowed thereunder from $125 million to $200 million. Subsequent to the
Offering, the Company has completed one and entered into a definitive agreement
to make another strategic acquisition. The Company intends to finance the PBASCO
and AMP acquisitions with the remaining proceeds of the Offering, cash from
operations and borrowings under its Bank Credit Facility. See "Recent
Developments."
In addition to the Old Notes, the Company also has outstanding the $100
million of 9 7/8% Notes which are unsecured senior subordinated obligations of
the Company and are subordinated in all senior indebtedness of the Company and
mature on February 1, 2006. Interest on the 9 7/8% Notes is payable semiannually
in arrears February 1 and August 1 of each year. The 9 7/8% 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 9 7/8% Notes may require the Company to repurchase such
holder's 9 7/8% Notes at 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of such purchase. The 9 7/8% Notes contain certain
restrictive covenants, all of which were met by the Company as of February 22,
1997, including limitations on future indebtedness, restricted payments,
transactions with affiliates, liens, dividends, mergers and transfers of assets.
FEEL, a subsidiary of the Company, has a revolving line of credit agreement
aggregating approximately $8.4 million (the "FEEL Credit Agreement"). The FEEL
Credit Agreement is collateralized by substantially all of the assets of FEEL.
Aggregate borrowings outstanding under the FEEL Credit Agreement were
approximately $7.2 million as of November 29, 1997. The Company has guaranteed a
portion of the indebtedness outstanding under the FEEL Credit Agreement.
Inventum, another subsidiary of the Company, has a revolving line of credit
agreement for approximately $1 million (the "Inventum Credit Agreement"). The
Inventum Credit Agreement is collateralized by substantially all of the assets
of Inventum. There were no borrowings outstanding under the Inventum Credit
Agreement as of November 29, 1997.
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<PAGE> 62
DESCRIPTION OF THE NEW NOTES
The Old Notes were issued under an indenture dated as of February 13, 1998
(the "Indenture") between the Company, as issuer, and United States Trust
Company of New York, as trustee (the "Trustee"), a copy of the form of which
will be made available upon request. Upon the issuance of the New Notes, the
Indenture will be subject to and governed by the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by, reference to the provisions of the Indenture,
including the definitions of certain terms contained therein and those terms
made part of the Indenture by reference to the Trust Indenture Act.
GENERAL
The New Notes will be unsecured, senior subordinated obligations of the
Company limited to $250,000,000 aggregate principal amount. The New Notes will
be issued solely in exchange for an equal principal amount of Old Notes pursuant
to the Exchange Offer. The form and terms of the New Notes will be identical in
all material respects to the form and terms of the Old Notes except that: (i)
the New Notes will have been registered under the Securities Act and (ii) the
Registration Rights and contingent interest reset provisions applicable to the
Old Notes are not applicable to the New Notes. The New Notes will be issued only
in registered form without coupons, in denominations of $1,000 and integral
multiples thereof. (Section 302) Principal of, premium, if any, and interest on
the Notes will be payable, and the Notes will be transferable (subject to
compliance with transfer restrictions imposed by applicable securities laws for
so long as the Notes are not registered for resale under the Securities Act), at
the corporate trust office or agency of the Trustee in The City of New York
maintained for such purposes at 114 West 47th Street. (Sections 301 and 305) In
addition, interest may be paid, at the option of the Company, by check mailed to
the Person entitled thereto as shown on the Note Register. (Section 309) No
service charge will be made for any transfer, exchange or redemption of Notes,
except in certain circumstances for any tax or other governmental charge that
may be imposed in connection therewith. (Section 305)
MATURITY, INTEREST AND PRINCIPAL PAYMENTS
The Notes will mature on March 1, 2008. Except as otherwise described
below, each Note will bear interest at the applicable rate set forth on the
cover page hereof from February 13, 1998 or from the most recent interest
payment date to which interest has been paid, payable in cash semiannually in
arrears on March 1 and September 1 of each year, commencing September 1, 1998,
to the Person in whose name the Note (or any predecessor Note) is registered in
the Note Register at the close of business on the February 15 or August 15 next
preceding such interest payment date.
As discussed under "Exchange Offer," pursuant to the Registration Rights
Agreement, the Company has agreed for the benefit of the holders of the Old
Notes, at the Company's cost, either (i) to effect a registered Exchange Offer
under the Securities Act to exchange the Old Notes for Exchange Notes, which
will have terms identical in all material respects to the Old Notes (except that
the Exchange Notes will not contain terms with respect to transfer restrictions)
or (ii) in the event that any changes in law or applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer, or if for any other reason the Exchange Offer is not consummated within
120 days following the date of the original issue of the Old Notes, or if any
holder of the Old Notes (other than the Initial Purchasers) is not eligible to
participate in the Exchange Offer, or upon the request of any Initial Purchaser
in certain circumstances, to register the Old Notes for resale under the
Securities Act through a shelf registration statement (the "Shelf Registration
Statement"). In the event that either (a) the Registration Statement is not
filed with the Commission on or prior to the 30th calendar day following the
date of original issue of the Old Notes, (b) the Registration Statement has not
been declared effective on or prior to the 90th calendar day following the date
of original issue of the Old Notes or (c) the Exchange Offer is not consummated
or a Shelf Registration Statement is not declared effective on or prior to the
120th calendar day following the date of original issue of the Old Notes, the
interest rate borne by the Old Notes shall be increased by one-half of one
percent per annum following such 30-day period in the case of (a) above,
following such 90-day period in the case of
61
<PAGE> 63
clause (b) above or following such 120-day period in the case of clause (c)
above. The aggregate amount of such increase from the original interest rate
pursuant to these provisions will in no event exceed one-half of one percent per
annum. Upon (x) the filing of the Registration Statement after the 30-day period
described in clause (a) above, (y) the effectiveness of the Registration
Statement after the 90-day period described in clause (b) above or (z) the
consummation of the Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be, after the 120-day period described in clause (c)
above, the interest rate borne by the Notes from the date of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest if the Company is otherwise in compliance with this paragraph.
See "Exchange Offer."
Notes that remain outstanding after the consummation of the Exchange Offer
and New Notes issued in connection with the Exchange Offer will be treated as a
single class of securities under the Indenture.
SUBORDINATION
The payment of the principal of, premium, if any, interest on and all other
amounts owing in respect of, the Notes will be subordinated, as set forth in the
Indenture, in right of payment to the prior payment in full in cash or cash
equivalents of all Senior Indebtedness; provided, however, that the Notes shall
rank equal with, or prior to, all existing and future unsecured indebtedness of
the Company that is subordinated to any Senior Indebtedness. (Section 1301)
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to the Company or to its creditors, as such, or
its assets, or any liquidation, dissolution or other winding-up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or any assignment for the benefit of creditors or any other
marshalling of assets or liabilities of the Company (except in connection with
the consolidation or merger of the Company or its liquidation or dissolution
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety upon the terms and conditions described under
"Merger, Consolidation and Sale of Assets, etc." below), the holders of Senior
Indebtedness will first be entitled to receive payment in full in cash or cash
equivalents of all amounts due on or in respect of all Senior Indebtedness, or
provision shall be made for such payment in cash or cash equivalents, before the
holders of the Notes will be entitled to receive any payment or distribution of
any kind or character (other than any payment or distribution in the form of
equity securities or subordinated securities of the Company or any successor
obligor provided for by a plan of reorganization or readjustment that, in the
case of any such subordinated securities, are subordinated in right of payment
to all Senior Indebtedness that may at the time be outstanding to at least the
same extent as the Notes are so subordinated (such equity securities or
subordinated securities hereinafter being "Permitted Junior Securities")) on
account of principal of (or premium, if any) or interest on the Notes; and any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities (other than a payment or distribution in
the form of Permitted Junior Securities) by set-off or otherwise, to which the
holders or the Trustee would be entitled but for the provisions of the Indenture
shall be paid by the liquidating trustee or agent or other person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Senior Indebtedness
or their representative or representatives ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness to the extent
necessary to make payment in full in cash or cash equivalents of all Senior
Indebtedness remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness. (Section 1302)
No payment (other than any payments made pursuant to the provisions
described under "-- Defeasance or Covenant Defeasance of Indenture" from monies
or U.S. Government Obligations previously deposited with the Trustee) or
distribution of any assets of the Company of any kind or character, whether in
cash, property or securities (other than Permitted Junior Securities), may be
made by or on behalf of the Company on account of principal of (or premium, if
any) or interest on the Notes or on account of the purchase, redemption or other
acquisition of Notes upon the occurrence of any default in payment of Designated
Senior Indebtedness (a "Payment Default") until such Payment Default shall have
been cured or waived in writing or shall have ceased to exist or such Designated
Senior Indebtedness shall have been discharged or paid in full in cash or cash
equivalents. (Section 1303(a))
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No payment (other than any payments made pursuant to the provisions
described under "-- Defeasance or Covenant Defeasance of Indenture" from monies
or U.S. Government Obligations previously deposited with the Trustee) or
distribution of any assets of the Company of any kind or character, whether in
cash, property or securities (other than Permitted Junior Securities), may be
made by or on behalf of the Company on account of principal (or premium, if any)
or interest on the Notes or on account of the purchase, redemption or other
acquisition of Notes for the period specified below (a "Payment Blockage
Period") upon the occurrence of any default or event of default with respect to
any Designated Senior Indebtedness other than any Payment Default pursuant to
which the maturity thereof may be accelerated (a "Non-payment Default") and
after the receipt by the Trustee of written notice thereof from the Agent Bank
or any other representative of a holder of Designated Senior Indebtedness.
(Section 1303(b))
The Payment Blockage Period will commence upon the date of receipt by the
Trustee of written notice from the Agent Bank or such other representative of
the Designated Senior Indebtedness in respect of which the Non-payment Default
exists and shall end on the earliest of (i) 179 days thereafter (provided any
Designated Senior Indebtedness as to which notice was given shall not
theretofore have been accelerated), (ii) the date on which such Non-payment
Default is cured, waived or ceased to exist or such Designated Senior
Indebtedness is discharged or paid in full in cash or cash equivalents or (iii)
such Payment Blockage Period shall have been terminated by written notice to the
Company or the Trustee from the Agent Bank or such other representative
initiating such Payment Blockage Period, after which the Company will resume
making any and all required payments in respect of the Notes, including any
missed payments. In any event, not more than one Payment Blockage Period may be
commenced during any period of 365 consecutive days. No event of default with
respect to Designated Senior Indebtedness that existed or was continuing on the
date of the commencement of any Payment Blockage Period will be, or can be made,
the basis for the commencement of a subsequent Payment Blockage Period, unless
such default has been cured or waived for a period of not less than 90
consecutive days subsequent to the commencement of such initial Payment Blockage
Period (it being acknowledged that any breach of any financial covenant for a
period commencing after the date of commencement of such Payment Blockage Period
which would give rise to a Non-payment Default pursuant to any provision under
which a Non-payment Default previously existed or was continuing shall
constitute a new Non-payment Default for this purpose).
Failure by the Company to make any required payment in respect of the Notes
when due or within any applicable grace period, whether or not occurring during
a Payment Blockage Period, would result in an Event of Default and, thereafter,
holders of the Notes would have the right to accelerate the maturity thereof.
See "-- Events of Default."
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency of the Company, creditors of the Company who are
holders of Senior Indebtedness may recover more, ratably, than the holders of
the Notes, and assets which would otherwise be available to pay obligations in
respect of the Notes will be available only after all Senior Indebtedness has
been paid in full in cash or cash equivalents, at which time there may not be
sufficient assets remaining to pay any amounts due on any or all of the Notes.
"Senior Indebtedness" means the principal of, premium, if any, and interest
on (including interest accruing after the filing of a petition by or against the
Company under any bankruptcy laws) and all other amounts due on or in connection
with any Indebtedness of the Company, whether outstanding on the date of the
Indenture or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall include
the principal of (and premium, if any, on) and interest (including interest
accruing after the occurrence of an event of default or after the filing of a
petition by or against the Company under any bankruptcy law) on all
Indebtedness, and all other amounts and obligations of every nature of the
Company, from time to time owed under, the Bank Credit Agreement and the Senior
Notes. Notwithstanding the foregoing, "Senior Indebtedness" shall not include
(i) Indebtedness evidenced by the Notes and the 9 7/8% Notes, (ii) Indebtedness
of the Company that is expressly subordinated in right of payment to any
Indebtedness of the Company, (iii) Indebtedness of the Company that by operation
of law is subordinate to any general unsecured obligations of the Company, (iv)
that portion of any
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Indebtedness of the Company that at the time of incurrence is incurred in
violation of any covenant of the Indenture, (v) any liability for federal, state
or local taxes or other taxes, owed or owing by the Company, (vi) trade accounts
payable owed or owing by the Company, (vii) Indebtedness of the Company to any
Subsidiary or any other Affiliate of the Company, (viii) Redeemable Capital
Stock of the Company and (ix) Indebtedness which when incurred and without
respect to any election under Section 1111(b) of Title 11 ecourse to the Company
or any Subsidiary.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under
the Bank Credit Agreement and the Senior Notes and (ii) following the full
repayment of indebtedness under the Bank Credit Agreement and the termination of
the commitments thereunder, any other Senior Indebtedness which, at the time of
determination, has an aggregate principal amount outstanding of at least $17
million and is specifically designated in the instrument evidencing such Senior
Indebtedness as "Designated Senior Indebtedness" by the Company.
SINKING FUND
The Notes will not be entitled to the benefit of any sinking fund.
REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after March 1, 2003, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest to the redemption date, if redeemed
during the 12-month period beginning on March 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003...................................................... 104.00%
2004...................................................... 102.00%
2005 and thereafter....................................... 100.00%
</TABLE>
In addition, at any time or from time to time, on or prior to March 1,
2001, the Company may, at its option, redeem up to 35% of the aggregate
principal amount of Notes originally issued under the Indenture at a redemption
price equal to 108% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the redemption date, with the net cash
proceeds of one or more Equity Offerings; provided that at least 65% of the
aggregate principal amount of Notes issued under the Indenture on the Issuance
Date remains outstanding immediately after the occurrence of such redemption;
provided further such redemption occurs within 60 days of the date of closing of
each such Equity Offering. The Trustee shall select the Notes to be purchased in
the manner described under "-- Selection and Notice."
As described below, (a) upon the occurrence of a Change of Control, the
Company is obligated to make an offer to purchase all outstanding Notes at a
redemption price of 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase and (b) upon certain sales or other
dispositions of assets, the Company may be obligated to make offers to purchase
Notes with a portion of the Net Cash Proceeds of such sales or other
dispositions at a redemption price of 100% of the principal amount thereof plus
accrued and unpaid interest to the date of purchase. See "Certain Covenants --
Change of Control" and "-- Limitation on Disposition of Proceeds of Asset
Sales." (Section 1101)
SELECTION AND NOTICE. In the event that less than all of the Notes are to
be redeemed at any time, selection of such Notes for redemption will be made by
the Trustee on a pro rata basis, by lot or by such method as the Trustee shall
deem fair and appropriate; provided, however, that no Note of a principal amount
of $1,000 or less shall be redeemed in part. Notice of redemption shall be
mailed by first-class mail at least 30 but not more than 60 days before the
redemption date to each holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the
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original Note. On and after the redemption date, interest will cease to accrue
on Notes or portions thereof called for redemption and accepted for payment.
(Sections 1104, 1105, 1107 and 1108)
CERTAIN COVENANTS
The Indenture will contain, among others, the covenants described below.
LIMITATION ON INDEBTEDNESS. (a) The Indenture will provide that the
Company will not create, incur, issue, assume, guarantee or in any manner become
directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Indebtedness (including any Acquired Indebtedness),
other than Permitted Indebtedness, unless (x) the Company's Consolidated Fixed
Charge Coverage Ratio for the four full fiscal quarters immediately preceding
the incurrence of such Indebtedness, taken as one period (and after giving pro
forma effect to: (i) the incurrence of such Indebtedness and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred and the application of such
proceeds occurred at the beginning of such four-quarter period; (ii) the
incurrence, repayment or retirement of any other Indebtedness by the Company or
its Restricted Subsidiaries since the first day of such four-quarter period as
if such Indebtedness was incurred, repaid or retired at the beginning of such
four-quarter period; and (iii) notwithstanding clause (d) of the definition of
Consolidated Adjusted Net Income, the acquisition (whether by purchase, merger
or otherwise) or disposition (whether by sale, merger or otherwise) of any
company, entity or business acquired or disposed of by the Company or its
Restricted Subsidiaries, as the case may be, since the first day of such four
quarter period, as if such acquisition or disposition occurred at the beginning
of such four-quarter period, reflecting, in the case of such an acquisition, any
amount attributable to operating expense that will be eliminated or cost
reduction that will be realized (in each case, net of any operating expense or
other cost increase) in connection with such acquisition, as determined in good
faith by the chief financial officer of the Company in accordance with GAAP and
the rules, regulations and guidelines of the Commission, as if such elimination
of operating expense or the realization of such cost reduction were achieved at
the beginning of such four-quarter period), would have been at least equal to
2.0 to 1 and (y) if such Indebtedness is Subordinated Indebtedness, such
Indebtedness shall have an Average Life longer than the Average Life of the
Notes and a final Stated Maturity of principal later than the final Stated
Maturity of principal of the Notes.
(b) The Company will not permit any Restricted Subsidiary to incur any
Indebtedness (including any Acquired Indebtedness), other than Permitted
Subsidiary Indebtedness, unless (x) the Company's Consolidated Fixed Charge
Coverage Ratio for the four full fiscal quarters immediately preceding the
incurrence of such Indebtedness, taken as one period (and after giving pro forma
effect to the matters referred to in clauses (i), (ii) and (iii) in the
parenthetical in paragraph (a) of the "Limitation on Indebtedness" covenant),
would have been at least equal to 3.0 to 1, and (y) any Restricted Subsidiary
which incurs any Indebtedness pursuant to clause (x) of this paragraph (b) shall
Guarantee the Notes in compliance with clause (i) of paragraph (b) and clauses
(i)(A), (ii) and (iii) of paragraph (a) of the "Limitation on Guarantees of
Indebtedness by Restricted Subsidiaries" covenant. (Section 1010)
LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS. The Indenture will
provide that the Company will not, and will not permit any Restricted Subsidiary
to, incur, create, assume, guarantee or in any other manner become directly or
indirectly liable with respect to or responsible for, or permit to remain
outstanding, any Indebtedness that is subordinate or junior in right of payment
to any Senior Indebtedness unless such Indebtedness is also pari passu with, or
subordinate in right of payment to, the Notes pursuant to subordination
provisions substantially similar to those contained in the Indenture. (Section
1019)
LIMITATION ON RESTRICTED PAYMENTS. (a) The Indenture will provide that the
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, take the following actions:
(i) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Company's Capital Stock (other than dividends
or distributions payable in shares of its Capital Stock or in options,
warrants or other rights to purchase such Capital Stock, but excluding
dividends or distributions payable in Redeemable Capital Stock or in
options, warrants or other rights to purchase Redeemable Capital Stock),
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(ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any options, warrants or other rights to
acquire such Capital Stock,
(iii) make any principal payment on or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to a scheduled principal
payment, scheduled sinking fund payment or maturity, any Subordinated
Indebtedness,
(iv) make any Investment (other than any Permitted Investment) in any
Person, or
(v) incur any guarantee of Indebtedness of any Affiliate, including
any Unrestricted Subsidiary (other than with respect to (a) guarantees of
Indebtedness of any wholly owned Restricted Subsidiary by the Company or
(b) guarantees of Indebtedness of the Company by any Restricted
Subsidiary),
(such payments or other actions described in (but not excluded from) clauses (i)
through (v) are collectively referred to as "Restricted Payments"), unless at
the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, as determined by the
Board of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), (1) no Default or Event of Default shall have
occurred and be continuing, (2) the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on
Indebtedness" covenant, and (3) the aggregate amount of all Restricted Payments
declared or made after the date of the 9 7/8% Notes Indenture shall not exceed
the sum of (A) 50% of the aggregate cumulative Consolidated Adjusted Net Income
of the Company accrued on a cumulative basis during the period beginning on the
first day after the date of the 9 7/8% Notes Indenture and ending on the last
day of the Company's last fiscal quarter ending prior to the date of such
proposed Restricted Payment (or, if such aggregate cumulative Consolidated
Adjusted Net Income shall be a loss, minus 100% of such loss), plus (B) the
aggregate net cash proceeds received after the date of the 9 7/8% Notes
Indenture by the Company from the issuance or sale (other than to any Restricted
Subsidiary) of shares of Capital Stock of the Company (other than Redeemable
Capital Stock) or warrants, options or rights to purchase such shares of Capital
Stock of the Company, plus (C) the aggregate net cash proceeds received after
the date of the 9 7/8% Notes Indenture by the Company from the issuance or sale
(other than to any Restricted Subsidiary) of debt securities that have been
converted into or exchanged for Capital Stock of the Company (other than
Redeemable Capital Stock) to the extent such debt securities were originally
sold for cash, together with the aggregate cash received by the Company at the
time of such conversion or exchange, plus (D) to the extent not otherwise
included in the Company's Consolidated Adjusted Net Income, the net reduction in
Investments in Unrestricted Subsidiaries resulting from the payments of interest
on Indebtedness, dividends, repayments of loans or advances, or other transfers
of assets, in each case to the Company or a Restricted Subsidiary after the date
of the 9 7/8% Notes Indenture from any Unrestricted Subsidiary or from the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary (valued
in each case as provided in the definition of Investment), not to exceed in the
case of any Unrestricted Subsidiary the total amount of Investments (other than
Permitted Investments), after the date of the 9 7/8% Notes Indenture in such
Unrestricted Subsidiary by the Company and its Restricted Subsidiaries, plus (E)
$10 million.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take the following actions so long as (with respect to clauses
(ii), (iii), (iv), (v) and (vi) below) no Default or Event of Default shall have
occurred and be continuing:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such declaration complied
with the provisions of paragraph (a) above;
(ii) the purchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of, a substantially concurrent issuance and
sale (other than to a Restricted Subsidiary) of shares of Capital Stock
(other than Redeemable Capital Stock) of the Company;
(iii) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness (other than
Redeemable Capital Stock) in exchange for or out of the net
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cash proceeds of a substantially concurrent issuance and sale (other than
to a Restricted Subsidiary) of shares of Capital Stock (other than
Redeemable Capital Stock) of the Company;
(iv) the repurchase of any Subordinated Indebtedness of the Company at
a purchase price not greater than 101% of the principal amount of such
Subordinated Indebtedness in the event of a Change of Control pursuant to a
provision similar to the "Change of Control" covenant; provided that prior
to such repurchase the Company has made the Change of Control Offer as
provided in such covenant with respect to the Notes and has repurchased all
Notes validly tendered for payment in connection with such Change of
Control Offer;
(v) the purchase, redemption or other acquisition or retirement for
value of Subordinated Indebtedness (other than Redeemable Capital Stock) in
exchange for, or out of the net cash proceeds of a substantially concurrent
incurrence (other than to a Restricted Subsidiary) of, Indebtedness of the
Company so long as (A) the principal amount of such new Indebtedness does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) of the Indebtedness being so purchased,
redeemed, acquired or retired, plus the amount of any premium required to
be paid in connection with such refinancing pursuant to the terms of the
Subordinated Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, (B) such new Indebtedness is subordinated
to the Notes to the same extent as the Notes are subordinated to Senior
Indebtedness and (C) such new Indebtedness has an Average Life longer than
the Average Life of the Notes and a final Stated Maturity of principal
later than the final Stated Maturity of principal of the Notes; and
(vi) the purchase, redemption or other acquisition or retirement for
value of shares of Common Stock of the Company issued pursuant to
non-qualified options granted under stock option plans of the Company, in
order to pay withholding taxes due as a result of income recognized upon
the exercise of such options; provided that (1) the Company is required, by
the terms of such plans, to effect such purchase, redemption or other
acquisition or retirement for value of such shares and (2) the aggregate
consideration paid by the Company for such shares so purchased, redeemed or
otherwise acquired or retired for value does not exceed $2 million during
any fiscal year of the Company.
The actions described in clauses (i), (ii), (iii), (iv) and (vi) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph (b) but shall reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph (a)
(provided that any dividend paid pursuant to clause (i) of this paragraph (b)
shall reduce the amount that would otherwise be available under clause (3) of
paragraph (a) when declared, but not also when subsequently paid pursuant to
such clause (i)) and the actions described in clause (v) of this paragraph (b)
shall be Restricted Payments that shall be permitted to be taken in accordance
with this paragraph (b) and shall not reduce the amount that would otherwise be
available for Restricted Payments under clause (3) of paragraph (a).
(c) In computing Consolidated Adjusted Net Income of the Company under
clause (3)(A) of paragraph (a) above, (1) the Company shall use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (2) the
Company shall be permitted to rely in good faith on the financial statements and
other financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment would in the
good faith determination of the Company be permitted under the requirements of
the Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Adjusted
Net Income of the Company for any period. (Section 1011)
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LIMITATION ON ISSUANCES AND SALES OF RESTRICTED SUBSIDIARY STOCK. The
Indenture will provide that the Company (i) will not permit any Restricted
Subsidiary to issue any Capital Stock (other than to the Company or a
wholly-owned Restricted Subsidiary) and (ii) will not permit any Person (other
than the Company or a wholly owned Restricted Subsidiary) to own any Capital
Stock of any Restricted Subsidiary; provided, however, that this covenant shall
not prohibit (1) the issuance and sale of all, but not less than all, of the
issued and outstanding Capital Stock of any Restricted Subsidiary owned by the
Company or any of its Restricted Subsidiaries in compliance with the other
provisions of the Indenture, (2) the ownership by directors of director's
qualifying shares or the ownership by foreign nationals of Capital Stock of any
Restricted Subsidiary, to the extent mandated by applicable law or (3) the
issuance and sale of Capital Stock by a Restricted Subsidiary, or the ownership
by any Person of any Capital Stock of a Restricted Subsidiary, if, in each case,
the Company has made, or is making, an Investment in such Restricted Subsidiary
pursuant to clause (v) of the definition of "Permitted Investment." (Section
1012)
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture will provide
that the Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction with, or
for the benefit of, any Affiliate of the Company or any beneficial owner of 5%
or more of any class of the Company's Capital Stock at any time outstanding
("Interested Persons"), unless (i) such transaction is among the Company and
wholly-owned Restricted Subsidiaries or (ii) (A) such transaction is on terms
that are no less favorable to the Company, or such Restricted Subsidiary, as the
case may be, than those which could have been obtained in an arm's length
transaction with third parties who are not Interested Persons, (B) with respect
to any transaction involving aggregate consideration equal to or greater than $2
million, the Company has delivered an Officers' Certificate to the Trustee
certifying that such transaction complies with clause (ii)(A) above, and (C)
with respect to any transaction involving aggregate consideration equal to or
greater than $5 million, such transaction has been approved by the Board of
Directors (including a majority of the Disinterested Directors); provided,
however, that this covenant will not restrict the Company from paying reasonable
and customary regular compensation and fees to directors of the Company or any
Restricted Subsidiary who are not employees of the Company or any Restricted
Subsidiary. (Section 1013)
LIMITATION ON LIENS SECURING PARI PASSU INDEBTEDNESS OR SUBORDINATED
INDEBTEDNESS. (a) The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) securing Pari Passu Indebtedness or
Subordinated Indebtedness of the Company on or with respect to any of its
property or assets, including any shares of stock or indebtedness of any
Restricted Subsidiary, whether owned at the date of the Indenture or thereafter
acquired, or any income, profits or proceeds therefrom, or assign or otherwise
convey any right to receive income thereon, unless (x) in the case of any Lien
securing Pari Passu Indebtedness of the Company, the Notes are secured by a Lien
on such property, assets or proceeds that is senior in priority to or pari passu
with such Lien and (y) in the case of any Lien securing Subordinated
Indebtedness of the Company, the Notes are secured by a Lien on such property,
assets or proceeds that is senior in priority to such Lien.
(b) The Company will not permit any Restricted Subsidiary to, directly or
indirectly, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) securing Indebtedness of such Restricted Subsidiary that is
pari passu or subordinate in right of payment to the Guarantee of such
Subsidiary, on or with respect to any of such Restricted Subsidiary's properties
or assets, including any shares of stock or Indebtedness of any Subsidiary of
such Restricted Subsidiary, whether owned at the date of the Indenture or
thereafter acquired, or any income, profits or proceeds therefrom, or assign or
otherwise convey any right to receive income thereon, unless (x) in the case of
any Lien securing Indebtedness of the Restricted Subsidiary that is pari passu
in right of payment to the Guarantee of such Restricted Subsidiary, such
Guarantee is secured by a Lien on such property, assets or proceeds that is
senior in priority to or pari passu with such Lien and (y) in the case of any
Lien securing Indebtedness of the Restricted Subsidiary that is subordinate in
right of payment to the Guarantee of such Restricted Subsidiary, such Guarantee
is secured by a Lien on such property, assets or proceeds that is senior in
priority to such Lien. (Section 1014)
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, the Company
shall be obligated to make an offer to purchase all of the then outstanding
Notes (a "Change of Control Offer"), and shall purchase, on a business day (the
"Change of Control Purchase Date") not more than 70 nor less than 60 days
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following the Change of Control, all of the then outstanding Notes validly
tendered pursuant to such Change in Control Offer, at a purchase price (the
"Change of Control Purchase Price") equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the Change of Control
Purchase Date.
In order to effect such Change of Control Offer, the Company shall, not
later than the 30th day after the Change of Control, mail to each Noteholder and
the Banks notice of the Change of Control Offer, which notice shall govern the
terms of the Change of Control Offer and shall state, among other things, the
procedures that Noteholders must follow to accept the Change of Control Offer.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
Purchase Price for all of the Notes that might be delivered by Noteholders
seeking to accept the Change of Control Offer. The Bank Credit Agreement
prohibits the purchase of the Notes by the Company prior to full repayment of
indebtedness under the Bank Credit Agreement and the termination of the
commitments thereunder and, upon a Change of Control, all amounts outstanding
under the Bank Credit Agreement may become due and payable. In addition, under
the terms of the indenture governing the Senior Notes, the repurchase of the
Notes by the Company would constitute a restricted payment that may be
prohibited at the time of a Change of Control. There can be no assurance that in
the event of a Change of Control the Company will be able to obtain the
necessary consents from the lenders under the Bank Credit Agreement, or, if
necessary, from the holders of the Senior Notes, to consummate a Change of
Control Offer. The failure of the Company to make or consummate the Change of
Control Offer or pay the Change of Control Purchase Price when due would result
in an Event of Default and would give the Trustee and the holders of the Notes
the rights described under "-- Events of Default."
One of the events which constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Notes elect to require the Company to purchase the
Notes and the Company elects to contest such election, there can be no assurance
as to how a court interpreting New York law would interpret the phrase.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction which constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to purchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "-- Certain Definitions" for the definition of "Change
of Control."
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that a Change of Control occurs and the
Company is required to purchase Notes as described above. (Section 1015)
LIMITATION ON DISPOSITION OF PROCEEDS OF ASSET SALES. (a) The Indenture
will provide that the Company will not, and will not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) such Asset Sale is for not
less than the Fair Market Value of the assets sold (as determined by the Board
of Directors of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 75% cash or Cash Equivalents; provided that the Company and
its Restricted Subsidiaries may engage in Asset Sales for consideration not in
the form of cash or Cash Equivalents in amounts in excess of that permitted in
this clause (ii), so long as (x) such excess consideration is in the form
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of Fully Traded Common Stock, (y) the aggregate Fair Market Value of such Fully
Traded Common Stock received by the Company and its Restricted Subsidiaries
(measured as of the date of receipt) from all Asset Sales in reliance on this
proviso since the date of the Indenture that has not been converted into cash or
Cash Equivalents does not exceed $10 million and (z) any Fully Traded Common
stock that is converted into cash or Cash Equivalents shall be applied as
provided in paragraphs (b) and (c) of this "Limitation on Disposition of
Proceeds of Asset Sales" covenant.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may use the Net Cash Proceeds thereof, within 12 months after such
Asset Sale, to (i) repay or prepay any then outstanding Senior Indebtedness of
the Company or Indebtedness of any Restricted Subsidiary or (ii) invest (or
enter into a legally binding agreement to invest) in properties and assets to
replace the properties and assets that were the subject of the Asset Sale or in
properties and assets that will be used in businesses of the Company or its
Restricted Subsidiaries, as the case may be, existing on the Closing Date or in
businesses reasonably related thereto. If any such legally binding agreement to
invest such Net Cash Proceeds is terminated, then the Company may, within 90
days of such termination or within 12 months of such Asset Sale, whichever is
later, invest such Net Cash Proceeds as provided in clauses (i) or (ii) (without
regard to the parenthetical contained in such clause (ii)) above. The amount of
such Net Cash Proceeds not so used as set forth above in this paragraph (b)
constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million, the
Company shall, within 15 business days, make an offer to purchase (an "Excess
Proceeds Offer") from all holders of Notes, on a pro rata basis, in accordance
with the procedures set forth below, the maximum principal amount (expressed as
a multiple of $1,000) of Notes that may be purchased with the Excess Proceeds.
The offer price as to each Note shall be payable in cash in an amount equal to
100% of the principal amount of such Note plus accrued and unpaid interest, if
any, to the date such Excess Proceeds Offer is consummated. To the extent that
the aggregate principal amount of Notes tendered pursuant to an Excess Proceeds
Offer is less than the Excess Proceeds, the Company may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes validly
tendered and not withdrawn by holders thereof exceeds the Excess Proceeds, Notes
to be purchased will be selected on a pro rata basis. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset to zero.
(Section 1016)
LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES.
(a) The Indenture will provide that the Company will not permit any Restricted
Subsidiary to guarantee the payment of any Indebtedness of the Company or any
Indebtedness of any other Restricted Subsidiary unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to the
Indenture providing for a Guarantee of payment of the Notes by such Restricted
Subsidiary except that (A) if the Notes are subordinated in right of payment to
such Indebtedness, the Guarantee under the supplemental indenture shall be
subordinated to such Restricted Subsidiary's guarantee with respect to such
Indebtedness substantially to the same extent as the Notes are subordinated to
such Indebtedness under the Indenture and (B) if such Indebtedness is by its
express terms subordinated in right of payment to the Notes, any such guarantee
of such Restricted Subsidiary with respect to such Indebtedness shall be
subordinated in right of payment to such Restricted Subsidiary's Guarantee with
respect to the Notes substantially to the same extent as such Indebtedness is
subordinated to the Notes; (ii) such Restricted Subsidiary waives and will not
in any manner whatsoever claim or take the benefit or advantage of, any rights
of reimbursement, indemnity or subrogation or any other rights against the
Company or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Guarantee; (iii) such Restricted Subsidiary
shall appoint CT Corporation in New York City as its agent for the service of
process: and (iv) such Restricted Subsidiary shall deliver to the Trustee an
Opinion of Counsel to the effect that (A) such appointment of CT Corporation is
valid, (B) such Guarantee of the Notes has been duly executed and authorized and
(C) such Guarantee of the Notes constitutes a valid, binding and enforceable
obligation of such Restricted Subsidiary, except insofar as enforcement thetcy,
insolvency or similar laws (including, without limitation, all laws relating to
fraudulent transfers) and except insofar as enforcement thereof is subject to
general principles of equity; provided that this paragraph (a) shall not be
applicable to any Guarantee of any Restricted Subsidiary that (x) existed at the
time such Person became a
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Restricted Subsidiary of the Company and (y) was not incurred in connection
with, or in contemplation of, such Person becoming a Restricted Subsidiary of
the Company.
(b) Notwithstanding the foregoing and the other provisions of the
Indenture, any Guarantee by a Restricted Subsidiary of the Notes shall provide
by its terms that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Indenture) or (ii) the release or
discharge of the Guarantee which resulted in the creation of such Guarantee,
except a discharge or release by or as a result of payment under such Guarantee.
(Section 1017)
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Indenture will provide that the Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company to (a)
pay dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock or any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary of the Company, (e) make loans or advances to the
Company or any other Restricted Subsidiary of the Company, (d) transfer any of
its properties or assets to the Company or any other Restricted Subsidiary of
the Company or (e) guarantee any Indebtedness of the Company or any other
Restricted Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reason of (i) applicable law, (ii) customary
non-assignment provisions of any lease governing a leasehold interest of the
Company or any Restricted Subsidiary of the Company, (iii) any agreement or
other instrument of a Person acquired by the Company or any Restricted
Subsidiary of the Company in existence at the time of such acquisition (but not
created in contemplation thereof), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, (iv) any
agreement in existence on the Closing Date (to the extent of any encumbrances or
restrictions in existence thereunder on the Closing Date) and (v) any agreement
providing for the incurrence of Indebtedness of Restricted Subsidiaries pursuant
to either clause (x) of paragraph (b) of the "Limitation of Indebtedness"
covenant or clause (vii) of the definition of Permitted Subsidiary Indebtedness;
provided that any Restricted Subsidiary that becomes subject to any such
encumbrances or restrictions pursuant to this clause (v) shall Guarantee the
Notes in compliance with the provisions of clause (i) of paragraph (b) and
clauses (i)(A), (ii) and (iii) of paragraph (a) of the "Limitation on Guarantees
of Indebtedness by Restricted Subsidiaries" covenant. (Section 1018)
REPORTS. The Indenture will require that the Company file on a timely
basis with the Commission, to the extent such filings are accepted by the
Commission and whether or not the Company has a class of securities registered
under the Exchange Act, the annual reports, quarterly reports and other
documents that the Company would be required to file if it were subject to
Section 13 or 15 of the Exchange Act. The Company will also be required (a) to
file with the Trustee, and provide to each holder of Notes, without cost to such
holder, copies of such reports and documents within 15 days after the date on
which the Company files such reports and documents with the Commission or the
date on which the Company would be required to file such reports and documents
if the Company were so required and (b) if filing such reports and documents
with the Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at the Company's cost copies of such reports and
documents to any prospective holder of Notes promptly upon written request.
(Section 1009)
MERGER, CONSOLIDATION AND SALE OF ASSETS, ETC.
The Company will not, in any transaction or series of transactions, merge
or consolidate with or into, or sell, assign, transfer, lease or otherwise
dispose of all or substantially all of its properties and assets as an entirety
to, any Person or Persons, and the Company will not permit any Restricted
Subsidiary to enter into any such transaction or series of transactions if such
transaction or series of transactions, in the aggregate, would result in a sale,
assignment, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any other Person or
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Persons, unless at the time and after giving effect thereto (i) either (A) if
the transaction or transactions is a merger or consolidation, the Company shall
be the surviving Person of such merger or consolidation, or (B) the Person
formed by such consolidation or into which the Company or such Restricted
Subsidiary is merged or to which the properties and assets of the Company or
such Restricted Subsidiary, as the case may be, substantially as an entirety,
are sold, assigned, transferred, leased or otherwise disposed of (any such
surviving Person or transferee Person being the "Surviving Entity") shall be a
corporation organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia and shall expressly
assume by a supplemental indenture executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under the
Notes and the Indenture, and, in each case, the Indenture shall remain in full
force and effect; (ii) immediately before and immediately after giving effect to
such transaction or series of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions), no
Default or Event of Default shall have occurred the Company or the Surviving
Entity, as the case may be, after giving effect to such transaction or series of
transactions on a pro forma basis, could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness"
covenant; and (iii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis, the Consolidated Net Worth of the
Company or the Surviving Entity, as the case may be, is at least equal to the
Consolidated Net Worth of the Company immediately before such transaction or
series of transactions. (Section 801)
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in the form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate stating that such consolidation, merger,
transfer, lease or other disposition and the supplemental indenture in respect
thereto comply with the requirements under the Indenture and an Opinion of
Counsel stating that the requirements of clause (i) of the preceding paragraph
have been complied with.
Upon any consolidation or merger or any sale, assignment, conveyance,
transfer, lease or disposition of all or substantially all of the properties and
assets of the Company in accordance with the immediately preceding paragraphs in
which the Company is not the continuing obligor under the Indenture, the
Surviving Entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor had been named as the Company therein. When a successor
assumes all the obligations of its predecessor under the Indenture or the Notes,
the predecessor shall be released from those obligations; provided that in the
case of a transfer by lease, the predecessor shall not be released from the
payment of principal and interest on the Notes.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any,
when due and payable, on any of the Notes; or
(ii) default in the payment of an installment of interest on any of
the Notes, when due and payable, for 30 days; or
(iii) default in the performance or breach of the provisions of the
"Merger, Consolidation and Sale of Assets" section of the Indenture, the
failure to make or consummate a Change of Control Offer in accordance with
the provisions of the "Change of Control" covenant or the failure to make
or consummate an Excess Proceeds Offer in accordance with the provisions of
the "Limitation on Disposition of Proceeds of Asset Sales" covenant; or
(iv) the Company or any Guarantor shall fail to perform or observe any
other term, covenant or agreement contained in the Notes, any Guarantee or
the Indenture (other than a default specified in (i), (ii) or (iii) above)
for a period of 30 days after written notice of such failure requiring the
Company
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to remedy the same shall have been given (x) to the Company by the Trustee
or (y) to the Company and the Trustee by the holders of 25% in aggregate
principal amount of the Notes then outstanding; or
(v) default or defaults under one or more mortgages, bonds, debentures
or other evidences of Indebtedness under which the Company or any
Significant Subsidiary then has outstanding Indebtedness in excess of $5
million, individually or in the aggregate, and either (a) such Indebtedness
is already due and payable in full or (b) such default or defaults have
resulted in the acceleration of the maturity of such Indebtedness; or
(vi) one or more final judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5 million, either individually or in the
aggregate, shall be entered against the Company or any of its Significant
Subsidiaries or any of their respective properties and shall not be
discharged or fully bonded and there shall have been a period of 60 days
after the date on which any period for appeal has expired and during which
a stay of enforcement of such judgment, order or decree shall not be in
effect: or
(vii) (A) any holder of at least $5 million in aggregate principal
amount of secured Indebtedness of the Company or of any Significant
Subsidiary as to which a default has occurred and is continuing shall
commence judicial proceedings (which proceedings shall remain unstayed for
5 Business Days) to foreclose upon assets of the Company or any Significant
Subsidiary having an aggregate Fair Market Value, individually or in the
aggregate, in excess of $5 million or shall have exercised any right under
applicable law or applicable security documents to take ownership of any
such assets in lieu of foreclosure or (B) any action described in the
foregoing clause (A) shall result in any court of competent jurisdiction
issuing any order for the seizure of such assets; or
(viii) any Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under any Guarantee, or gives notice to such effect (other than
by reason of the termination of the Indenture or the release of any such
Guarantee in accordance with the Indenture) and such condition shall have
continued for a period of 30 days after written notice of such failure
requiring the Guarantor and the Company to remedy the same shall have been
given (x) to the Company by the Trustee or (y) to the Company and the
Trustee by the holders of 25% in aggregate principal amount of the Notes
then outstanding; or
(ix) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
(Section 501)
If an Event of Default (other than as specified in clause (ix) above) shall
occur and be continuing, the Trustee, by notice to the Company, or the holders
of at least 25% in aggregate principal amount of the Notes then outstanding, by
notice to the Trustee and the Company, may declare the principal of, premium, if
any, and accrued interest on all of the outstanding Notes due and payable
immediately, upon which declaration all amounts payable in respect of the Notes
shall be immediately due and payable, provided, however, that, for so long as
the Bank Credit Agreement is in effect, such declaration shall not become
effective until the earlier of (i) five Business Days following delivery of
notice to the Agent Bank of the intention to accelerate the Notes or (ii) the
acceleration of any Indebtedness under the Bank Credit Agreement. If an Event of
Default specified in clause (ix) above occurs and is continuing, then the
principal of, premium, if any, and accrued interest on all of the outstanding
Notes shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Notes.
(Section 502)
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the holders of a majority in aggregate principal amount of the
outstanding Notes, by written notice to the Company and the Trustee, may rescind
such declaration if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes,
(iii) the principal of and premium, if any, on any Notes which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate borne by the Notes, and (iv) to the extent that payment of such interest is
lawful, interest
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upon overdue interest at the rate borne by the Notes which has become due
otherwise than by such declaration of acceleration; (b) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction; and
(c) all Events of Default, other than the nonpayment of principal of, premium,
if any, and interest on the Notes that has become due solely by such declaration
of acceleration, have been cured or waived. (Section 502)
Notwithstanding the preceding paragraph, in the event of a declaration of
acceleration in respect of the Securities because an Event of Default shall have
occurred and be continuing, such declaration of acceleration shall be
automatically annulled if the Indebtedness that is the subject of such Event of
Default has been discharged or the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness, and written notice
of such discharge or rescission, as the case may be, shall have been given to
the Trustee by the Company and countersigned by the holders of such Indebtedness
or a trustee, fiduciary or agent for such holders, within 30 days after such
declaration of acceleration in respect of the Securities, and no other Event of
Default has occurred during such 30-day period which has not been cured or
waived during such period. (Section 502)
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may on behalf of the holders of all the Notes waive any
past defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding. (Section 513)
No holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 15 days after receipt of such notice
and the Trustee, within such 15-day period, has not received directions
inconsistent with such written request by holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations do not apply,
however, to a suit instituted by a holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note. (Section 507)
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
under the Indenture is not under any obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the Noteholders
unless such holders shall have offered to the Trustee reasonable security or
indemnity. Subject to certain provisions concerning the rights of the Trustee,
the holders of a majority in aggregate principal amount of the outstanding Notes
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee under the Indenture. (Sections 512 and 602)
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee shall mail to each holder of the Notes notice of the
Default or Event of Default within 5 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of,
premium, if any, or interest on any Notes, the Trustee may withhold the notice
to the holders of such Notes if a committee of its Trust Officers in good faith
determines that withholding the notice is in the interest of the Noteholders.
(Section 601)
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company and the Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within ten days
of any Default.
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DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company and the Guarantors with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payment in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated. destroyed, lost or stolen Notes and maintain an office or agency for
payments in respect of the Notes, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company and any Guarantor with respect to certain
covenants that are set forth in the Indenture, some of which are described under
"Certain Covenants" above, and any omission to comply with such obligations
shall not constitute a Default or an Event of Default with respect to the Notes
("covenant defeasance"). The Company is permitted to exercise defeasance or
covenant defeasance only with the consent of the Banks. (Sections 1202 and 1203)
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes to redemption or maturity; (ii) the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such defeasance
or covenant defeasance had not occurred (in the case of defeasance, such opinion
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable federal income tax laws); (iii) no Default or Event of
Default shall have occurred and be continuing on the date of such deposit; (iv)
such defeasance or covenant defeasance shall not cause the Trustee to have a
conflicting interest with respect to any securities of the Company or any
Guarantor; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument to which the Company or any Guarantor is a party or by which it is
bound; (vi) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (vii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Osfactory to the Trustee, which, taken together,
state that all conditions precedent under the Indenture to either defeasance or
covenant defeasance, as the case may be, have been complied with. (Section 1204)
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company or any Guarantor has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel satisfactory to the Trustee, which, taken together, state
that all
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conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with. (Section 401)
AMENDMENTS AND WAIVERS
From time to time, the Company and the Trustee may, without the consent of
the Noteholders, amend, waive or supplement the Indenture or the Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, qualifying, or maintaining the qualification of, the
Indenture under the Trust Indenture Act of 1939, or making any change that does
not adversely affect the rights of any Noteholder; provided, however, that the
Company has delivered to the Trustee an Opinion of Counsel stating that such
change does not adversely affect the rights of any Noteholder. Other amendments
and modifications of the Indenture or the Notes may be made by the Company and
the Trustee with the consent of the holders of not less than a majority of the
aggregate principal amount of the outstanding Notes; provided, however, that no
such modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby, (i) reduce the principal amount of, extend
the fixed maturity of or alter the redemption provisions of, the Notes, (ii)
change the currency in which any Notes or any premium or the interest thereon is
payable, (iii) reduce the percentage in principal amount of outstanding Notes
that must consent to an amendment, supplement or waiver or consent to take any
action under the Indenture or the Notes, (iv) modify the "Limitation on Other
Senior Subordinated Indebtedness" covenant or any of the provisions in the
Indenture relating to the subordination of the Notes in a manner adverse to the
holders; (v) impair the right to institute suit for the enforcement of any
payment on or with respect to the Notes, (vi) waive a default in payment with
respect to the Notes, (vii) alter the Company's obligation to purchase the Notes
in accordance with the Indenture or waive any default in the performance
thereof, (viii) reduce or change the rate or time for payment of interest on the
Notes, or (ix) release any Guarantor from any of its obligations under its
Guarantee or the Indenture other than in accordance with the terms of the
Indenture. (Sections 901 and 902) The ability of the Company to amend the
Indenture will be restricted by the terms of the Bank Credit Agreement.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee thereunder will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent Person would exercise under the circumstances in the conduct of such
Person's own affairs. (Section 602)
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined) it must eliminate such conflict
or resign.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State of
New York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Asset Acquisition from such Person or (b) existing at the
time such Person becomes a subsidiary of any other Person (other than any
Indebtedness incurred in connection with, or in contemplation of, such Asset
Acquisition or such Person becoming such a subsidiary).
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"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and, in the case of the Company and
its Restricted Subsidiaries, also means AET and The K.A.D. Companies, Inc.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or any Restricted Subsidiary shall be merged with
or into the Company or any Restricted Subsidiary or (b) the acquisition by the
Company or any Restricted Subsidiary of the assets of any Person which
constitute all or substantially all of the assets of such Person or any division
or line of business of such Person.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition to any Person other than the Company or a wholly owned Restricted
Subsidiary, in one or a series of related transactions, of (a) any Capital Stock
of any Restricted Subsidiary held by the Company or any Restricted Subsidiary;
(b) all or substantially all of the properties and assets of any division or
line of business of the Company or any Restricted Subsidiary; or (c) any other
properties or assets of the Company or any Restricted Subsidiary other than in
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" shall not include any sale, issuance, conveyance, transfer, lease
or other disposition of properties or assets (i) that is governed by the
provisions of the Indenture governing "Merger, Consolidation and Sale of
Assets," (ii) to an Unrestricted Subsidiary, if permitted under the "Limitation
on Restricted Payments" covenant or (iii) having a Fair Market Value of less
than $250,000.
"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years from such date to the date or dates of each successive
scheduled principal payment (including, without limitation, any sinking fund
requirements) of such Indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.
"Bank Credit Agreement" means the Credit Agreement dated as of October 29,
1993, amended and restated as of May 29, 1997, as further amended on November
19, 1997, between the Company and the Banks as in effect on the date hereof and
as such Agreement may be amended, restated, supplemented, replaced, refinanced,
substituted or otherwise modified from time to time.
"Banks" means the banks and other financial institutions from time to time
that are lenders under the Bank Credit Agreement.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
of 180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) certificates of deposit or acceptances with a maturity of 180
days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500,000,000; and (iii) commercial paper with a maturity of 180 days
or less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by S&P or at least P-1 by Moody's.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed
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to have "beneficial ownership" of all securities that such Person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 40% of the total Voting
Stock of the Company; (b) the Company consolidates with, or merges with or into,
another Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is converted into or exchanged for cash, securities or other property, other
than any such transaction where (i) the outstanding Voting Stock of the Company
is converted into or exchanged for (1) Voting Stock (other than Redeemable
Capital Stock) of the surviving or transferee corporation or (2) cash,
securities and other property in an amount which could be paid by the Company as
a Restricted Payment under the Indenture and (ii) immediately after such
transaction no "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) is the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 40% of the total Voting Stock of
the surviving or transferee corporation; (c) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of 66 2/3% of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (d) any final order, judgment or decree of a court of competent jurisdiction
shall be entered against the Company decreeing the dissolution or liquidation of
the Company.
"Closing Date" means the date of the closing of the offering of the Notes.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means, with respect to any Person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such Person's common stock, whether
outstanding at the Closing Date or issued after the Closing Date, and includes,
without limitation, all series and classes of such common stock.
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and its Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted by excluding (a) net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) net after-tax gains or losses (less all fees and expenses relating
thereto) attributable to asset dispositions, (c) the net income (or net loss) of
any Person (other than the Company or a Restricted Subsidiary), including
Unrestricted Subsidiaries, in which the Company or any of its Restricted
Subsidiaries has an ownership interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or its Restricted
Subsidiaries in cash by such other Person during such period, (d) net income (or
net loss) of any Person combined with the Company or any of its Restricted
Subsidiaries on a "pooling of interests" basis attributable to any period prior
to the date of combination, (e) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that net income is not at the date of
determination permitted, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders and (f) income resulting from transfers of assets received by the
Company or any Restricted Subsidiary from an Unrestricted Subsidiary.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Adjusted Net Income,
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
Non-cash Charges, in each case, for such period, of such Person and its
subsidiaries on a consolidated basis, all determined in accordance with GAAP, to
(b) the sum of such Consolidated Interest Expense for such period; provided that
(i) in making such computation, the Consolidated Interest Expense of such Person
attributable to interest on any Indebtedness computed on a pro forma
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basis and bearing a floating interest rate shall be computed as if the rate in
effect on the date of computation had been the applicable rate for the entire
period, (ii) in making such computation, the Consolidated Interest Expense of
such Person attributable to interest on any Indebtedness under a revolving
credit facility computed on a pro forma basis shall be computed based upon the
average daily balance of such Indebtedness during the applicable period, and
(iii) notwithstanding clauses (i) and (ii) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Rate Protection Obligations, shall be deemed to
have accrued at the rate per annum resulting after giving effect to the
operation of such agreements. If such Person or any of its subsidiaries directly
or indirectly guarantees Indebtedness of a third Person, the above clause shall
give effect to the incurrence of such guaranteed Indebtedness as if such Person
or such subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Income Tax Expense" means, with respect to any Person for any
period, the provision for federal, state, local and foreign income taxes of such
Person and its Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (i) the interest expense of such Person
and its Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (a) any amortization of
debt discount, (b) the net cost under Interest Rate Protection Obligations
(including any amortization of discounts), (c) the interest portion of any
deferred payment obligation, (d) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and (e) all accrued interest, (ii) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by such Person
and its Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP and (iii) the aggregate dividends paid or accrued on
Preferred Stock of such Person or its Subsidiaries, to the extent such Preferred
Stock is owned by Persons other than such Person and its Subsidiaries.
"Consolidated Net Tangible Assets" of any Person means, as of any date, (a)
all amounts that would be shown on the latest consolidated balance sheet of such
Person and its Subsidiaries prepared in accordance with GAAP, at the date of
determination less (b) the amount thereof constituting goodwill and other
intangible assets as calculated in accordance with GAAP.
"Consolidated Net Worth" means, with respect to any Person at any date, the
consolidated stockholders' equity of such Person less the amount of such
stockholders' equity attributable to Redeemable Capital Stock or treasury stock
of such Person and its Subsidiaries, as determined in accordance with GAAP.
"Consolidated Non-cash Charges" means, with respect to any Person for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Subsidiaries reducing Consolidated Adjusted Net Income of
such Person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Eligible Inventories" as of any date means the consolidated inventories of
the Company and its Restricted Subsidiaries (net of any reserve) on the basis of
the method of accounting (either last in/first out or first in/first out) used
by the Company in the preparation of its financial statements included in the
latest Form 10-K filed by the Company under the Securities Act, as shown on a
consolidated balance sheet of the Company and its Restricted Subsidiaries, all
in accordance with GAAP.
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"Eligible Receivables" as of any date means the consolidated accounts
receivables (net of any reserve) of the Company and its Restricted Subsidiaries
that are not more than 60 days past their due date and that were entered into on
normal payment terms as shown on a consolidated balance sheet of the Company and
its Restricted Subsidiaries, all in accordance with GAAP.
"Equity Offering" means any public or private sale of common stock of the
Company, other than (i) any public offerings with respect to the Company's
Common Stock registered on Form S-8 or Form S-4 and (ii) any private placement
occurring in connection with or after the occurrence of a Change of Control when
the Company's Common Stock is eligible for delisting from a national securities
exchange or automated quotation dealer system on which such Common Stock was
trading or quoted prior to such Change of Control.
"Event of Default" has the meaning set forth under "Events of Default"
herein.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction.
"FEEL" means Flight Equipment and Engineering Limited, an English
corporation.
"Fully Traded Common Stock" means Common Stock issued by any corporation if
(A) such Common Stock is listed on either The New York Stock Exchange, The
American Stock Exchange, The London Stock Exchange or the Nasdaq National
Market; provided that such Common Stock is freely tradeable under the Securities
Act (or, in the case of The London Stock Exchange, any applicable law, rule or
regulation) upon issuance; and (B) such Common Stock does not constitute more
than 15% of the issued and outstanding Common Stock of such corporation held by
Persons other than 10% holders of such Common Stock and Affiliates and insiders
of such corporation.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States of America, which are
applicable as of the Closing Date.
"Guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of all or any
part of such obligation, including, without limiting the foregoing, the payment
of amounts drawn down by letters of credit.
"Guarantee" means any guarantee of any Indebtedness of the Company incurred
by any Restricted Subsidiary pursuant to (1) paragraph (a) of the "Limitation on
Guarantees of Indebtedness by Restricted Subsidiaries" covenant, (2) clause (v)
of the "Limitation on Dividends and other Payment Restrictions Affecting
Restricted Subsidiaries" covenant, (3) clause (y) of paragraph (b) of the
"Limitation on Indebtedness" covenant, or (4) clause (ii) of the definition of
Permitted Investment. When used as a verb, "Guarantee" shall have a
corresponding meaning.
"Guarantor" means any Restricted Subsidiary which incurs a Guarantee.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit, bankers' acceptance or other similar
credit transaction and in connection with any agreement to purchase, redeem,
exchange, convert or otherwise acquire for value any Capital Stock of such
Person, or any warrants, rights or options to acquire such Capital Stock, now or
hereafter outstanding, if, and to the extent, any of the foregoing would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, (b) all obligations of such Person evidenced by bonds, notes, debentures
or other similar instruments, if, and
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to the extent, any of the foregoing would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, (c) all indebtedness of
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business, (d)
all Capitalized Lease Obligations of such Person, (e) all Indebtedness referred
to in the preceding clauses of other Persons and all dividends of other Persons,
the payment of which is secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Inh obligation being deemed to be the lesser of the value of
such property or asset or the amount of the obligation so secured), (f) all
guarantees by such Person of Indebtedness referred to in this definition, (g)
all Redeemable Capital Stock of such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued dividends,
(h) all obligations of such Person under or in respect of currency exchange
contracts and Interest Rate Protection Obligations and (i) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of such Person of the types referred to in clauses (a) through (h)
above. For purposes hereof, the "maximum fixed repurchase price" of any
Redeemable Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Redeemable Capital Stock as if
such Redeemable Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such price
is based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such Person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other Person. In addition, the Fair
Market Value of the net assets of any Restricted Subsidiary of the Company at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary shall be deemed to be an "Investment" made by the Company in such
Unrestricted Subsidiary at such time. "Investments" shall exclude extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A Person shall be deemed to own subject to a Lien any property which such
Person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
"Maturity" means, with respect to any Note, the date on which any principal
of such Note or an installment of interest becomes due and payable as therein or
herein provided, whether at the Stated Maturity with respect to such principal
or by declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage
commissions and other fees and expenses
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(including fees and expenses of legal counsel and investment banks) related to
such Asset Sale, (ii) provisions for all taxes payable as a result of such Asset
Sale, (iii) amounts required to be paid to any Person (other than the Company or
any Restricted Subsidiary) owning a beneficial interest in the assets subject to
the Asset Sale and (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with GAAP consistently applied against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate delivered to the
Trustee.
"Pari Passu Indebtedness" means Indebtedness of the Company which is pari
passu with the Notes.
"Permitted Indebtedness" means any of the following:
(i) Indebtedness of the Company in an aggregate principal amount at
any one time outstanding not to exceed the greater of (i) $200 million and
(ii) the sum of 80% of the aggregate amount of Eligible Receivables and 50%
of the aggregate amount of Eligible Inventory, measured as of the most
recent fiscal quarter preceding the time such Indebtedness is incurred;
(ii) Indebtedness of the Company under the Notes;
(iii) Indebtedness of the Company outstanding on the date of the
Indenture (other than Indebtedness incurred pursuant to clause (i) of this
definition);
(iv) obligations of the Company pursuant to Interest Rate Protection
Obligations, which obligations do not exceed the aggregate principal amount
of the Indebtedness covered by such Interest Rate Protection Obligations
and obligations under currency exchange contracts entered into in the
ordinary course of business;
(v) Indebtedness of the Company to any wholly owned Restricted
Subsidiaries;
(vi) Indebtedness of the Company consisting of guarantees, indemnities
or obligations in respect of purchase price adjustments in connection with
the acquisition or disposition of assets, including, without limitation,
shares of Capital Stock of Restricted Subsidiaries;
(vii) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by the
Company of any Indebtedness of the Company incurred pursuant to the
"Limitation on Indebtedness" covenant or clauses (ii) and (iii) of this
definition, including any successive refinancings by the Company, so long
as (A) any such new Indebtedness shall be in a principal amount that does
not exceed the principal amount (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) so refinanced plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing, plus the amount of expenses of the Company incurred in
connection with such refinancing, (B) in the case of any refinancing of
Pari Passu Indebtedness or Subordinated Indebtedness, such new Indebtedness
is made pari passu with or subordinate to the Notes at least to the same
extent as the Indebtedness being refinanced and (C) such new Indebtedness
has an Average Life longer than the Average Life of the Notes and a final
Stated Maturity later than the final Stated Maturity of the Notes; and
(viii) Indebtedness in an aggregate principal amount not in excess of
$30 million at any one time outstanding, less the amount of Permitted
Subsidiary Indebtedness then outstanding pursuant to clause (vii) of the
definition thereof.
"Permitted Investments" means any of the following: (i) Investments in Cash
Equivalents; (ii) Investments in the Company or wholly owned Restricted
Subsidiaries; (iii) Investments in an amount not to exceed $15 million at any
one time outstanding; (iv) Investments by the Company or any Restricted
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Subsidiary of the Company in another Person, if as a result of such Investment
(A) such other Person becomes a wholly owned Restricted Subsidiary or (B) such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all of its assets to, the Company or a wholly-owned Restricted
Subsidiary; or (v) Investments from the date of the Indenture in a Restricted
Subsidiary that is less than wholly owned in an aggregate amount measured at the
time of Investment (less payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Restricted Subsidiary, to the extent not included in clause
(D) of the last paragraph of Subsection (a) of the "Limitation on Restricted
Payments" covenant) not to exceed 5% of Consolidated Net Tangible Assets of the
Company. In connection with any assets or property contributed or transferred to
any Person as an Investment, such property and assets shall be equal to the Fair
Market Value (as determined by the Company's Board of Directors) at the time of
Investment.
"Permitted Liens" means the following types of Liens:
(a) Liens on any property or assets of a Restricted Subsidiary granted
in favor of the Company or any Restricted Subsidiary;
(b) Liens securing the Notes;
(c) Liens securing the Guarantees;
(d) Liens securing Acquired Indebtedness created prior to (and not in
connection with or in contemplation of) the incurrence of such Indebtedness
by the Company or any Restricted Subsidiary; provided that any such Lien
does not extend to any property or assets of the Company or any Restricted
Subsidiary other than the assets acquired in connection with the incurrence
of such Acquired Indebtedness; and
(e) any extension, renewal or replacement, in whole or in part, of any
Lien described in the foregoing clauses (a) through (d); provided that any
such extension, renewal or replacement shall be no more restrictive in any
material respect that the Lien so extended, renewed or replaced and shall
not extend to any additional property or assets.
"Permitted Subsidiary Indebtedness" means any of the following:
(i) Indebtedness of any Restricted Subsidiary outstanding on the date
of the Indenture;
(ii) obligations of any Restricted Subsidiary pursuant to Interest
Rate Protection Obligations, which obligations do not exceed the aggregate
principal amount of the Indebtedness covered by such Interest Rate
Protection Obligations;
(iii) Indebtedness of any Restricted Subsidiary to any wholly owned
Restricted Subsidiary of the Company or to the Company;
(iv) Indebtedness of any Restricted Subsidiary consisting of
guaranties, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock of Restricted
Subsidiaries;
(v) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by any
Restricted Subsidiary of any Indebtedness of such Restricted Subsidiary
incurred pursuant to clause (i) of this definition, including any
successive refinancings by such Restricted Subsidiary, so long as any such
new Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
by such Restricted Subsidiary as necessary to accomplish such refinancing,
plus the amount of expenses of such Restricted Subsidiary incurred in
connection with such refinancing and such new Indebtedness has an Average
Life longer than the Average Life of the Notes and a final Stated Maturity
later than the final Stated Maturity of the Notes;
83
<PAGE> 85
(vi) Indebtedness (as defined in clauses (e) and (f) of the definition
of Indebtedness) to the Noteholders incurred pursuant to provisions of the
Indenture;
(vii) Indebtedness in an amount not to exceed $30 million at any one
time outstanding, less the amount of Permitted Indebtedness then
outstanding pursuant to clause (viii) of the definition thereof; and
(viii) Guarantees of Indebtedness of the Company permitted under the
"Limitation on Guarantees of Indebtedness by Restricted Subsidiaries"
covenant.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding, or issued after
the Closing Date, and including, without limitation, all classes and series of
preferred or preference stock of such Person.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to the final
Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time prior to such final Stated Maturity, or is convertible into
or exchangeable for debt securities at any time prior to such final Stated
Maturity.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc. and its successors.
"Senior Notes" means the 9 3/4% Senior Notes due 2003 of the Company issued
under the Senior Notes Indenture.
"Significant Subsidiary" of the Company means any Restricted Subsidiary of
the Company that is a "significant subsidiary" as defined in Rule 1.02(v) of
Regulation S-X under the Securities Act, and in any event shall include any
Guarantor.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest
thereon, is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Person performing
similar functions). Unless specifically provided to the contrary herein,
Unrestricted Subsidiaries shall not be included in the definition of
Subsidiaries for any purpose of the Indenture (other than for the purposes of
the definition of "Unrestricted Subsidiary" herein).
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company which at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (2) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary) to be an
84
<PAGE> 86
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns, or holds any Lien on, any property of the Company or any other Subsidiary
of the Company which is not a Subsidiary of the Subsidiary to be so designated;
provided that either (x) the Subsidiary to be designated has total assets of
$1,000 or less at the time of its designation or (y) immediately after giving
effect to such designation, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the "Limitation on
Indebtedness" covenant. The Board of Directors may designate any Unrestricted
Subsidiary to be a Subsidiary; provided that immediately after giving effect to
such designation, the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the "Limitation on Indebtedness"
covenant.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly Owned" with respect to any Subsidiary, means any Subsidiary of any
Person of which at least 99% of the outstanding Capital Stock is owned by such
Person or another wholly owned Subsidiary of such Person. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
"9 7/8% Notes" means the Company's 9 7/8% Senior Subordinated Notes due
2006.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form, without coupons. Except as described in the next paragraph, the Notes will
be deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC"), and registered in the name of Cede & Co., as DTC's nominee in the
form of a global Note certificate (the "Global Certificate") or will remain in
the custody of the Trustee pursuant to a FAST Balance Certificate Agreement
between DTC and the Trustee.
Notes originally purchased by or transferred to (i) except as described
below, persons outside the United States pursuant to sales in accordance with
Regulation S under the Securities Act or (ii) any other Persons who are not QIBs
(collectively, "Non-Global Purchasers") will be issued in registered form
without coupons (the "Certificated Notes"). Upon the transfer to a QIB of
Certificated Notes initially issued to a Non-Global Purchaser, such Certificated
Notes will be exchanged for an interest in the Global Certificate or in the
Notes in the custody of the Trustee representing the principal amount of notes
being transferred.
Notes originally purchased by persons outside the United States pursuant to
sales in accordance with Regulations S under the Securities Act will be
represented upon issuance by a temporary global Note certificate (the "Temporary
Certificate") which will not be exchangeable for Certificated Notes until the
expiration of the "40-day restricted period" within the meaning of Rule
903(c)(3) of Regulation S under the Securities Act. The Temporary Certificate
will be registered in the name of, and held by, a temporary certificate holder
until the expiration of such 40-day period, at which time the Temporary
Certificate will be delivered to the Trustee in exchange for Certificated Notes
registered in the names requested by such temporary certificate holder. In
addition, until the expiration of such 40-day period, transfers of interest in
the Temporary Certificate can only be effected through such temporary
certificate holder in accordance with the requirements set forth in "Notice to
Investors."
85
<PAGE> 87
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 180 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resales. In
addition, the Company agreed that it would not for a period of 120 days from
February 6, 1998, the date of the Offering Memorandum distributed in connection
with the sale of the Old Notes, directly or indirectly offer, sell, grant any
options to purchase or otherwise dispose of any debt securities other than in
connection with this Exchange Offer.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
New Notes being offered hereby will be passed upon for the Company by Shearman &
Sterling, New York, New York.
EXPERTS
The financial statements of BE Aerospace, Inc. as of February 22, 1997 and
February 24, 1996 and for each of the three fiscal years in the period ended
February 22, 1997 (which includes an explanatory paragraph relating to the
Company's change in its method of accounting for engineering expenditures),
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing elsewhere herein and
have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
86
<PAGE> 88
BE AEROSPACE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996
(Unaudited)
Consolidated Balance Sheet, November 29, 1997............. F-2
Consolidated Statements of Earnings for the Nine Months
Ended November 29, 1997 and November 30, 1996
(Unaudited)............................................ F-3
Consolidated Statements of Cash Flows for the Nine Months
Ended November 29, 1997 and November 30, 1996
(Unaudited)............................................ F-4
Notes to Consolidated Financial Statements for the Nine
Months Ended November 29, 1997 and November 30, 1996
(Unaudited)............................................ F-5
FISCAL YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND
FEBRUARY 25, 1995
Independent Auditors' Report.............................. F-7
Consolidated Balance Sheets, February 22, 1997 and
February 24, 1996...................................... F-8
Consolidated Statements of Operations for the Years Ended
February 22, 1997, February 24, 1996 and February 25,
1995................................................... F-9
Consolidated Statements of Stockholders' Equity for the
Years Ended February 22, 1997, February 24, 1996, and
February 25, 1995...................................... F-10
Consolidated Statements of Cash Flows for the Years Ended
February 22, 1997, February 24, 1996 and February 25,
1995................................................... F-11
Notes to Consolidated Financial Statements for the Years
Ended February 22, 1997, February 24, 1996, and
February 25, 1995...................................... F-12
</TABLE>
F-1
<PAGE> 89
BE AEROSPACE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOVEMBER 29, FEBRUARY 22,
1997 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 58,221 $ 44,149
Receivables -- trade, less allowance for doubtful accounts
of $2,696 (November 29, 1997) and $4,864 (February 22,
1997).................................................. 79,970 73,489
Inventories, net.......................................... 113,869 92,900
Other current assets...................................... 6,935 2,781
-------- --------
Total current assets................................... 258,995 213,319
-------- --------
Property and Equipment, net................................. 98,753 87,888
Intangibles and Other Assets, net........................... 188,963 189,882
-------- --------
$546,711 $491,089
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 55,913 $ 42,889
Accrued expenses.......................................... 42,578 43,837
Current portion of long-term debt......................... 7,222 4,419
-------- --------
Total current liabilities.............................. 105,713 91,145
-------- --------
Long-Term Debt.............................................. 225,339 225,402
Deferred Income Taxes....................................... 1,310 1,667
Other Liabilities........................................... 14,149 7,114
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding......................
Common stock, $.01 par value; 50,000,000 shares
authorized; 22,792,892 (November 29, 1997) 21,893,392
(February 22, 1997) issued and outstanding............. 228 219
Additional paid-in capital................................ 238,578 228,710
Accumulated deficit....................................... (37,834) (62,286)
Cumulative foreign exchange translation adjustment........ (772) (882)
-------- --------
Total stockholders' equity............................. 200,200 165,761
-------- --------
$546,711 $491,089
======== ========
</TABLE>
F-2
<PAGE> 90
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
NOVEMBER 29, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Net Sales................................................... $362,687 $308,151
Cost of Sales............................................... 230,825 204,655
-------- --------
Gross Profit................................................ 131,862 103,496
Operating Expenses:
Selling, general and administrative....................... 43,017 37,619
Research, development and engineering..................... 34,988 27,759
Amortization expense...................................... 8,195 8,021
-------- --------
Total operating expenses............................... 86,200 73,399
-------- --------
Operating Earnings.......................................... 45,662 30,097
Interest Expense, net....................................... 16,899 21,845
-------- --------
Earnings Before Income Taxes................................ 28,763 8,252
Income Taxes................................................ 4,311 825
-------- --------
Net Earnings................................................ $ 24,452 $ 7,427
======== ========
Earnings Per Common Share:
Net Earnings Per Common Share............................. $ 1.04 $ 0.42
======== ========
Common and Common Equivalent Shares....................... 23,414 17,786
======== ========
</TABLE>
F-3
<PAGE> 91
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------------
NOVEMBER 29, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings.............................................. $ 24,452 $ 7,427
Adjustments to reconcile net earnings to net cash flows
provided by (used in) operating activities:
Depreciation and amortization.......................... 18,482 16,325
Deferred income taxes.................................. (413) 637
Non cash employee benefit plan contributions........... 1,251 783
Changes in operating assets and liabilities:
Accounts receivable.................................. (5,886) (15,193)
Inventories.......................................... (19,785) (15,106)
Other current assets................................. (4,168) 3,266
Accounts payable..................................... 13,638 1,370
Other liabilities.................................... 221 (9,683)
-------- --------
Net cash flows provided by (used in) operating
activities...................................... 27,792 (10,174)
-------- --------
Cash Flows from Investing Activities:
Capital expenditures...................................... (21,099) (8,675)
Change in intangibles and other assets -- net............. (3,836) (2,177)
-------- --------
Net cash flows used in investing activities....... (24,935) (10,852)
-------- --------
Cash Flows from Financing Activities:
Net borrowings under revolving lines of credit............ 2,518 7,903
Proceeds from issuances of stock.......................... 8,647 11,229
-------- --------
Net cash flows provided by financing activities... 11,165 19,132
-------- --------
Effect of exchange rate changes on cash flows............... 50 188
-------- --------
Net increase (decrease) in cash and cash equivalents........ 14,072 (1,706)
Cash and cash equivalents, beginning of period.............. 44,149 15,376
-------- --------
Cash and cash equivalents, end of period.................... $ 58,221 $ 13,670
======== ========
Supplemental disclosures of cash flow information:
Cash paid during period for interest...................... $ 17,716 $ 20,935
Cash paid during period for income taxes, net............. $ 1,871 $ 1,183
</TABLE>
F-4
<PAGE> 92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION:
The information set forth in these consolidated financial statements as of
November 29, 1997 and for the nine months ended November 29, 1997 and November
30, 1996 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 B/E Aerospace, Inc. (the "Company" or
"B/E") for the periods indicated. Results of operations for the interim periods
ended November 29, 1997 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 22, 1997.
The accompanying consolidated financial statements consolidate all of the
Company's subsidiaries. All significant intercompany transactions have been
eliminated. Certain amounts in the prior year's Consolidated Financial
Statements have been reclassified to conform to the current fiscal year's
presentation.
Certain information normally included in footnote disclosures to the annual
financial statements has been condensed or omitted in accordance with the rules
and regulations of the Securities and Exchange Commission.
NOTE 2. EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share which is
effective for financial statements issued for periods ending after December 15,
1997. SFAS No. 128 requires the disclosure of basic and diluted earnings per
share. Earnings per share, as reported and as would be reportable under SFAS No.
128 for the nine months ended November 29, 1997 and November 30, 1996 are as
follows:
<TABLE>
<CAPTION>
AS REPORTED
NINE MONTHS ENDED
----------------------------
NOVEMBER 29, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Primary earnings per share............... $1.04 $.42
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED
----------------------------
NOVEMBER 29, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Basic earnings per share................. $1.10 $.44
Diluted earnings per share............... $1.04 $.41
</TABLE>
NOTE 3. NEW ACCOUNTING PRONOUNCEMENTS
Comprehensive Income -- During 1997 the FASB issued SFAS No. 130,
"Reporting Comprehensive Income," which established standards for the reporting
and displaying of comprehensive income. Comprehensive income is defined as all
changes in a Company's net assets except changes resulting from transactions
with shareholders. It differs from net income in that certain items currently
recorded to equity would be a part of comprehensive income. Comprehensive income
must be reported in a financial statement with the cumulative total presented as
a component of equity. This statement will be adopted by the Company in its
fiscal 1999 quarterly financial statements.
Segment Information -- In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards (SFAS) No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
will be effective for the Company beginning March 1, 1998. SFAS No. 131
redefines how
F-5
<PAGE> 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED NOVEMBER 29, 1997 AND NOVEMBER 30, 1996 -- (CONTINUED)
(UNAUDITED)
operating segments are determined and requires disclosure of certain financial
and descriptive information about a company's operating segments. The Company
believes the segment information required to be disclosed under SFAS No. 131
will be more comprehensive than previously provided, including expanded
disclosure of income statement and balance sheet items. The Company has not yet
completed its analysis of which operating segments it will report on.
NOTE 4. LONG-TERM DEBT
In May 1997, the Company amended its existing credit facilities with The
Chase Manhattan Bank by increasing the aggregate principal amount that may be
borrowed thereunder to $125,000 (the "Bank Credit Facility"). The Bank Credit
Facility consists of a $25,000 Reducing Revolver and a $100,000 Revolving
Facility. The amount of the Reducing Revolver will be reduced automatically by
12.5% on August 26, 2000 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 a wholly owned subsidiary and has a
five-year maturity. 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 29, 1997 indebtedness under the Bank Credit Facility were
letters of credit amounting to approximately $4,572. The Company has
approximately $120,428 available for subsequent borrowings under its Bank Credit
Facility.
NOTE 5. SUBSEQUENT EVENTS
In January 1998, the Company resolved a long-running dispute with the U.S.
Government over export sales between 1992 and 1995 to Iran Air. The dispute
centered on shipments of aircraft seats and related spare parts for five
civilian aircraft operated by Iran. Iran Air purchased the seats in 1992 and
arranged for them to be installed by a contractor in France. At the time, Iran
was not the subject of a U.S. trade embargo. In connection with its sale of
seats to Iran Air, B/E applied for and was granted a validated export license by
the U.S. Department of Commerce (the "DOC"). The dispute with the U.S.
Government centered on whether seats were delivered to Iran Air before the
formal license was issued by the DOC, some seven months after B/E first applied
for the license. This action resolved all disputes between B/E Aerospace and the
Department of Justice as well as the DOC's Bureau of Export Enforcement. As part
of the settlement, B/E plead guilty to a violation of the International Economic
Emergency Powers Act and entered into a consent order with the DOC under which
the DOC has agreed to suspend the imposition of a three-year export denial order
on PTC Aerospace, a member of B/E's U.S. Seating Products Group, provided no
further violations of the export laws occur. The Company will record a charge of
approximately $4 million in its fourth quarter of fiscal 1998, which ends
February 28, 1998, related to fines, civil penalties and associated legal fees
arising from the settlement.
F-6
<PAGE> 94
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
B/E Aerospace, Inc.
Wellington, Florida
We have audited the accompanying consolidated balance sheets of B/E
Aerospace, Inc. and subsidiaries as of February 22, 1997 and February 24, 1996,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended February 22, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of B/E Aerospace, Inc. and
subsidiaries as of February 22, 1997 and February 24, 1996 and the results of
their operations and their cash flows for each of the three years in the period
ended February 22, 1997, in conformity with generally accepted accounting
principles.
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 10, 1997
F-7
<PAGE> 95
CONSOLIDATED BALANCE SHEETS,
FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 44,149 $ 15,376
Accounts receivable -- trade, less allowance for doubtful
accounts of $4,864 (1997) and $4,973 (1996)............ 73,489 54,242
Inventories, net.......................................... 92,900 72,569
Other current assets...................................... 2,781 7,621
-------- --------
Total current assets................................... 213,319 149,808
-------- --------
Property and Equipment, net................................. 87,888 86,357
Intangibles and Other Assets, net........................... 189,882 197,421
-------- --------
$491,089 $433,586
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 42,889 $ 45,102
Accrued liabilities....................................... 43,837 56,400
Current portion of long-term debt and borrowings.......... 4,419 6,482
-------- --------
Total current liabilities.............................. 91,145 107,984
-------- --------
Long-term debt.............................................. 225,402 273,192
Deferred income taxes....................................... 1,667 1,257
Other liabilities........................................... 7,114 6,996
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; 21,893,392 (1997) and 16,392,994 (1996)
shares issued and outstanding.......................... 219 164
Additional paid-in capital................................ 228,710 121,366
Accumulated deficit....................................... (62,286) (75,995)
Cumulative foreign exchange translation adjustment........ (882) (1,378)
-------- --------
Total stockholders' equity............................. 165,761 44,157
-------- --------
$491,089 $433,586
======== ========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 96
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996,
AND FEBRUARY 25, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
FEBRUARY 22, FEBRUARY 24, FEBRUARY 25,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................. $412,379 $232,582 $229,347
Cost of sales......................................... 270,557 160,031 154,863
-------- -------- --------
Gross profit.......................................... 141,822 72,551 74,484
Operating expenses:
Selling, general and administrative................. 51,734 42,000 31,787
Research, development and engineering............... 37,083 58,327 12,860
Amortization of intangible assets................... 10,607 9,499 9,954
Other expenses...................................... -- 4,170 23,736
-------- -------- --------
Total operating expenses......................... 99,424 113,996 78,337
-------- -------- --------
Operating earnings (loss)............................. 42,398 (41,445) (3,853)
Interest expense, net................................. 27,167 18,636 15,019
-------- -------- --------
Earnings (loss) before income taxes
(benefit) and cumulative effect
of change in accounting principle................... 15,231 (60,081) (18,872)
Income taxes (benefit)................................ 1,522 -- (6,806)
-------- -------- --------
Earnings (loss) before cumulative
effect of change in accounting principle............ 13,709 (60,081) (12,066)
Cumulative effect of change in
accounting principle................................ -- (23,332) --
-------- -------- --------
Net earnings (loss)................................... $ 13,709 $(83,413) $(12,066)
======== ======== ========
Earnings (loss) per common share:
Earnings (loss) before cumulative effect
of change in accounting principle................ $ .72 $ (3.71) $ (0.75)
Cumulative effect of change in
accounting principle............................. -- (1.44) --
-------- -------- --------
Net earnings (loss)................................. $ .72 $ (5.15) $ (0.75)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-9
<PAGE> 97
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995
(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 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
Sale of stock under employee stock
purchase plan................... 58 482 -- -- 482
Exercise of stock options.......... 1,362 14 11,650 -- -- 11,664
Employee benefit plan matching
contribution.................... 75 1 1,316 -- -- 1,317
Sale of common stock under public
offering, net of expenses....... 4,005 40 93,896 -- -- 93,936
Net earnings....................... -- -- -- 13,709 -- 13,709
Foreign currency translation
adjustment...................... -- -- -- -- 496 496
------ ---- -------- -------- ------- --------
Balance, February 22, 1997........... 21,893 $219 $228,710 $(62,286) $ (882) $165,761
====== ==== ======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE> 98
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996 AND FEBRUARY 25, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss).................................... $ 13,709 $(83,413) $(12,066)
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....................... 24,147 18,435 16,146
Change in intangible assets......................... -- -- 8,588
Deferred income taxes............................... 410 (3,453) (6,764)
Non cash employee benefit plan contributions........ 1,317 859 721
Changes in operating assets and liabilities, net of
effects from acquisitions:
Accounts receivable............................... (19,366) 6,068 6,226
Inventories....................................... (19,536) (11,929) (16,863)
Other current assets.............................. 5,059 (638) (585)
Accounts payable.................................. (4,767) 3,008 7,295
Other liabilities................................. (11,564) 13,169 (642)
-------- -------- --------
Net cash flows (used in) provided by operating
activities................................... (10,591) (34,562) 2,056
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment........ (14,471) (13,656) (12,172)
Change in other assets................................. (1,331) (5,914) (8,610)
Acquisitions........................................... -- (42,500)
-------- -------- --------
Net cash flows used in investing activities.... (15,802) (62,070) (20,782)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving lines of
credit.............................................. (38,882) 2,000 9,080
Proceeds from issuance of stock, net of expenses....... 106,082 1,302 132
Principal payments on long-term debt................... (11,968) (942)
Proceeds from long-term debt........................... -- 101,252 3,873
-------- -------- --------
Net cash flows provided by financing
activities................................... 55,232 103,612 13,085
-------- -------- --------
Effect of exchange rate changes on cash flows.......... (66) 77 222
-------- -------- --------
Net increase (decrease) in cash and cash equivalents... 28,773 7,057 (5,419)
Cash and cash equivalents, beginning of year........... 15,376 8,319 13,738
-------- -------- --------
Cash and cash equivalents, end of year................. $ 44,149 $ 15,376 $ 8,319
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid (received) during year for:
Interest............................................... $ 26,097 $ 16,967 $ 16,664
Income taxes -- net.................................... 1,209 (3,292) (1,096)
SCHEDULE OF NON-CASH TRANSACTIONS:
Liabilities assumed and accrued acquisition costs
incurred in connection with the acquisitions (See
Note 3)............................................. -- 27,532 --
Liabilities incurred in connection with purchase of
land and buildings.................................. -- -- 4,000
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 99
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation -- B/E 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.
Consolidation -- The accompanying financial statements consolidate the
accounts of B/E 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 occasional sales collateralized by letters of credit. 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 accounts for the impairment and
disposition of long-lived assets in accordance with SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed. In
accordance with SFAS No. 121, long-lived assets to be held are reviewed for
events or changes in circumstances which indicate that their carrying value may
not be recoverable. 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 15, the Company introduced a
new product to the in-flight 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, 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 (FASB) issued SFAS No. 123, Accounting for Stock-Based
Compensation, which became effective for the Company beginning during fiscal
1997. SFAS No. 123 requires extended disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based
F-12
<PAGE> 100
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
on the fair value of the equity instrument awarded. Companies are permitted,
however, to continue to apply Accounting Principles Board (APB) Opinion No. 25,
which recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company continues to apply APB Opinion No. 25 to its
stock-based compensation awards to employees and discloses the required pro
forma effect on net income and earnings per share. See Note 12.
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 anti-dilutive) shares outstanding during each period. The
number of weighted average shares of common stock outstanding amounted to
19,107,000, 16,185,000, and 16,021,000 for the years ended February 22, 1997,
February 24, 1996 and February 25, 1995, respectively.
In February 1997, the FASB issued SFAS No. 128, Earnings per Share which is
effective for financial statements issued for period ending after December 15,
1997. SFAS No. 128 requires the disclosure of basic and diluted earnings per
share. The amount reported as net income per common and common equivalent share
for the year ended February 22, 1997 would not be materially different than that
which would have been reported for basic and diluted earnings per share in
accordance with SFAS No. 128.
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.
Reclassifications -- Certain items in prior years' financial statements
have been reclassified to conform with the presentation used in the year ended
February 22, 1997.
2. ACCOUNTING CHANGE
In fiscal 1996, 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
precontract 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 precontract
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 $65,446 as of February 24, 1996.
F-13
<PAGE> 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
Pro forma amounts assuming the change in application of accounting
principle applied retroactively (unaudited):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------
FEBRUARY 24, FEBRUARY 25,
1996 1995
------------ ------------
<S> <C> <C>
Net loss.................................... $(60,081) $(35,398)
Net loss per share.......................... $ (3.71) $ (2.20)
</TABLE>
3. ACQUISITIONS
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 liabilities arising from the acquisition.
Funds for the acquisition were obtained from proceeds of the long-term debt
issuance described in Note 8.
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>
The following table presents unaudited proforma operating results for the
fiscal years ended February 1996 and 1995, respectively, as if the 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>
4. INVENTORIES
Inventories are stated at the lower of cost or market, cost is determined
using the weighted average cost method. Finished goods and work in process
inventories include material, labor and manufacturing overhead costs.
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials.................................... $45,947 $28,252
Work-in-process.................................. 41,399 39,045
Finished goods................................... 7,929 5,272
Less customer advances........................... (2,375) --
------- -------
$92,900 $72,569
======= =======
</TABLE>
F-14
<PAGE> 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, and depreciated and amortized
generally on the straight-line method over their estimated useful lives of two
to thirty years (term of lease as to leasehold improvements). Property and
equipment consist of the following:
<TABLE>
<CAPTION>
YEARS 1997 1996
----- -------- --------
<S> <C> <C> <C>
Land, buildings and improvements.............. 10-30 $ 42,966 $ 39,979
Machinery..................................... 3-13 45,444 46,374
Tooling....................................... 3-10 17,179 14,819
Furniture and equipment....................... 2-10 18,327 12,758
-------- --------
123,916 113,930
Less accumulated depreciation and
amortization........................... (36,028) (27,573)
-------- --------
$ 87,888 $ 86,357
======== ========
</TABLE>
6. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
STRAIGHT-LINE
AMORTIZATION
PERIOD (YEARS) 1997 1996
-------------- -------- --------
<S> <C> <C> <C>
Covenants not-to-compete................ 14 $ 10,198 $ 10,198
Product technology, production plans and
drawings.............................. 7-20 59,484 60,201
Replacement parts annuity............... 20 29,778 29,416
Product approvals and technical
manuals............................... 20 18,331 18,529
Goodwill................................ 30 78,913 77,256
Debt issue costs........................ 10 13,431 12,592
Trademarks and patents.................. 20 10,820 10,470
Other................................... 14,271 11,761
-------- --------
235,226 230,423
Less accumulated amortization...... (45,344) (33,002)
-------- --------
$189,882 $197,421
======== ========
</TABLE>
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accrued product warranties....................... $ 5,231 $ 3,455
Accrued salaries, vacation and related
benefits....................................... 12,868 10,479
Accrued acquisition expenses..................... 5,488 11,105
Accrued interest................................. 6,585 7,449
Customer advances................................ -- 5,940
Accrued income taxes............................. 6,563 7,315
Other accrued liabilities........................ 7,102 10,657
------- -------
$43,837 $56,400
======= =======
</TABLE>
F-15
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
8. LONG-TERM DEBT AND BORROWINGS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Senior notes................................... $124,411 $124,313
Senior subordinated notes...................... 100,000 100,000
Revolving lines of credit...................... 4,419 42,967
Term loan...................................... -- 11,968
Other long-term debt........................... 991 696
-------- --------
229,821 279,674
Less current portion of long-term debt.... (4,419) (6,482)
-------- --------
$225,402 $273,192
======== ========
</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 a wholly owned subsidiary 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 22, 1997.
Borrowings under the Bank Credit Facility currently bear interest at LIBOR
plus 1.75% or prime (as defined) plus .5%. 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 22, 1997,
approximately $5,100 of letters of credit were outstanding, reducing the
aggregate Bank Credit Facility availability to approximately $94,900.
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.
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 on 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 22,
1997, 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
F-16
<PAGE> 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
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 22, 1997, 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 50%
of the Company's consolidated adjusted net earnings 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 22, 1997, approximately $3,400 of dividends could have been
declared by the Company.
The Company has a U.K. revolving line of credit agreement for approximately
$4,800 (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 as of February 22, 1997. Aggregate borrowings outstanding under
the FEEL Credit Agreement were approximately $4,419 as of February 22, 1997.
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 22, 1997. There were no borrowings outstanding under the Inventum
Credit Agreement as of February 22, 1997.
Maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Fiscal year ending February:
1998.................................................. $ 4,419
1999.................................................. 177
2000.................................................. 138
2001.................................................. 315
2002.................................................. --
Thereafter.............................................. 224,772
--------
$229,821
========
</TABLE>
Interest expense amounted to $28,369, $18,788 and $17,225 for the years
ended February 22, 1997, February 24, 1996 and February 25, 1995, respectively.
F-17
<PAGE> 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
9. INCOME TAXES
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Current:
Federal.............................. $ -- $ 1,972 $ (786)
State................................ -- 818 105
Foreign.............................. 1,112 663 639
------ ------- -------
1,112 3,453 (42)
------ ------- -------
Deferred:
Federal.............................. -- (2,635) (5,146)
State................................ -- (818) (904)
Foreign.............................. 410 -- (714)
------ ------- -------
410... (3,453) (6,764)
------ ------- -------
$1,522 $ -- $(6,806)
====== ======= =======
</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>
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
Statutory U.S. federal income tax expense
(benefit).......................................... $ 5,331 $(21,028) $(6,605)
Operating loss (with) without tax benefit............ (6,164) 14,569 --
Foreign tax rate differential........................ 1,267 3,324 --
Goodwill amortization................................ 566 558 708
Other, net........................................... 522 2,577 (909)
------- -------- -------
$ 1,522 $ -- $(6,806)
======= ======== =======
</TABLE>
F-18
<PAGE> 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
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>
1997 1996
-------- --------
<S> <C> <C>
Engineering costs........................................... $ -- $ 22,182
Inventory reserves.......................................... 3,145 5,164
Acquisition reserves........................................ (1,740) 991
Inventory costs capitalized for tax purposes................ 1,236 815
Bad debt reserves........................................... 948 658
Warranty reserve............................................ 1,452 --
Other....................................................... 2,840 1,611
-------- --------
Net current deferred income tax assets...................... 7,881 31,421
Intangible assets........................................... (13,565) (14,701)
Depreciation................................................ (2,074) (1,556)
Net operating loss carryforward............................. 26,309 9,254
Research credit carryforward................................ 2,941 600
Other....................................................... -- 1,137
-------- --------
Net noncurrent deferred income tax asset (liabilities)...... 13,611 (5,266)
Valuation allowance......................................... (23,159) (27,412)
-------- --------
Net deferred tax liabilities................................ $ (1,667) $ (1,257)
======== ========
</TABLE>
Due to uncertainty surrounding the realization of the benefits of its net
deferred tax asset, the Company has established a valuation allowance of $23,159
against its otherwise recognizable net deferred tax asset.
As of February 22, 1997, the Company had approximately $63,022 of federal
operating loss carryforwards which expire at various dates through 2011, federal
research credit carryforwards of $2,941 which expire at various dates through
2011, and alternative minimum tax credit carryforwards of $658 which have no
expiration date. Approximately $6,000 of the Company's net operating loss
carryforward related to non-qualified stock options will be credited to
paid-in-capital rather than income tax expense.
The Company has not provided for any residual U.S. income taxes on the
approximately $3,651 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 Internal Revenue Service completed its examination of the Company's
federal tax returns for the years ended February 26, 1994 and February 27, 1993.
The resolution of the examination did not have a material adverse effect on the
Company's results of operations or its financial condition.
The Company's federal tax returns for the years ended February 24, 1996 and
February 25, 1995 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.
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 1997, 1996 and 1995 was
F-19
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
approximately $7,021, $2,943 and $2,276, respectively. Future payments under
leases with terms currently greater than one year are as follows:
<TABLE>
<S> <C>
Year ending February:
1998....................................................... $ 6,075
1999....................................................... 4,239
2000....................................................... 3,058
2001....................................................... 2,306
2002....................................................... 1,462
Thereafter................................................. 702
-------
$17,842
=======
</TABLE>
Contingencies -- B/E 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 noncompliance 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. An employee of a foreign based
subsidiary of B/E has been charged with offenses relating to the investigation.
The investigation is continuing, 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 2002, 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 2001. In addition, if the officer terminates his employment 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 22, 1997.
The Company has other employment agreements with certain key members of
management that provide for aggregate minimum annual base compensation of $1,825
expiring on various dates through 1999.
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 March 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 22, 1997, February 24, 1996, and February
25, 1995, were $1,642, $1,301 and $984, respectively.
F-20
<PAGE> 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
11. EMPLOYEE RETIREMENT 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. 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 $1,317, $859 and $721 related
to this plan for the years ended February 22, 1997, February 24, 1996 and
February 25, 1995, respectively.
12. STOCKHOLDERS' EQUITY
On December 18, 1996, the Company issued approximately 4,005,000 shares of
common stock to the public at a price of $25.00 per share. The net proceeds of
the offering were $93,936. The Company used approximately $57,600 of the net
proceeds to repay outstanding balances under various credit facilities.
Had this sale and the corresponding repayment of the credit facilities
taken place on February 26, 1995, earnings per common and common equivalent
shares would have been $.87 and $(4.24), respectively, for the years ended
February 22, 1997 and February 24, 1996.
As required by APB 15, the supplemental earnings (loss) per common share
data 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 $25), 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 sold by the Company.
Stock Option Plans -- The Company has various stock option plans, including
the 1989 Stock Option Plan, the 1991 Directors Stock Option Plan, the 1992 Share
Option Scheme and the 1996 Stock Option Plan (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. Options granted generally vest at the rate of 25% per year from the
date of grant and are exercisable to the extent vested and the option term
cannot exceed ten years.
The following table sets forth options granted, canceled, forfeited and
outstanding:
<TABLE>
<CAPTION>
FEBRUARY 22, 1997 FEBRUARY 24, 1996 FEBRUARY 25, 1995
-------------------------- ------------------------ ------------------------
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.......... 2,720,350 $ 0.81-$13.00 2,871,287 $0.81-$13.00 2,493,162 $0.81-$13.00
Options granted...... 1,313,500 $10.25-$24.94 731,925 $7.37-$10.37 484,500 $7.44-$ 8.75
Options exercised.... (1,361,925) $ 0.81-$16.13 (139,750) $0.81-$ 8.75 (375) $0.81
Options forfeited.... (224,500) $ 7.38-$16.13 (743,112) $7.00-$13.00 (106,000) $8.25-$11.75
---------- --------- ---------
Outstanding, end of
period............. 2,447,425 $ 0.81-$24.93 2,720,350 $0.81-$13.00 2,871,287 $0.81-$13.00
========== ========= =========
Exercisable at end of
year............... 1,374,927 $ 0.81-$24.93 2,223,225 $0.81-$13.00 694,737 $0.81-$13.00
========== ========= =========
</TABLE>
F-21
<PAGE> 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
At February 22, 1997 options were available for grant under each of the
Company's option plans.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
AT FEBRUARY 22, 1997
- --------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE OPTIONS
RANGE OF OPTIONS WEIGHTED AVERAGE REMAINING EXERCISABLE AT WEIGHTED AVERAGE
EXERCISE PRICE OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE FEBRUARY 22, 1997 EXERCISE PRICE
- -------------- ----------- ---------------- ---------------- ----------------- ----------------
(YEARS)
<S> <C> <C> <C> <C> <C>
$ .81-$ 8.50 641,625 $ 7.84 6.51 513,000 $ 7.75
$ 8.63-$ 8.75 637,750 $ 8.72 5.87 566,500 $ 8.74
$ 8.88-$16.13 373,050 $12.05 8.65 101,675 $12.19
$19.00-$24.94 795,000 $20.06 9.68 193,752 $19.94
</TABLE>
The estimated fair value of options granted during 1997 was $16.60 per
share. The estimated fair value of options granted during 1996 was $7.69 per
share. The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock option and purchase plans. Accordingly, no compensation
cost has been recognized for its stock option plans and its stock purchase plan
other than that described above. Had compensation cost for the Company's stock
option plans and its stock purchase plans been determined consistent with SFAS
No. 123, the Company's net earnings (loss) and net earnings (loss) per share for
the year ended February 22, 1997 and February 24, 1996 would have been reduced
to the pro forma amounts indicated in the following table:
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Net earnings (loss) -- as reported.................... $13,709 $(83,413)
Net earnings (loss) -- pro forma...................... $10,709 $(84,932)
Net earnings (loss) per share -- as reported.......... $ .72 $ (5.15)
Net earnings (loss) per share -- pro forma............ $ .56 $ (5.24)
Weighted average and pro forma weighted average common
shares.............................................. 19,107 16,185
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for options granted in 1997 and 1996; risk-free interest rates
of 6.4%; expected dividend yields of 0.0%; expected lives of 4 years; and
expected volatility of 43%.
The impact of outstanding non-vested stock options granted prior to fiscal
1996 has been excluded from the pro forma calculation; accordingly, the 1997 and
1996 pro forma adjustments are not indicative of future period pro forma
adjustments, when the calculation will apply to all applicable stock options.
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 58,490 and 73,544 shares of
stock during fiscal 1997 and 1996 pursuant to this plan at an average price per
share of $9.70 and $5.50, respectively.
14. EXPORT SALES AND MAJOR CUSTOMERS
Export sales from the United States to customers in foreign countries
amounted to approximately $153,423 $61,717, and $61,645 in fiscal 1997, 1996,
and 1995, respectively. Total sales to all customers in foreign countries
amounted to approximately $203,388, $124,469 and $114,511 in fiscal 1997, 1996
and 1995,
F-22
<PAGE> 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
respectively. Total sales to Europe amounted to 29%, 18% and 22% in fiscal 1997,
1996 and 1995, respectively. Total sales to Asia amounted to 16%, 20% and 19% in
fiscal 1997, 1996 and 1995, 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 1997, 1996 or 1995.
15. 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 in-flight 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 systems for the airlines
similar to the Company's MDDS system. These events have caused the in-flight
entertainment industry to re-evaluate its product offerings and, in the process,
have impaired the value of certain of its assets. As a result, the Company has
written down certain of its assets, including certain customer-specific
inventories and other assets.
16. FOREIGN OPERATIONS
Geographic Area -- The Company operated principally in two geographic
areas, the United States and Europe during the years ended February 22, 1997,
February 24, 1996 and February 25, 1995. There were no significant transfers
between geographic areas during the period. Identifiable assets are those assets
of the Company that are identified with the operations in each geographic area.
The following table presents net sales and operating income for the years
ended February 22, 1997, February 24, 1996, and February 25, 1995 and
identifiable assets as of February 22, 1997, February 24, 1996 and February 25,
1995 by geographic area.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
NET SALES:
United States............................ $312,497 $169,830 $170,542
Europe................................... 99,882 62,752 58,805
-------- -------- --------
Total:................................ $412,379 $232,582 $229,347
======== ======== ========
OPERATING INCOME:
United States............................ $ 33,834 $(35,822) $ (9,457)
Europe................................... 8,564 (5,623) 5,604
-------- -------- --------
Total:................................ $ 42,398 $(41,445) $ (3,853)
======== ======== ========
IDENTIFIABLE ASSETS:
United States............................ $380,273 $332,832 $279,402
Europe................................... 110,816 100,754 100,552
-------- -------- --------
Total:................................ $491,089 $433,586 $379,954
======== ======== ========
</TABLE>
F-23
<PAGE> 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 22, 1997, FEBRUARY 24, 1996
AND FEBRUARY 25, 1995 -- (CONTINUED)
17. FAIR VALUE INFORMATION
The following disclosure of the estimated fair value of financial
instruments at February 22, 1997 and February 24, 1996 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. At February 22, 1997, the Company's Senior Notes have a carrying
value of $124,411 and fair value of 131,250, while the Company's Senior
Subordinated Notes have a carrying value of $100,000 and fair value of $104,500.
The carrying amounts of other long-term debts 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 22, 1997. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively re-valued for purposes
of these consolidated financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.
18. SELECTED QUARTERLY DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 1997 is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 22, 1997
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales............................................ $97,302 $103,026 $107,823 $104,228
Gross profit..................................... 32,547 34,439 36,510 38,326
Net earnings..................................... 1,433 1,863 4,131 6,282
Net earnings per share........................... 0.08 0.11 0.23 0.29
</TABLE>
Summarized quarterly financial data for fiscal 1996 is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 24, 1996
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales........................................... $ 55,594 $ 57,451 $ 55,188 $ 63,349
Gross profit.................................... 18,442 18,719 17,726 17,664
Net (loss) before cumulative effect of
accounting change............................. (9,682) (7,514) (14,021) (28,864)
Cumulative effect of accounting change.......... (23,332) -- -- --
Net loss........................................ (33,014) (7,514) (14,021) (28,864)
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>
F-24
<PAGE> 112
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
OFFERING MEMORANDUM IN CONNECTION WITH THE OFFERING COVERED BY THIS OFFERING
MEMORANDUM. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS.
THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS OFFERING MEMORANDUM OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 4
Incorporation of Certain Documents By
Reference............................ 4
Summary................................ 6
Risk Factors........................... 19
Cautionary Statement Regarding Forward-
Looking Statements................... 22
The Company............................ 23
Use of Proceeds........................ 23
The Exchange Offer..................... 23
Capitalization......................... 30
Recent Developments.................... 31
Selected Financial Data................ 34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 36
Business............................... 42
Management............................. 55
Security Ownership of Certain
Beneficial Owners and Management..... 58
Description of Certain Indebtedness.... 60
Description of the New Notes........... 61
Plan of Distribution................... 86
Experts................................ 86
Independent Auditors................... 86
Index to Consolidated Financial
Statements........................... F-1
</TABLE>
======================================================
======================================================
$250,000,000
EXCHANGE OFFER
BE AEROSPACE, INC.
LOGO
8% SENIOR SUBORDINATED
NOTES DUE 2008
------------------------
PROSPECTUS
-----------------------
APRIL 20, 1998
======================================================
<PAGE> 113
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal or investigative (other than an action by or
in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any action or proceeding, had no reasonable
cause to believe his conduct was unlawful. Section 145 further provides that a
corporation similarly may indemnify any such person serving in any such capacity
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor, against expenses actually and reasonably
incurred in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
unlawful payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Registrant's Restated Certificate of Incorporation (the "Certificate")
provides that the Company's Directors shall not be liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a director
except to the extent that exculpation from liabilities is not permitted under
the DGCL as in effect at the time such liability is determined. The Registrant's
Certificate further provides that the Registrant shall indemnify its directors
and officers to the fullest extent permitted by the DGCL.
The directors and officers of the Company are covered under directors' and
officers' liability insurance policies maintained by the Company.
II-1
<PAGE> 114
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or were previously filed:
<TABLE>
<CAPTION>
PAGE NUMBER IS SEQUENTIAL
NUMBERING SYSTEM WHERE
EXHIBITS MAY BE LOCATED
-------------------------
<C> <S> <C>
*1.1 Purchase Agreement dated January 6, 1998 by and among the
Registrant, Merrill Lynch & Co., BT Alex. Brown, Chase
Securities Inc., Credit Suisse First Boston and Morgan
Stanley Dean Witter
*4.1 Indenture dated February 13, 1998 for Registrant's issue of
8% Senior Subordinated Notes due 2008 between the Registrant
and United States Trust Company of New York, as trustee
*4.2 Second Supplemental Indenture to Indenture dated March 3,
1993 for the Registrant's issue of 9 3/4% Senior Notes due
2003 as supplemented on January 6, 1996, between the
Registrant and United States Trust Company of New York, as
trustee
*4.3 Form of Note for the Registrant's 8% Senior Subordinated
Notes (included in Exhibit 4.1)
5.1 Opinion of Shearman & Sterling
*10.1 Third Amended and Restated Credit Agreement (the "Third
Amended and Restated Credit Agreement") dated as of October
29, 1993, as amended and restated as of May 29, 1997, among
the Registrant, the banks named therein and The Chase
Manhattan Bank, N.A. as agent
10.1(a) Fourth Amended and Restated Credit Agreement dated as of
October 29, 1993, as amended and restated as of April 3,
1998, among the Registrant, the banks named therein and the
Chase Manhattan Bank, N.A., as agent
*10.2 Amendment No. 1 dated November 19, 1997 to the Third Amended
and Restated Credit Agreement
*10.3 Amendment No. 2 dated January 28, 1998 to the Third Amended
and Restated Credit Agreement
23.1 Consent of Deloitte & Touche
23.2 Consent of Shearman & Sterling (included in Exhibit 5.1)
*24 Power of Attorney (included on signature page)
25 Statement of Eligibility of United States Trust Company of
New York, Trustee
</TABLE>
- ---------------
* Previously Filed.
The following exhibits previously have been filed with the Commission under
the Securities Act of 1933 and/or the Securities Exchange Act of 1934 and are
incorporated by reference herein, (i) the Registrant's Registration Statement on
Form S-1, as amended (No. 33-33689), filed with the Commission on March 7, 1990
(referred to below as "33-33689"); (ii) the Registrant's Registration Statement
on Form S-1, as amended (No. 33-43147), filed with the Commission on October 3,
1991 (referred to below as "33-43147"); (iii) the Registrant's Registration
Statement on Form S-1, as amended (No. 33-54146), filed with the Commission on
November 3, 1992 (referred to below as "33-54146"); (iv) the Registrant's
Registration Statement on Form S-3, as amended (No. 33-57798) filed with the
Commission on February 2, 1993 (referred to below as "33-57798"); (v) the
Registrant's Registration Statement on Form S-2 (No. 33-66490) filed with the
Commission on July 23, 1993 (referred to below as "33-66490"); (vi) the
Registrant's Registration Statement on Form S-8 (No. 33-48119), filed with the
Commission on May 26, 1992 (referred to below as "33-48119"); (vii) the
Registrant's Registration Statement on Form S-8 (No. 33-72194), filed
II-2
<PAGE> 115
with the Commission on November 29, 1993 (referred to below as "33-72194");
(viii) the Registrant's Registration Statement on Form S-8 (No. 33-82894), filed
with the Commission on August 16, 1994 (referred to below as "33-82894"); (ix)
the Registrant's Registration Statement on Form S-4 (No. 333-00433, filed with
the Commission on January 26, 1996 (referred to below as "33-00433"); (x) the
Registrant's Current Report on Form 8-K dated March 5, 1992, filed with the
Commission on March 6, 1992 (referred to below as "March 8-K"); (xi) the
Registrant's Current Report on Form 8-K dated April 16, 1992, filed with the
Commission on April 17, 1992 (referred to below as "April 8-K"); (xii) the
Registrant's Current Report on Form 8-K dated August 23, 1993, filed with the
Commission on September 7, 1994 (referred to below as "August 8-K"); (xiii) the
Registrant's Current Report on Form 8-K dated December 14, 1995 filed with the
Commission on December 28, 1995 (referred to below as "December 8-K"); (xiv) the
Registrant's Current Report on Form 8-K dated March 26, 1996, filed with the
Commission on April 5, 1996 (referred to below as "March 1996 8-K"); (xv) the
Registrant's Report on Form 10-K for the seven-month transition period ended
February 29, 1992, filed with the Commission on May 27, 1992 (referred to below
as "1992 10-K"); (xvi) the Registrant's Report on Form 10-K, as amended, for the
fiscal year ended February 27, 1993, filed with the Commission on May 13, 1993
(referred to below as "1993 10-K"); (xvii) the Registrant's Report on Form 10-K,
as amended, for the fiscal year ended February 26, 1994, filed with the
Commission on May 23, 1994 (referred to below as "1994 10-K"); and (xviii) the
Registrant's Report on Form 10-K for the fiscal year ended February 25, 1995
filed with the Commission on May 16, 1995 (referred to below as the "1995
10-K").
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<S> <C> <C> <C>
Exhibit 2. Plan of acquisition, reorganization, arrangement,
liquidation or succession
2.1 Agreement of Purchase and Sale dated January 15, 2 March 8-K
1992 among The Pullman Company, PTC Aerospace,
Inc., Aircraft Products Company and the Registrant
2.2 Flight Equipment and Engineering Limited ("FEEL") 2.1 April 8-K
Stock Purchase Agreement among FEEL Holdings
Limited, Dr. Ling Kal K'ung, Mr. John Frederick
Branham ("Mr. Branham"), Mr. John Tcheng and the
Registrant dated April 2, 1992
2.3 Asset Purchase Agreement among JFB Engineering 2.2 April 8-K
Company Limited, Mr. Branham, FEEL and the
Registrant dated April 3, 1992
2.4 Agreement among Boustead Industries Limited, FEEL, 10.26 1993 10-K
Boustead PLC and the Registrant relating to the
sale and purchase of the entire issued share
capital of Fort Hill Aircraft Holdings Limited
dated February 8, 1993
2.5 Acquisition Agreement among the Registrant, 10.28 1993 10-K
Inventum and B.V. Industrieele Maatschappij dated
as of April 29, 1993
2.6 Acquisition Agreement dated as of July 26, 1993 2.1 August 8-K
among the Registrant, Nordskog Industries, Inc.,
and Elinor T. Nordskog, individually and as Trustee
Exhibit 3. Articles of Incorporation and By-laws
3.1 Amended and Restated Certificate of Incorporation 3.1 33-33689
</TABLE>
II-3
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<S> <C> <C> <C>
3.2 Certificate of Amendment of the Restated 3 33-54146
Certificate of Incorporation
3.3 Amended and Restated By-Laws 3.2 March 8-K
Exhibit 4. Instruments defining the rights of security
holders, including debentures
4.4 Specimen Common Stock Certificate 4 33-33689
4.5 Form of Note for the Registrant's issue of 9 3/4% 4.1 33-57798
Senior notes
4.6 Indenture dated March 3, 1993 between U.S. Trust 4.2 33-57798
Company of New York, as trustee, and the Registrant
relating to the Registrant's 9 3/4% Senior Notes
4.7 First Supplemental Indenture to Indenture dated 4.2 333-00433
March 3, 1993 for the Registrant's 9 3/4% Senior
Notes
4.8 Form of Note for the Registrant's 9 7/8% Senior 4.3 333-00433
Subordinated Notes
4.9 Form of Note for the Registrant's Series B 9 7/8% 4.3 333-00433
Senior Subordinated Notes
4.10 Indenture dated January 24, 1996 between Fleet 4.1 333-00433
National Bank, as trustee, and the Registrant
relating to the Registrant's 9 7/8% Senior
Subordinated Notes and Series B 9 7/8% Senior
Subordinated Notes
4.11 Form of Stockholders' Agreement by and among the 4.4 33-66490
Registrant, Summit Ventures II, L.P., Summit
Investors II, L.P. and Wedbush Capital Partners
Exhibit 10(i) Material Contracts
10.4 Supply Agreement dated as of April 17, 1990 between 10.7 33-33689
the Registrant and Applied Extrusion Technologies,
Inc.
10.5 Receivables Sales Agreement dated January 24, 1996 10.1 333-00433
among the Registrant, First Trust of Illinois, N.A.
and Centrally Held Eagle Receivables Program, Inc.
10.6 Escrow Agreement dated January 24, 1996 among the 10.2 333-00433
Registrant, Eagle Industrial Products Corporation
and First Trust of Illinois, NA, as Escrow Agent
10.7 Acquisition Agreement dated as of December 14, 1995 1 December 8-K
by and among the Registrant, Eagle Industrial
Products Corporation, Eagle Industries, Inc., and
Great America Management and Investment, Inc.
10.8 Flight Equipment and Engineering Limited ("FEEL") 2.1 April 8-K
Stock Purchase Agreement among FEEL Holdings
Limited, Dr. Ling Kai K'ung, Mr. John Frederick
Branham ("Mr. Branham"), Mr. John Tcheng and the
Registrant dated April 2, 1992
</TABLE>
II-4
<PAGE> 117
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<S> <C> <C> <C>
10.9 Agreement among Boustead Industries Limited, FEEL, 10.26 1993 10-K
Boustead PLC and the Registrant relating to the
sale and purchase of the entire issued share
capital of Fort Hill Aircraft Holdings Limited
dated February 8, 1993
10.10 Acquisition Agreement among the Registrant, 10.28 1993-K
Inventum and B.V. Industrieelle Maatschappij dated
as of April 29, 1993
Exhibit 10(ii) Leases
10.11 Lease dated May 15, 1992 between McDonnell Douglas 10.1 33-54146
Realty Company, as lessor, and the Registrant, as
lessee, relating to the Irvine, California property
10.12 Lease dated September 1, 1992 relating to the 10.2 33-54146
Wellington, Florida property
10.13 Chesham, England Lease dated October 1, 1973 10.13(a) 1992 10-K
between Drawheath Limited and The Peninsular and
Oriental Steam Navigation Company (assigned in
February 1985)
10.14 Kilkeel, Northern Ireland Lease dated April, 1984 10.27 1993 10-K
between The Department of Economic Development and
Aircraft Furnishing International Limited.
10.15 Utrecht, The Netherlands Lease dated December 15, 10.29 1993 10-K
1988 between the Pension Fund Foundation for Good
Supply Commodity Boards and Inventum
10.16 Utrecht, The Netherlands Lease dated January 31, 10.30 1993 10-K
1992 between G.W. van de Grift Onroerend Goed B.V.
and Inventum
10.17 Lease dated October 25, 1993 relating to the 10.32 1994 10-K
property in Longwood, Florida.
Exhibit 10(iii) Executive Compensation Plans and Arrangements
10.18 Amended and Restated 1989 Stock Option Plan 28.1 33-48119
10.19 Directors' 1991 Stock Option Plan 28.2 33-48119
10.20 1990 Stock Option Agreement with Richard G. 28.3 33-48119
Hamermesh
10.21 1990 Stock Option Agreement with B. Martha Cassidy 28.4 33-48119
10.22 1990 Stock Option Agreement with Jim C. Cowart 28.5 33-48119
10.23 1990 Stock Option Agreement with Petros A. 28.7 33-48119
Palanjian
10.24 1990 Stock Option Agreement with Hansjorg Wyss 28.8 33-48119
10.25 1991 Stock Option Agreement with Amin J. Khoury 28.9 33-48119
10.26 1991 Stock Option Agreement with Jim C. Cowart 28.10 33-48119
10.27 1992 Stock Option Agreement with Amin J. Khoury 28.11 33-48119
10.28 1992 Stock Option Agreement with Jim C. Cowart 28.12 33-48119
10.29 1992 Stock Option Agreement with Paul W. Marshall 28.13 33-48119
10.30 1992 Stock Option Agreement with David Lahar 28.14 33-48119
10.31 United Kingdom 1992 Employee Share Option Scheme 10.4 33-54146
</TABLE>
II-5
<PAGE> 118
<TABLE>
<CAPTION>
EXHIBIT NUMBER AND
FILING REFERENCE FROM
WHICH EXHIBITS ARE
INCORPORATED BY REFERENCE
-------------------------
<S> <C> <C> <C>
10.32 1994 Employee Stock Purchase Plan 99 33-82894
10.33 Employment Agreement dated as of January 1, 1992 10.12(a) 1992 10-K
between the Registrant and Amin J. Khoury
10.34 Amendment No. 2 dated as of April 1, 1996 to the A. 10.2 March 1996 8-K
Khoury Agreement
10.35 Employment Agreement dated as of March 1, 1992 10.12(b) 1992 10-K
between the Registrant and Robert J. Khoury
10.36 Amendment No. 2 dated as of January 1, 1996 to the 10.3 March 1996 8-K
R. Khoury Agreement
10.37 Employment Agreement dated as of March 1, 1992 10.12(c) 1992 10-K
between the Registrant and Marco Lanza (the "Lanza
Agreement")
10.38 Amendment No. 1 dated as of January 1, 1996 to the 10.4 March 1996 8-K
Lanza Agreement
10.39 Employment Agreement dated as of April 1, 1992 10.12(e) 1992 10-K
between the Registrant and G. Bernard Jewell
10.40 Employment Agreement dated as of May 1, 1994 10.34 1994 10-K
between the Registrant and Thomas P. McCaffrey (the
"McCaffrey Agreement")
10.41 Amendment No. 1 dated as of January 1, 1996 to the 10.4 March 1996 8-K
McCaffrey Agreement
10.42 Employment Agreement dated as of April 1, 1996 10.1 March 1996 8-K
between the Registrant and Paul E. Fulchino
10.43 Acquisition Agreement dated December 14, 1995 among 1 December 8-K
the Registrant, Eagle Industries, Inc., Eagle
Industrial Products Corporation and Great American
Management and Investment, Inc.
Exhibit 21. Subsidiaries of the Registrant 21 1993 10-K
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel
II-6
<PAGE> 119
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether or not such indemnification is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication to such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE> 120
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
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
Boston and the Commonwealth of Massachusetts, on the 20th day of April, 1998.
BE AEROSPACE, INC.
By: /s/ AMIN J. KHOURY
------------------------------------
AMIN J. KHOURY
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities indicated on the 20th day of April, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ AMIN J. KHOURY Chairman of the Board of Directors
- ---------------------------------------------------
AMIN J. KHOURY
ROBERT J. KHOURY* Vice Chairman of the Board of Directors and
- --------------------------------------------------- Chief Executive Officer (principal executive
ROBERT J. KHOURY officer)
PAUL E. FULCHINO* President, Chief Operating Officer and
- --------------------------------------------------- Director
PAUL E. FULCHINO
/s/ THOMAS P. MCCAFFREY Corporate Vice President of Administration,
- --------------------------------------------------- Chief Financial Officer and Assistant
THOMAS P. MCCAFFREY Secretary, (principal financial and
accounting officer)
JIM C. COWART* Director
- ---------------------------------------------------
JIM C. COWART
RICHARD G. HAMERMESH* Director
- ---------------------------------------------------
RICHARD G. HAMERMESH
BRIAN H. ROWE* Director
- ---------------------------------------------------
BRIAN H. ROWE
HANSJOERG WYSS* Director
- ---------------------------------------------------
HANSJOERG WYSS
*By: /s/ THOMAS P. MCCAFFREY
---------------------------------------------
THOMAS P. MCCAFFREY
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF SHEARMAN & STERLING]
April 20, 1998
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
Ladies and Gentlemen:
We have acted as counsel to BE Aerospace, Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing by the Company with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Securities Act"), of a Registration Statement on
Form S-4 (Registration No. 333-47649), as it may be amended (the "Registration
Statement") including the prospectus included therein at the time the
Registration Statement is declared effective (the "Prospectus"), relating to the
exchange offer (the "Exchange Offer") by the Company of the Company's 8% Series
B Senior Subordinated Notes due 2008 (the "New Notes") for the Company's 8%
Senior Subordinated Notes due 2008 (the "Old Notes"), originally issued by the
Company pursuant to Rule 144A under the Securities Act. The Old Notes were, and
the New Notes are to be, issued pursuant to the terms of an Indenture (the
"Indenture") between the Company and the United States Trust Company of New
York, as trustee (the "Trustee"). The form of the Indenture is filed as an
exhibit to the Registration Statement.
In this capacity, we have examined the Registration Statement, the form of
the Indenture and the originals, or copies, identified to our satisfaction, of
such corporate records of the Company and its subsidiaries and other persons,
and such other documents, agreements and instruments, as we have deemed
necessary as a basis for the opinions hereinafter expressed. In our
examinations, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
to originals of all documents submitted to us as copies thereof. In rendering
the opinions expressed below, we have relied as to certain factual matters upon
certificates of officers of the Company and certificates of public officials.
For purposes of this opinion, we have assumed that the Indenture will be
valid and binding on the Trustee and enforceable against the Trustee in
accordance with its terms.
Our opinions set forth below are limited to the laws of the State of New
York, the federal laws of the United States of America and the General
Corporation Law of the State of Delaware, and we do not express any opinions
herein concerning any other laws.
<PAGE> 2
Based upon and subject to the foregoing, we are of the opinion that:
When the New Notes have been duly executed by the Company and
authenticated by the Trustee as provided in the Indenture, and
delivered in exchange for the Old Notes as described in the
Registration Statement, the New Notes will be duly issued and
delivered by the Company and will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture
and will be enforceable against the Company in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in
equity or at law).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name therein and in the related
prospectus under the captions "The Exchange Offer--Federal Income Tax
Consequences" and "Legal Matters".
Very truly yours,
/s/ Shearman & Sterling
<PAGE> 1
Execution Counterpart
- --------------------------------------------------------------------------------
BE AEROSPACE, INC.
------------------------
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 29, 1993
Amended and Restated as of April 3, 1998
------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
NATIONSBANK, N.A.,
as Documentation Agent
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
----
Section 1. Definitions and Accounting Matters .............................. 1
1.01 Certain Defined Terms ........................................... 1
1.02 Accounting Terms and Determinations .............................19
1.03 Classes and Types of Loans ......................................20
Section 2. Commitments, Loans, Notes and Prepayments .......................20
2.01 Loans ...........................................................20
2.02 Borrowings ......................................................21
2.03 Letters of Credit ...............................................21
2.04 Changes of Commitments ..........................................25
2.05 Commitment Fee ..................................................26
2.06 Lending Offices .................................................26
2.07 Several Obligations; Remedies Independent .......................26
2.08 Evidence of Debt ................................................26
2.09 Optional Prepayments and Conversions or Continuations of Loans ..27
2.10 Mandatory Prepayments and Reductions of Commitments .............27
Section 3. Payments of Principal and Interest ..............................29
3.01 Repayment of Loans ..............................................29
3.02 Interest ........................................................30
Section 4. Payments; Pro Rata Treatment; Computations; Etc. ................31
4.01 Payments ........................................................31
4.02 Pro Rata Treatment ..............................................31
4.03 Computations ....................................................32
4.04 Minimum Amounts .................................................32
4.05 Certain Notices .................................................32
4.06 Non-Receipt of Funds by the Administrative Agent ................33
4.07 Sharing of Payments, Etc. .......................................34
Section 5. Yield Protection, Etc. ..........................................35
5.01 Additional Costs ................................................35
5.02 Limitation on Types of Loans ....................................37
5.03 Illegality ......................................................38
5.04 Treatment of Affected Loans .....................................38
5.05 Compensation ....................................................39
5.06 Additional Costs in Respect of Letters of Credit ................40
5.07 U.S. Taxes ......................................................40
(i)
<PAGE> 3
Section 6. Conditions Precedent ............................................41
6.01 Conditions to Effectiveness .....................................41
6.02 Initial and Subsequent Extensions of Credit .....................44
Section 7. Representations and Warranties ..................................44
7.01 Corporate Existence .............................................44
7.02 Financial Condition .............................................45
7.03 Litigation ......................................................45
7.04 No Breach .......................................................45
7.05 Action ..........................................................46
7.06 Approvals .......................................................46
7.07 Use of Credit ...................................................46
7.08 ERISA ...........................................................46
7.09 Taxes ...........................................................47
7.10 Investment Company Act ..........................................47
7.11 Public Utility Holding Company Act ..............................47
7.12 Material Agreements and Liens ...................................47
7.13 Environmental Matters ...........................................48
7.14 Capitalization ..................................................49
7.15 Subsidiaries, Etc. ..............................................50
7.16 Title to Assets .................................................50
7.17 Compliance with Law .............................................51
7.18 True and Complete Disclosure ....................................51
7.19 Year 2000 .......................................................51
Section 8. Covenants of the Company ........................................52
8.01 Financial Statements, Etc. ......................................52
8.02 Litigation ......................................................55
8.03 Existence, Etc. .................................................55
8.04 Insurance .......................................................56
8.05 Prohibition of Fundamental Changes ..............................56
8.06 Limitation on Liens .............................................57
8.07 Indebtedness ....................................................58
8.08 Investments .....................................................59
8.09 Restricted Payments .............................................60
8.10 Leverage Ratio ..................................................60
8.11 Adjusted Net Worth ..............................................61
8.12 Interest Coverage Ratio .........................................61
8.13 [Intentionally Omitted.] ........................................62
8.14 Lines of Business ...............................................62
8.15 Transactions with Affiliates ....................................62
8.16 Use of Proceeds .................................................63
8.17 Certain Obligations Respecting Subsidiaries .....................63
8.18 Modifications of Certain Documents ..............................64
8.19 Environmental Matters ...........................................64
(ii)
<PAGE> 4
8.20 Security for Loans ..............................................65
8.21 Redemption of Senior Subordinated Indebtedness ..................65
Section 9. Events of Default ...............................................65
Section 10. The Administrative Agent ........................................68
10.01 Appointment, Powers and Immunities ..............................68
10.02 Reliance by Administrative Agent ................................69
10.03 Defaults ........................................................69
10.04 Rights as a Lender ..............................................70
10.05 Indemnification .................................................70
10.06 Non-Reliance on Administrative Agent and Other Lenders ..........71
10.07 Failure to Act ..................................................71
10.08 Resignation or Removal of Administrative Agent ..................71
10.09 Consents under Basic Documents ..................................72
10.10 Collateral Sub-Agents ...........................................72
10.11 Documentation Agent .............................................72
Section 11. Miscellaneous ...................................................72
11.01 Waiver ..........................................................73
11.02 Notices .........................................................73
11.03 Expenses, Etc. ..................................................73
11.04 Amendments, Etc. ................................................74
11.05 Successors and Assigns ..........................................75
11.06 Assignments and Participations ..................................75
11.07 Survival ........................................................77
11.08 Captions ........................................................77
11.09 Counterparts ....................................................77
11.10 Governing Law; Submission to Jurisdiction .......................78
11.11 Waiver of Jury Trial ............................................78
11.12 Treatment of Certain Information; Confidentiality ...............78
(iii)
<PAGE> 5
Annex 1 - Commitments
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Hazardous Materials
SCHEDULE III - Subsidiaries and Investments
SCHEDULE IV - Approvals and Compliance
SCHEDULE V - Existing Letters of Credit
SCHEDULE VI - Taxes
SCHEDULE VII - Transactions with Affiliates
EXHIBIT A-l - Form of Security Agreement
EXHIBIT A-2 - Form of In-Flight Guarantee and Security Agreement
EXHIBIT B - Form of Confidentiality Agreement
(iv)
<PAGE> 6
-1-
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 29,
1993, amended and restated as of April 3, 1998, among: BE AEROSPACE, INC., a
corporation duly organized and validly existing under the laws of the State of
Delaware (the "Company"); each of the lenders that is a signatory hereto
identified under the caption "LENDERS" on the signature pages hereto or which,
pursuant to Section 11.06(b) hereof, shall become a "Lender" hereunder
(individually, a "Lender" and, collectively, the "Lenders"); and THE CHASE
MANHATTAN BANK, a New York banking corporation, as agent for the Lenders (in
such capacity, together with its successors in such capacity, the
"Administrative Agent").
The Company, certain Lenders and the Administrative Agent are party
to a Third Amended and Restated Credit Agreement dated as of October 29, 1993,
amended and restated as of May 29, 1997 (as modified and supplemented and in
effect immediately prior to the Amendment Effective Date referred to below, the
"Existing Credit Agreement"). The Company has requested that the Lenders and the
Administrative Agent agree to amend and restate the Existing Credit Agreement,
and the Lenders and the Administrative Agent are willing to amend and restate
the Existing Credit Agreement, all on the terms and conditions herein set forth.
Accordingly, the parties hereto agree to amend and restate the
Existing Credit Agreement so that, as amended and restated, it reads in its
entirety as provided herein.
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms.
As used herein, the following terms shall have the following
meanings (all terms defined in this Section 1.01 or in other provisions of this
Agreement in the singular to have the same meanings when used in the plural and
vice versa):
"Acquisition" shall mean any transaction, or any series of related
transactions, by which the Company and/or any of its Subsidiaries (a) acquires
any ongoing business or all or substantially all of the assets of any Person,
whether through purchase of assets, merger or otherwise, (b) directly or
indirectly acquires control of at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors or (c) directly or indirectly acquires control of a majority ownership
interest in any partnership, joint venture or similar arrangement. The terms
"Acquire" and "Acquired" used as a verb shall have a correlative meaning.
"Adjusted Net Worth" shall mean, as at any date, the sum of (a)
total stockholders' equity of the Company and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP) plus (b) the
aggregate amount of Restricted Payments made since November 29, 1997 in respect
of the purchase, redemption, retirement or other acquisition of any shares of
any class of stock of the Company permitted under Section 8.09
Credit Agreement
<PAGE> 7
-2-
hereof plus (c) the fair market value of any shares of capital stock of the
Company (determined as of the date such shares are issued) issued after November
29, 1997 which are utilized in any business combination accounted for using
pooling of interest accounting plus (d) an amount not to exceed $35,000,000 in
the aggregate of the after-tax amount (calculated using the then effective
corporate Federal tax rate, regardless of the after-tax amount determined in
accordance with GAAP) of any nonrecurring noncash write-offs of intangible
assets since November 29, 1997 plus (e) the amount of any purchased research and
development and related acquisition costs of a target company to the extent such
costs are or have been expensed after November 29, 1997.
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Company and,
if such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), provided that, in any event, any
Person that owns directly or indirectly securities having 5% or more of the
voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee of the Company or any of its
Subsidiaries and (b) none of the Subsidiaries of the Company shall be
Affiliates.
"Amendment Effective Date" shall mean the date on which all of the
conditions set forth in Section 6.01 hereof shall have been satisfied or waived
by the Lenders and the Administrative Agent.
"Applicable Lending Office" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan in the Administrative Questionnaire
submitted by such Lender or such other office of such Lender (or of an affiliate
of such Lender) as such Lender may from time to time specify to the
Administrative Agent and the Company as the office by which its Loans of such
Type are to be made and maintained.
Credit Agreement
<PAGE> 8
-3-
"Applicable Margin" shall mean with respect to Base Rate Loans and
Eurodollar Loans, the rate for such Type of Loan for each level period set forth
in the schedule below:
<TABLE>
<CAPTION>
Applicable Margin
Level Period Base Rate Loans Eurodollar Loans
---------------------------- --------------------- --------------------
<S> <C> <C>
Level I Period 0.00% 0.500%
Level II Period 0.00% 0.750%
Level III Period 0.00% 0.875%
Level IV Period 0.00% 1.000%
Level V Period 0.00% 1.250%
Level VI Period 0.25% 1.500%
Level VII Period 0.75% 2.000%
</TABLE>
provided that notwithstanding anything herein to the contrary, the Applicable
Margin from the Amendment Effective Date through August 31, 1998 shall not be
less than the rate for a Level V Period.
"B/E Services" shall mean B/E Services, Inc., a Delaware corporation
and Wholly Owned Subsidiary of the Company.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Basic Documents" shall mean, collectively, this Agreement, the
Notes, the Letter of Credit Documents and the Security Documents.
"Business Day" shall mean any day (a) on which commercial banks are
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Company with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, which is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
Credit Agreement
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"Calculation Period" shall mean, as at any date, the period of four
consecutive complete fiscal quarters of the Company ending on or most recently
ended prior to such date for which financial statements have been delivered
pursuant to Sections 7.02(a), 8.01(a), 8.01(b) or 8.01(h) hereof.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"Casualty Event" shall mean, with respect to any Property of any
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"Chase" shall mean The Chase Manhattan Bank.
"Class" shall have the meaning assigned to such term in Section 1.03
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral Account" shall have the meaning assigned to such term in
Section 4.01 of the Security Agreement.
"Commitment Fee Rate" shall mean (a) 0.2000% for any Level I Period,
(b) 0.2250% for any Level II Period, (c) 0.2500% for any Level III Period, (d)
0.2750% for any Level IV Period, (e) 0.3250% for any Level V Period, (f) 0.3750%
for any Level VI Period and (e) 0.5000% for any Level VII Period, provided that
notwithstanding anything herein to the contrary, the Commitment Fee Rate from
the Amendment Effective Date through August 31, 1998 shall not be less than the
rate for a Level V Period.
"Commitments" shall mean the Series A Commitments and the Series B
Commitments.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans,
which may be
Credit Agreement
<PAGE> 10
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accompanied by the transfer by a Lender (at its sole discretion) of a Loan from
one Applicable Lending Office to another.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any Person excluding any sale, assignment,
transfer or other disposition of inventory in the ordinary course of business
and on ordinary business terms; provided that the term "Disposition" shall not
include (i) any Equity Issuance (as such term is defined in this Section 1.01
without giving effect to the proviso therein), (ii) any sale, assignment,
transfer or other disposition of Property by any Subsidiary of the Company to
the Company or to any other Subsidiary of the Company, in each case for
consideration that is not in excess of the fair market value of such Property as
determined in good faith by the chief financial officer of the Company or (iii)
any sale, assignment, transfer or other disposition of Property by the Company
or any Subsidiary of the Company to a joint venture, subject to the proviso in
Section 8.08(h) hereof. The creation of any Lien on any Property permitted under
Section 8.06 hereof shall not constitute a "Disposition" of such Property. The
term "Dispose" shall have a correlative meaning.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Domestic Subsidiary" shall mean any Subsidiary of the Company that
is incorporated under the law of any State of the United States of America.
"EBITDA" shall mean, for any period of four consecutive fiscal
quarters of the Company, for the Company and its Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP), net operating
earnings (calculated before depreciation and amortization expense, non-recurring
non-cash write-offs of assets (to the extent deducted in computing net operating
earnings), Interest Expense, taxes and extraordinary and unusual items) for such
period.
"Environmental Claim" shall mean, with respect to any Person, (a)
any written notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any written claim by any governmental
authority for enforcement, cleanup, removal, response, remedial or other actions
or damages pursuant to any applicable Environmental Law, and any written claim
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
Credit Agreement
<PAGE> 11
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"Environmental Laws" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Equity Issuance" shall mean (a) any issuance or sale by the Company
or any of its Subsidiaries after the Restatement Date of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital stock (other than
any warrants or options issued to directors, officers, employees, agents,
consultants or advisors of the Company or any of its Subsidiaries and any
capital stock of the Company issued upon the exercise of such warrants or
options) or (iii) any other security or instrument representing an equity
interest (or the right to obtain any equity interest) in the issuing or selling
Person or (b) the receipt by the Company or any of its Subsidiaries after
November 29, 1997 of any capital contribution (whether or not evidenced by any
equity security issued by the recipient of such contribution); provided that
Equity Issuance shall not include (x) any such issuance or sale by any
Subsidiary of the Company to the Company or any Wholly Owned Subsidiary of the
Company, (y) any capital contribution by the Company or any Wholly Owned
Subsidiary of the Company to any Subsidiary of the Company or (z) any such
issuance or sale by the Company in connection with a permitted Acquisition under
Section 8.05(b).
"Equity Rights" shall mean, with respect to any Person, any
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any stockholders' or
voting trust agreements) for the issuance, sale, registration or voting of, or
outstanding securities convertible into, any additional shares of capital stock
of any class, or partnership or other ownership interests of any type in, such
Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which the Company is a member and (ii) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which the
Company is a member.
"Eurodollar Base Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period therefor, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/100 of 1%) of the respective rates per annum quoted
by each Reference Lender at approximately
Credit Agreement
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11:00 a.m. London time (or as soon thereafter as practicable) on the date two
Business Days prior to the first day of such Interest Period for the offering by
such Reference Lender to leading banks in the London interbank market of Dollar
deposits having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the Eurodollar Loan to be made by such
Reference Lender for such Interest Period. If any Reference Lender is not
participating in any Eurodollar Loan during any Interest Period therefor, the
Eurodollar Base Rate for such Loan for such Interest Period shall be determined
by reference to the amount of the Eurodollar Loan to be made by Chase for such
Interest Period.
"Eurodollar Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "Eurodollar
Base Rate" in this Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any
Interest Period therefor, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the Eurodollar Base Rate for such Loan for such Interest Period divided by 1
minus the Reserve Requirement for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in
Section 9 hereof.
"Existing Credit Agreement" shall have the meaning assigned to such
term in the recitals hereto.
"Existing Lenders" shall mean the lenders party to the Existing
Credit Agreement.
"Existing Letters of Credit" shall have the meaning assigned to such
term in Section 2.03(1) hereof.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent.
"Fiscal Date" shall mean the last day of each fiscal quarterly
period of the Company.
"Foreign Subsidiary" shall mean each Subsidiary of the Company other
than any Domestic Subsidiary.
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<PAGE> 13
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"Funded Debt" shall mean, for any Person: (a) all Indebtedness of
such Person that should be reflected on a balance sheet of such Person in
accordance with GAAP; and (b) all Indebtedness of any other Person that should
be reflected on a balance sheet of such other Person in accordance with GAAP and
that is secured by a Lien on the Property of, is supported by a letter of credit
issued for account of, or is Guaranteed by, such Person.
"GAAP" shall mean generally accepted accounting principles applied
on a basis consistent with those which, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
"GE Lease Agreement" shall mean the Master Lease Agreement dated as
of October 20, 1997 between the Company and General Electric Capital
Corporation, for itself and as Agent for Certain Participants.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall
have a correlative meaning.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of
Credit Agreement
<PAGE> 14
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the date the respective goods are delivered or the respective services are
rendered; (c) Indebtedness of others secured by a Lien on the Property of such
Person, whether or not the respective indebtedness so secured has been assumed
by such Person; (d) obligations of such Person in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of such
Person; and (f) Indebtedness of others Guaranteed by such Person.
"In-Flight" shall mean In-Flight Entertainment, LLC, a Delaware
limited liability company and Wholly Owned Subsidiary of the Company.
"In-Flight Guarantee and Security Agreement" shall mean the Amended
and Restated Guarantee and Security Agreement dated as of the Restatement Date
between In-Flight and the Administrative Agent, substantially in the form of
Exhibit A-2 hereto, as the same shall be modified, supplemented and in effect
from time to time.
"Information Memorandum" shall mean the Confidential Information
Memorandum dated March, 1998 distributed to the Lenders.
"Interest Coverage Ratio" shall mean, as at any date the ratio of
(i) EBITDA for the relevant Calculation Period to (ii) Interest Expense for such
Calculation Period; provided that, from and after the date of any Acquisition
occurring after February 28, 1998 until four full fiscal quarters of the Company
have elapsed since the date of such Acquisition, the Interest Coverage Ratio
shall be calculated on a pro forma basis (reflecting, inter alia, any amount
attributable to any operating expense that will be eliminated or cost reduction
that will be realized (in each case, net of any operating expense or other cost
increase) in connection with such Acquisition, as determined in good faith by
the chief financial officer of the Company in accordance with GAAP and the
rules, regulations and guidelines of the Securities and Exchange Commission, as
if such elimination of operating expense or the realization of such cost
reductions were achieved at the beginning of such four-quarter period) as though
such Acquisition had occurred, and any Funded Debt incurred or assumed by the
Company or any of its Subsidiaries in connection with, or in anticipation of,
such Acquisition had been incurred or assumed, on the first day of such
Calculation Period.
"Interest Expense" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness accrued or capitalized during such period (whether or
not actually paid during such period) plus (b) the net amounts payable (or minus
the net amounts receivable) under Interest Rate Protection Agreements accrued
during such period (whether or not actually paid or received during such period)
minus (c) interest income during such period.
"Interest Period" shall mean, with respect to any Eurodollar Loan,
each period commencing on the date such Eurodollar Loan is made or Converted
from a Base Rate Loan or the last day of the next preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first, second,
third or sixth calendar month thereafter, as the Company
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may select as provided in Section 4.05 hereof, except that each Interest Period
that commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate subsequent
calendar month. Notwithstanding the foregoing: (i) no Interest Period for any
Series A Loan may end after the Series A Commitment Termination Date; (ii) no
Interest Period for any Series B Loan may commence before and end after any
Series B Principal Payment Date unless, after giving effect thereto, the
aggregate principal amount of the Series B Loans having Interest Periods that
end after such Series B Principal Payment Date shall be equal to or less than
the aggregate principal amount of the Series B Loans scheduled to be outstanding
after giving effect to the payments of principal required to be made on such
Series B Principal Payment Date; (iii) each Interest Period that would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day (or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day); and (iv)
notwithstanding clauses (i) and (ii) above, no Interest Period shall have a
duration of less than one month and, if the Interest Period for any Eurodollar
Loan would otherwise be a shorter period, such Eurodollar Loan shall not be
available hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
For purposes hereof, the "credit exposure" at any time of any Person under an
Interest Rate Protection Agreement to which such Person is a party shall be
determined at such time in accordance with the standard methods of calculating
credit exposure under similar arrangements as prescribed from time to time by
the Administrative Agent, taking into account potential interest rate movements
and the respective termination provisions and notional principal amount and term
of such Interest Rate Protection Agreement.
"Investment" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of, or capital contribution to, any other Person or any
agreement to make any such acquisition or capital contribution (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such short sale);
(b) the making of any deposit with, or advance, loan or other extension of
credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person, but excluding any such advance, loan or
extension of credit having a term not exceeding 90 days representing the
purchase price of inventory or supplies sold by such Person in the ordinary
course of business); (c) the entering into of any Guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person; or (d) the entering into of any Interest Rate
Protection Agreement.
"Issuing Lender" shall mean Chase, as the issuer of Letters of
Credit under Section 2.03 hereof, together with its successors and assigns in
such capacity.
Credit Agreement
<PAGE> 16
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"Letter of Credit" shall have the meaning assigned to such term in
Section 2.03 hereof.
"Letter of Credit Documents" shall mean, with respect to any Letter
of Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be modified and supplemented and in effect from time to
time.
"Letter of Credit Interest" shall mean, for each Series A Lender,
such Lender's participation interest (or, in the case of the Issuing Lender, the
Issuing Lender's retained interest) in the Issuing Lender's liability under
Letters of Credit and such Lender's rights and interests in Reimbursement
Obligations and fees, interest and other amounts payable in connection with
Letters of Credit and Reimbursement Obligations.
"Letter of Credit Liability" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the undrawn amount
of such Letter of Credit plus (b) the aggregate unpaid principal amount of all
Reimbursement Obligations of the Company at such time due and payable in respect
of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Series A Lender (other than the Issuing Lender) shall be deemed to
hold a Letter of Credit Liability in an amount equal to its participation
interest in the related Letter of Credit under Section 2.03 hereof, and the
Issuing Lender shall be deemed to hold a Letter of Credit Liability in an amount
equal to its retained interest in the related Letter of Credit after giving
effect to the acquisition by the Series A Lenders other than the Issuing Lender
of their participation interests under said Section 2.03.
"Level I Period" shall mean any period during which (a) no Event of
Default shall have occurred and be continuing, and (b) the Leverage Ratio is
less than 2.25 to 1; "Level II Period" shall mean any period, other than a Level
I Period, during which (a) no Event of Default shall have occurred and be
continuing and (b) the Leverage Ratio is greater than or equal to 2.25 to 1 but
less than 2.75 to 1; "Level III Period" shall mean any period, other than a
Level I Period or a Level II Period, during which (a) no Event of Default shall
have occurred and be continuing and (b) the Leverage Ratio is greater than or
equal to 2.75 to 1 but less than 3.25 to 1; "Level IV Period" shall mean any
period, other than a Level I Period, a Level II Period or a Level III Period
during which (a) no Event of Default shall have occurred and be continuing and
(b) the Leverage Ratio is greater than or equal to 3.25 to 1 but less than 3.75
to 1; "Level V Period" shall mean any period, other than a Level I Period, a
Level II Period, a Level III Period or Level IV Period during which (a) no Event
of Default shall have occurred and be continuing and (b) the Leverage Ratio is
greater than or equal to 3.75 to 1 but less than 4.25 to 1; "Level VI Period"
shall mean any period that is not a Level I Period, a Level II Period, a Level
III Period, a Level IV Period or a Level V Period during which (a) no Event of
Default shall have occurred and be continuing and (b) the Leverage Ratio is
greater than or equal to 4.25 to 1 but less than 4.75; and "Level VII Period"
shall mean any period that is not a Level I Period, a Level II Period, a Level
III Period, a Level IV Period, a Level V Period or a Level VI Period. Any change
in the Applicable Margin
Credit Agreement
<PAGE> 17
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for any Type of Loan or any change in the Commitment Fee by reason of a change
in the Leverage Ratio shall become effective on the third Business Day following
receipt by the Administrative Agent of the financial statements of the Company
and its Subsidiaries delivered as required by Sections 8.01(a), (b) or (h)
hereof; provided that failure to deliver such financial statements as required
by Sections 8.01(a), (b) or (h) hereof shall result in the Applicable Margin and
Commitment Fee Rate being at the rates set forth opposite Level VII Period.
"Leverage Ratio" shall mean, as at any date, the ratio of Total
Funded Debt at such date to EBITDA for the relevant Calculation Period; provided
that, from and after the date of any Acquisition occurring after February 28,
1998 until four full fiscal quarters of the Company shall have elapsed since the
date of such Acquisition, the Leverage Ratio shall be calculated on a pro forma
basis (reflecting, inter alia, any amount attributable to any operating expense
that will be eliminated or cost reduction that will be realized (in each case,
net of any operating expense or other cost increase) in connection with such
Acquisition, as determined in good faith by the chief financial officer of the
Company in accordance with GAAP and the rules, regulations and guidelines of the
Securities and Exchange Commission, as if such elimination of operating expense
or the realization of such cost reductions were achieved at the beginning of
such four-quarter period") as though such Acquisition had occurred, any Funded
Debt incurred or assumed by the Company or any of its Subsidiaries in connection
with, or in anticipation of, such Acquisition had been incurred or assumed, on
the first day of such Calculation Period.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Basic Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loans" shall mean the Series A Loans and the Series B Loans.
"Majority Lenders" shall mean Majority Series A Lenders and Majority
Series B Lenders.
"Majority Series A Lenders" shall mean Series A Lenders having more
than 50% of the aggregate amount of the Series A Commitments or, if the Series A
Commitments shall have terminated, Lenders holding more than 50% of the sum of
(a) the aggregate unpaid principal amount of the Series A Loans plus (b) the
aggregate amount of all Letter of Credit Liabilities.
"Majority Series B Lenders" shall mean Series B Lenders having more
than 50% of the aggregate amount of the Series B Commitments or, if the Series B
Commitments shall have terminated, Lenders holding more than 50% of the
aggregate unpaid principal amount of the Series B Loans.
Credit Agreement
<PAGE> 18
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"Margin Stock" shall mean "margin stock" within the meaning of
Regulations U and X.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of the Company to perform its obligations under any of
the Basic Documents to which it is a party, (c) the validity or enforceability
of any of the Basic Documents, (d) the rights and remedies of the Lenders and
the Administrative Agent under any of the Basic Documents or (e) the timely
payment of the principal of or interest on the Loans or the Reimbursement
Obligations or other amounts payable in connection therewith.
"Material Subsidiary" shall mean at any date any Subsidiary of the
Company whose total assets equal or exceed 2% of the total assets of the Company
and its Subsidiaries on a consolidated basis as at the most recent Fiscal Date;
provided that, notwithstanding the above, each of B/E Services and Royal
Inventum B.V. shall at all times constitute a Material Subsidiary of the Company
so long as it is a Subsidiary of the Company.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean:
(i) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Company and its Subsidiaries in respect of such Casualty Event net
of (A) reasonable expenses incurred by the Company and its Subsidiaries in
connection therewith and (B) contractually required repayments of
Indebtedness to the extent secured by a Lien on such Property and any
income and transfer taxes payable by the Company or any of its
Subsidiaries in respect of such Casualty Event;
(iii) in the case of any Equity Issuance, the aggregate amount of
all cash received by the Company and its Subsidiaries in respect of such
Equity Issuance net of reasonable expenses incurred by the Company and its
Subsidiaries in connection therewith; and
(iv) in the case of any Reversion, the aggregate amount of all cash
received by the Company or any of its Subsidiaries in respect of such
Reversion net of (A) reasonable expenses incurred by the Company and its
Subsidiaries in connection therewith and (B) any income and excise taxes
payable by the Company or any of its Subsidiaries in respect of such
Reversion.
Credit Agreement
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"Net Cash Payments" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments, and the fair market value of any non-cash
consideration, received by the Company and its Subsidiaries directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
Payments shall be net of (i) the amount of any legal, accounting and other
professional fees, title and recording tax expenses, commissions and other fees
and expenses paid by the Company and its Subsidiaries in connection with such
Disposition and (ii) any Federal, state and local income or other taxes
estimated to be payable by the Company and its Subsidiaries as a result of such
Disposition (but only to the extent that such estimated taxes are in fact paid
to the relevant Federal, state or local governmental authority within three
months of date of such Disposition or the Company or any of its Subsidiaries
uses any applicable tax benefit available to it as set forth on its balance
sheet to reduce such estimated taxes payable within such three month period),
(b) Net Cash Payments shall not include any cash payments of less than $100,000
from any one Disposition or a series of related Dispositions, and (c) Net Cash
Payments shall be net of any repayments by the Company or any of its
Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is secured
by a Lien on the Property that is the subject of such Disposition and (ii) the
transferee of (or holder of a Lien on) such Property requires that such
Indebtedness be repaid as a condition to the purchase of such Property.
"Notes" shall mean the promissory notes (if any) executed and
delivered by the Company pursuant to Section 2.08 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean any Investment in (i) direct
obligations of the United States of America or any agency thereof, or
obligations guaranteed by the United States of America, or of any agency
thereof; (ii) commercial paper rated at least A-1 by S&P or P-1 by Moody's;
(iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of America of any bank or trust company
which is organized under the laws of the United States of America or any state
thereof and has capital, surplus and undivided profits aggregating at least
$1,000,000,000; (iv) shares of any money market or mutual fund not less than 80%
of the assets of which are invested solely in securities or obligations of the
type described in clauses (i) through (iii) above and (v) repurchase agreements
with respect to securities described in clause (i) above entered into with an
office of a bank or trust company meeting the criteria specified in clause (iii)
above, provided in each case that such Investment matures within one year from
the date of acquisition thereof by the Company or a Subsidiary of the Company.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit plan established or maintained
by the Company or any ERISA Affiliate and that is covered by Title IV of ERISA,
other than a Multiemployer Plan.
Credit Agreement
<PAGE> 20
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"Post-Default Rate" shall mean, in respect of any principal of any
Loan, any Reimbursement Obligation or any other amount under this Agreement, any
Note or any other Basic Document that is not paid when due (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise), a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to 2% plus the
Base Rate as in effect from time to time plus the Applicable Margin for Base
Rate Loans (provided that, if the amount so in default is principal of a
Eurodollar Loan and the due date thereof is a day other than the last day of the
Interest Period therefor, the "Post-Default Rate" for such principal shall be,
for the period for and including such due date to but excluding the last day of
the Interest Period, 2% plus the interest rate for such Loan as provided in
Section 3.02 hereof and, thereafter, the rate provided for above in this
definition).
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at the Principal Office as its prime commercial lending rate.
"Principal Office" shall mean the principal office of Chase, located
on the date hereof at 270 Park Avenue, New York, New York 10017.
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the quarterly anniversaries of the
Restatement Date; provided that, if any such date is not a Business Day, the
Quarterly Date shall be the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, the next
preceding Business Day).
"Recapture Date" shall mean the last day of the Recapture Period.
"Recapture Period" shall mean each period (a) commencing on the
later of (i) the Restatement Date and (ii) the day immediately following the
last day of the immediately preceding Recapture Period, and (b) ending on the
date on which the Company and/or its Subsidiaries receives Net Available
Proceeds which, together with all Net Available Proceeds received since the
first day of such Recapture Period, equal or exceeds in the aggregate
$1,000,000.
"Reference Lenders" shall mean Chase and NationsBank, N.A.
"Regulations A, D, U and X" shall mean, respectively, Regulations A,
D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Lender, any
change after the date of this Agreement in Federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation,
Credit Agreement
<PAGE> 21
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directive or request applying to a class of banks including such Lender of or
under any Federal, state or foreign law or regulations (whether or not having
the force of law and whether or not failure to comply therewith would be
unlawful) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reimbursement Obligations" shall mean, at any time, the obligations
of the Company then outstanding, or which may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, groundwater,
wetlands, land or subsurface strata. The terms "Release" and "Released" used as
a verb shall have a correlative meaning.
"Reserve Requirement" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
"Restatement Date" shall mean April 3, 1998.
"Restricted Payment" shall mean, with respect to any Person, (a)
dividends (in cash, Property or obligations) on, or other payments or
distributions on account of, or the setting apart of money for a sinking or
other analogous fund for, or the purchase, redemption, retirement or other
acquisition of, any shares of any class of stock of such Person or of any
warrants (other than of shares of common stock, warrants or options of such
Person as payment for the exercise price of options or warrants to purchase
common stock of such Person having a fair market value equal to such exercise
price), options or other rights to acquire the same (or to make any payments to
any other Person, such as "phantom stock" payments, where the amount thereof is
calculated with reference to the fair market or equity value of such Person or
any of its Subsidiaries), but excluding dividends payable solely in shares of
common stock or in options, warrants or other rights to purchase such common
stock of such Person or (b) any payment (whether made by such Person or any of
its Subsidiaries) on account of the purchase, redemption, prepayment, defeasance
or other acquisition or retirement of value of any Indebtedness (such
Indebtedness, "Retired Indebtedness") that is subordinated in right of payment
to the prior payment of the Loans, except any such payment made from the
proceeds of
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<PAGE> 22
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(x) the issuance of any equity securities or (y) any additional unsecured
Indebtedness that does not rank senior in right of payment to, and does not
mature or have any mandatory prepayment, which does not include required
prepayments as a result of a change of control or asset sale, prior to the
maturity of such Retired Indebtedness.
"Reversion" shall mean the termination by the Company or any of its
Subsidiaries of a Plan which results in a payment to the Company or any of its
Subsidiaries of any part of the over-funded portion of such Plan.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Security Agreement" shall mean the Amended and Restated Security
Agreement dated as of the Restatement Date between the Company and the
Administrative Agent, substantially in the form of Exhibit A-1 hereto, as the
same shall be modified, supplemented and in effect from time to time.
"Security Documents" shall mean, collectively, the Security
Agreement and the In-Flight Guarantee and Security Agreement.
"Senior Subordinated Indentures" shall mean the Senior Subordinated
1996 Indenture and the Senior Subordinated 1998 Indenture.
"Senior Subordinated 1996 Indenture" shall mean the Indenture dated
as of February 1, 1996 between the Company and Fleet National Bank Connecticut,
N.A., as Trustee, as the same shall be modified and supplemented and in effect
from time to time.
"Senior Subordinated 1998 Indenture" shall mean the Indenture dated
as of February 13, 1998 between the Company and United States Trust Company of
New York as Trustee, as the same shall be modified and supplemented and in
effect from time to time.
"Series A Commitment" shall mean, for each Series A Lender, the
obligation of such Lender to make Series A Loans in an aggregate amount at any
one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on Annex 1 hereto under the caption "Series A Commitment" (as the
same may be reduced from time to time pursuant to Section 2.04 hereof or
increased or reduced from time to time pursuant to Section 11.06 hereof). The
original aggregate principal amount of the Series A Commitments is $100,000,000.
"Series A Commitment Percentage" shall mean, with respect to any
Series A Lender, the ratio of (a) the amount of the Series A Commitment of such
Lender to (b) the aggregate amount of the Series A Commitments of all of the
Lenders.
"Series A Commitment Termination Date" shall mean the sixth
anniversary of the Restatement Date; provided that if such day is not a Business
Day, the Series A Commitment Termination Date shall be the immediately preceding
Business Day.
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<PAGE> 23
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"Series A Lenders" shall mean (a) on the Amendment Effective Date,
the Lenders having Series A Commitments as indicated on Annex 1 hereto and (b)
thereafter, the Lenders from time to time holding Series A Loans and Series A
Commitments after giving effect to any assignments thereof permitted by Section
11.06 hereof.
"Series A Loans" shall mean the loans provided for by Section
2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Series A Notes" shall mean the promissory notes (if any) provided
for by Section 2.08(a) hereof and all promissory notes delivered in substitution
or exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time.
"Series B Commitment" shall mean, for each Series B Lender, the
obligation of such Lender to make Series B Loans in an aggregate amount at any
one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on Annex 1 hereto under the caption "Series B Commitment" (as the
same may be reduced from time to time pursuant to Section 2.04 hereof or
increased or reduced from time to time pursuant to Section 11.06 hereof). The
original aggregate principal amount of the Series B Commitments is $100,000,000.
"Series B Commitment Termination Date" shall mean the date 364 days
after the Restatement Date; provided that if such day is not a Business Day, the
Series B Commitment Termination Date shall be the immediately preceding Business
Day.
"Series B Lenders" shall mean (a) on the Amendment Effective Date,
the Lenders having Series B Commitments as indicated on Annex 1 hereto and (b)
thereafter, the Lenders from time to time holding Series B Loans and Series B
Commitments after giving effect to any assignments thereof permitted by Section
11.06 hereof.
"Series B Loans" shall mean the loans provided for by Section
2.01(b) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Series B Notes" shall mean the promissory notes provided for by
Section 2.08(b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Series B Principal Payment Date" shall mean any Quarterly Date on
which payments of principal of Series B Loan are scheduled to be made pursuant
to Section 3.01(b) hereof.
"Specified Subsidiary" shall mean each Subsidiary of the Company
identified as a "Specified Subsidiary" on Schedule III hereto, but only until
all (or, in the case of a Subsidiary that is not a Domestic Subsidiary, 65%) of
its shares that are owned by the Company become subject to the Lien of the
Security Agreement or are otherwise pledged to the Administrative
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<PAGE> 24
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Agent for the benefit of the Lenders pursuant to documentation in form and
substance reasonably satisfactory to the Majority Lenders.
"Subsidiary" shall mean, for any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person. "Wholly Owned Subsidiary" shall mean any such corporation,
partnership or other entity of which all of the equity securities or other
ownership interests (other than, in the case of a corporation, directors'
qualifying shares) are so owned or controlled.
"Total Funded Debt" shall mean, as at any date, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of all Funded Debt.
"Type" shall have the meaning assigned to such term in Section 1.03
hereof.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder (which, prior to the delivery of
the first financial statements under Section 8.01 hereof, shall mean the audited
financial statements as at February 22, 1997 referred to in Section 7.02
hereof). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Lenders pursuant to Section 8.01 hereof
(or, prior to the delivery of the fist financial statements under Section 8.01
hereof, used in the preparation of the audited financial statements as at
February 22, 1997, referred to in Section 7.02 hereof) unless (i) the Company
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Majority Lenders shall so
object in writing within 30 days after delivery of such financial statements, in
either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01 hereof,
shall mean the audited financial statements as at February 22, 1997 referred to
in Section 7.02 hereof).
Credit Agreement
<PAGE> 25
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(b) The Company shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, the fiscal year of the Company
shall end on the last Saturday in February of each year, and the last days of
the first three fiscal quarters shall fall on the last Saturday in each of May,
August and November of each year, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished
by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a
Loan) refers to whether such Loan is a Series A Loan or a Series B Loan, each of
which constitutes a Class. The "Type" of a Loan refers to whether such Loan is a
Base Rate Loan or a Eurodollar Loan, each of which constitutes a Type. Loans may
be identified by both Class and Type.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans.
(a) Series A Loans. Each Series A Lender severally agrees, on the
terms and conditions of this Agreement, to make loans to the Company in Dollars
to but not including the Series A Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Series A Commitment of such Lender as in effect from time to time (such
Loans, together with the "Series A Loans" made under the Existing Credit
Agreement, being herein called "Series A Loans"), provided that in no event
shall the aggregate principal amount of all Series A Loans, together with the
aggregate amount of all Letter of Credit Liabilities, exceed the aggregate
amount of the Series A Commitments. Subject to the terms and conditions of this
Agreement, the Company may borrow, repay and reborrow the amount of the Series A
Commitments by means of Base Rate Loans and Eurodollar Loans and may Convert
Series A Loans of one Type into Series A Loans of another Type (as provided in
Section 2.09 hereof).
(b) Series B Loans. Each Series B Lender severally agrees, on the
terms and conditions of this Agreement, to make loans to the Company in Dollars
to but not including the Series B Commitment Termination Date in an aggregate
principal amount up to but not exceeding the amount of the Series B Commitment
of such Lender as in effect from time to time (such Loans being herein called
"Series B Loans"). Subject to the terms and conditions of this Agreement, the
Company may borrow the amount of the Series B Commitments by means of
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<PAGE> 26
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Base Rate Loans and Eurodollar Loans and may Convert Series B Loans of one Type
into Series B Loans of another Type (as provided in Section 2.09 hereof) or
Continue Series B Loans of one Type as Series B Loans of the same Type (as
provided in Section 2.09 hereof). Series B Loans may be prepaid, but they may
not be reborrowed once prepaid.
(c) Limit on Eurodollar Loans. No more than six separate Interest
Periods in respect of Eurodollar Loans of either Class from each Lender may be
outstanding at any one time.
2.02 Borrowings. The Company shall give the Administrative Agent
(which shall promptly notify the Lenders) notice of each borrowing hereunder as
provided in Section 4.05 hereof. Not later than 1:00 p.m. New York time on the
date specified for each borrowing hereunder, each Lender shall make available
the amount of the Loan or Loans to be made by it on such date to the
Administrative Agent, to the account of the Administrative Agent most recently
designated by it for such purpose by notice to the Lenders, in immediately
available funds, for account of the Company. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained with Chase
at the Principal Office designated by the Company.
2.03 Letters of Credit. Subject to the terms and conditions of this
Agreement, the Series A Commitments may be utilized, upon the request of the
Company, in addition to the Series A Loans provided for by Section 2.01(a)
hereof, by the issuance by the Issuing Lender of letters of credit
(collectively, "Letters of Credit") for account of the Company or any of its
Subsidiaries (as specified by the Company), provided that in no event shall (i)
the aggregate amount of all Letter of Credit Liabilities, together with the
aggregate principal amount of the Series A Loans, exceed the aggregate amount of
the Series A Commitments as in effect from time to time, (ii) the outstanding
aggregate amount of all Letter of Credit Liabilities exceed $15,000,000 and
(iii) the expiration date of any Letter of Credit extend beyond the earlier of
the Series A Commitment Termination Date and the date twelve months following
the issuance of such Letter of Credit. The following additional provisions shall
apply to Letters of Credit:
(a) The Company shall give the Administrative Agent at least three
Business Days' irrevocable prior notice (effective upon receipt) specifying the
Business Day (which shall be no later than thirty days preceding the Series A
Commitment Termination Date) each Letter of Credit is to be issued and the
account party or parties therefor and describing in reasonable detail the
proposed terms of such Letter of Credit (including the beneficiary thereof) and
the nature of the transactions or obligations proposed to be supported thereby
(including whether such Letter of Credit is to be a commercial letter of credit
or a standby letter of credit). Upon receipt of any such notice, the
Administrative Agent shall advise the Issuing Lender of the contents thereof.
(b) On each day during the period commencing with the issuance by
the Issuing Lender of any Letter of Credit and until such Letter of Credit shall
have expired or been terminated, the Series A Commitment of each Series A Lender
shall be deemed to be utilized for
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<PAGE> 27
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all purposes of this Agreement in an amount equal to such Lender's Series A
Commitment Percentage of the then undrawn face amount of such Letter of Credit.
Each Series A Lender (other than the Issuing Lender) agrees that, upon the
issuance of any Letter of Credit hereunder, it shall automatically acquire a
participation in the Issuing Lender's liability under such Letter of Credit in
an amount equal to such Lender's Series A Commitment Percentage of such
liability, and each Series A Lender (other than the Issuing Lender) thereby
shall absolutely, unconditionally and irrevocably assume, as primary obligor and
not as surety, and shall be unconditionally obligated to the Issuing Lender to
pay and discharge when due, its Series A Commitment Percentage of the Issuing
Lender's liability under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify the Company (through the Administrative Agent) of the amount to
be paid by the Issuing Lender as a result of such demand and the date on which
payment is to be made by the Issuing Lender to such beneficiary in respect of
such demand. Notwithstanding the identity of the account party of any Letter of
Credit, the Company hereby unconditionally agrees to pay and reimburse the
Administrative Agent for account of the Issuing Lender for the amount of each
demand for payment under such Letter of Credit at or prior to the date on which
payment is to be made by the Issuing Lender to the beneficiary thereunder,
without presentment, demand, protest or other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in clause (c)
of this Section 2.03, the Company shall advise the Administrative Agent whether
or not the Company intends to borrow hereunder to finance its obligation to
reimburse the Issuing Lender for the amount of the related demand for payment
and, if it does, submit a notice of such borrowing as provided in Section 4.05
hereof. In the event that the Company fails to so advise the Administrative
Agent, or if the Company fails to reimburse the Issuing Lender for a demand for
payment under a Letter of Credit by the date of such payment, the Administrative
Agent shall give each Series A Lender prompt notice of the amount of the demand
for payment, specifying such Lender's Series A Commitment Percentage of the
amount of the related demand for payment.
(e) Each Series A Lender (other than the Issuing Lender) shall pay
to the Administrative Agent for account of the Issuing Lender at the Principal
Office in Dollars and in immediately available funds, the amount of such
Lender's Series A Commitment Percentage of any payment under a Letter of Credit
upon notice by the Issuing Lender (through the Administrative Agent) to such
Series A Lender requesting such payment and specifying such amount; provided
that such Series A Lender shall not be obligated to reimburse the Issuing Bank
if such payment is the result of the willful misconduct or gross negligence of
the Issuing Bank in determining that the request or demand for such payment
complied with the terms of such Letter of Credit. Each such Series A Lender's
obligation to make such payments to the Administrative Agent for account of the
Issuing Lender under this clause (e), and the Issuing Lender's right to receive
the same, shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever, including, without limitation, (i) the failure of any
other Series A Lender to make its payment under this clause (e), the financial
condition of the Company (or any
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<PAGE> 28
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other account party), the existence of any Default or (ii) the termination of
the Commitments. Each such payment to the Issuing Lender shall be made without
any offset, abatement, withholding or reduction whatsoever. If any Series A
Lender shall default in its obligation to make any such payment to the
Administrative Agent for account of the Issuing Lender, for so long as such
default shall continue the Administrative Agent shall at the request of the
Issuing Bank withhold from any payments received by the Administrative Agent
under this Agreement or any Note for account of such Series A Lender the amount
so in default and the Administrative Agent shall pay the same to the Issuing
Lender in satisfaction of such defaulted obligation.
(f) Upon the making of each payment by a Series A Lender to the
Issuing Lender pursuant to clause (e) above in respect of any Letter of Credit,
such Lender shall, automatically and without any further action on the part of
the Administrative Agent, the Issuing Lender or such Lender, acquire (i) a
participation in an amount equal to such payment in the Reimbursement Obligation
owing to the Issuing Lender by the Company hereunder and under the Letter of
Credit Documents relating to such Letter of Credit and (ii) a participation in a
percentage equal to such Lender's Series A Commitment Percentage in any interest
or other amounts payable by the Company hereunder and under such Letter of
Credit Documents in respect of such Reimbursement Obligation (other than the
commissions, charges, costs and expenses payable to the Issuing Lender pursuant
to clause (g) of this Section 2.03). Upon receipt by the Issuing Lender from or
for account of the Company of any payment in respect of any Reimbursement
Obligation or any such interest or other amount (including by way of setoff or
application of proceeds of any collateral security) the Issuing Lender shall
promptly pay to the Administrative Agent for account of each Series A Lender
entitled thereto, such Series A Lender's Series A Commitment Percentage of such
payment, each such payment by the Issuing Lender to be made in the same money
and funds in which received by the Issuing Lender. In the event any payment
received by the Issuing Lender and so paid to the Series A Lenders hereunder is
rescinded or must otherwise be returned by the Issuing Lender, each Series A
Lender shall, upon the request of the Issuing Lender (through the Administrative
Agent), repay to the Issuing Lender (through the Administrative Agent) the
amount of such payment paid to such Lender, with interest as specified in clause
(J) of this Section 2.03.
(g) The Company shall pay to the Administrative Agent for account of
the Series A Lenders in respect of each Letter of Credit a letter of credit fee
in an amount equal to the product of the Applicable Margin for Eurodollar Loans
times the daily average undrawn amount of such Letter of Credit for the period
from and including the date of issuance of such Letter of Credit to and
including the date such Letter of Credit is drawn in full, expires or is
terminated (such fee to be non-refundable, to be paid in arrears on each
Quarterly Date and on the Series A Commitment Termination Date and to be
calculated, for any day, after giving effect to any payments made under such
Letter of Credit on such day). In addition, the Company shall pay to the
Administrative Agent for account of the Issuing Lender all commissions, charges,
costs and expenses in the amounts customarily charged by the Issuing Lender from
time to time in like circumstances with respect to the issuance of each Letter
of Credit and drawings and other transactions relating thereto.
Credit Agreement
<PAGE> 29
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(h) Promptly following the end of each calendar month, the Issuing
Lender shall deliver (through the Administrative Agent) to each Series A Lender
and the Company a notice describing the aggregate amount of all Letters of
Credit outstanding at the end of such month. Upon the request of any Series A
Lender from time to time, the Issuing Lender shall deliver any other information
reasonably requested by such Lender with respect to each Letter of Credit then
outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 6 hereof, be
subject to the conditions precedent that (i) such Letter of Credit shall be in
such form, contain such terms and support such transactions as shall be
satisfactory to the Issuing Lender consistent with its then current practices
and procedures with respect to letters of credit of the same type and (ii) the
Company shall have executed and delivered such applications, agreements and
other instruments relating to such Letter of Credit as the Issuing Lender shall
have reasonably requested consistent with its then current practices and
procedures with respect to letters of credit of the same type, provided that in
the event of any conflict between any such application, agreement or other
instrument and the provisions of this Agreement or any Security Document, the
provisions of this Agreement and the Security Documents shall control.
(j) To the extent that any Series A Lender fails to pay any amount
required to be paid pursuant to clause (e) or (f) of this Section 2.03 on the
due date therefor, such Lender shall pay interest to the Issuing Lender (through
the Administrative Agent) on such amount from and including such due date to but
excluding the date such payment is made (i) during the period from and including
such due date to but excluding the date three Business Days thereafter, at a
rate per annum equal to the Federal Funds Rate (as in effect from time to time)
and (ii) thereafter, at a rate per annum equal to the Base Rate (as in effect
from time to time) plus 2%.
(k) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new Letters of
Credit, and no such modification or supplement shall be issued hereunder unless
either (x) the respective Letter of Credit affected thereby would have complied
with such conditions had it originally been issued hereunder in such modified or
supplemented form or (y) each Series A Lender shall have consented thereto.
(l) Pursuant to Section 2.03 of the Existing Credit Agreement, Chase
has issued the Letters of Credit identified on Schedule V hereto (the "Existing
Letters of Credit"). Each Series A Lender hereby agrees that each Existing
Letter of Credit shall constitute, on and after the Amendment Effective Date, a
Letter of Credit for all purposes of this Agreement.
The Company hereby indemnifies and holds harmless each Series A Lender and the
Administrative Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses which such Lender or the Administrative Agent may
incur (or which may be claimed against such Lender or the Administrative Agent
by any Person whatsoever) by reason of or in connection with the execution and
delivery or transfer of or payment or refusal to pay by the Issuing Lender under
any Letter of Credit; provided that the Company shall not be required
Credit Agreement
<PAGE> 30
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to indemnify any Lender or the Administrative Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (x) the willful misconduct or gross negligence of the Issuing Lender
in determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or (y) in the case of the Issuing
Lender, such Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of Credit. Nothing in this Section 2.03 is intended to limit the
other obligations of the Company, any Lender or the Administrative Agent under
this Agreement.
2.04 Changes of Commitments.
(a) Series A Commitments.
(i) The Series A Commitments shall terminate on the Series A
Commitment Termination Date.
(ii) The Company shall have the right at any time or from time to
time (x) so long as no Series A Loans or Letter of Credit Liabilities are
outstanding, to terminate the Series A Commitments and (y) to reduce the
aggregate unused amount of the Series A Commitments (for which purpose use
of the Series A Commitments shall be deemed to include the aggregate
amount of Letter of Credit Liabilities); provided that (A) the Company
shall give notice of each such termination or reduction as provided in
Section 4.05 hereof and (B) each partial reduction shall be in an
aggregate amount at least equal to $5,000,000 or in multiples of
$1,000,000 in excess thereof.
(b) Series B Commitments.
(i) The Series B Commitments shall terminate on the Series B
Commitment Termination Date.
(ii) The Company shall have the right at any time or from time to
time (x) so long as no Series B Loans are outstanding, to terminate the
Series B Commitments and (y) to reduce the aggregate amount of the Series
B Commitments; provided that (A) the Company shall give notice of each
such termination or reduction as provided in Section 4.05 hereof; (B) each
partial reduction shall be in an aggregate amount at least equal to
$5,000,000 or in multiples of $1,000,000 in excess thereon and (C) to the
extent that, after giving effect to any such reduction, the aggregate
principal amount of the Series B Loans would exceed the Series B
Commitments, the Company shall prepay the Series B Loans.
(c) All Commitments. The Commitments once terminated or reduced may
not be reinstated.
2.05 Commitment Fee. The Company shall pay to the Administrative
Agent for account of (i) each Series A Lender a commitment fee on the daily
average unused amount of
Credit Agreement
<PAGE> 31
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such Lender's Series A Commitment (for which purpose Letter of Credit
Liabilities shall be deemed to be a use of any Lender's Series A Commitment) and
(ii) each Series B Lender a commitment fee on the daily average unused amount of
such Lender's Series B Commitment, for the period from and including the
Amendment Effective Date to but not including the date such Commitment is
terminated, at a rate per annum equal to the Commitment Fee Rate. Accrued
commitment fee shall be payable on each Quarterly Date and on the date the
relevant Commitments are terminated.
2.06 Lending Offices. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
2.07 Several Obligations; Remedies Independent. The failure of any
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor the Administrative Agent shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender, and
no Lender shall have any obligation to the Administrative Agent (except as
provided in Section 4.06 hereof) or any other Lender for the failure by such
Lender to make any Loan required to be made by such Lender.
2.08 Evidence of Debt.
(a) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the Indebtedness of the Company to such Lender
resulting from each Loan made or continued hereunder by such Lender, including
the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.
(b) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made or continued hereunder, the Class
and Type thereof and the Interest Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and payable from the
Company to each Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each Lender's
share thereof.
(c) The entries made in the accounts maintained pursuant to
paragraph (a) or (b) of this Section 2.08 shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Company
to repay the Loans in accordance with the terms of this Agreement.
(d) Any Lender may request that Loans made or continued by it
hereunder be evidenced by a promissory note(s). In such event, the Company, at
its own expense, shall prepare, execute and deliver to such Lender a promissory
note(s) payable to the order of such Lender (or, if requested by such Lender, to
such Lender and its registered assigns) and in a form approved by the
Administrative Agent and such note(s) shall be evidence of such Loans (and all
amounts payable in respect thereof).
Credit Agreement
<PAGE> 32
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2.09 Optional Prepayments and Conversions or Continuations of Loans.
Subject to Sections 4.04 and 5.05 hereof, the Company shall have the right to
prepay Loans, or to Convert Loans of one Type into Loans of another Type or
Continue Loans of one Type as Loans of the same Type, at any time or from time
to time, provided that the Company shall give the Administrative Agent notice of
each such prepayment, Conversion or Continuation as provided in Section 4.05
hereof (and, upon the date specified in any such notice of prepayment, the
amount to be prepaid shall become due and payable hereunder) and provided
further that any prepayment of the principal of the Series B Loans shall be
applied to reduce the then remaining installments thereof on a pro rata basis
(based on the then remaining principal amount of each such installment).
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of the Company to
Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar
Loan, in which event all Loans shall be Converted (on the last day(s) of the
respective Interest Periods therefor) or Continued, as the case may be, as Base
Rate Loans.
2.10 Mandatory Prepayments and Reductions of Commitments.
(a) [Intentionally Omitted]
(b) Casualty Events. Unless the Company or any of its Subsidiaries,
as the case may be, shall have irrevocably committed to repair or replace any
Property of the Company or such Subsidiary affected by a Casualty Event, on the
date 30 days following the receipt by the Company of the proceeds of insurance,
condemnation award or other compensation in respect of such Casualty Event
affecting such Property (or upon such earlier date as the Company or such
Subsidiary, as the case may be, shall have determined not to repair or replace
the Property affected by such Casualty Event), the Company shall prepay the
Loans (and/or provide cover for Letter of Credit Liabilities as specified in
clause (f) below), and the Commitments shall be subject to automatic reduction,
in an aggregate amount, if any, equal to 75% of the Net Available Proceeds of
such Casualty Event not theretofore applied to the repair or replacement of such
Property (or reserved by the Company for application to such purposes), such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (e) of this Section 2.10. Nothing in this clause (b)
shall be deemed to limit any obligation of the Company or any of its
Subsidiaries pursuant to any of the Security Documents to remit to a collateral
or similar account (including, without limitation, the Collateral Account)
maintained by the Administrative Agent pursuant to any of the Security Documents
the proceeds of insurance, condemnation award or other compensation received in
respect of any Casualty Event.
(c) Recapture of Proceeds from Asset Sales. In the event of a
Disposition, the Company shall deposit 75% of the Net Available Proceeds
therefrom into the Collateral Account no later than five Business Days after
receipt thereof; provided that prior to such deposit the Company may invest such
Net Available Proceeds, or after such deposit the Company may withdraw such Net
Available Proceeds from the Collateral Account within 270 days after such
Credit Agreement
<PAGE> 33
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Disposition so long as immediately thereafter such Net Available Proceeds are
invested, in Property to be used by the Company or any of its Subsidiaries in
the lines of business in which the Company or any of its Subsidiaries is engaged
as of the Restatement Date or in any business related thereto. No later than 270
days following the occurrence of any such Disposition, the Company will deliver
to the Lenders a statement, certified by the chief financial officer of the
Company, in form and detail satisfactory to the Administrative Agent, of the
amount of the Net Available Proceeds of such Disposition not applied as
contemplated by the immediately preceding sentence and, on the first Recapture
Date thereafter, the Company shall withdraw the remaining Net Available Proceeds
from the Collateral Account and prepay the Loans (and/or provide cover for
Letter of Credit Liabilities as specified in clause (f) below), and the
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 75% of the Net Available Proceeds received or which become available
for prepayment or reduction during such Recapture Period ending on such
Recapture Date, such prepayment and reduction to be effected in each case in the
manner and to the extent specified in clause (e) of this Section 2.10. In
addition to the foregoing, to the extent the remaining 25% of the Net Available
Proceeds from such Disposition would become "Excess Proceeds" (as defined in the
Senior Subordinated Indenture[s]) under clause (b) of Section 1016 of the Senior
Subordinated Indenture[s] (the "Remainder Amount"), the Company shall,
immediately prior to such Remainder Amount becoming "Excess Proceeds" as
aforesaid, prepay the Loans (and/or provide cover for Letter of Credit
Liabilities as specified in clause (f) below), and the Commitments shall be
subject to automatic reduction, in an aggregate amount equal to such Remainder
Amount, such prepayment and reduction to be effected in each case in the manner
and to the extent specified in clause (e) of this Section 2.10. Nothing in this
Section 2.10(c) shall be deemed to excuse or otherwise limit the obligation of
the Company to obtain the consent of the Majority Lenders pursuant to Section
8.05 hereof to any Disposition not otherwise permitted hereunder.
(d) Reversions. Without limiting the obligation of the Company under
Section 8.01(c) hereof, upon any Reversion the Company shall prepay the Loans
(and/or provide cover for Letter of Credit Liabilities as specified in clause
(f) below), and the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to 75% of the Net Available Proceeds thereof, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in clause (e) of this Section 2.10.
(e) Application. Prepayments and reductions of Commitments described
in the above clauses of this Section 2.10 shall be effected as follows:
(i) first, the Series B Loans shall be prepaid in an amount equal to
the prepayment or reduction specified in such clauses (such prepayments
shall be applied first to Base Rate Loans and then to Eurodollar Loans)
and shall be applied to the installments of the Series B Loans on a pro
rata basis (based on the then remaining principal amount of each such
installment); and
(ii) second, any excess over the amount referred to in the foregoing
clause (i) shall automatically reduce the Series A Commitments (and to the
extent that, after giving effect to such reduction, the aggregate
principal amount of Series A Loans, together with
Credit Agreement
<PAGE> 34
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the aggregate amount of all Letter of Credit Liabilities, would exceed the
Series A Commitments, the Company shall, first, prepay Series A Loans
(such prepayments shall be applied first to Base Rate Loans and then to
Eurodollar Loans) and, second, provide cover for Letter of Credit
Liabilities as specified in clause (f) below, in an aggregate amount equal
to such excess).
(f) Cover for Letter of Credit Liabilities. In the event that the
Company shall be required pursuant to this Section 2.10 to provide cover for
Letter of Credit Liabilities, the Company shall effect the same by paying to the
Administrative Agent immediately available funds in an amount equal to the
required amount, which funds shall be retained by the Administrative Agent in
the Collateral Account (as provided therein as collateral security in the first
instance for the Letter of Credit Liabilities) until such time as the Letters of
Credit shall have been terminated and all of the Letter of Credit Liabilities
paid in full.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans.
(a) The Company hereby promises to pay to the Administrative Agent
for account of each Series A Lender the entire outstanding principal amount of
such Lender's Series A Loans, and each Series A Loan shall mature, on the Series
A Commitment Termination Date.
(b) Subject to Sections 2.09 and 2.10 hereof, the Company hereby
promises to pay to the Administrative Agent for account of each Series B Lender
the principal amount of each of such Lender's Series B Loans in twenty (20)
consecutive quarterly installments, commencing on the Quarterly Date falling
approximately three (3) months after the Series B Commitment Termination Date
and on each of the nineteen (19) Quarterly Dates thereafter, the first eight (8)
of which shall each be in an amount equal to 2.5% of the initial principal
amount of such Series B Loan, the next four (4) of which shall each be in an
amount equal to 4% of the initial principal amount of such Series B Loan, the
next four (4) of which shall each be in an amount equal to 7% of the initial
principal amount of such Series B Loan, and the last four (4) of which shall
each be in an amount equal to 9% of the initial principal amount of such Series
B Loan.
3.02 Interest. The Company hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender for the period from and including the
date of such Loan to but excluding the date such Loan shall be paid in full, at
the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin (if any) and
Credit Agreement
<PAGE> 35
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(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan for such
Interest Period plus the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount payable by
the Company hereunder or under the Notes held by such Lender to or for account
of such Lender, which shall not be paid in full when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), for the period
from and including the due date thereof to but excluding the date the same is
paid in full. Accrued interest on each Loan shall be payable (i) in the case of
a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period, and (iii) in the case of any Loan, upon
the payment or prepayment thereof or the Conversion of such Loan to a Loan of
another Type (but only on the principal amount so paid, prepaid or Converted),
except that interest payable at the Post-Default Rate shall be payable from time
to time on demand. Promptly after the determination of any interest rate
provided for herein or any change therein, the Administrative Agent shall give
notice thereof to the Lenders to which such interest is payable and to the
Company.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Company under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Company under any
other Basic Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Company, not later than 1:00 p.m. New York time on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is not
made by such time to any ordinary deposit account of the Company with such
Lender (with notice to the Company and the Administrative Agent).
(c) The Company shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans,
Reimbursement Obligations or other amounts payable by the Company hereunder to
which such payment is to be applied (and in the
Credit Agreement
<PAGE> 36
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event that the Company fails to so specify, or if an Event of Default has
occurred and is continuing, the Administrative Agent may distribute such payment
to the Lenders for application in such manner as it or the Majority Lenders,
subject to Section 4.02 hereof, may determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence of
Section 2.03(e) hereof, each payment received by the Administrative Agent under
this Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing of Loans of a particular Class from the Lenders under
Section 2.01 hereof shall be made from the relevant Lenders, each payment of
commitment fee under Section 2.05 hereof in respect of Commitments of a
particular Class shall be made for account of the relevant Lenders, and each
termination or reduction of the amount of the Commitments of a particular Class
under Section 2.04 hereof and under Section 2.10(e) hereof shall be applied to
the respective Commitments of such Class of the relevant Lenders, pro rata
according to the amounts of their respective Commitments of such Class; (b) the
making, Conversion and Continuation of Series A Loans and Series B Loans of a
particular Type (other than Conversions provided for by Section 5.04 hereof)
shall be made pro rata among the relevant Lenders according to the amounts of
their respective Series A and Series B Commitments (in the case of making of
Loans) or their respective Series A and Series B Loans (in the case of
Conversions and Continuations of Loans) and the then current Interest Period for
each Eurodollar Loan shall be coterminous; (c) each payment or prepayment of
principal of Series A Loans or Series B Loans by the Company shall be made for
account of the relevant Lenders pro rata in accordance with the respective
unpaid principal amounts of the Loans of such Class held by them; and (d) each
payment of interest on Series A Loans and Series B Loans by the Company shall be
made for account of the relevant Lenders pro rata in accordance with the amounts
of interest on such Loans then due and payable to the respective Lenders.
4.03 Computations. Interest on Eurodollar Loans and Reimbursement
Obligations and commitment fee and letter of credit fee shall be computed on the
basis of a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable and interest
on Base Rate Loans shall be computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
Notwithstanding the foregoing, for each date that the Base Rate is calculated by
reference to the Federal Funds Rate, interest on Base Rate Loans shall be
computed on the basis of a year of 360 days and actual days elapsed.
Credit Agreement
<PAGE> 37
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4.04 Minimum Amounts. Except for mandatory prepayments made pursuant
to Section 2.10 hereof and Conversions or prepayments made pursuant to Section
5.04 hereof, (i) each borrowing, Conversion and partial prepayment of principal
of Series A Loans shall be in multiples of $1,000,000 and (ii) each borrowing,
Conversion or partial prepayment of principal of Series B Loans shall be in
multiples of $1,000,000 (borrowings, Conversions or prepayments of or into Loans
of different Types, or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period). Anything in this Agreement to the contrary notwithstanding,
the aggregate principal amount of Eurodollar Loans having the same Interest
Period shall be in an amount at least equal to $5,000,000 or in multiples of
$1,000,000 in excess thereof and, if any Eurodollar Loans would otherwise be in
a lesser principal amount for any period, such Loans shall be Base Rate Loans
during such period.
4.05 Certain Notices. Notices by the Company to the Administrative
Agent of terminations or reductions of the Commitments, of borrowings,
Conversions, Continuations and optional prepayments of Loans and of Classes of
Loans and of Types of Loans and of the duration of Interest Periods shall be
irrevocable and shall be effective only if received by the Administrative Agent
not later than 10:00 a.m. New York time on the number of Business Days prior to
the date of the relevant termination, reduction, borrowing, Conversion,
Continuation or prepayment or the first day of such Interest Period specified
below:
<TABLE>
<CAPTION>
Number of Business Notice Days Prior
------------------------------------------- ------------------
<S> <C>
Termination or reduction 3
of Commitments
Borrowing or prepayment of, 1
or Conversions into,
Base Rate Loans
Borrowing or prepayment of, 3
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans
</TABLE>
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event that the
Company fails to select the Type of Loan, or the duration of any Interest Period
for any Eurodollar Loan, within the time period and otherwise as provided in
this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted
Credit Agreement
<PAGE> 38
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into a Base Rate Loan on the last day of the then current Interest Period for
such Loan or (if outstanding as a Base Rate Loan) will remain as, or (if not
then outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Lender or the Company (the
"Payor") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender, or a participation in a Letter of Credit drawing to be
acquired by such Lender, hereunder or (in the case of the Company) a payment to
the Administrative Agent for account of one or more of the Lenders hereunder
(such payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the Advance Date, then, retroactively to the
Advance Date, the Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by
the Company to the Lenders, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the Post-Default Rate (and, in case the
recipient(s) shall return the Required Payment to the Administrative
Agent, without limiting the obligation of the Company under Section 3.02
hereof to pay interest to such recipient(s) at the Post-Default Rate in
respect of the Required Payment) and
(ii) if the Required Payment shall represent proceeds of a loan to
be made by the Lenders to the Company, the Payor and the Company shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the rate of interest provided for such
Required Payment pursuant to Section 3.02 hereof (and, in case the Company
shall return the Required Payment to the Administrative Agent, without
limiting any claim the Company may have against the Payor in respect of
the Required Payment).
4.07 Sharing of Payments, Etc.
Credit Agreement
<PAGE> 39
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(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option, to offset balances held by
it for account of the Company at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such balances are then due to
the Company), in which case it shall promptly notify the Company and the
Administrative Agent thereof, provided that such Lender's failure to give such
notice shall not affect the validity thereof.
(b) If any Lender shall obtain from the Company payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Basic Document through the exercise of any right of set-off banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the Loans
of such Class or Letter of Credit Liabilities or such other amounts then due
hereunder or thereunder by the Company to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans of such Class or Letter of Credit Liabilities or such
other amounts, respectively, owing to such other Lenders (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all the Lenders shall
share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) pro rata
in accordance with the unpaid principal of and/or interest on the Loans of such
Class or Letter of Credit Liabilities or such other amounts, respectively, owing
to each of the Lender. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Company. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 4.07 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section 4.07 to
share in the benefits of any recovery on such secured claim.
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Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change that:
(i) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such Loans
(other than taxes imposed on or measured by the overall net income of such
Lender or of its Applicable Lending Office for any of such Loans by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender
(including, without limitation, the Commitments of such Lender hereunder);
or
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the
Regulatory Change giving rise to such request ceases to be in effect (in which
case the provisions of Section 5.04 hereof shall be applicable), provided that
such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the provisions of paragraph (a)
of this Section 5.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender that includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Lender that includes
Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets that it may hold, then, if such Lender so
elects by notice to the Company (with a copy to the
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Administrative Agent), the obligation of such Lender to make or Continue, or to
Convert Base Rate Loans into, Eurodollar Loans hereunder shall be suspended
until such Regulatory Change ceases to be in effect (in which case the
provisions of Section 5.04 hereof shall be applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Lender from time to time on request such amounts as such Lender may determine to
be necessary to compensate such Lender (or, without duplication, the bank
holding company of which such Lender is a subsidiary) for any costs that it
determines are attributable to the maintenance by such Lender (or any Applicable
Lending Office or such bank holding company), pursuant to any law or regulation
or any interpretation, directive or request (whether or not having the force of
law and whether or not failure to complete therewith would be unlawful) of any
court or governmental or monetary authority (i) following any Regulatory Change
or (ii) implementing any risk-based capital guideline or other requirement
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) heretofore or hereafter issued by any government or
governmental or supervisory authority implementing at the national level the
Basle Accord (including, without limitation, the Final Risk-Based Capital
Guidelines of the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 208, Appendix A; 12 C.F.R. Part 225, Appendix A) and the Final Risk-Based
Capital Guidelines of the Office of the Comptroller of the Currency (12 C.F.R.
Part 3, Appendix A)), of capital in respect of its Commitments or Loans (such
compensation to include, without limitation, an amount equal to any reduction of
the rate of return on assets or equity of such Lender (or any Applicable Lending
Office or such bank holding company) to a level below that which such Lender (or
any Applicable Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or request). For
purposes of this Section 5.01(c) and Section 5.06 hereof, "Basle Accord" shall
mean the proposals for risk-based capital framework described by the Basle
Committee on Banking Regulations and Supervisory Practices in its paper entitled
"International Convergence of Capital Measurement and Capital Standards" dated
July 1988, as amended, modified and supplemented and in effect from time to time
or any replacement thereof.
(d) Each Lender shall notify the Company of any event occurring
after the Amendment Effective Date entitling such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in any
event within 45 days, after such Lender obtains actual knowledge thereof;
provided that (i) if any Lender fails to give such notice within 45 days after
it obtains actual knowledge of such an event, such Lender shall, with respect to
compensation payable pursuant to this Section 5.01 in respect of any costs
resulting from such event, only be entitled to payment under this Section 5.01
for costs incurred from and after the date 45 days prior to the date that such
Lender does give such notice and (ii) each Lender will designate a different
Applicable Lending Office for the Loans of such Lender affected by such event if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no obligation
to designate an Applicable Lending Office located in the United States of
America. Each Lender will furnish to the Company a certificate setting forth the
basis and amount of each request by such Lender for compensation under paragraph
(a) or (c) of this Section 5.01. Determinations and allocations by any Lender
for purposes of this
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Section 5.01 of the effect of any Regulatory Change pursuant to paragraph (a) or
(b) of this Section 5.01, or of the effect of capital maintained pursuant to
paragraph (c) of this Section 5.01, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive, provided that such determinations
and allocations are made on a reasonable basis.
5.02 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:
(a) the Administrative Agent reasonably determines, which
determination shall be conclusive, that quotations of interest rates for the
relevant deposits referred to in the definition of "Eurodollar Base Rate" in
Section 1.01 hereof are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) if the related Loans are Series A Loans, the Majority Series A
Lenders or, if the related Loans are Series B Loans, the Majority Series B
Lenders reasonably determine, which determination shall be conclusive, and
notify the Administrative Agent that the relevant rates of interest referred to
in the definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the
basis of which the rate of interest for Eurodollar Loans for such Interest
Period is to be determined are not likely adequately to cover the cost to such
Lenders of making or maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Company and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Company shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Company thereof
(with a copy to the Administrative Agent) and such Lender's obligation to make
or Continue, or to Convert Loans of any other Type into, Eurodollar Loans shall
be suspended until such time as such Lender may again make and maintain
Eurodollar Loans (in which case the provisions of Section 5.04 hereof shall be
applicable).
5.04 Treatment of Affected Loans. If the obligation of any Lender to
make Eurodollar Loans or to Continue, or to Convert Base Rate Loans into,
Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof,
such Lender's Eurodollar Loans shall be automatically Converted into Base Rate
Loans on the last day(s) of the then current Interest
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Period(s) for Eurodollar Loans (or, in the case of a Conversion required by
Section 5.01(b) or 5.03 hereof, on such earlier date as such Lender may specify
to the Company with a copy to the Administrative Agent) and, unless and until
such Lender gives notice as provided below that the circumstances specified in
Section 5.01 or 5.03 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise be
applied to such Lender's Eurodollar Loans shall be applied instead to its Base
Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Lender that would otherwise be Converted
into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Company with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent necessary so that, after giving
effect thereto, all Loans held by the Lenders holding Eurodollar Loans and by
such Lender are held pro rata (as to principal amounts, Types and Interest
Periods) in accordance with their respective Commitments.
5.05 Compensation. The Company shall pay to the Administrative Agent
for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense incurred by it that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 9 hereof) on a
date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in Section
6 hereof to be satisfied) to borrow a Eurodollar Loan from such Lender on the
date for such borrowing specified in the relevant notice of borrowing given
pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid or
Converted or not borrowed for the period
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from the date of such payment, prepayment, Conversion or failure to borrow to
the last day of the then current Interest Period for such Loan (or, in the case
of a failure to borrow, the Interest Period for such Loan that would have
commenced on the date specified for such borrowing) at the applicable rate of
interest for such Loan provided for herein over (ii) the amount of interest that
otherwise would have accrued on such principal amount at a rate per annum equal
to the interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
5.06 Additional Costs in Respect of Letters of Credit. Without
limiting the obligations of the Company under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing or maintaining participations in) or
maintaining its obligation hereunder to issue (or purchase participations in)
any Letter of Credit hereunder or reduce any amount receivable by any Lender
hereunder in respect of any Letter of Credit (which increases in cost, or
reductions in amount receivable, shall be the result of such Lender's or
Lenders' reasonable allocation of the aggregate of such increases or reductions
resulting from such event), then, upon demand by such Lender or Lenders (through
the Administrative Agent), the Company shall pay immediately to the
Administrative Agent for account of such Lender or Lenders, from time to time as
specified by such Lender or Lenders (through the Administrative Agent), such
additional amounts as shall be sufficient to compensate such Lender or Lenders
(through the Administrative Agent) for such increased costs or reductions in
amount. A statement as to such increased costs or reductions in amount incurred
by any such Lender or Lenders, submitted by such Lender or Lenders to the
Company shall be conclusive in the absence of manifest error as to the amount
thereof, provided that the determination of such increased costs or reductions
are made on a reasonable basis.
5.07 U.S. Taxes.
(a) The Company agrees to pay to each Lender that is not a U.S.
Person such additional amounts as are necessary in order that the net payment of
any amount due to such non-U.S. Person hereunder after deduction for or
withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then due and payable, provided
that the foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to a Lender hereunder unless such Lender is, on
the Amendment Effective Date (or on the date it becomes a Lender as
provided in Section 11.06(b) hereof) and on the date of any change in the
Applicable Lending Office of such Lender, either entitled to submit a Form
1001 (relating to such Lender and entitling it to a complete exemption
from withholding on all interest to be received by it
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hereunder in respect of the Loans) or Form 4224 (relating to all interest
to be received by such Lender hereunder in respect of the Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the nationality,
residence, identity or connections with the United States of America of
such non-U.S. Person if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.07(a), (w) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates), (y) "U.S. Person" shall mean a citizen, national or
resident of the United States of America, a corporation, partnership or other
entity created or organized in or under any laws of the United States of
America, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income and (z) "U.S. Taxes" shall mean any
present or future tax, assessment or other charge or levy imposed by or on
behalf of the United States of America or any taxing authority thereof or
therein.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the Company
shall deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
Section 6. Conditions Precedent.
6.01 Conditions to Effectiveness. The effectiveness of the amendment
and restatement of the Existing Credit Agreement provided for hereby is subject
to the receipt by the Administrative Agent of the following documents, each of
which shall be satisfactory to the Administrative Agent (and to the extent
specified below, to each Lender) in form and substance:
(a) Corporate Documents. The following documents, each certified as
indicated below:
(i) a copy of the charter, as amended and in effect, of the Company
certified as of a recent date by the Secretary of State of the State of
Delaware (or, if there have been no
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modifications to such charter from the copy thereof delivered by the
Company pursuant to the Existing Credit Agreement, a certificate of the
Secretary or an Assistant Secretary of the Company to that effect), and a
certificate from such Secretary of State dated as of a recent date as to
the good standing of and charter documents filed by the Company;
(ii) a certificate of the Secretary or an Assistant Secretary of the
Company, dated the Amendment Effective Date and certifying (A) that
attached thereto is a true and complete copy of the by-laws of the Company
as amended and in effect at all times from the date on which the
resolutions referred to in clause (B) below were adopted to and including
the date of such certificate (or if there have been no modifications to
such bylaws from the copy thereof delivered by the Company pursuant to the
Existing Credit Agreement, a certificate of the Secretary or an Assistant
Secretary of the Company to that effect), (B) that attached thereto is a
true and complete copy of resolutions duly adopted by the board of
directors of the Company authorizing the execution, delivery and
performance of the amendment and restatement of the Existing Credit
Agreement and such other of the Basic Documents to which the Company is or
is intended to be a party and the extensions of credit hereunder, and that
such resolutions have not been modified, rescinded or amended and are in
full force and effect, (C) that the charter of the Company has not been
amended since the date of the certification thereto furnished pursuant to
clause (i) above, and (D) as to the incumbency and specimen signature of
each officer of the Company executing the amendment and restatement of the
Existing Credit Agreement and such other of the Basic Documents to which
the Company is intended to be a party and each other document to be
delivered by the Company from time to time in connection therewith (and
the Administrative Agent and each Lender may conclusively rely on such
certificate until it receives notice in writing from the Company to the
contrary); and
(iii) a certificate of another officer of the Company as to the
incumbency and specimen signature of the Secretary or Assistant Secretary,
as the case may be, of the Company.
(b) Officer's Certificate. A certificate of a senior officer of the
Company, dated the Amendment Effective Date, to the effect that (i) no Default
shall have occurred and be continuing and (ii) the representations and
warranties made by the Company in Section 7 hereof, and in each of the other
Basic Documents, are true and correct on and as of the Amendment Effective Date
with the same force and effect as if made on and as of such date (or, if any
such representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date).
(c) Opinion of Counsel to the Company. An opinion, dated the
Amendment Effective Date, of Ropes & Gray, counsel to the Company, in form and
substance satisfactory to the Administrative Agent (and the Company hereby
instructs such counsel to deliver such opinions to the Lenders and the
Administrative Agent).
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(d) Opinion of Special New York Counsel to Chase. An opinion, dated
the Amendment Effective Date, of Milbank, Tweed, Hadley & McCloy, special New
York counsel to Chase, in form and substance satisfactory to the Administrative
Agent.
(e) Financial Information. True, correct and complete copies of the
financial statements, projections and other information referred to in Section
7.02 hereof.
(f) Approvals and Consents. Evidence that all necessary governmental
and third party filings, licenses, permits, consents and approvals have been
obtained by the Company and are in full force and effect on the Amendment
Effective Date.
(g) Payment of Fees and Expenses. Evidence that (i) all principal of
and interest on, and all other amount owing in respect of, the loans made by the
Existing Lenders under the Existing Credit Agreement shall have been paid in
full and (ii) all fees and expenses payable to the Existing Lenders and the
Administrative Agent under the Existing Credit Agreement accrued to the
Amendment Effective Date and unpaid and such fees as the Company shall have
agreed to pay or deliver to the Administrative Agent in connection herewith,
including, without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special New York counsel to Chase in connection with the
negotiation, preparation, execution and delivery of the amendment and
restatement of the Existing Credit Agreement and the Notes and the other Basic
Documents and the extensions of credit hereunder (to the extent that statements
for such fees and expenses have been delivered to the Company) shall have been
paid in full.
(h) Governmental Proceedings; Etc. Evidence that no litigation or
similar proceeding is threatened by any governmental agency or authority or any
other person with respect to the execution and delivery of the amendment and
restatement of the Existing Credit Agreement, the Notes and the other Basic
Documents, and the consummation of the transactions herein or therein
contemplated which, in each case, the Lenders shall reasonably determine is
likely to have a material adverse effect on (i) the assets, business,
operations, or condition (financial or otherwise) or prospects of the Company
and its Subsidiaries taken as a whole or (ii) the timely payment of the Loans
and interest thereon or the enforceability of the Basic Documents or the rights
and remedies thereunder.
(i) Leverage Ratio. A certificate of a senior officer of the
Company, dated the Amendment Effective Date, setting forth the Leverage Ratio as
at the Amendment Effective Date.
(j) Security Documents. The Security Documents duly executed and
delivered by the parties thereto, together with (x) stock certificates
representing all of the shares of each Domestic Subsidiary that is a Material
Subsidiary directly owned by the Company (except for B/E Advanced Thermal
Technologies, Inc.) and not less than 65% of the shares of each Foreign
Subsidiary that is a Material Subsidiary directly owned by the Company, together
with undated stock powers (or the equivalent with respect to the Foreign
Subsidiaries) duly signed in blank, (y) the limited liability company
certificates representing all of the ownership interest in In-
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Flight Entertainment, LLC, together with an undated transfer power duly signed
in blank and (z) such Uniform Commercial Code financing statements as the
Administrative Agent shall request.
(k) Senior Notes. A certificate of a senior financial officer of the
Company, dated the Amendment Effective Date, stating that the Company's 9-3/4%
Senior Notes due 2003 have been fully redeemed.
(l) Other Documents. Such other documents as the Administrative
Agent or any Lender or special New York counsel to Chase may reasonably request.
6.02 Initial and Subsequent Extensions of Credit. The obligation of
the Lenders to make any Loan or otherwise extend any credit to the Company upon
the occasion of each borrowing or other extension of credit hereunder (including
the initial borrowing) is subject to the further conditions precedent that:
(a) Both immediately prior to the making of such Loan or other
extension of credit and also after giving effect thereto and to the intended use
thereof: (i) no Default shall have occurred and be continuing; (ii) the
representations and warranties made by the Company in Section 7 hereof, and in
each of the other Basic Documents, shall be true and correct on and as of the
date of the making of such Loan or other extension of credit with the same force
and effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of such
specific date). Each notice of borrowing or request for the issuance of a Letter
of Credit by the Company hereunder shall constitute a certification by the
Company to the effect set forth in the preceding sentence (both as of the date
of such notice or request and, unless the Company otherwise notifies the
Administrative Agent prior to the date of such borrowing or issuance, as of the
date of such borrowing or issuance); and
(b) The Administrative Agent shall have received a certificate of a
senior financial officer of the Company setting forth in reasonable detail the
computations necessary to demonstrate that both immediately prior to the making
of such Loan or other extension of credit and immediately after giving effect
thereto, the Company is or will be in compliance with Section 1010 of the Senior
Subordinated Indentures.
Section 7. Representations and Warranties. The Company represents
and warrants to the Lenders that:
7.01 Corporate Existence. Each of the Company and its Subsidiaries:
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which
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the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify could have a Material Adverse Effect.
7.02 Financial Condition.
(a) The Company has heretofore furnished to each of the Lenders (i)
the consolidated balance sheet of the Company and its Subsidiaries as at
February 22, 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
fiscal year ended on said date, with the opinion thereon of Deloitte & Touche,
and (ii) the consolidated balance sheet of the Company and its Subsidiaries as
at November 29, 1997 and the related consolidated statements of earnings,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
fiscal quarters ended on such date and for the three fiscal quarters ended on
such date. All such financial statements present fairly, in all material
respects, the financial position of the Company and its Subsidiaries as at, and
the results of operations for the fiscal year and fiscal quarter, ended on said
date, all in accordance with generally accepted accounting principles and
practices applied on a consistent basis (subject, in the case of such financial
statements as at November 29, 1997, to normal year-end audit adjustments).
Neither the Company nor any of its Subsidiaries has on the Restatement Date any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said balance
sheets as at said dates.
(b) Since February 22, 1997, there has been no material adverse
change in the financial condition, operations, business or prospects of the
Company and its Subsidiaries from that set forth in said financial statements as
at said date.
7.03 Litigation. Except as disclosed to the Lenders in writing prior
to the Amendment Effective Date, there are no legal or arbitral proceedings, or
any proceedings by or before any governmental or regulatory authority or agency,
now pending or (to the knowledge of the Company) threatened against the Company
or any of its Subsidiaries which, if adversely determined, could have a Material
Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement
and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of the Company, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any agreement or instrument to
which the Company or any of its Subsidiaries is a party (including, without
limitation, the Senior Subordinated Indentures) or by which any of them or any
of their Property is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or (except for Liens created
pursuant to the Security Documents) result in the creation or imposition of any
Lien upon any Property of the Company or any of its Subsidiaries pursuant to the
terms of any such agreement or instrument.
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7.05 Action. The Company has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents; the execution, delivery and performance by the
Company of each of the Basic Documents have been duly authorized by all
necessary corporate action on its part (including, without limitation, any
required shareholder approvals); and this Agreement has been duly and validly
executed and delivered by the Company and constitutes, and each of the Notes and
the other Basic Documents to which it is a party when executed and delivered (in
the case of the Notes, for value) will constitute, its legal, valid and binding
obligation, enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by the Company of the Basic Documents to which it is a party or for
the legality, validity or enforceability hereof or thereof, except for filings
and recordings in respect of the Liens created pursuant to the Security
Documents.
7.07 Use of Credit. Neither the Company nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and no part of the proceeds of any extension
of credit hereunder will be used to buy or carry any Margin Stock.
7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Lenders under Section 8.01(f)
hereof.
7.09 Taxes. The Company and its Domestic Subsidiaries are members of
an affiliated group of corporations filing consolidated returns for Federal
income tax purposes, of which the Company is the "common parent" (within the
meaning of Section 1504 of the Code) of such group. Except as set forth in
Schedule VI hereto, the Company and its Domestic Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company or any of its Domestic
Subsidiaries. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company, adequate. The Company has not given or been requested to
give a waiver of the statute of limitations relating to the payment of Federal,
state, local and foreign taxes or other impositions.
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7.10 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.11 Public Utility Holding Company Act. Neither the Company nor any
of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.12 Material Agreements and Liens.
(a) Part A of Schedule I hereto is a complete and correct list, as
of the Restatement Date, of each credit agreement, loan agreement, indenture,
purchase agreement, guarantee, letter of credit or other arrangement providing
for or otherwise relating to any Indebtedness or any extension of credit (or
commitment for any extension of credit) to, or guarantee by, the Company or any
of its Subsidiaries the aggregate principal or face amount of which equals or
exceeds (or may equal or exceed) $1,000,000, and the aggregate principal or face
amount outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list, as
of the Restatement Date, of each Lien securing Indebtedness the aggregate
principal or face amount of which equals or exceeds $1,000,000 of any Person and
covering any Property of the Company or any of its Subsidiaries, and the
aggregate amount of such Indebtedness secured (or which may be secured) by each
such Lien and the Property covered by each such Lien is correctly described in
Part B of said Schedule I.
7.13 Environmental Matters. Except as set forth in Schedule II
hereto, each of the Company and its Subsidiaries has obtained all environmental,
health and safety permits, licenses and other authorizations required under all
Environmental Laws to carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such permit, license or
authorization would not have a Material Adverse Effect. All of the permits,
licenses and authorizations that have been obtained are in full force and effect
and each of the Company and its Subsidiaries is in compliance with the terms and
conditions thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply therewith would not have a Material Adverse Effect.
In addition, except as set forth in Schedule II hereto:
(a) To the Company's knowledge after due inquiry, no written notice,
notification, demand, request for information, citation, summons or order has
been issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending
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or threatened by any governmental or other entity with respect to any alleged
failure by the Company or any of its Subsidiaries to have any environmental,
health or safety permit, license or other authorization required under any
Environmental Law in connection with the conduct of the business of the Company
or any of its Subsidiaries or with respect to any generation, treatment,
storage, recycling, transportation, discharge or disposal, or any Release of any
Hazardous Materials generated by the Company or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries owns, operates
or leases a treatment, storage or disposal facility requiring a permit under the
Resource Conservation and Recovery Act of 1976, as amended, or under any
comparable state or local statute; and
(i) to the Company's knowledge after due inquiry, no PCB
Transformers (as defined in the Toxic Substances Control Act, 15 U.S.C.
ss. 1601, et seq., as amended, and the regulations relating thereto) are
present at any site or facility owned, operated or leased by the Company
or any of its Subsidiaries;
(ii) to the Company's knowledge after due inquiry, no asbestos or
asbestos-containing materials is present at any site or facility owned,
operated or leased by the Company or any of its Subsidiaries;
(iii) to the Company's knowledge after due inquiry, there are no
underground storage tanks or surface impoundments for Hazardous Materials,
active or abandoned, at any site or facility owned, operated or leased by
the Company or any of its Subsidiaries; and
(iv) to the Company's knowledge after due inquiry, no Hazardous
Materials have been Released by the Company or any of its Subsidiaries at,
on or under any site or facility now owned, operated or leased by the
Company or any of its Subsidiaries in a reportable quantity established by
any Environmental Law.
(c) To the Company's knowledge after due inquiry, neither the
Company nor any of its Subsidiaries has transported or arranged for the
transportation of any Hazardous Material to any location that is listed on the
National Priorities List ("NPL") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), listed for
possible inclusion on the NPL by the Environmental Protection Agency, or listed
in the Comprehensive Environmental Response and Liability Information System, as
provided for by 40 C.F.R. ss. 300.5 ("CERCLIS"), or on any similar state or
local list or that is the subject of Federal, state or local enforcement actions
or other investigations that may lead to Environmental Claims against the
Company or any of its Subsidiaries.
(d) No Liens are presently recorded with the appropriate land
records under or pursuant to any Environmental Laws on any site or facility
owned, operated or leased by the Company or any of its Subsidiaries, and to the
Company's knowledge no government action has been taken or is in process that
could subject any such site or facility to such Liens. Neither the Company nor
any of its Subsidiaries would be required to place any notice or restriction
relating
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to the presence of Hazardous Materials at any site or facility owned by it in
any deed to the real property on which such site or facility is located.
(e) There have been no environmental investigations, written
studies, audits, tests, reviews or other analyses conducted by or that are in
the possession of the Company or any of its Subsidiaries in relation to any site
or facility now or previously owned, operated or leased by the Company or any of
its Subsidiaries which have not been made available to the Lenders.
7.14 Capitalization. The authorized capital stock of the Company
consists, on the Restatement Date, of an aggregate of 31,000,000 shares
consisting of (i) 30,000,000 shares of common stock, par value $0.01 per share,
of which 22,891,918 shares were, as at February 28, 1998 duly and validly issued
and outstanding, each of which shares is fully paid and nonassessable and (ii)
1,000,000 shares of preferred stock, par value $0.01 per share, of which no
shares were outstanding as at February 28, 1998. As of the Restatement Date the
Company is registered with the Securities and Exchange Commission under the
Securities Exchange Act, and its shares of common stock are publicly owned and
traded on the NASDAQ National Market System. As of the Restatement Date, (x)
except for options to purchase 2,902,001 shares of the common stock of the
Company, there are no outstanding Equity Rights with respect to the Company and
(y) there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of capital
stock of the Company nor are there any outstanding obligations of the Company or
any of its Subsidiaries to make payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market value or equity value of the Company or any of its Subsidiaries.
7.15 Subsidiaries, Etc.
(a) Set forth in Part A of Schedule III hereto is a complete and
correct list, as of the Restatement Date, of all of the Subsidiaries of the
Company, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests in
such Subsidiary, (iii) the nature of the ownership interests held by each such
Person and the percentage of ownership of such Subsidiary represented by such
ownership interests and (iv) the total book value of the assets of each such
Subsidiary as of November 29, 1997. Except as disclosed in Part A of Schedule
Ill hereto, (x) each of the Company and its Subsidiaries owns, free and clear of
Liens (other than Liens created pursuant to the Security Documents), and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it in Part A of Schedule III hereto, (y) all of the issued
and outstanding capital stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule III hereto is a complete and
correct list, as of the Restatement Date, of all Investments (other than
Investments disclosed in Part A of said Schedule III hereto) of $1,000,000 or
more held by the Company or any of its Subsidiaries in any Person and, for each
such Investment, (x) the identity of the Person or Persons in which such
Investment has been made, (y) the nature of such Investment and (z) the amount
of such
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Investment. Except as disclosed in Part B of Schedule III hereto, each of the
Company and its Subsidiaries owns, free and clear of all Liens (other than Liens
created pursuant to the Security Documents), all such Investments.
(c) Except as set forth in Schedule III hereto, none of the
Subsidiaries of the Company is, on the Restatement Date, subject to any
indenture, agreement, instrument or other arrangement of the type described in
the last sentence of Section 8.17 hereof.
7.16 Title to Assets. The Company owns and has on the Restatement
Date, and will own and have on the Amendment Effective Date, good and marketable
title (subject only to Liens permitted by Section 8.06 hereof) to the Properties
shown to be owned in the most recent financial statements referred to in Section
7.02 hereof (other than Properties disposed of in the ordinary course of
business or otherwise permitted to be disposed of pursuant to Section 8.05
hereof). The Company owns and has on the Restatement Date, and will own and have
on the Amendment Effective Date, good and marketable title to, and enjoys on the
Restatement Date, and will enjoy on the Amendment Effective Date, peaceful and
undisturbed possession of, all Properties (subject only to Liens permitted by
Section 8.06 hereof) that are necessary for the operation and conduct of its
businesses.
7.17 Compliance with Law. Except as set forth in Schedule IV hereto,
each of the Company and its Subsidiaries is in compliance with all applicable
laws, rules, regulations and orders of, and all applicable restrictions imposed
by, all governmental authorities or bodies, domestic or foreign, in respect of
the conduct of its business and the ownership of its Property (including
Environmental Laws), except such noncompliance as would not, in the aggregate,
have a Material Adverse Effect on the business, properties, assets, operations,
condition (financial or otherwise), or prospects of the Company and its
Subsidiaries, taken as a whole.
7.18 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Administrative Agent or any Lender prior to the
Amendment Effective Date in connection with the negotiation, preparation or
delivery of this Agreement and the other Basic Documents or included herein or
therein or delivered pursuant hereto or thereto, when taken as a whole (together
with the Information Memorandum which the Lenders acknowledge contains
projections based on certain assumptions therein stated) do not contain any
untrue statement of material fact or omit to state any material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished on or
after the Amendment Effective Date by the Company and its Subsidiaries to the
Administrative Agent and the Lenders in connection with this Agreement and the
other Basic Documents and the transactions contemplated hereby and thereby will
be true, complete and accurate in every material respect, or (in the case of
projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to the Company that
could have a Material Adverse Effect that has not been disclosed herein, in the
other Basic Documents or in a report, financial statement, exhibit,
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schedule, disclosure letter or other writing furnished to the Lenders for use in
connection with the transactions contemplated hereby or thereby.
7.19 Year 2000. Substantially all reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the Company's
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others or with which the Company's systems
interface) and the testing of all such systems and equipment, as so
reprogrammed, will be materially completed by July 1, 1999. The cost to the
Company of such reprogramming and testing and of the reasonable foreseeable
consequences of year 2000 to the Company (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
result in a Default or a Material Adverse Effect. Nothing herein shall preclude
the Company from making the foregoing representation after the making of an
Acquisition of any Person that is not in compliance with the above, so long as
the Company has prepared a plan prior to such Acquisition that sets forth, in
the reasonable judgment of the chief financial officer of the Company, the
action that the Company has taken or proposes to take to bring such Person into
compliance with the above.
Section 8. Covenants of the Company. The Company covenants and
agrees with the Lenders and the Administrative Agent that, so long as any
Commitment, Loan or Letter of Credit Liability is outstanding and until payment
in full of all amounts payable by the Company hereunder:
8.01 Financial Statements, Etc. The Company shall deliver to each of
the Lenders:
(a) as soon as available and in any event within 60 days after the
end of each of the first three quarterly fiscal periods of each fiscal year of
the Company, consolidated statements of earnings, stockholders' equity and cash
flows of the Company and its Subsidiaries, for such period and for the period
from the beginning of the respective fiscal year to the end of such period,
setting forth in each case in comparative form the corresponding consolidated
figures for the corresponding period in the preceding fiscal year, and the
related consolidated balance sheet of the Company and its Subsidiaries, as at
the end of such period, setting forth in comparative form the corresponding
consolidated figures for the last day of the preceding fiscal year, accompanied
by a certificate of a senior financial officer of the Company, which certificate
shall state that said consolidated financial statements present fairly, in all
material respects, the consolidated financial condition and results of
operations of the Company and its Subsidiaries, in accordance with generally
accepted accounting principles, consistently applied, as at the end of, and for,
such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 105 days after the
end of each fiscal year of the Company, consolidated and consolidating
statements of operations and stockholders' equity of the Company and its
Subsidiaries, and consolidated statements of cash flows of the Company and its
Subsidiaries, for such fiscal year and the related consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the end
of such fiscal
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year, setting forth in each case in comparative form the corresponding
consolidated and consolidating figures for the preceding fiscal year, and
accompanied, (i) in the case of said consolidated statements and balance sheet
of the Company, by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that said
consolidated financial statements present fairly, in all material respects, the
consolidated financial condition and results of operations of the Company and
its Subsidiaries as at the end of, and for, such fiscal year in accordance with
generally accepted accounting principles, and a report of such accountants
stating that, in making the examination necessary for their opinion, nothing
came to their attention, except as specifically stated, that caused them to
believe that the Company had failed to comply with Sections 8.09, 8.10, 8.11 and
8.12 hereof, or any other provisions hereof, insofar as they relate to
accounting matters, and (ii) in the case of said consolidating statements and
balance sheets, by a certificate of a senior financial officer of the Company
which certificate shall state that said consolidating financial statements
fairly present the respective individual unconsolidated financial condition and
results of operations of the Company and of each of its Subsidiaries, in each
case in accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such fiscal year;
(c) as soon as available and in any event within 105 days after the
end of each fiscal year of the Company, statements of information concerning net
sales, operating earnings, depreciation and amortization of each division of the
Company and its Subsidiaries (including, without limitation, the Seating
Products Division, Galley Products Division, In-Flight Entertainment Division
and Service Division) for such period setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year;
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the Company
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities exchange;
(e) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(f) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred or
exists, a statement signed by a senior financial officer of the Company setting
forth details respecting such event or condition and the action, if any, that
the Company or its ERISA Affiliate proposes to take with respect thereto (and a
copy of any report or notice required to be filed with or given to PBGC by the
Company or an ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(b) of ERISA and
the regulations issued thereunder, with respect to a Plan, as to which
PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section
412 of the Code or Section 302 of ERISA, including, without
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limitation, the failure to make on or before its due date a required
installment under Section 412(m) of the Code or Section 302(e) of ERISA,
shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for a waiver
under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Company or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan by
the Company or any ERISA Affiliate that results in liability under Section
4201 or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by the
Company or any ERISA Affiliate of notice from a Multiemployer Plan that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section
4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days;
and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in
the loss of tax-exempt status of the trust of which such Plan is a part if
the Company or an ERISA Affiliate fails to timely provide security to the
Plan in accordance with the provisions of said Sections;
(g) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken or proposes to
take with respect thereto;
(h) Within 10 Business Days after the date of any Acquisition and at
the time of delivery of the financial statements for the first four Fiscal Dates
thereafter, pro forma consolidated statements of earnings of the Company and its
Subsidiaries for the relevant Calculation Period and related pro forma
consolidated balance sheet items necessary for the pro forma calculation of
compliance with the covenants in this Agreement of the Company and its
Subsidiaries as of the last day of each fiscal quarter of the Company occurring
during such Calculation Period, prepared as though such Acquisition had
occurred, and any Funded Debt
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incurred or assumed by the Company or any of its Subsidiaries in connection with
such Acquisition had been incurred or assumed, on the first day of such
Calculation Period;
(i) with the delivery of the financial statements pursuant to
Sections 8.01(a) and 8.01(b) hereof, a statement of a senior financial officer
of the Company (A) listing each Disposition by the Company and its Subsidiaries
that occurred during the quarterly fiscal period ending on the date of such
financial statements if the Net Available Proceeds thereof exceeded $100,000 and
(B) setting forth in reasonable detail the Net Available Proceeds of each such
Disposition and the aggregate Net Available Proceeds since the first day of the
then current Recapture Period; and
(j) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan and
any reports or other information required to be filed under ERISA) as any Lender
or the Administrative Agent may reasonably request.
The Company will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a), (b) or (h) above, a certificate
of a senior financial officer of the Company (i) to the effect that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the action
that the Company has taken or proposes to take with respect thereto) and (ii)
setting forth in reasonable detail (x) the computations necessary to determine
whether the Company is in compliance with Sections 8.07(e), 8.07(g), 8.08(f),
8.08(h), 8.09, 8.10, 8.11 and 8.12 hereof, and (y) the Interest Coverage Ratio
and the Leverage Ratio as of the end of the respective quarterly fiscal period,
fiscal year or Calculation Period.
8.02 Litigation. The Company will promptly give to each Lender
notice of all legal or arbitral proceedings, and of all proceedings by or before
any governmental or regulatory authority or agency, and any material development
in respect of such legal or other proceedings, affecting the Company or any of
its Subsidiaries, except proceedings which, if adversely determined, would not
have a Material Adverse Effect. Without limiting the generality of the
foregoing, the Company will give to each Lender notice of the assertion of any
Environmental Claim by any Person against, or with respect to the activities of,
the Company or any of its Subsidiaries and notice of any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations, other than any Environmental Claim or alleged violation which,
if adversely determined, would not have a Material Adverse Effect.
8.03 Existence, Etc. The Company will, and will cause each of its
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that nothing in
this Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof);
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(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure to
comply with such requirements could have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves are
being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied; and
(f) permit representatives of any Lender or the Administrative
Agent, during normal business hours, to examine, copy and make extracts from its
books and records, to inspect any of its Properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by such
Lender or the Administrative Agent (as the case may be).
8.04 Insurance. The Company will, and will cause each of its
Subsidiaries to, keep insured by financially sound and reputable insurers all
Property of a character usually insured by corporations engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such corporations and carry such
other insurance as is usually carried by such corporations.
8.05 Prohibition of Fundamental Changes. The Company will not, nor
will it permit any of its Subsidiaries to, enter into any transaction of merger
or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution) or Dispose of all or substantially all of
its Property. The Company will not, nor will it permit any of its Subsidiaries
to, to make any Acquisition except for Investments permitted under Section 8.08
hereof. Notwithstanding the foregoing provisions of this Section 8.05:
(a) any Subsidiary of the Company may be merged or consolidated with
or into: (i) the Company if the Company shall be the continuing or surviving
corporation or (ii) any other such Subsidiary; provided that (x) if any such
transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, the
Wholly Owned Subsidiary shall be the continuing or surviving corporation;
(b) subject to Section 8.14 hereof, the Company or any Subsidiary of
the Company may make any Acquisition; provided that immediately prior to and
after giving effect to any such Acquisition, (i) no Default shall have occurred
and be continuing, (ii) not more than $25,000,000 of the proceeds of the Series
A Loans then outstanding shall have been applied,
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directly by the Company or indirectly through a Subsidiary, to the purchase
price of one or more Acquisitions; and
(c) the Company or any Subsidiary of the Company may make any
Acquisition from any Subsidiary of the Company in each case for consideration
that is not in excess of the fair market value of the Property acquired in such
Acquisition as determined in good faith by the chief financial officer of the
Company.
8.06 Limitation on Liens. The Company will not, nor will it permit
any of its Domestic Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any of its Property, whether now owned or hereafter acquired,
except:
(a) Liens created pursuant to the Security Documents;
(b) Liens outstanding on the Restatement Date and listed in Part B
of Schedule I hereto;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or which are being contested in good faith
and by appropriate proceedings if, unless the amount thereof is not material
with respect to it or its financial condition, adequate reserves with respect
thereto are maintained on the books of the Company or the affected Domestic
Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings and Liens securing judgments but
only to the extent, for an amount and for a period not resulting in an Event of
Default under Section 9(h) hereof;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the use
of Property or minor imperfections in title thereto which, in the aggregate, are
not material in amount, and which do not in any case materially detract from the
value of the Property subject thereto or interfere with the ordinary conduct of
the business of the Company or any of its Domestic Subsidiaries;
Credit Agreement
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(h) Liens on Property of any corporation which becomes a Domestic
Subsidiary of the Company after the Restatement Date, provided that such Liens
are in existence at the time such corporation becomes a Domestic Subsidiary of
the Company and were not created in anticipation thereof;
(i) subject to the restrictions contained in the Security Documents,
Liens upon real and/or tangible personal Property and/or software and license
rights with respect to software (including, without limitation, software and
license rights with respect to software under the GE Lease Agreement) acquired
after the Restatement Date (by purchase, construction or otherwise) by the
Company or any of its Domestic Subsidiaries other than in connection with any
Acquisition by the Company or any of its Domestic Subsidiaries, each of which
Liens either (A) existed on such Property before the time of its acquisition and
was not created in anticipation thereof, or (B) was created solely for the
purpose of securing Indebtedness representing, or incurred to finance, refinance
or refund, the cost (including the cost of construction) of such Property;
provided that no such Lien shall extend to or cover any Property of the Company
or such Domestic Subsidiary other than the Property so acquired and improvements
thereon; and provided, further, that the principal amount of Indebtedness
secured by any such Lien shall at no time exceed 100% of the fair market value
(as determined in good faith by a senior financial officer of the Company) of
such Property at the time it was acquired (by purchase, construction or
otherwise);
(j) additional Liens upon real and/or tangible personal Property of
the Company or any of its Domestic Subsidiaries created after the Restatement
Date, provided that the aggregate Indebtedness secured thereby and incurred on
and after the Restatement Date shall not exceed $20,000,000 in the aggregate at
any one time outstanding; and
(k) any extension, renewal or replacement of the foregoing,
provided, however, that the Liens permitted hereunder shall not be spread to
cover any additional Indebtedness or Property (other than a substitution of like
Property).
8.07 Indebtedness. The Company will not, nor will it permit any of
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding or committed on the Restatement Date
and, if equal to or in excess of $1,000,000, listed in Part A of Schedule I
hereto and any extension, renewal or replacement thereof;
(c) Indebtedness of Subsidiaries of the Company to the Company to
the extent contemplated by Section 8.08(d) hereof;
(d) Indebtedness of the Company to its Subsidiaries and Indebtedness
of Subsidiaries of the Company to other Subsidiaries of the Company;
Credit Agreement
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(e) Indebtedness of the Company and its Subsidiaries secured by
Liens permitted under Sections 8.06(i) and 8.06(j) hereof;
(f) Guarantees by any Subsidiary of the Company of Indebtedness of
the Company or any Subsidiary of the Company;
(g) unsecured Indebtedness that has no regularly scheduled maturity
or mandatory prepayments on or before the Series A Commitment Termination Date,
that does not include required prepayments (including, without limitation, as a
result of a change of control or asset sale) on terms less favorable to the
Lenders than the Senior Subordinated Indentures, and that is subordinated in
right of payment to the Loans at least to the extent provided in the Senior
Subordinated Indentures; and
(h) additional unsecured Indebtedness of the Company and its
Subsidiaries up to but not exceeding in the aggregate $40,000,000 at any one
time outstanding; provided that any such Indebtedness of any such individual
Subsidiary may not exceed $10,000,000 in the aggregate at any one time
outstanding.
8.08 Investments. The Company will not, nor will it permit any of
its Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the Restatement Date and identified
in Schedule III Part B hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Company in Subsidiaries of the Company in the
ordinary course of business; provided that the aggregate amount of the
Investments by the Company or any of its Subsidiaries in the Specified
Subsidiaries shall not exceed $5,000,000 at any one time outstanding; provided
further, that the Company will not at any time transfer any Property to any one
or more Subsidiaries which, together with all Property so transferred since the
Restatement Date, has a book value at the time of such transfer in excess of 5%
of Adjusted Net Worth as of the most recent Fiscal Date (not including Property
that is subject to a Lien in favor of the Administrative Agent for the benefit
of the Lenders);
(e) subject to the first proviso to clause (d) above, Investments by
Subsidiaries of the Company in other Subsidiaries of the Company and in the
Company in the ordinary course of business;
(f) Interest Rate Protection Agreements so long as the aggregate
credit exposure under all Interest Rate Protection Agreements calculated at the
time any Interest Rate Protection Agreement is entered into does not exceed
$10,000,000;
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(g) Investments permitted by clause (b) of the last sentence of
Section 8.05 hereof; and
(h) Investments of the Company and its Subsidiaries (i) in
corporations, companies, limited liability companies, partnerships and other
entities in each case that are not, or do not thereby become, Subsidiaries of
the Company ("Minority-Owned Entities") or (ii) representing obligations of
customers owing to the Company and its Subsidiaries in respect of the deferred
purchase price of products or services sold or the leasing of products to
customers ("Customer Obligations"), in each case in the ordinary course of
business of the Company and its Subsidiaries as provided for in Section 8.14
hereof and on such terms as the management of the Company may determine in its
reasonable business judgment, provided that the aggregate amount of such
Customer Obligations that are not fully secured (whether by a perfected Lien on,
or an indefeasible title retention to, the products so sold or leased, or
otherwise) plus the aggregate fair market value of all Property (whether now
owned or hereafter acquired) of the Company or any of its Subsidiaries (as
determined in good faith by the chief financial officer of the Company) sold,
assigned, transferred or otherwise disposed of on or after the Restatement Date
to any such Minority-Owned Entities shall not exceed in the aggregate at any one
time outstanding the greater of (i) $25,000,000 and (ii) 5% of Adjusted Net
Worth.
8.09 Restricted Payments. The Company will not, nor will it permit
any of its Subsidiaries to, declare or make any Restricted Payment at any time;
provided that (i) the Company may make Restricted Payments in an amount up to
but not exceeding (A) $25,000,000 in the aggregate plus (B) in any fiscal year
of the Company, an aggregate amount up to but not exceeding 25% of the net
earnings of the Company for the immediately preceding fiscal year ("Available
Net Earnings"), provided that any portion of Available Net Earnings not used for
Restricted Payments in any fiscal year (the "Carry-Over Amount") may be used for
Restricted Payments in the immediately succeeding fiscal year only, for which
purpose Restricted Payments in any fiscal year shall be deemed to have been made
first from Available Net Earnings, and only thereafter from any Carry-Over
Amount, such Restricted Payments set forth in clauses (i)(A) and (B) hereof not
to exceed $50,000,000 in the aggregate, and (ii) any Subsidiary of the Company
may make Restricted Payments to the Company from time to time.
8.10 Leverage Ratio. The Company will not permit the Leverage Ratio
to exceed the following respective ratios at any time during the following
respective periods:
Credit Agreement
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<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From (but not including) the
Fiscal Date in November 1997
through the Fiscal Date in
August 1998 5.25 to 1
From (but not including) the
Fiscal Date in August 1998
through the Fiscal Date in
February 1999 4.90 to 1
From (but not including) the
Fiscal Date in February 1999
through the Fiscal Date in
February 2000 4.50 to 1
From (but not including) the
Fiscal Date in February 2000
through the Fiscal Date in
February 2001 4.00 to 1
Thereafter 3.50 to 1
</TABLE>
8.11 Adjusted Net Worth. The Company will not at any date permit
Adjusted Net Worth to be less than the sum of (a) $150,000,000 plus (b) 75% of
the aggregate amount of Net Available Proceeds of Equity Issuances received
after November 29,1997 plus (c) 75% of the sum of consolidated net earnings of
the Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP) for each fiscal quarter of the Company
ending after November 29, 1997; provided that consolidated net earnings for any
fiscal quarter in which there is a consolidated net loss shall be deemed to be
zero.
8.12 Interest Coverage Ratio. The Company will not permit the
Interest Coverage Ratio to be less than the following respective ratios during
the following respective periods:
Credit Agreement
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<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From (but not including) the
Fiscal Date in November 1997
through the Fiscal Date in
August 1998 2.00 to 1
From (but not including) the
Fiscal Date in August 1998
through the Fiscal Date in
February 1999 2.25 to I
From (but not including) the
Fiscal Date in February 1999
through the Fiscal Date in
February 2000 2.50 to 1
From (but not including) the
Fiscal Date in February 2000
through the Fiscal Date in
February 2001 2.75 to 1
Thereafter 3.00 to 1
</TABLE>
8.13 [Intentionally Omitted.]
8.14 Lines of Business. Neither the Company nor any of its
Subsidiaries shall engage to any substantial extent in any line or lines of
business activity other than the business of designing, manufacturing,
distributing, selling, leasing and servicing products used in the interior of
airplanes, buses and trains and servicing and acting as a broker in the sales
and leases of such products together with any other business reasonably related
to the foregoing.
8.15 Transactions with Affiliates. Except as set forth in Schedule
VII hereto or as expressly permitted by this Agreement, the Company will not,
nor will it permit any of its Subsidiaries to, directly or indirectly: (a) make
any Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise
dispose of any Property to an Affiliate; (c) merge into or consolidate with or
purchase or acquire Property from an Affiliate; or (d) enter into any other
transaction directly or indirectly with or for the benefit of an Affiliate
(including, without limitation, guarantees and assumptions of obligations of an
Affiliate); provided that (x) any Affiliate who is an individual may serve as a
director, officer or employee of the Company or any of its Subsidiaries and
receive reasonable compensation for his or her services in such capacity and (y)
the Company and its Subsidiaries may enter into transactions (other than
extensions of credit by the Company or any of its Subsidiaries to an Affiliate)
providing for the leasing of Property, the rendering or receipt of services or
the purchase or sale of inventory and other Property in the
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<PAGE> 66
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ordinary course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to the Company and its
Subsidiaries as the monetary or business consideration which would obtain in a
comparable transaction with a Person not an Affiliate.
8.16 Use of Proceeds. The Company will use the proceeds of (i) the
Series A Loans hereunder solely to finance ongoing working capital and other
capital requirements of the Company and to finance Acquisitions (subject to
clause (b) of the last sentence of Section 8.05) (in compliance with all
applicable legal and regulatory requirements) and (ii) the Series B Loans
hereunder solely to finance Acquisitions (subject to clause (b) of the last
sentence of Section 8.05); provided that neither the Administrative Agent nor
any Lender shall have any responsibility as to the use of any of such proceeds.
8.17 Certain Obligations Respecting Subsidiaries.
(a) The Company will, and will cause each of its Subsidiaries to,
take such action from time to time as shall be necessary to ensure that the
Company and each of its Subsidiaries at all times owns (subject only to the Lien
of the Security Documents) at least the same percentage of the issued and
outstanding shares of each class of stock or partnership or other ownership
interest of each of its Subsidiaries as is owned on the Restatement Date (or,
with respect to any Subsidiary acquired or organized after the date hereof; as
of the date of such acquisition or organization). Without limiting the
generality of the foregoing, none of the Company nor any of its Subsidiaries
shall sell, transfer, pledge or otherwise dispose of any shares of stock or
partnership or other ownership interest in any Subsidiary owned by them, nor
permit any Subsidiary to issue any shares of stock of any class or partnership
or other ownership interest whatsoever to any Person (other than to the Company
or the immediate parent of such Subsidiary which is a Wholly Owned Subsidiary of
the Company). In the event that (a) any such additional shares of stock or
partnership or other ownership interest shall be issued by any such Subsidiary
or (b) the Company shall directly or indirectly create any new Material
Subsidiary or Acquire any additional Material Subsidiary and shall thereby
become the owner, directly or indirectly, of the shares of capital stock or
partnership or other ownership interest of such new or additional Material
Subsidiary, the Company agrees forthwith to deliver to the Administrative Agent
pursuant to security documents satisfactory to the Banks, any shares,
certificates of ownership, membership interests or other evidence of ownership,
or other securities received as a result therefrom (together with undated stock
or other powers executed in blank) and shall give, execute, deliver, file and/or
record any financing statement, notice, instrument, document, agreement or other
papers that may be necessary or desirable (in the judgment of the Administrative
Agent) to create, preserve or validate the security interest created therein,
including, without limitation, causing any or all of the Collateral (as defined
in the Security Agreement and the In-Flight Guarantee and Security Agreement,
respectively) to be transferred of record into the name of the Administrative
Agent; provided that if any such Material Subsidiary is organized under the laws
of a jurisdiction other than the United States of America or a State thereof,
the Company need not pledge to the Administrative Agent more than 65% of the
capital stock, partnership or other ownership interest in such Material
Subsidiary.
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(b) The Company will not permit any of its Subsidiaries to enter
into, after the Restatement Date, any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence or payment of Indebtedness, the granting of Liens, the
declaration or payment of dividends, the making of loans, advances or
Investments or the sale, assignment, transfer or other disposition of Property.
8.18 Modifications of Certain Documents. The Company will not
consent to (i) any modification, supplement or waiver of any of the provisions
of the Senior Subordinated Indentures or (ii) to the creation of any class of
preferred stock that has a mandatory dividend or redemption date prior to the
Series A Commitment Termination Date; provided that any Senior Subordinated
Indenture may be amended in connection with, and to facilitate, the purchase,
redemption, prepayment, defeasance or other retirement in full of the
Indebtedness issued pursuant thereto, which purchase, redemption, prepayment,
defeasance or other retirement is permitted hereunder.
8.19 Environmental Matters.
(a) The Company will, and will cause each of its Subsidiaries to,
comply with all Environmental Laws applicable to the Company and each of its
Subsidiaries, except to the extent that failure to comply with such laws would
not have a Material Adverse Effect, and shall obtain, at or prior to the time
required by applicable Environmental Laws, all environmental, health and safety
permits, licenses and other authorizations necessary for its operations and
maintain such authorizations in full force and effect.
(b) If the Company discovers evidence of the presence of any
Hazardous Materials in any amount that is required to be reported under
Environmental Law, the Company will promptly clean-up such Hazardous Materials
or take such other remedial action as is (a) required by law or (b) deemed
necessary by the Company in its reasonable determination, such determination to
be based in part on the advice of independent environmental consultants
acceptable to the Company and the Administrative Agent.
(c) The Company shall promptly furnish to the Administrative Agent
all written notices of any Environmental Claims received by the Company or any
of its Subsidiaries with respect to any alleged violation of or non-compliance
with any Environmental Laws or any permits, licenses or authorizations issued
thereunder in connection with the ownership, operation or use of any site or
facility or the operation of their businesses or the presence or Release of
Hazardous Substances, which Environmental Claim if determined adversely to the
Company would have a Material Adverse Effect.
8.20 Security for Loans. The Company shall, no later than 90 days
following the request by the Majority Lenders, file in each governmental office
or agency in each appropriate jurisdiction as owner of record of each of the
Foreign Trademarks identified on Annex 4 to the Security Agreement.
Credit Agreement
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8.21 Redemption of Senior Subordinated Indebtedness. Except as
permitted by Section 8.09 hereof, the Company will not prepay, redeem, effect a
defeasance or covenant defeasance or otherwise retire any of the Indebtedness
issued pursuant to the Senior Subordinated Indentures.
Section 9. Events of Default. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) The Company shall (i) default in the payment of any principal of
any Loan or any Reimbursement Obligation when due (whether at stated maturity or
upon mandatory or optional prepayment) or (ii) default in the payment of any
interest on any Loan, any fee or any other amount payable by it hereunder or
under any other Basic Document when due (whether at stated maturity or upon
mandatory or optional prepayment or otherwise) and such default shall have
continued unremedied for three or more Business Days; or
(b) The Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $5,000,000 or more, or in the payment when due of any
amount aggregating $5,000,000 or more under any Interest Rate Protection
Agreement; or any event specified in any note, agreement, indenture or other
document evidencing or relating to any such Indebtedness or any event specified
in any Interest Rate Protection Agreement shall occur if the effect of such
event is to cause, or (with the giving of any notice or the lapse of time or
both) to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity or to have the interest
rate thereon reset to a level so that securities evidencing such Indebtedness
trade at a level specified in relation to the par value thereof or, in the case
of an Interest Rate Protection Agreement, to permit the payments owing under
such Interest Rate Protection Agreement to be liquidated in an amount
aggregating $5,000,000 or more; or
(c) Any representation, warranty or certification made or deemed
made herein or in any other Basic Document (or in any modification or supplement
hereto or thereto) by the Company, or any certificate furnished to any Lender or
the Administrative Agent pursuant to the provisions hereof or thereof shall
prove to have been false or misleading in any material respect as of the time
made or furnished; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09, 8.10,
8.11 or 8.12 hereof or the Company shall default in the performance of any of
its obligations under Section 5.02 of the Security Agreement; or the Company
shall default in the performance of any of its other obligations in this
Agreement or any other Basic Document and such default shall continue unremedied
for a period of thirty days after notice thereof to the Company by the
Administrative Agent or any
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Lender (through the Administrative Agent); or In-Flight shall default in the
performance of any of its obligations under Section 6.02 of the In-Flight
Guarantee and Security Agreement; or
(e) The Company or any of its Subsidiaries shall admit in writing
its inability to, or be generally unable to, pay its debts as such debts become
due; or
(f) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a substantial
part of its Property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file
a petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement or winding-up,
or composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the Company or any of its Subsidiaries, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of the Company or such Subsidiary or of all or any substantial part of its
Property, or (iii) similar relief in respect of the Company or such Subsidiary
under any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
60 or more days; or an order for relief against the Company or such Subsidiary
shall be entered in an involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $5,000,000 in the aggregate (exclusive of judgment amounts fully covered by
insurance where the insurer has admitted liability in respect of such judgment)
or in excess of $20,000,000 in the aggregate (regardless of insurance coverage)
shall be rendered by one or more courts, administrative tribunals or other
bodies having jurisdiction against the Company or any of its Subsidiaries and
the same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within 30 days
from the date of entry thereof and the Company or the relevant Subsidiary shall
not, within said period of 30 days, or such longer period during which execution
of the same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(i) An event or condition specified in Section 8.01(f) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a result
of such event or condition, together with all other such events or conditions,
the Company or any ERISA Affiliate shall incur or in the opinion of the Majority
Lenders shall be reasonably likely to incur a liability to a Plan, a
Multiemployer Plan or PBGC (or any combination of the foregoing) which would
constitute, in the determination of the Majority Lenders, a Material Adverse
Effect; or
Credit Agreement
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(j) A reasonable basis shall exist for the assertion against the
Company or any of its Subsidiaries of (or there shall have been asserted against
the Company or any of its Subsidiaries) claims or liabilities, whether accrued,
absolute or contingent, based on or arising from the generation, storage,
transport, handling or disposal of Hazardous Materials by the Company or any of
its Subsidiaries or Affiliates, or any predecessor in interest of the Company or
any of its Subsidiaries or Affiliates, or relating to any site or facility
owned, operated or leased by the Company or any of its Subsidiaries or
Affiliates, which claims or liabilities (insofar as they are payable by the
Company or any of its Subsidiaries but after deducting any portion thereof which
is reasonably expected to be paid by other creditworthy Persons jointly and
severally liable therefor), in the judgment of the Majority Lenders are
reasonably likely to be determined adversely to the Company or any of its
Subsidiaries, and the amount thereof is, singly or in the aggregate, reasonably
likely to have a Material Adverse Effect; or
(k) Any "person" or "group" (as such terms are defined in Sections
13(d) and 14(d) of the Securities Exchange Act (other than Amin or Robert
Khoury, their lineal descendants or trusts established by such Persons for their
respective lineal descendants)) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of 30% or more of
the aggregate voting rights of the outstanding capital stock of the Company (on
a fully diluted basis); or during any consecutive 25-month period, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by the stockholders of
the Company was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then in
office; or
(1) Except for expiration in accordance with its terms, any of the
Security Documents shall be terminated or shall cease to be in full force and
effect, for whatever reason;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to the Company, the
Administrative Agent may, by notice to the Company, terminate the Commitments
and/or declare the principal amount then outstanding of; and the accrued
interest on, the Loans, the Reimbursement Obligations and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 or 5.06 hereof) to be
forthwith due and payable (provided that (x) if so requested by the Majority
Series A Lenders, the Administrative Agent shall take such action with respect
to the Series A Commitments and/or the Series A Loans, Reimbursement Obligations
and such interest and other amounts to the extent owed to the Series A Lenders
and (y) if so requested by the Majority Series B Lenders, the Administrative
Agent shall take such action with respect to the Series B Commitments and the
Series B Loans and such interest and other amounts to the extent owed to the
Series B Lenders), whereupon such amounts shall be immediately due and payable
without presentment, demand, protest or other formalities
Credit Agreement
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of any kind, all of which are hereby expressly waived by the Company; and (2) in
the case of the occurrence of an Event of Default referred to in clause (f) or
(g) of this Section 9 with respect to the Company, the Commitments shall
automatically be terminated and the principal amount then outstanding of; and
the accrued interest on, the Loans, the Reimbursement Obligations and all other
amounts payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 or 5.06 hereof) shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company.
In addition, upon the occurrence and during the continuance of any
Event of Default (if the Administrative Agent has declared the principal amount
then outstanding of, and accrued interest on, the Series A Loans and all other
amounts payable by the Company hereunder and under the Notes to be due and
payable), the Company agrees that it shall, if requested by the Administrative
Agent or the Majority Series A Lenders through the Administrative Agent (and, in
the case of any Event of Default referred to in clause (f) or (g) of this
Section 9 with respect to the Company, forthwith, without any demand or the
taking of any other action by the Administrative Agent or such Lenders) provide
cover for the Letter of Credit Liabilities by paying to the Administrative Agent
immediately available funds in an amount equal to the then aggregate undrawn
face amount of all Letters of Credit, which funds shall be held by the
Administrative Agent in the Collateral Account as collateral security in the
first instance for the Letter of Credit Liabilities and be subject to withdrawal
only as therein provided.
Section 10. The Administrative Agent.
10.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the other Basic Documents with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and of the other Basic Documents, together with such other powers as
are reasonably incidental thereto. The Administrative Agent (which term as used
in this sentence and in Section 10.05 and the first sentence of Section 10.06
hereof shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Basic Documents, and shall not by reason of this Agreement or any other
Basic Document be a trustee for any Lender; (b) shall not be responsible to the
Lenders for any recitals, statements, representations or warranties contained in
this Agreement or in any other Basic Document, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or any other Basic Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, any
Note or any other Basic Document or any other document referred to or provided
for herein or therein or for any failure by the Company or any other Person to
perform any of its obligations hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Basic Document; and (d) shall not be responsible
for any action taken or omitted to be taken by it hereunder or under any other
Basic Document or under any other document or instrument referred to or provided
for herein or therein or in
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connection herewith or therewith, except for its own gross negligence or willful
misconduct. The Administrative Agent may deem and treat the payee of any Note as
the holder thereof for all purposes hereof unless and until a notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent, together with the consent of the Company to such assignment or transfer
(to the extent provided in Section 11.06(b) hereof).
10.02 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telex,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Basic Document, the Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Lenders or, if provided herein, in accordance with the instructions given by the
Majority Series A Lenders, the Majority Series B Lenders or all of the Lenders
as is required in such circumstance, and such instructions of such Lenders and
any action taken or failure to act pursuant thereto shall be binding on all of
the Lenders.
10.03 Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Company specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 10.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders or, if
provided herein, the Majority Series A Lenders or the Majority Series B Lenders,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of the Lenders except to
the extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Majority
Lenders, the Majority Series A Lenders, the Majority Series B Lenders or all of
the Lenders.
10.04 Rights as a Lender. With respect to its Commitments and the
Loans made by it, Chase (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. Chase (and any successor acting as Administrative Agent)
and its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Company (and any of its
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase and its affiliates may accept fees and other consideration
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from the Company for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders.
10.05 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 11.03 hereof,
but without limiting the obligations of the Company under said Section 11.03,
and including in any event any payments under any indemnity that the
Administrative Agent is required to issue to any bank referred to in Section
4.02 of the Security Agreement or Section 5.02 of the In-Flight Guarantee and
Security Agreement to which remittances in respect of Accounts, as defined
therein, are to be made) ratably in accordance with the aggregate principal
amount of the Loans and Reimbursement Obligations held by the Lenders (or, if no
Loans or Reimbursement Obligations are at the time outstanding, ratably in
accordance with their respective Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against the Administrative Agent (including by any
Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Basic Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses that the Company is obligated to pay under Section 11.03
hereof, and including also any payments under any indemnity that the
Administrative Agent is required to issue to any bank referred to in Section
4.02 of the Security Agreement or Section 5.02 of the In-Flight Guarantee and
Security Agreement to which remittances in respect of Accounts, as defined
therein, are to be made, but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the performance
of its agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
10.06 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and its Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Administrative Agent shall
not be required to keep itself informed as to the performance or observance by
the Company of this Agreement or any of the other Basic Documents or any other
document referred to or provided for herein or therein or to inspect the
Properties or books of the Company or any of its Subsidiaries. Except for
notices, reports and other documents and information expressly required to be
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Company or any of its Subsidiaries (or any of their
affiliates) that may come into the possession of the Administrative Agent or any
of its affiliates.
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10.07 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder and under the other Basic Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 10.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
10.08 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Company, and the Administrative Agent may be removed at
any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, after consultations with the Company, appoint a successor
Administrative Agent, that shall be a bank which has an office in New York, New
York with a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Section 10 shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Administrative Agent.
10.09 Consents under Basic Documents. Except as otherwise provided
in Section 11.04 hereof with respect to this Agreement, the Administrative Agent
may, with the prior consent of the Majority Lenders (but not otherwise), consent
to any modification, supplement or waiver under any of the Basic Documents,
provided that, without the consent of each Lender, the Administrative Agent
shall not (except as provided herein or in the Security Documents) release any
collateral or otherwise terminate any Lien under the Security Agreement, or
agree to additional obligations being secured by such collateral security
(unless the Lien for such additional obligations shall be junior to the Lien in
favor of the other obligations secured by such Security Documents), except that
no such consent shall be required, and the Administrative Agent is hereby
authorized, to release any Lien covering Property which (a) is the subject of a
Disposition of Property permitted hereunder or to which the Majority Lenders
have consented, (b) consists of the membership interests in In-Flight to which
release the Majority Lenders have consented or (c) consists of shares of any
Subsidiary of the Company that is no longer a Material Subsidiary.
10.10 Collateral Sub-Agents. Each Lender by its execution and
delivery of this Agreement agrees, as contemplated by Section 4.03 of the
Security Agreement and Section 5.02 of the In-Flight Guarantee and Security
Agreement, that, in the event it shall hold any Permitted
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Investments referred to therein, such Permitted Investments shall be held in the
name and under the control of such Lender, and such Lender shall hold such
Permitted Investments as a collateral sub-agent for the Administrative Agent
thereunder. The Company by its execution and delivery of this Agreement hereby
consents to the foregoing.
10.11 Documentation Agent. The Documentation Agent identified on the
front cover page of this Agreement shall have no duties or responsibilities
hereunder other than as a Bank hereunder.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of the Administrative Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
11.02 Notices. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telecopy)
delivered to the intended recipient at (i) in the case of the Company and the
Administrative Agent, the "Address for Notices" specified below its name on the
signature pages hereof) and (ii) in the case of each of the Lenders, the address
(or telecopy number) set forth in its Administrative Questionnaire; or, as to
any party, at such other address as shall be designated by such party in a
notice to each other party. Except as otherwise provided in this Agreement, all
such communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
11.03 Expenses, Etc. The Company agrees to pay or reimburse each of
the Lenders and the Administrative Agent for paying: (a) all reasonable
out-of-pocket costs and expenses of the Administrative Agent (including, without
limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase), in connection with (i) the negotiation,
preparation, execution and delivery of this Agreement and the other Basic
Documents and the extension of credit hereunder and (ii) any modification,
supplement or waiver of any of the terms of this Agreement or any of the other
Basic Documents; (b) all reasonable costs and expenses of the Lenders and the
Administrative Agent (including, without limitation, reasonable counsels' fees)
in connection with (i) any Default and any enforcement or collection proceedings
resulting therefrom or in connection with the negotiation of any restructuring
or "work-out" (whether or not consummated), or the obligations of the Company
hereunder and (ii) the enforcement of this Section 11.03; and (c) all transfer,
stamp, documentary, intangibles or other similar taxes, assessments or charges
levied by any
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governmental or revenue authority in respect of this Agreement or any of the
other Basic Documents or any other document referred to herein or therein and
all costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security interest
contemplated by any Basic Document or any other document referred to therein.
The Company hereby agrees (i) to indemnify the Administrative Agent
and each Lender and their respective directors, officers, employees, attorneys
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them (including,
without limitation, any and all losses, liabilities, claims, damages or expenses
incurred by the Administrative Agent to any Lender, whether or not the
Administrative Agent or any Lender is a party thereto) arising out of or by
reason of any investigation or litigation or other proceedings (including any
threatened investigation or litigation or other proceedings) relating to the
extensions of credit hereunder or any actual or proposed use by the Company or
any of its Subsidiaries of the proceeds of any of the extensions of credit
hereunder, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified) and (ii) not to assert any claim against the
Administrative Agent, any Lender, any of their affiliates, or any of their
respective directors, officers, employees, attorneys and agents, on any theory
of liability, for special, indirect, consequential or punitive damages arising
out of or otherwise relating to any of the transactions contemplated herein or
in any other Basic Document. Without limiting the generality of the foregoing,
the Company will (x) indemnify the Administrative Agent for any payments that
the Administrative Agent is required to make under any indemnity issued to any
bank referred to in Section 4.02 of the Security Agreement or Section 5.02 of
the In-Flight Guarantee and Security Agreement to which remittances in respect
to Accounts, as defined therein, are to be made and (y) indemnify the
Administrative Agent and each Lender from, and hold the Administrative Agent and
each Lender harmless against, any losses, liabilities, claims, damages or
expenses described in the preceding sentence (but excluding, as provided in the
preceding sentence, any loss, liability, claim, damage or expense incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified) arising under any Environmental Law as a result of the past,
present or future operations of the Company or any of its Subsidiaries (or any
predecessor in interest to the Company or any of its Subsidiaries), or the past,
present or future condition of any site or facility owned, operated or leased by
the Company or any of its Subsidiaries (or any such predecessor in interest), or
any Release or threatened Release of any Hazardous Materials from any such site
or facility, including any such Release or threatened Release which shall occur
during any period when the Administrative Agent or any Lender shall be in
possession of any such site or facility following the exercise by the
Administrative Agent or any Lender of any of its rights and remedies hereunder
or under any of the Security Documents but only to the extent that such Release
or threatened Release is directly or indirectly attributable to facts,
circumstances or Releases of Hazardous Materials existing prior to the date of
such possession.
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11.04 Amendments, Etc. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company, the Administrative Agent
and the Majority Lenders, or by the Company and the Administrative Agent acting
with the consent of the Majority Lenders, and any provision of this Agreement
may be waived by the Majority Lenders or by the Administrative Agent acting with
the consent of the Majority Lenders; provided that: (a) no modification,
supplement or waiver shall, unless by an instrument signed by all of the Lenders
or by the Administrative Agent acting with the consent of all of the Lenders:
(i) increase, or extend the term of any of the Commitments, or extend the time
or waive any requirement for the reduction or termination of any of the
Commitments, (ii) extend the date fixed for the payment of principal of or
interest on any Loan, the Reimbursement Obligations or any fee hereunder, (iii)
reduce the amount of any such payment of principal, (iv) reduce the rate at
which interest is payable thereon or any fee is payable hereunder, (v) alter the
rights or obligations of the Company to prepay Loans, (vi) alter the terms of
this Section 11.04, (vii) modify the definition of the term "Majority Lenders",
"Majority Series A Lenders" or "Majority Series B Lenders", or modify in any
other manner the number or percentage of the Lender required to make any
determinations or waive any rights hereunder or to modify any provision hereof;
or (viii) waive any of the conditions precedent set forth in Section 6 hereof;
(b) any modification or supplement of Section 10 hereof shall require the
consent of the Administrative Agent; and (c) notwithstanding the above, (i)
Sections 2.01(a), 2.03, 2.04(a), 2.05(i) and 5.06, may be modified or
supplemented only by an instrument in writing signed by the Company, the
Administrative Agent and the Series A Lenders, or by the Company and the
Administrative Agent acting with the consent of the Series A Lenders, and any
such provision may be waived by the Series A Lenders or by the Administrative
Agent acting with the consent of the Series A Lenders, and (ii) Sections
2.01(b), 2.04(b) and 2.05(ii) may be modified or supplemented only by an
instrument in writing signed by the Company, the Administrative Agent and the
Series B Lenders, or by the Company and the Administrative Agent acting with the
consent of the Series B Lenders, and any such provision may be waived by the
Series B Lenders or by the Administrative Agent acting with the consent of the
Series B Lenders.
11.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 Assignments and Participations.
(a) The Company may not assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders and
the Administrative Agent.
(b) Each Lender may assign any of its Loans, its Notes, its
Commitments, and, if such Lender is a Series A Lender, its Letter of Credit
Interest (but only with the consent of the Company and the Administrative Agent
and, in the case of a Series A Commitment or a Letter of Credit Interest, the
Issuing Lender, which consents in the case of the Company and the Administrative
Agent shall not be unreasonably withheld or delayed); provided that (i) any such
consent by the Company shall not be unreasonably withheld, (ii) no such consent
by the Company or the Administrative Agent shall be required in the case of any
assignment to another
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Lender; (iii) any such partial assignment shall be in an amount at least equal
to $5,000,000; (iv) unless the Company and the Administrative Agent shall
otherwise consent (which consents shall not be unreasonably withheld or
delayed), each such assignment by a Lender of its Series A Loans, Series A Note,
Series A Commitment or Letter of Credit Interest shall be made in such manner so
that the same percentage of its Series A Loans, Series A Note, Series A
Commitment and Letter of Credit Interest, Series B Loans, Series B Note and
Series B Commitment is assigned to the respective assignee; and (v) unless the
Company and the Administrative Agent shall otherwise consent (which consents
shall not be unreasonably withheld or delayed), each such assignment by a Lender
of its Series B Loans, Series B Note or Series B Commitment shall be made in
such manner so that the same percentage of its Series B Loans, Series B Note and
Series B Commitment, Series A Loans, Series A Note, Series A Commitment and
Letter of Credit Interest is assigned to the respective assignee. Upon execution
and delivery by the assignee to the Company, the Administrative Agent and the
Issuing Lender of an instrument in writing pursuant to which such assignee
agrees to become a "Lender" hereunder (if not already a Lender) having the
Commitment(s), Loans, and, if applicable, Letter of Credit Interest specified in
such instrument, and upon consent thereto by the Company, the Administrative
Agent and the Issuing Lender, to the extent required above, the assignee shall
have, to the extent of such assignment (unless otherwise provided in such
assignment with the consent of the Company, the Administrative Agent and the
Issuing Lender), the obligations, rights and benefits of a Lender hereunder
holding the Commitment(s), Loans and, if applicable, Letter of Credit Interest
(or portions thereof) assigned to it (in addition to the Commitment(s), Loans
and Letter of Credit Interest, if any, theretofore held by such assignee) and
the assigning Lender shall, to the extent of such assignment, be released from
the Commitment(s) (or portion(s) thereof) so assigned. Upon each such assignment
the assigning Lender shall pay the Administrative Agent an assignment fee of
$3,000.
(c) A Lender may sell or agree to sell to one or more other Persons
a participation in all or any part of any Loans or Letter of Credit Interest
held by it, or in its Commitments, in which event each purchaser of a
participation (a "Participant") shall be entitled to the rights and benefits of
the provisions of Section 8.01(j) hereof with respect to its participation in
such Loans, Letter of Credit Interest and Commitments as if (and the Company
shall be directly obligated to such Participant under such provisions as if)
such Participant were a "Lender" for purposes of said Section, but, except as
otherwise provided in Section 4.07(c) hereof, shall not have any other rights or
benefits under this Agreement or any Note or any other Basic Document (the
Participant's rights against such Lender in respect of such participation to be
those set forth in the agreements executed by such Lender in favor of the
Participant). All amounts payable by the Company to any Lender under Section 5
hereof in respect of Loans, Letter of Credit Interest held by it, and its
Commitments, shall be determined as if such Lender had not sold or agreed to
sell any participations in such Loans, Letter of Credit Interest and
Commitments, and as if such Lender were funding each of such Loan, Letter of
Credit Interest and Commitments in the same way that it is funding the portion
of such Loan, Letter of Credit Interest and Commitments in which no
participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Basic Document except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term, or extend the time or
waive
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any requirement for the reduction or termination, of such Lender's related
Commitment, (ii) extend the date fixed for the payment of principal of or
interest on the related Loan or Loans, Reimbursement Obligations or any portion
of any fee hereunder payable to the Participant, (iii) reduce the amount of any
such payment of principal, (iv) reduce the rate at which interest is payable
thereon, or any fee hereunder payable to the Participant, to a level below the
rate at which the Participant is entitled to receive such interest or fee, (v)
alter the rights or obligations of the Company to prepay the related Loans or
(vi) consent to any modification, supplement or waiver hereof or of any of the
other Basic Documents to the extent that the same, under Section 10.10 or 11.04
hereof, requires the consent of each Lender.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 11.06, any Lender may assign and
pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release the
assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan or Reimbursement
Obligation held by it hereunder to the Company or any of its Affiliates or
Subsidiaries without the prior written consent of each Lender.
11.07 Survival. The obligations of the Company under Sections 5.01,
5.05, 5.06, 5.07 and 11.03 hereof and the obligations of the Lenders under
Sections 10.05 and 11.12 hereof shall survive the repayment of the Loans and
Reimbursement Obligations and the termination of the Commitments. In addition,
each representation and warranty made, or deemed to be made by a notice of any
extension of credit (whether by means of a Loan or a Letter of Credit), herein
or pursuant hereto shall survive the making of such representation and warranty,
and no Lender shall be deemed to have waived, by reason of making any extension
of credit hereunder (whether by means of a Loan or a Letter of Credit), any
Default which may arise by reason of such representation or warranty proving to
have been false or misleading, notwithstanding that such Lender or the
Administrative Agent may have had notice or knowledge or reason to believe that
such representation or warranty was false or misleading at the time such
extension of credit was made.
11.08 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
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11.09 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This Agreement and
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York. The Company hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Company irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
11.11 Waiver of Jury Trial. EACH OF THE COMPANY, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
11.12 Treatment of Certain Information; Confidentiality.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender and the Company hereby authorizes each Lender to share
any information delivered to such Lender by the Company and its Subsidiaries
pursuant to this Agreement, or in connection with the decision of such Lender to
enter into this Agreement, to any such subsidiary or affiliate, it being
understood that any such subsidiary or affiliate receiving such information
shall be bound by the provisions of clause (b) below as if it were a Lender
hereunder.
(b) Each Lender and the Administrative Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Company pursuant to this Agreement
which is identified by the Company as being confidential at the time the same is
delivered to the Lenders or the Administrative Agent, provided that nothing
herein shall limit the disclosure of any such information (i) to the extent
required by statute, rule, regulation or judicial process, (ii) to counsel for
any of the Lenders or the Administrative Agent, (iii) to bank examiners,
auditors or accountants, (iv) to the Administrative Agent or any other Lender
(or to Chase Securities Inc.), (v) in connection with any litigation to which
any one or more of the Lenders or the
Credit Agreement
<PAGE> 81
-76-
Administrative Agent is a party, (vi) to a subsidiary or affiliate of such
Lender as provided in clause (a) above or (vii) to any assignee or participant
(or prospective assignee or participant) so long as such assignee or participant
(or prospective assignee or participant) first executes and delivers to the
respective Lender a Confidentiality Agreement substantially in the form of
Exhibit B hereto; provided, further, that (x) unless specifically prohibited by
applicable law or court order, each Lender and the Administrative Agent shall,
prior to disclosure thereof, notify the Company of any request for disclosure of
any such non-public information (A) by any governmental agency or representative
thereof (other than any such request in connection with an examination of the
financial condition of such Lender by such governmental agency) or (B) pursuant
to legal process and (y) in no event shall any Lender or the Administrative
Agent be obligated or required to return any materials furnished by the Company.
Credit Agreement
<PAGE> 82
-77-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
BE AEROSPACE, INC.
By_____________________
Title:
Address for Notices:
BE Aerospace, Inc.
1400 Corporate Center Way
Wellington, Florida 33414
Attention: Jeffrey P. Holtzman, Vice
President and Treasurer
Telecopier No.: (561) 791-3966
Telephone No.: (561) 791-5000
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Winthrop G. Minot, Esq.
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7000
Credit Agreement
<PAGE> 83
-78-
LENDERS
THE CHASE MANHATTAN BANK
By__________________________
Title:
NATIONSBANK, N.A.
By__________________________
Title:
CREDIT LYONNAIS ATLANTA AGENCY
By__________________________
Title:
LASALLE BUSINESS CREDIT, INC.
By__________________________
Title:
Credit Agreement
<PAGE> 84
-79-
THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By__________________________
Title:
THE FUJI BANK AND TRUST COMPANY
By__________________________
Title:
WACHOVIA BANK, N.A.
By__________________________
Title:
AMSOUTH BANK
By__________________________
Title:
THE BANK OF NEW YORK
By__________________________
Title:
Credit Agreement
<PAGE> 85
-80-
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK,
CAYMAN ISLAND BRANCH
By__________________________
Title:
By__________________________
Title:
FIRST UNION NATIONAL BANK
By__________________________
Title:
SUNTRUST BANK, SOUTH FLORIDA, N.A.
By__________________________
Title:
ABN AMRO BANK N.V.
By__________________________
Title:
By__________________________
Title:
Credit Agreement
<PAGE> 86
-81-
THE CHASE MANHATTAN BANK,
as Administrative Agent
By__________________________
Title:
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
Loan and Agency Services Group
1 Chase Manhattan Plaza
New York, New York 10081
Credit Agreement
<PAGE> 87
Annex 1
<TABLE>
<CAPTION>
Series A Series B Total
Bank Commitment Commitment Commitments
- ---- ---------- ---------- -----------
<S> <C> <C> <C>
The Chase Manhattan Bank $ 11,000,000 $ 11,000,000 $ 22,000,000
NationsBank, N.A. $ 10,000,000 $ 10,000,000 $ 20,000,000
Credit Lyonnais Atlanta Agency $ 9,500,000 $ 9,500,000 $ 19,000,000
LaSalle Business Credit Inc. $ 9,500,000 $ 9,500,000 $ 19,000,000
The Long-Term Credit Bank $ 9,500,000 $ 9,500,000 $ 19,000,000
of Japan, Ltd.
The Fuji Bank and Trust Company $ 9,500,000 $ 9,500,000 $ 19,000,000
Wachovia Bank, N.A $ 9,500,000 $ 9,500,000 $ 19,000,000
Amsouth Bank $ 6,000,000 $ 6,000,000 $ 12,000,000
The Bank of New York $ 6,000,000 $ 6,000,000 $ 12,000,000
DG Bank Deutsche Genossenschaftsbank $ 6,000,000 $ 6,000,000 $ 12,000,000
Cayman Island Branch
First Union National Bank $ 6,000,000 $ 6,000,000 $ 12,000,000
SunTrust Bank, South Florida, N.A. $ 6,000,000 $ 6,000,000 $ 12,000,000
ABN Amro Bank N.V. $ 1,500,000 $ 1,500,000 $ 3,000,000
Total $100,000,000 $100,000,000 $200,000,000
</TABLE>
Annex 1 to Credit Agreement
<PAGE> 88
SCHEDULE I
Part A - Materials Agreements
[See Section 7.12]
1. Indenture dated as of February 13, 1998 between the Company, as
issuer, and the United States Trust Company of New York, as trustee,
in connection with $250,000,000 of 8% Senior Subordinated Notes of
the Company.
2. Loan agreements dated February 24, 1993 between the Company's
subsidiary B/E Aerospace (UK) Limited, a Northern Ireland
corporation, ("BEA-UK") and Barclays Bank PLC ("Barclays"), as
amended, providing for an overdraft facility in the aggregate
principal amount of (pound) 5,000,000.
3. Guarantee dated February 24, 1993 by the Company to Barclays Limited
to (pound) 2,750,000 of the indebtedness of B/E Aerospace (UK)
Limited described in Item 2 above.
4. Loan agreement between Royal Inventum B.V. and InG Bank dated July
14, 1993 in the aggregate principal amount of Dfl. 2,000,000.
5. Acquisition Agreement among the Company, Elinor T. Nordskog and
Nordskog Industries, Inc. dated July 27, 1993. (Acquisition purchase
price adjustments unknown).
6. Capitalized lease obligations B/E Aerospace (UK) Limited for
machinery and equipment in the aggregate amount of $600,000
7. Indebtedness of BE Aerospace (Netherlands) B.V. to the Company in an
aggregate principal amount not in excess of Dfls. 49,385,000.
8. Indenture dated as of January 24, 1996 between the Company and First
National Bank of Connecticut, as trustee, in connection with
$100,000,000 of 9-7/8% Senior Subordinated Notes due 2006.
9. Acquisition Agreement dated as of December 14, 1995, among the
Company, Burns Aerospace Corporation, Eagle Industrial Products
Corporation, Eagle Industries, Inc. and Great American Management
and Investment, Inc. (Acquisition purchase price adjustment
unknown.)
MATERIAL AGREEMENTS
<PAGE> 89
10. Agreement and Plan of Reorganization and Merger by and among BE
Aerospace, Inc., BE Acquisition Corp., Aerospace Interiors, Inc.,
Gregory and Deborah Fodell Partnership, Ltd., Gregory and Deborah
Fodell Partnership II, Ltd. and Gregory N. Fodell dated March 27,
1998 ($5.6 million).
11. Stock Purchase Agreement dated as of March 31, 1998 by and between
Puritan-Bennett Corporation and BE Aerospace, Inc. ($69.7 million,
subject to purchase price adjustments).
12. Re-Formation Agreement dated as of February 10, 1998 among the
Company, In-Flight, Harris Corporation, In-Flight Phone Corporation
and B/E Harris LiveTV, LLC.
13. Amended and Restated Limited Liability Company Agreement dated as of
February 10, 1998 of B/E Harris LiveTV, LLC.
14. Amended and Restated Security Agreement dated as of October 29,
1993, amended and restated as of April 3, 1993 between BE Aerospace,
Inc. and The Chase Manhattan Bank.
15. Amended and Restated Guarantee and Security Agreement dated as of
November 19, 1997. amended and restated as of April 3, 1998 between
In-Flight Entertainment, LLC and The Chase Manhattan Bank.
MATERIAL AGREEMENTS
-2-
<PAGE> 90
Part B - Liens
[See Section 7.12]
BE Aerospace, Inc.
1. California
a. UCC - Secretary of State
(i) 1st Source Bank, filed September 3, 1993, file number 93180963.
Certain leased machining equipment
(ii) The Chase Manhattan Bank, filed November 3, 1993, file number
93221435. Blanket filing.
(iii) UJB Leasing Corporation, filed December 1, 1994, file number
9435361073. Miscellaneous equipment.
(iv) Hewlett-Packard Company Finance and Remark, filed December 4, 1994,
file number 9435560656. Miscellaneous equipment.
(v) British Airways PLC, filed May 20, 1996, file number 9614460354.
Miscellaneous equipment.
(vi) Hewlett-Packard Company Finance and Remark, filed May 6, 1997, file
number 9712861105. Certain leased equipment and related tangible and
intangible property.
(vii) Pullman Bank & Trust Company, filed August 20, 1997, file number
9723460500. Certain leased equipment and related tangible property.
(viii) Telogy, Inc., filed December 15, 1997, file number 975360190.
Certain leased equipment.
2. Connecticut
a. UCC - Secretary of State
MATERIAL AGREEMENTS
-3-
<PAGE> 91
(i) The Chase Manhattan Bank, filed November 3,1993, file number
1034166; Blanket; Amendment filed February 1, 1996, file number
1678686 (Debtor address change); Partial Release filed December 16,
1996, file number 1741071 (miscellaneous equipment).
(ii) UJB Leasing Corporation, filed August 23, 1994, file number 1070220.
Miscellaneous leased equipment.
(iii) UJB Leasing Corporation, filed September 8, 1994, file number
1574243. Miscellaneous leased equipment.
(iv) UJB Leasing Corporation, filed January 23, 1995, file number
1600177. Miscellaneous Leased Equipment.
(v) Bankers Leasing Association, Inc., filed December 20, 1996, file
number 1739286. Miscellaneous office equipment.
(vi) General Electric Capital Corporation, filed March 5, 1997, file
number 1754332. Leased aircraft.
3. Florida
a. UCC - Secretary of State
(i) NationsBanc Leasing Corporation, filed March 22, 1993, file number
9360950. Certain leased equipment; Continuation, filed March 3,
1998, file number 9846659.
(ii) The Chase Manhattan Bank, filed November 4, 1993, file number
930000227345, Blanket; Amendment filed January 31, 1996, file number
960000020922 (Debtor address change); Partial Release filed December
16, 1996, file number 960000262425 (miscellaneous equipment);
Partial Release filed December 3, 1997, file number 970000271483
(miscellaneous equipment); Amendment filed December 11, 1997, file
number 970000277923.
(iii) UJB Leasing Corporation, filed September 6, 1994, file number
940180451. Miscellaneous leased equipment.
(iv) United Jersey Bank, filed September 7, 1994, file number 940182527.
Miscellaneous leased equipment.
MATERIAL AGREEMENTS
-4-
<PAGE> 92
(v) General Electric Capital Corporation filed March 5, 1997, file
number 97047206. Leased aircraft.
(vi) General Electric Capital Corporation filed December 3, 1997, file
number 970271431. Leased computer system.
(vii) General Electric Capital Corporation filed March 11, 1998, file
number 98054023. Leased computer equipment.
b. UCC - Palm Beach County Clerk of Circuit Court, Florida
(i) General Electric Capital Corporation filed December 3, 1997, file
number 97-430801. Leased computer system.
(ii) General Electric Capital Corporation filed March 12, 1998, file
number 98-086001. Leased computer equipment.
4. North Carolina
a. UCC - Secretary of State
(i) The Chase Manhattan Bank N.A. filed January 30, 1996, file number
1304283, blanket; partial release filed December 3, 1997, file
number 001520696.
(ii) General Electric Capital Corporation filed June 23, 1997, file
number 1467282, leased machinery.
(iii) General Electric Capital Corporation filed December 3, 1997, file
number 001528953. Leased computer system.
b. UCC - Forsyth County, North Carolina
(i) The Chase Manhattan Bank, filed January 29, 1996, file number
215975, blanket; partial release filed December 3, 1997, file number
224501.
(ii) General Electric Capital Corporation filed December 3, 1997, file
number 224500. Leased computer system.
MATERIAL AGREEMENTS
-5-
<PAGE> 93
(iii) General Electric Capital Corporation filed March 11, 1998, file
number 226702. Leased computer system.
In-Flight Entertainment, LLC
1. California
a. UCC - Secretary of State
(i) The Chase Manhattan Bank, filed December 11, 1997, file number
9734960163. Blanket filing.
2. In-Flight Entertainment, LLC, doing business as BE Aerospace, Inc.
a. UCC - California Secretary of State
(i) The Chase Manhattan Bank, filed December 11, 1997, file number
9734960155. Blanket filing.
3. In-Flight Entertainment, LLC, doing business as In-Flight Entertainment
a. UCC - California Secretary of State
(i) The Chase Manhattan Bank, filed December 11, 1997, file number
9734960171. Blanket filing.
B/E Aerospace (UK) Limited
The Indebtedness of B/E Aerospace (UK) Limited identified in Section 2 of
Part A of this Schedule I is cross-collateralized in the U.K. by the following:
1. A Debenture over the assets of B/E Aerospace (UK) Limited on Barclays'
standard form dated 19th November 1982.
2. The Company's guarantee referred to in Section 4 of Part A of this
Schedule I.
3. A Letter of Set Off allowing Barclays' to combine any account, Sterling or
Currency dated May 8, 1989.
MATERIAL AGREEMENTS
-6-
<PAGE> 94
SCHEDULE II
Hazardous Materials
[See Section 7.13]
1. Litchfield, CT, facility historically did not have state or federal clean
Water Act permits authorizing discharge of wastewater to the Bantam River.
The discharge has been substantially eliminated as of this date.
2. Litchfield, CT, facility may not have required air permits for air
emissions associated with paint booths and adhesive operations. A request
for determination of the need for permits has been made to the state
officials.
3. In 1992, the Garden Grove, CA, facility paid a $45,000 penalty for
violation of air pollution regulations.
4. The Route 209 facility of Pullman in Bantam, CT, is an interim status
facility under RCRA. There appears to be documentary evidence that waste
from the Route 209 facility may have been transshipped through the
Litchfield, CT, facility, raising potential issues of RCRA compliance
relating to the Litchfield, CT facility.
5. Asbestos-containing materials may be present in the Litchfield, CT,
facility. A preliminary investigation has been completed and does not
indicate any large-scale concerns.
6. Hazardous Materials have been detected in the soils and groundwater at the
Litchfield, CT facility. A groundwater assessment is ongoing under the
supervision of the CTDEP. The latest groundwater monitoring reports show
that contaminant levels in groundwater meet applicable standards.
7. Certain sites to which the Company and its Subsidiaries may have sent
waste which are listed on CERCLIS, or any similar state or local list or
are under investigation by governmental agencies are set forth in Exhibits
3-2, 3-3, 3-4 and 3-5 of the ICF Kaiser, Engineers report entitled
"Environmental Assessment of PTC Aerospace and Aircraft Products Companies
Final Report" dated February 14, 1992 and, with respect to the Burns
Aerospace facility, in a report entitled "Phase I Environmental Due
Diligence Examination of the Burns Aerospace Corporation, Winston-Salem,
North Carolina, dated January 1994, prepared by ENSR Consulting and
Engineering".
MATERIAL AGREEMENTS
-7-
<PAGE> 95
8. The Litchfield, CT, facility has two utility-owned transformers, one
contains less than 50 ppm PCBs. The other contains 63 ppm PCBs.
9. Hazardous waste from the Altamonte Springs, Florida facility was sent to
the Chemical Conservation Corporation landfill in Valdosta, Georgia which
is on the CERCLIS list.
10. Hazardous waste from the Altamonte Springs, Florida site may have been
disposed of at the Seabord Chemical site in North Carolina, which is being
remediated under consent order with the State of North Carolina.
11. Certain wells upgradient of the Anaheim, California site have been
impacted by dichlorodifluoromethane (refrigerant) and trichloroethane
(degreaser), both of which are believed to have been used by the
predecessor of Acurex.
12. At a facility in Santa Ana, California which EECO Incorporated, a former
owner of part of the BE Avionics business, owned and later leased, there
may have been some seepage into the soil of toxic materials involved in
metal plating, including arsenic. The Company purchased the BE Avionics
business from EECO in a 1989 asset acquisition, and EECO has subsequently
filed for bankruptcy protection and is no longer in operation. The BE
Avionics business was never conducted in the affected facility.
13. Certain of the ovens manufactured by Nordskog prior to 1981 contain
asbestos.
14. Hazardous waste originating from the Burns Aerospace, Winston-Salem, North
Carolina facility may have been shipped to the Seaboard Chemical site in
North Carolina which is listed on CERCLIS. In 1991, a letter was received
from the North Carolina Department of Environment, Health and National
Resources indicating that Fairchild Burns Company was a de minimis
contributor of waste to that site. By letter dated February 26, 1992 Burns
Aerospace Corporation notified Fairchild Industries, from whom it had
acquired the Winston-Salem facility, that Fairchild Industries was
responsible for that liability.
15. In May, 1994, the Company received notice that it was considered a de
minimis PRP with respect to the Frontier Chemical Site in Niagara Falls,
NY relating to a shipment of waste from the Litchfield, CT facility in
1992. The Company joined a group of de minimis PRPs that performed certain
actions under an Administrative Consent Order with EPA. The Company
believes that it has fully settled its liability with respect to the site
through payment to the group.
16. The roof at the Chesham, UK facility may contain asbestos cement-root
sheeting.
MATERIAL AGREEMENTS
-8-
<PAGE> 96
Compliance Issues
PTC Aerospace, Litchfield, CT
(1) Facility is listed on the CERCLIS Data Base.
(2) Pursuant to a Notice of Violation issued by the Connecticut DEP in March,
1992, the Facility has implemented a RCRA closure plan and has upgraded
record keeping and training functions.
PTC Aerospace, Garden Grove, CA
(1) Oily compressor blowdown is discharged directly to the ground.
(2) Facility does not comply with state RCRA regulations governing generators
of less than 1,000 kilograms of hazardous waste per month.
(3) Facility does not comply with state OSHA requirements governing a written
respiratory protection program, personnel training and record keeping,
personnel medical monitoring, and other worker safety and health
requirements.
(4) Facility may require NPDES storm water discharge permit.
Aircraft Products Company, Delray Beach, FL
(1) Facility has not applied for an air emissions permit or conditional
exemption from the State for its air emission sources.
(2) Paint booth filters, empty drums, and solvent-contaminated rags are
disposed of as nonhazardous solid wastes.
(3) Not all hazardous waste drums were properly labeled.
(4) Unused chemicals are stored onsite that are no longer used in the
production process and should be disposed of as hazardous waste.
(5) Plant does not have a written respiratory protection program or a hearing
conservation program, although such protection is provided to employees.
MATERIAL AGREEMENTS
-9-
<PAGE> 97
(6) Plant may require an NPDES storm water discharge permit.
Aircraft Products Company, Jacksonville, FL
(1) Facility has no data to indicate that its nonhazardous solid wastes, which
include solvent-contaminated rags, are properly disposed of as
nonhazardous waste.
(2) The facility qualifies currently as a large quantity generator of
regulated hazardous wastes but does not comply with the RCRA requirements
applicable to these generators or to the storage of wastes onsite for less
than 90 days.
(3) Unused chemicals are stored onsite that are no longer used in the
production process and should be disposed of as nonhazardous waste.
(4) Areas designed for hazardous waste drum storage are not posted as such or
signs are obscured.
(5) Plant personnel with responsibility to handle hazardous wastes have not
received the requisite health and safety training.
(6) Containers of hazardous materials are not consistently labeled as to the
hazards they may present to worker health and safety.
(7) Plant does not have a written respiratory protection program nor are
employees fit tested to wear respirators as required by OSHA.
(8) Plant may require an NPDES storm water discharge permit.
Nordskoq Industries, Inc., Van Nuys, CA
(1) Several facilities to which hazardous waste may have been shipped for
disposal are on the CERCLIS data base, as noted in Table 1 of the June 4,
1993 Draft Phase I Environmental Site Assessment.
(2) There may be a compliance issue concerning the mixing of hazardous and
non-hazardous wastes prior to 1984.
(3) The facility has had historical problems meeting effluent standards for
metal finishing. Wastewater is treated in an on-site clarifier prior to
discharge to the municipal sewer.
MATERIAL AGREEMENTS
-10-
<PAGE> 98
(4) Nordskog received a Notice to Comply dated July 21, 1993 from the South
Coast Air Quality Management District requiring Nordskog to (i) keep more
detailed usage records as required by Rule 109, including all "VOC" and
vapor pressure information, (ii) use only HLVP or 65% efficient spray
equipment, (iii) use only closed containers for all solvents, and (iv) use
only Rule 1171 and 1124 compliance cleaning solvents.
Status of Mountain View, CA Property
The Prudential Insurance Company of America ("Prudential") is the owner of
property known as 485 Clyde Avenue (Building 1), Mountain View, California (the
"Property"). Acurex Corporation ("Acurex") owned the Property in the early 1970s
and then entered into a sale-leaseback arrangement with Prudential in connection
with the Property. The Property itself sits on part of a very large
contamination plume said to result from discharges into the soil and groundwater
from a nearby Hewlett Packard manufacturing facility. As of the date hereof, the
Company believes that the municipal authorities in Mountain View do not intend
to commence an environmental clean-up in connection with the plume and do not
intend to permit any owner of property on or contiguous with the plume to
commence a clean-up of such owner's property.
In 1992, pursuant to an Amended and Restated Agreement and Plan of Merger
(the "Merger Agreement") among Acurex, Xeruca, Inc. and others, the lease was
assigned from Acurex to Xeruca. The Merger Agreement included an indemnity from
Xeruca to Acurex for, among other things, those liabilities associated with the
Property. In connection with the expiration of the lease for the Property on
July 13, 1993, Prudential requested that Acurex execute an indemnification
agreement whereby Xeruca would agree to clean-up the Property (if and when
permitted by the municipal authorities) and provide a general indemnity for
matters related to the clean-up while Acurex would agree to guarantee Xeruca's
performance and indemnify Prudential for Xeruca's failure to perform its
obligations. Acurex refused to enter into this agreement, and Prudential
threatened to sue Acurex to compel it to acknowledge such alleged
indemnification obligations.
This dispute between Acurex and Prudential was resolved by an Agreement
made as of August 27, 1993 (the "Settlement Agreement") among Prudential, Xeruca
and Acurex. Pursuant to the Settlement Agreement, Xeruca agreed to indemnify
Prudential with respect to environmental claims related to the Property. In
addition, Acurex assigned to Prudential the benefit of the indemnification
provisions from Xeruca under the Merger Agreement with respect to environmental
claims related to the Property. As a result of the Settlement Agreement, Acurex
is now a co-beneficiary with Prudential of Xeruca's indemnification obligations
and Prudential has released and forever discharged Acurex from any and all
claims that Acurex is obligated to sign an indemnification agreement with
Prudential.
MATERIAL AGREEMENTS
-11-
<PAGE> 99
No lawsuit is currently pending or threatened against Acurex in connection
with the Property.
Burns Aerospace - Winston-Salem, NC
Contaminants have been detected in the soil and groundwater at the former
Burns-Aerospace facility at levels that may require remediation under the
regulations of the North Carolina Department of Environmental Health and Natural
Resources. Initial conditions at the site at the time of purchase are described
in a report entitled "Site Characterization Report" dated January 19, 1996,
prepared by Groundwater Technology. Further site assessment work is being
conducted by the Company that includes groundwater and soils testing. The
Company has informed the Seller of the facility, Eagle Industries, that the
environmental remedial costs are subject to the indemnification claims of the
purchase contract. Certain other compliance issues at the facility are
identified in a report entitled "Environmental Survey and Compliance
Evaluation," prepared by Environmental Quality Management, dated February
21,1996.
MATERIAL AGREEMENTS
-12-
<PAGE> 100
SCHEDULE III
Subsidiaries and Investments
[See Sections 7.15 and 8.08(a)]
Part A - Subsidiaries
<TABLE>
<CAPTION>
Book Value
Jurisdiction of Assets
of (in millions)
Subsidiary Organization Owners Ownership as of 11/29/97
- ---------- ------------ ------ --------- --------------
<S> <C> <C> <C> <C>
(1)BE Aerospace Barbados Acurex 100% Non-material
International, Ltd. ("N.M.")
BE Aerospace (UK) England BEA 100% $105
Holdings Limited
("BEA-Holdings")
BE Aerospace (UK) England BEA 100% $105
Limited ("BEA- Holdings
UK")
(1)Fort Hill Aircraft Northern Ireland BEA-UK 100% N.M.
Limited ("AFL")
(1)AFI Holdings Northern Ireland BEA-UK 100% N.M.
Limited
(1)Burns Aerospace France BEA 100% N.M.
S.A.R.L.
(1)BE Aerospace France BEA 98.00% N.M.
(France) S.A.R.L. K.A.D. 1.00%
Companies, 1.00%
Inc.
Marc Leveille
(director)
BE Aerospace Delaware BEA 100% N.M.
(U.S.A.), Inc.
</TABLE>
MATERIAL AGREEMENTS
-13-
<PAGE> 101
<TABLE>
<CAPTION>
Book Value
Jurisdiction of Assets
of (in millions)
Subsidiary Organization Owners Ownership as of 1/29/97
- ---------- ------------ ------ --------- -------------
<S> <C> <C> <C> <C>
BE Aerospace Netherlands BEA 90% $38
(Netherlands) B.V. BEA 10%
("BEA-Neth") (U.S.A.)
Royal Inventum Netherlands BEA-Neth 96.60%* $14
B.V.
BE Aerospace (Sales Netherlands BEA-Neth 100% N.M.
and Services) B.V.
Acurex Corporation Delaware BEA 100% $64
("Acurex")
B/E Aerospace Delaware BEA 100% $14
Services, Inc.
B/E Advanced Delaware BEA 100% N.M.
Thermal
Technologies, Inc.
(1)Nordskog California BEA 100% N.M.
Industries, Inc.
Aerospace Interiors, Texas BEA 100% $2
Inc.
In-Flight Entertain- Delaware BEA 100% $45
ment, LLC
</TABLE>
- ----------
(1) Specified Subsidiary as defined in the Credit Agreement.
* The balance of these shares were lost prior to the sale of the shares of
this entity to BEA.
Part B - Investments
In addition to the Investments set forth in Part A above, as of the date
hereof the Company has the following outstanding Investments:
a. an Investment in a Middle East sales office in an amount not to exceed
$200,000;
MATERIAL AGREEMENTS
-14-
<PAGE> 102
b. Money Market Funds in the amount, as of April 1, 1998, of
approximately $118M.
Finally, each of the matters described in Items 3, 5, 9 and 10 of Part A
of Schedule I constitutes an Investment in or by BEA-UK, AFL and the Company, as
the case may be.
MATERIAL AGREEMENTS
-15-
<PAGE> 103
SCHEDULE IV
Approvals and Compliance
[See Section 7.17]
None, except compliance with certain Environmental Laws disclosed in the
materials set forth in Schedule II hereto.
MATERIAL AGREEMENTS
-16-
<PAGE> 104
SCHEDULE V
Existing Letters of Credit
I. Series A $100,000,000
1. Drawdowns: None
2. Letters of Credit Outstanding:
<TABLE>
<CAPTION>
Issue Date Amount ($) LC# Expiry Date Beneficiary
---------- ---------- --- ----------- -----------
<S> <C> <C> <C> <C>
March 25, 1992 307,817.00 P-751178 February 28, 1998 National Union Fire Ins. Co.
March 16, 1995 505,000.00 P-754750 March 16, 1998 National Union fire Ins. Co.
December 20, 1993 313,719.00 P-753306 May 1, 1998 CA Self Insurance Plans
May 30, 1996 636,380.00 P-259468 May 29, 1998 National Union Fire Ins. Co.
December 11, 1995 534,000.00 P-258984 December 11, 1998 National Union Fire Ins. Co.
January 10, 1995 800,000.00 P-754546 January 10, 1998 National Union Fire Ins. Co.
January 22, 1996 1,400,000.00 P-259114 January 31, 1999 Eagle Industries
</TABLE>
Total Letters of Credit $4,496,916.00
Outstanding
II. Series B $25,000,000
1. Drawdowns: None
Total Facility Availability: $120,503,084.00
MATERIAL AGREEMENTS
-17-
<PAGE> 105
SCHEDULE VI
Taxes
[See Section 7.09]
None.
MATERIAL AGREEMENTS
-18-
<PAGE> 106
SCHEDULE VII
Transactions with Affiliates
Under a Supply Agreement dated April 17, 1990 with Applied Extrusion
Technologies, Inc., a Delaware corporation ("AET"), the Company purchases from
AET its requirements of injection-molded plastic parts for use in the
manufacture of passenger control units and other products for installation in
commercial aircraft for the period ending March 31, 1998. Under that agreement,
AET has agreed to use its best efforts at all times to maintain available and in
good working order a sufficient number and variety of injection molding machines
to satisfy the Company's orders as received and to use its best efforts to
initiate production within three days of receipt of an order or, in emergency
situations, on the date on which the order is received. The price to be paid by
the Company to AET for products purchased under the Supply Agreement is an
amount which results in a 33-1/3% gross margin to AET, after including in AET's
standard cost for such products, all direct and indirect costs of labor,
materials, equipment and overhead. Purchases by the Company under this agreement
for the fiscal year ended on February 22, 1997 were approximately $1,642,000.
Mr. Amin J. Khoury is a director and significant stockholder of AET and serves
as its Chairman and Chief Executive Officer. Messrs. Richard G. Hamermesh and
Hansjoerg Wyss, directors of BE Aerospace, Inc. are also directors of AET.
MATERIAL AGREEMENTS
<PAGE> 107
EXHIBIT A-1
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of October 29,
1993, AMENDED AND RESTATED AS OF April 3, 1998, between BE AEROSPACE, INC., a
corporation duly organized and validly existing under the laws of Delaware (the
"Company"); and THE CHASE MANHATTAN BANK, as agent for certain lenders or other
financial institutions or entities party, as lenders, to the Credit Agreement
referred to below (in such capacity, together with its successors in such
capacity, the "Administrative Agent").
The Company, certain lenders and the Administrative Agent are
parties to a Credit Agreement dated as of October 29, 1993 amended and restated
as of April 3, 1998 (as modified and supplemented and in effect from time to
time, the "Credit Agreement"), providing, subject to the terms and conditions
thereon for extensions of credit (by making of loans and issuing letters of
credit) to be made by said lenders to the Company.
The Company and the Administrative Agent are party to a Revolving
Credit Security Agreement and a Tern Loan Security Agreement, each dated October
29, 1993.
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company has agreed
to amend and restate the foresaid Revolving Credit Security Agreement and Term
Loan Security Agreement so that, as so amended and restated, they are combined
into one document and read in their entirety as herein provided. Accordingly,
the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are
used herein as defined therein. In addition, as used herein:
"Accounts" shall have the meaning ascribed thereto in Section 3(d)
hereof.
"Collateral" shall have the meaning ascribed thereto in Section 3
hereof.
"Collateral Account" shall have the meaning ascribed thereto in
Section 4.01 hereof.
Amended and Restated Security Agreement
<PAGE> 108
-2-
"Copyright Collateral" shall mean all Copyrights, whether now owned
or hereafter acquired by the Company, including each Copyright identified
in Annex 2 hereto.
"Copyrights" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation,
all renewals and extensions thereof, the right to recover for all past,
present and future infringements thereof, and all other rights of any kind
whatsoever accruing thereunder or pertaining thereto.
"Documents" shall have the meaning ascribed thereto in Section 3(j)
hereof.
"Equipment" shall have the meaning ascribed thereto in Section 3(h)
hereof.
"Instruments" shall have the meaning ascribed thereto in Section
3(e) hereof.
"Intellectual Property" shall mean all Copyright Collateral, all
Patent Collateral and all Trademark Collateral, together with (a) all
inventions, processes, production methods, proprietary information,
know-how and trade secrets; (b) all licenses or user or other agreements
granted to the Company with respect to any of the foregoing, in each case
whether now or hereafter owned or used including, without limitation, the
licenses or other agreements with respect to the Copyright Collateral, the
Patent Collateral or the Trademark Collateral, listed in Annex 5 hereto;
(c) all information, customer lists, identification of suppliers, data,
plans, blueprints, specifications, designs, drawings, recorded knowledge,
surveys, engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and
automatic machinery software and programs; (d) all field repair data,
sales data and other information relating to sales or service of products
now or hereafter manufactured; (e) all accounting information and all
media in which or on which any information or knowledge or data or records
may be recorded or stored and all computer programs used for the
compilation or printout of such information, knowledge, records or data;
(f) all licenses, consents, permits, variances, certifications and
approvals of governmental agencies now or hereafter held by the Company;
and (g) all causes of action, claims and warranties now or hereafter owned
or acquired by the Company in respect of any of the items listed above.
"Inventory" shall have the meaning ascribed thereto in Section 3(f)
hereof.
"Issuers" shall mean, collectively, (a) the respective corporations
identified on Annex 1 hereto under the caption "Issuer" and (b) to the
extent not otherwise identified on Annex 1 hereto, each other Subsidiary
of the Company.
"LLC Agreements" shall have the meaning ascribed thereto in Section
3(m) hereof.
Amended and Restated Security Agreement
<PAGE> 109
-3-
"LLC Collateral" shall have the meaning ascribed thereto in Section
3(m) hereof.
"LLC Issuers" shall mean the respective limited liability companies
identified on Annex 7 hereto.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by the Company, including each Patent identified in
Annex 3 hereto.
"Patents" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties,
damages and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding thereto
throughout the world.
"Pledged Membership Interests" shall have the meaning ascribed
thereto in Section 3(m) hereof.
"Pledged Stock" shall have the meaning ascribed thereto in Section
3(a) hereof.
"Secured Obligations" shall mean, collectively, (a) the principal of
and interest on the Loans made by the Lenders to, and the Note(s) held by
each Lender of, the Company and all other amounts from time to time owing
to the Lenders or the Administrative Agent by the Company under the Basic
Documents including, without limitation, all Reimbursement Obligations and
interest thereon and (b) all obligations of the Company to the Lenders and
the Administrative Agent hereunder.
"Stock Collateral" shall mean, collectively, the Collateral
described in clauses (a) through (c) of Section 3 hereof and the proceeds
of and to any such property and, to the extent related to any such
property or such proceeds, all books, correspondence, credit files,
records, invoices and other papers.
"Trademark Collateral" shall mean all Trademarks, whether now owned
or hereafter acquired by the Company, including each Trademark identified
in Annex 4 hereto. Notwithstanding the foregoing, the Trademark Collateral
does not and shall not include any Trademark which would be rendered
invalid, abandoned, void or unenforceable by reason of its being included
as part of the Trademark Collateral.
"Trademarks" shall mean all trade names, trademarks and service
marks, logos, trademark and service mark registrations, and applications
for trademark and service
Amended and Restated Security Agreement
<PAGE> 110
-4-
mark registrations, including, without limitation, all renewals of
trademark and service mark registrations, all rights corresponding thereto
throughout the world, the right to recover for all past, present and
future infringements thereof, all other rights of any kind whatsoever
accruing thereunder or pertaining thereto, together, in each case, with
the product lines and goodwill of the business connected with the use of,
and symbolized by, each such trade name, trademark and service mark.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York.
Section 2. Representations and Warranties. The Company represents
and warrants to the Revolving Credit Lenders and the Agent that:
(a) The Company is the sole beneficial owner of the Collateral and
no Lien exists or will exist upon the Collateral at any time (and no right
or option to acquire the same exists in favor of any other Person), except
for Liens permitted under Section 8.06 of the Credit Agreement and except
for the pledge and security interest in favor of the Agent for the benefit
of the Lenders created or provided for herein, which pledge and security
interest constitute a first priority perfected pledge and security
interest in and to all of the Collateral (other than Intellectual Property
registered or otherwise located outside of the United States of America).
(b) The Pledged Stock represented by the certificates identified in
Annex 1 hereto is, and all other Pledged Stock in which the Company shall
hereafter grant a security interest pursuant to Section 3 hereof will be,
duly authorized, validly existing, fully paid and non-assessable and none
of such Pledged Stock is or will be subject to any contractual
restriction, or any restriction under the charter or by-laws of the
respective Issuer, upon the transfer of such Pledged Stock (except for any
such restriction contained herein or in the Credit Agreement).
(c) The Pledged Stock represented by the certificates identified in
Annex 1 hereto constitutes at least 65% of the issued and outstanding
shares of capital stock of any class of the Issuers beneficially owned by
the Company on the date hereof (whether or not registered in the name of
the Company) and said Annex 1 correctly identifies, as at the date hereof,
the respective Issuers of such Pledged Stock, the respective class and par
value of the shares comprising such Pledged Stock and the respective
number of shares (and registered owners thereof) represented by each such
certificate.
(d) Annex 2, 3 and 4 hereto set forth a complete and correct list of
all Copyrights, Patents and Trademarks owned by the Company on the date
hereof; except pursuant to licenses and other user agreements entered into
by the Company in the ordinary course of business, which are listed in
Annex 5 hereto, the Company owns and possesses the right to use, and has
done nothing to authorize or enable any other Person to use, any
Amended and Restated Security Agreement
<PAGE> 111
-5-
Copyright, Patent or Trademark listed in said Annex 2, 3 and 4, and all
registrations listed in said Annex 2, 3 and 4 are valid and in full force
and effect; except as may be set forth in said Annex 5, the owns and
possesses the right to use all Copyrights, Patents and Trademarks.
(e) Annex 5 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property
on the date hereof.
(f) To the Company's knowledge, (i) except as set forth in Annex 5
hereto, there is no violation by others of any right of the Company with
respect to any Copyright, Patent or Trademark listed in Annex 2, 3 and 4
hereto and (ii) the Company is not infringing in any respect upon any
Copyright, Patent or Trademark of any other Person; and no proceedings
have been instituted or are pending against the Company or, to the
Company's knowledge, threatened, and no claim against the Company has been
received by the Company, alleging any such violation, except as may be set
forth in said Annex 5.
(g) The Company does not own any Trademarks registered in the United
States of America to which the last sentence of the definition of
Trademark Collateral applies.
(h) Any goods now or hereafter produced by the Company or any of its
Subsidiaries included in the Collateral have been and will be produced in
compliance with the requirements of the Fair Labor Standards Act, as
amended.
(i) the Pledged Membership Interests, and all other Pledged
Membership Interests in which the Company shall hereafter grant a security
interest pursuant to Section 3 hereof will be duly authorized, validly
existing, fully paid and non-assessable and none of such Pledged
Membership Interests is or will be subject to any contractual restriction,
upon the transfer of such Pledged Membership Interests (except for any
such restriction contained herein).
(j) the Pledged Membership Interests constitute all of the ownership
interests in the LLC Issuers held by the Company on the date hereof
(whether or not registered in the name of the Company), and the Company is
the registered owner of all such ownership interests."
Section 3. Collateral. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, the Company hereby pledges and grants to the
Administrative Agent, for the benefit of the Lenders as hereinafter provided, a
security interest in all of the Company's right, title and interest in the
following property, whether now owned by the Company or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
Amended and Restated Security Agreement
<PAGE> 112
-6-
(a) the shares of capital stock of the Issuers represented by the
certificates identified in Annex 1 hereto and, subject to the limitation
set forth in Section 5.04(a)(1) hereof, all other shares of capital stock
of whatever class of the Issuers, now or hereafter owned by the Company,
in each case together with the certificates evidencing the same
(collectively, the "Pledged Stock");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which the Issuer is not the
surviving corporation, all shares of each class of the capital stock of
the successor corporation formed by or resulting from such consolidation
or merger (the Pledged Stock, together with all other certificates,
shares, securities, properties or moneys as may from time to time be
pledged hereunder pursuant to clause (a) or (b) above and this clause (c)
being herein collectively called the "Stock Collateral");
(d) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Company constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to the Company in respect of any loans or advances or for
Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to the Company under any
guarantee (not including a letter of credit) of the purchase price of
Inventory or Equipment sold by the Company and all tax refunds (such
accounts, general intangibles and moneys due and to become due being
herein called collectively "Accounts");
(e) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Company evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including (but not limited to) promissory notes, drafts, bills of exchange
and trade acceptances (herein collectively called "Instruments");
(f) all inventory (as defined in the Uniform Commercial Code) of the
Company, including Motor Vehicles held by the Company for lease (including
lease to Subsidiaries of the Company), fuel, tires and other spare parts,
all goods obtained by the Company in exchange for such inventory, and any
products made or processed from such inventory including all substances,
if any, commingled therewith or added thereto (herein collectively called
"Inventory");
Amended and Restated Security Agreement
<PAGE> 113
-7-
(g) all Intellectual Property and all other accounts or general
intangibles of the Company not constituting Intellectual Property or
Accounts;
(h) all equipment (as defined in the Uniform Commercial Code) of the
Company, including all Motor Vehicles (herein collectively called
"Equipment");
(i) each contract and other agreement of the Company relating to the
sale or other disposition of Inventory or Equipment;
(j) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of the Company covering, evidencing or
representing Inventory or Equipment (herein collectively called
"Documents");
(k) all rights, claims and benefits of the Company against any
Person arising out of, relating to or in connection with Inventory or
Equipment purchased by the Company, including, without limitation, any
such rights, claims or benefits against any Person storing or transporting
such Inventory or Equipment;
(l) the balance from time to time in the Collateral Account;
(m) the ownership interests of the Company in the LLC Issuers
identified in Annex 7 hereto, all certificates (if any) representing or
evidencing such ownership interests, and all right, title and interest in,
to and under the limited liability company agreements (the "LLC
Agreements") of such LLC Issuers (including without limitation all of the
right, title and interest (if any) as a member to participate in the
operation or management of the LLC Issuers and all of its ownership
interests under the LLC Agreements), and all present and future rights of
the Company to receive payment of money or other distribution of payments
arising out of or in connection with its ownership interests and its
rights under the LLC Agreements, now or hereafter owned by the Company, in
each case together with any certificates evidencing the same
(collectively, the "Pledged Membership Interests" and, together with the
Collateral pledged hereunder pursuant to clauses (n) through (r) being
herein collectively called the "LLC Collateral");
(n) any and all moneys, and any and all rights to receive such
moneys, due or to become due to the Company now or in the future by way of
a distribution made to the Company in its capacity as a member of any of
the LLC Issuers or otherwise pursuant to the LLC Agreements;
(o) any other property or assets, and any and all rights to receive
such property or assets, of any of the LLC Issuers to which the Company
now or in the future may be entitled in its capacity as a member of such
LLC Issuers;
Amended and Restated Security Agreement
<PAGE> 114
-8-
(p) any other claim which the Company now has or may in the future
acquire in its capacity as a member of any of the LLC Issuers against any
such LLC Issuer and its property or arising out of or for breach of or
default under the LLC Agreements or otherwise relating to the property of
any of the LLC Issuers;
(q) all rights to terminate, amend, supplement, modify or waive
performance under the LLC Agreements, to perform thereunder and to compel
performance and to otherwise exercise all remedies thereunder;
(r) all other tangible and intangible property of the Company,
including, without limitation, all proceeds, products, offspring,
accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of the Company described in the
preceding clauses of this Section 3 (including, without limitation, any
proceeds of insurance thereon) and, to the extent related to any property
described in said clauses or such proceeds, products and accessions, all
books, correspondence, credit files, records, invoices and other papers,
including without limitation all tapes, cards, computer runs and other
papers and documents in the possession or under the control of the Company
or any computer bureau or service company from time to time acting for the
Company.
Section 4. Cash Proceeds of Collateral.
4.01 Collateral Account. The Administrative Agent may establish with
Chase a cash collateral account (the "Collateral Account"), which may be a
"securities account" (within the meaning of Section 8-501 of the Uniform
Commercial Code), in the name and under the sole control of the Administrative
Agent into which there shall be deposited from time to time the cash proceeds of
any of the Collateral (including proceeds of insurance thereon) required to be
delivered to the Administrative Agent pursuant hereto and into which the Company
may from time to time deposit any additional amounts which it wishes to pledge
to the Administrative Agent for the benefit of the Lenders as additional
collateral security hereunder. The balance from time to time in the Collateral
Account shall constitute part of the Collateral hereunder and shall not
constitute payment of the Secured Obligations until applied as hereinafter
provided. Except as expressly provided in the next sentence, the Administrative
Agent shall remit the collected balance outstanding to the credit of the
Collateral Account to or upon the order of the Company as the Company shall from
time to time instruct; provided that the Net Available Proceeds from
Dispositions deposited in the Collateral Account (but not the investment
earnings thereof) shall remain in the Collateral Account until withdrawn as
permitted or required by Section 2.10(c) of the Credit Agreement. However, at
any time following the occurrence and during the continuance of an Event of
Default, the Administrative Agent may (and, if instructed by the Lenders as
specified in Section 10.03 of the Credit Agreement, shall) in its (or their)
discretion apply or cause to be applied (subject to collection) the balance from
time to time outstanding to the credit of the Collateral Account to the payment
of the Secured Obligations in the manner specified in Section 5.09 hereof. The
balance from time to time in the Collateral
Amended and Restated Security Agreement
<PAGE> 115
-9-
Account shall be subject to withdrawal only as provided herein and in Section
2.10(c) of the Credit Agreement.
4.02 Proceeds of Accounts. At any time after the occurrence and
during the continuance of an Event of Default, the Company shall, upon the
request of the Administrative Agent, instruct all account debtors and other
Persons obligated in respect of all Accounts to make all payments in respect of
the Accounts either (a) directly to the Administrative Agent (by instructing
that such payments be remitted to a post office box which shall be in the name
and under the control of the Administrative Agent) or (b) to one or more other
banks in the United States of America (by instructing that such payments be
remitted to a post office box which shall be in the name and under the control
of the Administrative Agent) under arrangements, in form and substance
satisfactory to the Administrative Agent pursuant to which the Company shall
have irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all proceeds of such payments directly to the Administrative
Agent for deposit into the Collateral Account. All payments made to the
Administrative Agent, as provided in the preceding sentence, shall be
immediately deposited in the Collateral Account. In addition to the foregoing,
the Company agrees that, at any time after the occurrence and during the
continuance of an Event of Default, if the proceeds of any Collateral hereunder
(including the payments made in respect of Accounts) shall be received by it,
the Company shall as promptly as possible deposit such proceeds into the
Collateral Account. Until so deposited, all such proceeds shall be held in trust
by the Company for and as the property of the Administrative Agent and shall not
be commingled with any other funds or property of the Company.
4.03 Investment of Balance in Collateral Account. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the Company (or, after the occurrence and during the continuance
of a Default, the Administrative Agent) shall determine, which Permitted
Investments shall if the Collateral Account is a "securities account" (within
the meaning of Section 8-501 of the Uniform Commercial Code) be credited to the
Collateral Account and otherwise shall be held in the name and be under the
control of the Administrative Agent and may be credited to the Collateral
Account; provided that (i) at any time after the occurrence and during the
continuance of an Event of Default, the Administrative Agent may (and, if
instructed by the Lenders as specified in Section 10.03 of the Credit Agreement,
shall) in its (or their) discretion at any time and from time to time elect to
liquidate any such Permitted Investments and to apply or cause to be applied the
proceeds thereof to the payment of the Secured Obligations in the manner
specified in Section 5.09 hereof and (ii) if requested by the Company, such
Permitted Investments may be held in the name and under the control of one or
more of the Lenders (and in that connection each Lender, pursuant to Section
10.10 of the Credit Agreement, has agreed that such Permitted Investments shall
be held by such Lender as a collateral sub-Administrative Agent for the
Administrative Agent hereunder).
4.04 Cover for Letter of Credit Liabilities. Amounts deposited into
the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 2.10(f) or Section 9 thereof shall be held
by the Administrative Agent in a separate
Amended and Restated Security Agreement
<PAGE> 116
-10-
sub-account (designated "Letter of Credit Liabilities Sub-Account") and all
amounts held in such sub-account shall constitute collateral security first for
the Letter of Credit Liabilities outstanding from time to time and second as
collateral security for the other Secured Obligations hereunder.
Section 5. Further Assurances; Remedies. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Company
hereby agrees with each Lender and the Administrative Agent as follows:
5.01 Delivery and Other Perfection. The Company shall:
(a)(i) with respect to any Pledged Membership Interests acquired,
received or hereafter held by the Company, take such action as the Agent
shall deem necessary or appropriate to perfect the pledge and security
interest granted by Section 3 of this Agreement in such Pledged Membership
Interests, including without limitation (a) to the extent that they
constitute Securities (as defined in Section 8-102(a)(15) of the Uniform
Commercial Code) which are not represented by a certificate, cause the LLC
Issuer of such Pledged Membership Interests to either register the Agent
as the registered owner thereof or agree that it will comply with
Instructions (as defined in Section 8-102(a)(12) of the Uniform Commercial
Code) originated by the Agent with respect to such Pledged Membership
Interests without further consent by the Company and (b) to the extent
that they constitute Securities (as defined in Section 8-102(a)(15) of the
Uniform Commercial Code) which are represented by a certificate, deliver
to the Agent any such certificates representing the Pledged Membership
Interests and (ii) subject to Section 5.04(a)(l) hereof, if any of the
above-described shares, securities, moneys or property required to be
pledged by the Company under clauses (a), (b) and (c) of Section 3 hereof
are received by the Company, forthwith either (x) transfer and deliver to
the Administrative Agent such shares or securities so received by the
Company (together with the certificates for any such shares and securities
duly endorsed in blank or accompanied by undated stock powers duly
executed in blank), all of which thereafter shall be held by the
Administrative Agent, pursuant to the terms of this Agreement, as part of
the Collateral or (y) take such other action as the Administrative Agent
shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c);
(b) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Administrative Agent may
request; provided, that so long as no Default shall have occurred and be
continuing, the Company may retain for collection in the ordinary course
any Instruments received by the Company in the ordinary course of business
and the Administrative Agent shall, promptly upon request of the Company,
make appropriate arrangements for making any other Instrument pledged by
the Company available to the Company for purposes of presentation,
collection or renewal
Amended and Restated Security Agreement
<PAGE> 117
-11-
(any such arrangement to be effected, to the extent deemed appropriate by
the Administrative Agent, against trust receipt or like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Administrative
Agent) to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Administrative Agent to exercise
and enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the Stock
Collateral to be transferred of record into the name of the Administrative
Agent or its nominee (and the Administrative Agent agrees that if any
Stock Collateral is transferred into its name or the name of its nominee,
the Administrative Agent will thereafter promptly give to the Company
copies of any notices and communications received by it with respect to
the Stock Collateral), provided that notices to account debtors in respect
of any Accounts or Instruments shall be subject to the provisions of
clause (i) below;
(d) from time to time as requested by any Lender, cause the
Administrative Agent to be listed as the lienholder of any Equipment
covered by a certificate of title or ownership and within 120 days of such
request deliver evidence of the same to the Administrative Agent;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(f) furnish to the Administrative Agent from time to time (but,
unless a Default shall have occurred and be continuing, no more frequently
than quarterly) statements and schedules further identifying and
describing the Copyright Collateral, the Patent Collateral and the
Trademark Collateral and such other reports in connection with the
Copyright Collateral, the Patent Collateral and the Trademark Collateral,
as the Administrative Agent may reasonably request, all in reasonable
detail;
(g) promptly upon request of the Administrative Agent, following
receipt by the Administrative Agent of any statements, schedules or
reports pursuant to clause (f) above, modify this Agreement by amending
Annex 2, 3 and/or 4 hereto to include any Copyright, Patent or Trademark
which becomes part of the Collateral under this Agreement;
(h) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Collateral,
and permit representatives of the Administrative Agent to be present at
the Company's place of business to receive copies of all communications
and remittances relating to the Collateral, and forward copies of any
Amended and Restated Security Agreement
<PAGE> 118
-12-
notices or communications received by the Company with respect to the
Collateral, all in such manner as the Administrative Agent may require;
(i) upon the occurrence and during the continuance of any Event of
Default, upon request of the Administrative Agent, promptly notify (and
the Company hereby authorizes the Administrative Agent so to notify) each
account debtor in respect of any Accounts or Instruments that such
Collateral has been assigned to the Administrative Agent hereunder, and
that any payments due or to become due in respect of such Collateral are
to be made directly to the Administrative Agent.
5.02 Other Financing Statements and Liens. Except as otherwise
permitted under Section 8.06 of the Credit Agreement, without the prior written
consent of the Administrative Agent (granted with the authorization of the
Lenders as specified in Section 10.09 of the Credit Agreement), the Company
shall not file or suffer to be on file, or authorize or permit to be filed or to
be on file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Administrative Agent is not named as the
sole secured party for the benefit of the Lenders.
5.03 Preservation of Rights. The Administrative Agent shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.
5.04 Special Provisions Relating to Certain Collateral.
(a) Stock Collateral.
(1) The Company will cause the Stock Collateral to constitute at all
times 100% of the total number of shares of each class of capital stock of each
Issuer then outstanding; provided that if any such Issuer is organized under the
laws of jurisdiction other than the United States of America or a State thereof,
the Company need only cause the Stock Collateral of such Issuer to constitute
not less than 65% of the total number of shares of each class of capital stock
of such Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, provided that the Company agrees that it will not vote the Stock
Collateral in any manner that is inconsistent with the terms of this Agreement,
the Credit Agreement, the Notes or any such other instrument or agreement; and
the Administrative Agent shall execute and deliver to the Company or cause to be
executed and delivered to the Company all such proxies, powers of attorney,
dividend and other orders, and all such instruments, without recourse, as the
Company may reasonably request for the purpose of enabling the Company to
exercise the rights and powers which it is entitled to exercise pursuant to this
Section 5.04(a)(2).
Amended and Restated Security Agreement
<PAGE> 119
-13-
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends on
the Stock Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Administrative
Agent or any Lender exercises any available right to declare any Secured
Obligations due and payable or seeks or pursues any other relief or remedy
available to it under applicable law or under this Agreement, the Credit
Agreement, the Notes or any other agreement relating to such Secured
Obligations, all dividends and other distributions on the Stock Collateral shall
be paid directly to the Administrative Agent and retained by it in the
Collateral Account as part of the Stock Collateral, subject to the terms of this
Agreement, and, if the Administrative Agent shall so request in writing, the
Company agrees to execute and deliver to the Administrative Agent appropriate
additional dividend, distribution and other orders and documents to that end,
provided that if such Event of Default is cured, any such dividend or
distribution theretofore paid to the Administrative Agent shall, upon request of
the Company (except to the extent theretofore applied to the Secured
Obligations), be returned by the Administrative Agent to the Company.
(b) Intellectual Property.
(1) For the purpose of enabling the Administrative Agent to exercise
rights and remedies under Section 5.05 hereof at such time as the Administrative
Agent shall be lawfully entitled to exercise such rights and remedies, and for
no other purpose, the Company hereby grants to the Administrative Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable without
payment of royalty or other compensation to the Company) to use, assign, license
or sublicense any of the Intellectual Property now owned or hereafter acquired
by the Company, wherever the same may be located, including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof.
(2) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 8.05 of the Credit Agreement which limit
the right of the Company to dispose of its property, so long as no Event of
Default shall have occurred and be continuing, the Company will be permitted to
exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of or
take other actions with respect to the Intellectual Property in the ordinary
course of the business of the Company. In furtherance of the foregoing, unless
an Event of Default shall have occurred and be continuing the Administrative
Agent shall from time to time, upon the request of the Company, execute and
deliver any instruments, certificates or other documents, in the form so
requested, which the Company shall have certified are appropriate (in its
judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to clause (1) immediately above
as to any specific Intellectual Property). Further, upon the payment in full of
all of the Secured Obligations and cancellation or termination of the
Commitments and Letter of Credit Liabilities or earlier expiration of this
Agreement or release of the Collateral, the Administrative Agent shall grant
back to the Company the license granted
Amended and Restated Security Agreement
<PAGE> 120
-14-
pursuant to clause (1) immediately above. The exercise of rights and remedies
under Section 5.05 hereof by the Administrative Agent shall not terminate the
rights of the holders of any licenses or sublicenses theretofore granted by the
Company in accordance with the first sentence of this clause (2).
(c) LLC Collateral.
(1) The Company will cause the LLC Collateral to constitute at all
times 100% of the aggregate ownership and membership interests of each LLC
Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the LLC Collateral for all purposes
not inconsistent with the terms of this Agreement, the Credit Agreement, the
Notes or any other instrument or agreement referred to herein or therein,
provided that the Company agrees that it will not vote the LLC Collateral in any
manner that is inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any such other instrument or agreement; and the Agent
shall execute and deliver to the Company or cause to be executed and delivered
to the Company all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as the Company may reasonably
request for the purpose of enabling the Company to exercise the rights and
powers that they are entitled to exercise pursuant to this Section 5.04(c).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any
distributions and dividends payable in respect of the LLC Collateral.
(4) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Agent or any Lender
exercises any available right to declare any Secured Obligations due and payable
or seeks or pursues any other relief or remedy available to it under applicable
law or under this Agreement, the Credit Agreement, the Notes or any other
agreement relating to such Secured Obligations, all distributions and dividends
on the LLC Collateral, whether consisting of cash, checks and other near-cash
items, shall be paid directly to the Agent and retained by it as part of the
Collateral, subject to the terms of this Agreement, and, if the Agent shall so
request in writing, the Company agrees to execute and deliver to the Agent
appropriate additional dividend, distribution and other orders and documents to
that end, and if the Company shall receive any such amounts, it shall hold the
same in trust for the Agent and deliver the same forthwith to the Agent in the
exact form received, duly indorsed by the Company to the Agent, if required;
provided that if such Event of Default is cured, any such dividend or
distribution theretofore paid to the Agent shall, upon request of the Company
(except to the extent theretofore applied to the Secured Obligations), be
returned by the Agent to the Company.
5.05 Events of Default, Etc. During the period during which an Event
of Default shall have occurred and be continuing:
Amended and Restated Security Agreement
<PAGE> 121
-15-
(a) the Company shall, at the request of the Administrative Agent,
assemble the Collateral owned by it at such place or places, reasonably
convenient to both the Administrative Agent and the Company, designated in
the Administrative Agent's request;
(b) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;
(c) the Administrative Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to
the maximum extent permitted by law, to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral as if the
Administrative Agent were the sole and absolute owner thereof (and the
Company agrees to take all such action as may be appropriate to give
effect to such right);
(d) the Administrative Agent in its discretion may, in its name or
in the name of the Company or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account
of or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(e) the Administrative Agent may, upon ten Business Days' prior
written notice to the Company of the time and place, with respect to the
Collateral or any part thereof which shall then be or shall thereafter
come into the possession, custody or control of the Administrative Agent,
the Lenders or any of their respective agents, sell, lease, assign or
otherwise dispose of all or any part of such Collateral, at such place or
places as the Administrative Agent deems best, and for cash or for credit
or for future delivery (without thereby assuming any credit risk), at
public or private sale, without demand of performance or notice of
intention to effect any such disposition or of the time or place thereof
(except such notice as is required above or by applicable statute and
cannot be waived), and the Administrative Agent or any Lender or anyone
else may be the purchaser, lessee, assignee or recipient of any or all of
the Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Company,
any such demand, notice and right or equity being hereby expressly waived
and released. In the event of any sale, assignment, or other disposition
of any of the Trademark Collateral, the goodwill connected with and
symbolized by the Trademark Collateral subject to such disposition
Amended and Restated Security Agreement
<PAGE> 122
-16-
shall be included, and the Company shall supply to the Administrative
Agent or its designee, for inclusion in such sale, assignment or other
disposition, all Intellectual Property relating to such Trademark
Collateral. The Administrative Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05, including by virtue of the exercise of the license granted to the
Administrative Agent in Section 5.04(b) hereof, shall be applied in accordance
with Section 5.09 hereof
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Company acknowledges that any such private sales may be at prices and on terms
less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the Administrative Agent
or issuer thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Company shall remain liable for any
deficiency.
5.07 Removals, Etc. Without at least 30 days' prior written notice
to the Administrative Agent, the Company shall not (i) maintain any of its books
and records with respect to the Collateral at any office or maintain its
principal place of business at any place, or permit any Inventory or Equipment
to be located anywhere, other than at the address indicated beneath the
signature of the Company to the Credit Agreement or at one of the locations
identified in Part A of Annex 6 hereto or in transit from one of such locations
to another or (ii) change its name, or the name under which it does business,
from the name shown on the signature pages hereto; provided, however, that the
Company may do business in the states and under the names specified in Part B of
Annex 6 hereto.
5.08 Private Sale. The Administrative Agent and the Lenders shall
incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 5.05 hereof conducted in a
commercially reasonable manner. The Company hereby waives any claims against the
Administrative Agent or any Lender arising by reason of the fact that the price
at which the Collateral may have been sold at such a private sale was less than
the
Amended and Restated Security Agreement
<PAGE> 123
-17-
price which might have been obtained at a public sale or was less than the
aggregate amount of the Secured Obligations, even if the Administrative Agent
accepts the first offer received and does not offer the Collateral to more than
one offeree.
5.09 Application of Proceeds. Except as otherwise herein expressly
provided and except as provided below in this Section 5.09, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Administrative Agent
under Section 4 hereof or this Section 5, shall be applied by the Administrative
Agent:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Administrative Agent and the reasonable fees and expenses
of its agents and counsel, and all reasonable expenses incurred and
advances made by the Administrative Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in each
case equally and ratably in accordance with the respective amounts thereof
then due and owing or as the Lenders holding the same may otherwise agree;
and
Finally, to the payment to the Company, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.04 hereof shall be applied first to the Letter of Credit
Liabilities outstanding from time to time and second to the other Secured
Obligations in the manner provided above in this Section 5.09.
As used in this Section 5, "proceeds" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the Company or any issuer of or obligor on any of the
Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers granted
by this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of the Company for the purpose of carrying out the provisions
of this Section 5 and taking any action and executing any instruments which the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 5 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks made payable to
Amended and Restated Security Agreement
<PAGE> 124
-18-
the order of the Company representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution and
delivery of this Agreement, the Company shall (i) file such financing statements
and other documents in such offices as the Administrative Agent may request to
perfect the security interests granted by Section 3 of this Agreement, (ii)
cause the Administrative Agent (to the extent requested by any Lender) to be
listed as the lienholder on all certificates of title or ownership relating to
Motor Vehicles owned by the Company, (iii) deliver to the Administrative Agent
all certificates identified in Annex I hereto, accompanied by undated stock
powers duly executed in blank and (iv) in the case of the Pledged Membership
Interests, take such action as the Agent shall deem necessary or appropriate to
perfect the pledge and security interest granted by Section 3 of this Agreement
in such Pledged Membership Interests, including without limitation (x) to the
extent that they constitute Securities (as defined in Section 8-102(a)(15) of
the Uniform Commercial Code) which are not represented by a certificate, cause
the LLC Issuer of such Pledged Membership Interests to either register the Agent
as the registered owner thereof or agree that it will comply with Instructions
(as defined in Section 8-102(a)(12) of the Uniform Commercial Code) originated
by the Agent with respect to such Pledged Membership Interests without further
consent by the Company and (y) to the extent that they constitute Securities (as
defined in Section 8-102(a)(15) of the Uniform Commercial Code) which are
represented by a certificate, deliver to the Agent any such certificates
representing the Pledged Membership Interests.
5.12 Termination. When all Secured Obligations shall have been paid
in full and the Commitments of the Lenders under the Credit Agreement and all
Letter of Credit Liabilities shall have expired or been terminated, this
Agreement shall terminate, and the Administrative Agent shall forthwith cause to
be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of the Company and to be
released and canceled all licenses and rights referred to in Section 5.04(b)
hereof. The Administrative Agent shall also execute and deliver to the Company
upon such termination such Uniform Commercial Code termination statements,
certificates for terminating the Liens on the Motor Vehicles and such other
documentation as shall be reasonably requested by the Company to effect the
termination and release of the Liens on the Collateral.
5.13 Expenses. The Company agrees to pay to the Administrative Agent
all reasonable out-of-pocket expenses (including reasonable expenses for legal
services of every kind) of, or incident to, the enforcement of any of the
provisions of this Section 5, or performance by the Administrative Agent of any
obligations of the Company in respect of the Collateral which the Company has
failed or refused to perform, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement in respect of any of the
Collateral, and for the care of the Collateral and defending or asserting rights
and claims of the Administrative Agent in respect thereof, by litigation or
otherwise, including expenses of
Amended and Restated Security Agreement
<PAGE> 125
-19-
insurance, and all such expenses shall be Secured Obligations to the
Administrative Agent secured under Section 3 hereof.
5.14 Further Assurances. The Company agrees that, from time to time
upon the written request of the Administrative Agent, the Company will execute
and deliver such further documents and do such other acts and things as the
Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.
5.15 Release of Motor Vehicles. So long as no Event of Default shall
have occurred and be continuing, upon the request of the Company, the
Administrative Agent shall execute and deliver to the Company such instruments
as the Company shall reasonably request to remove the notation of the
Administrative Agent as lienholder on any certificate of title for any Motor
Vehicle; provided that any such instruments shall be delivered, and the release
effective only upon receipt by the Administrative Agent of a certificate from
the Company stating that the Motor Vehicle the lien on which is to be released
is to be sold or has suffered a casualty loss (with title thereto passing to the
casualty insurance company therefor in settlement of the claim for such loss).
Section 6. Miscellaneous.
6.01 No Waiver. No failure on the part of the Administrative Agent
or any of its agents to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof nor shall any single or partial exercise by the Administrative
Agent or any of its agents of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
6.02 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
6.03 Notices. All notices, requests, consents and demands hereunder
shall be in writing and telexed, telecopied or delivered to the intended
recipient at its "Address for Notices" specified pursuant to Section 11.02 of
the Credit Agreement and shall be deemed to have been given at the times
specified in said Section 11.02.
6.04 Waivers, Etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the Company
and the Administrative Agent (with the consent of the Lenders as specified in
Section 10.09 of the Credit Agreement). Any such amendment or waiver shall be
binding upon the Administrative Agent and each Lender, each holder of any of the
Secured Obligations and the Company.
Amended and Restated Security Agreement
<PAGE> 126
-20-
6.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the
Company, the Administrative Agent, the Lenders and each holder of any of the
Secured Obligations (provided, however, that the Company shall not assign or
transfer its rights hereunder without the prior written consent of the
Administrative Agent).
6.06 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
6.07 Agents. The Administrative Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
6.08 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
Amended and Restated Security Agreement
<PAGE> 127
-21-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.
BE AEROSPACE, INC.
By
-----------------------------
Title:
THE CHASE MANHATTAN BANK
as Administrative Agent
By
-----------------------------
Title:
Amended and Restated Security Agreement
<PAGE> 128
ANNEX 1
PLEDGED STOCK
[See Section 2(b) and (c).]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Certificate
Issuer Nos. Registered Owner Number of Shares
- ------ ---- ---------------- ----------------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BE Avionics, Inc.
Flight Equipment and (now known as BE 325,000 ordinary shares, (pounds)1
Engineering Limited 26 Aerospace, Inc.) par value
- -----------------------------------------------------------------------------------------------------
1-23
BE Aerospace (uncertificated BE Aerospace, 23 shares of capital stock,
(Netherlands) B.V. shares) Inc. dfl. 1,000 par value
- -----------------------------------------------------------------------------------------------------
BE Aerospace (USA), BE Aerospace, 65 shares of common stock,
Inc. 2 Inc. par value $0.01
- -----------------------------------------------------------------------------------------------------
BE Aerospace, 100 shares of common stock,
Acurex Inc. 2 Inc. par value $0.01
- -----------------------------------------------------------------------------------------------------
BE Aerospace, 1,000 shares of common
B/E Services, Inc. 1 Inc. stock, par value $0.01
- -----------------------------------------------------------------------------------------------------
</TABLE>
Annex 1 to Amended and Restated Credit Security Agreement
<PAGE> 129
ANNEX 2
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
<TABLE>
<CAPTION>
Title Date filed Registration No. Effective Date
----- ---------- ---------------- --------------
<S> <C> <C> <C>
None.
</TABLE>
<PAGE> 130
ANNEX 3
LIST OF PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
File Patent Country Registration No. Date
- ---- ------ ------- ---------------- ----
<S> <C> <C> <C> <C>
Locking USA 37103076 01/23/73
Electrical Cable
Connector
Acoustic Yoke Great Brit. 1510243 02/27/76
Coupler Switch
Transducer USA 4028491 06/07/77
Switching System
Miniature USA 4029375 06/14/77
Electrical
Connector
Acoustic Yoke USA 4029169 06/14/77
Ear Coupler USA 4055233 10/25/77
Variable USA 4352084 09/28/82
Resistor Disk
Assembly
Controller Unit USA 4509097 04/02/85
Quick Release USA 4547016 10/15/85
Mounting
Matrix Control USA 4577191 03/18/86
Method &
Apparatus
574259-1 Coffee/Tea Maker APPLICATION BEING PREPARED
574259-11 Auto Retractable Step II APPLICATION BEING PREPARED
574259-12 Auto Retractable Step I APPLICATION BEING PREPARED
776650 Auto Monitor Tilt Mechanism APPLICATION FILED 10/03/91
</TABLE>
<PAGE> 131
<TABLE>
<CAPTION>
File Patent Country Registration No. Date
- ---- ------ ------- ---------------- ----
<S> <C> <C> <C> <C>
574267-12 Apparatus for France 46414
Selectively
574267-13 Apparatus for Great Brit. 46414
Selectively
574267-14 Apparatus for Italy 46414
Selectively
574267- Brewing Inline USA 3898428 08/05/73
Apparatus
574267- Cart, Serving USA 2986582 10/19/76
Has Spaced
574267-30 Des. Dish Singl- USA 284156 06/10/86
Serv.
574267- Des. Dish Singl- USA 280960 10/15/85
Serv.
574267- Des. Dish Singl- USA 282325 01/28/86
Serv.
574267- Dinsh Singl- USA 4560859 12/24/85
Serv.
574267- Heater Assy USA 4294643 10/13/81
Method
574267- Heater Assy USA 4286143 08/25/81
Laminated
574267- Oven Freezer Canada 0891768 02/01/72
Has Fan
574267-5 Singl-Serv. Australia 515828 09/15/78
Heater Shelf
574267-17 Singl Serv. Canada 1218245 02/24/87
574267-18 Singl Serv. Canada 1231543 01/19/88
574267-11 Singl Serv. Europe 0046414 08/20/81
</TABLE>
<PAGE> 132
<TABLE>
<CAPTION>
File Patent Country Registration No. Date
- ---- ------ ------- ---------------- ----
<S> <C> <C> <C> <C>
574267-15 Singl Serv. Japan 1214307 10/20/83
574267-10 Singl. Serv. Germany 31728324 08/20/81
System
574267-20 Singl Serv. Great Brit. 2017293 09/14/78
Heater
574267-8 Singl. Serv. Japan 1085804 06/18/81
Heater
574267-25 Singl Serv. USA 4180125 12/25/79
Heater
574267-33 Singl Serv. USA 30623 05/26/81
Heater
574267-34 Singl Serv. USA 4346756 08/31/82
System
574267-29 Singl Serv. USA 4776485 10/11/88
with Insulat.
Aircraft USA 4647980 03/02/87
Passenger
Television
System
Airline USA 281940 12/03/85
Passenger
Seatback
Combined LCD
Display and
Battery Pack
Unit For an
Entertainment
and Information
System
Television USA 295042 04/05/88
Module
</TABLE>
<PAGE> 133
<TABLE>
<CAPTION>
File Patent Country Registration No. Date
- ---- ------ ------- ---------------- ----
<S> <C> <C> <C> <C>
Aircraft Taiwan 36006 11/10/87
Passenger
Television
System
Television Taiwan 17791 03/10/89
Module
Aircraft Australia 577768 02/13/89
Passenger
Television
System
Aircraft Canada 1227735 10/06/87
Passenger
Television
System
Aircraft Europe Application Filed 1/15/87;
Passenger (designated Ser. No. 87100474.3
Television countries
System are:
Belg., Fr.,
Ger., U.K.,
Italy,
Swed.,
Switz. and
Neth.)
Airline Japan Application Filed 5/18/87;
Passenger Ser. No. 12160/27
Television
System
Television Japan Application Filed 5/23/26;
Module Set. No. 61-19680
</TABLE>
<PAGE> 134
ANNEX 4
LIST OF TRADE NAMES, TRADEMARKS, SERVICE MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
U.S. Trademarks
<TABLE>
<CAPTION>
Registration Registration
Mark No. Date Goods
---- --- ---- -----
<S> <C> <C> <C>
1. Airvision
Logo 1,404,654 8/12/86 Audio visual entertainment units
for installation in the rear seats
of transportation vehicles,
consisting of: a viewing screen,
earphones, cassettes, cassette
players - sold as a unit,
international class 9.
2. Airvision 1,449,452 7/28/87 Audio visual entertainment units
for installation in the rear seats
of transportation vehicles,
consisting of: a viewing screen,
earphones, cassettes, cassette
players - sold as a unit, in
international class 9.
</TABLE>
<PAGE> 135
Foreign Trademarks
<TABLE>
<CAPTION>
Mark Full Ctry Status Application Filing Registration Reg. Date Next Classes
Names No. Date No. Renewal
Date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRVISION ALGERIA Registered 22/06/88 526719A 22/06/88 22/06/98 9.37.41.
AIRVISION AUSTRALIA Registered A490611 06/07/88 A19D611 06/07/88 06/07/96 41.
AIRVISION AUSTRALIA Registered A460612 06/07/88 A19D612 06/07/88 06/07/95 9.
AIRVISION AUSTRIA Registered 22/06/88 525719A 22/06/88 22/06/95 9.37.41.
AIRVISION BENELUX Registered 710856 07/01/88 438360 03/06/88 07/01/96 9.37.41.
AIRVISION BULGARIA Registered 22/06/88 525719A 22/06/88 22/06/96 9.37.41.
AIRVISION CROATIA Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION CZECHOSLOVAKIA Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION DENMARK Pending 4276/88 24/06/88 3671-1991 14/06/91 14/06/01 9.37.41.
AIRVISION EGYPT Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION FINLAND Registered 3766/88 24/06/88 106329 06/06/90 06/06/00 9.37.41.
AIRVISION FRANCE Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION GERMANY EAST Registered 22/06/88 525719 22/06/88 22/06/98 9.37.41.
AIRVISION GERMANY WEST Withdrawn 22/06/88 525719 22/06/88 22/06/98 9.37.41.
AIRVISION GREAT BRITAIN _______ 1360026 29/04/88 9.
AIRVISION GREAT BRITAIN Pending 1360026 29/04/88 41.
AIRVISION GREECE Registered 89642 06/07/88 89642 17/12/90 06/07/98 9.
AIRVISION HUNGARY Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION INDONESIA Registered 22/06/88 248940 24/04/88 24/04/99 9.
AIRVISION INTERNATIONAL Registered 22/06/88 525719 22/06/88 22/06/98 9.37.41.
AIRVISION INTERNATIONAL Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION IRELAND Registered 2593/88 23/06/88 129284 28/11/90 07/01/96 9.
AIRVISION ITALY Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION JAPAN Registered 78073/88 07/01/88 229993T 31/01/91 31/10/00 24.
AIRVISION JAPAN Pending 78072/88 07/01/88 11.
AIRVISION JAPAN Registered 78074/88 07/01/88 2325T84 30/06/91 30/06/01 26.
AIRVISION JAPAN Drop 78072/88 07/01/88 11.
AIRVISION KOREA PEP.DEM.R. Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION LIECHTENSTEIN Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION MALAYSIA Pending 88/03214 04/07/88 9.
AIRVISION MONACO Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION MOROCCO Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION NEW ZEALAND Registered 184962 24/06/88 184982 10/03/92 24/06/95 41.
AIRVISION NEW ZEALAND Registered 184961 24/06/88 184981 10/03/92 24/06/96 9.
AIRVISION NORWAY Registered 882834 27/06/88 140062 11/01/90 11/01/00 9.37.41.
AIRVISION PORTUGAL Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION ROMANIA Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION SAN MARINO Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION SINGAPORE Registered 3332/88 30/06/88 3332/88 30/06/88 07/01/96 9.
AIRVISION SLOVENIA Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION SOUTH KOREA Registered 1368/88 29/06/88 10336 20/09/89 20/08/98 111.
AIRVISION SOUTH KOREA Registered 14427/88 29/06/88 181022 11/10/89 11/10/99 39.
AIRVISION SOUTH KOREA Registered 14429/88 29/06/88 177402 23/06/89 23/06/99 52.
AIRVISION SOUTH KOREA Registered 14426/88 29/06/88 177778 23/06/89 23/06/99 31.
AIRVISION SOVIET UNION Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION SPAIN Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION SUDAN Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION SWEDEN Pending 88-6694 06/07/88 227108 13/10/91 18/10/01 9.37.41.
AIRVISION SWITZERLAND Registered 22/06/88 525719A 22/06/88 22/06/98 9.
AIRVISION TAIWAN Registered 71129896 24/06/88 447777 01/08/89 01/06/99 73.
AIRVISION TAIWAN Registered 77-29696 24/06/88 457033 06/01/89 01/11/99 33.
AIRVISION TAIWAN Registered 77129899 24/06/38 33324 11/01/88 16/01/99 1.
</TABLE>
<PAGE> 136
<TABLE>
<CAPTION>
Mark Full Ctry Status Application Filing Registration Reg. Date Next Classes
Names No. Date No. Renewal
Date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRVISION TAIWAN Registered 77129897 24/06/88 424801 31/01/89 31/01/99 66.
AIRVISION UKRAINE Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION YUGOSLAVIA Registered 22/06/88 525719A 22/06/88 22/06/98 9.37.41.
AIRVISION (LOGO) ALGERIA Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) AUSTRALIA Registered 492951 09/06/88 A492981 06/01/89 09/06/95 41.
AIRVISION (LOGO) AUSTRALIA Registered 492979 09/06/88 A412979 09/06/88 09/06/95 9.
AIRVISION (LOGO) AUSTRALIA Registered 492980 09/06/88 A492989 09/06/88 09/06/95 16.
AIRVISION (LOGO) AUSTRIA Registered 06/01/89 533525A 06/01/88 06/01/99 9.16.41.
AIRVISION (LOGO) BENELUX Registered 717180 06/07/88 447996 10/02/89 06/07/98 9.16.41.
AIRVISION (LOGO) BULGARIA Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) CROATIA Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) CZECHOSLOVAKIA Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) DENMARK Registered 5390/88 04/06/88 639-1990 09/02/90 09/02/90 9.16.41.
AIRVISION (LOGO) EGYPT Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) FINLAND Registered 3412/88 06/08/88 109123 06/10/90 06/10/00 9.16.41.
AIRVISION (LOGO) FRANCE Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) GERMANY EAST Registered 06/01/89 533525 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) GERMANY WEST Registered 06/01/89 533525 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) GREAT BRITAIN Registered 1363493 06/06/88 1353493 23/10/92 06/05/95 41.
AIRVISION (LOGO) GREAT BRITAIN Registered 1492841 21/02/92 1492041 21/02/93 26/02/99 9.
AIRVISION (LOGO) GREAT BRITAIN Rejected 1363992 06/06/88 16.
AIRVISION (LOGO) GREAT BRITAIN Pending 1363991 06/06/88 9.
AIRVISION (LOGO) GREECE Registered 90143 10/06/88 90143 10/06/88 10/06/98 9.16
AIRVISION (LOGO) HONG KONG Registered 5063/88 16/06/88 8700/93 16/02/93 16/06/95 16.
AIRVISION (LOGO) HONG KONG Registered 5062/88 16/06/88 9.
AIRVISION (LOGO) HUNGARY Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) INDONESIA Registered 11/06/88 266038 O1/04/91 01/04/01 9.16,
AIRVISION (LOGO) INTERNATIONAL Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) INTERNATIONAL Registered 06/01/89 533525 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) IRELAND Registered 3410/88 06/06/88 129286 26/11/90 06/08/95 9.
AIRVISION (LOGO) IRELAND Registered 3411/88 06/06/88 129286 26/11/90 06/08/95 16.
AIRVISION (LOGO) ITALY Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) JAPAN Registered 92602/88 10/06/88 2402644 30/04/92 30/04/02 26.
AIRVISION (LOGO) JAPAN Pending 92599/88 10/06/88 11.
AIRVISION (LOGO) JAPAN Registered 92601/88 10/06/88 2364916 25/12/91 29/12/01 25.
AIRVISION (LOGO) JAPAN Registered 92600/88 10/06/88 2340952 30/09/91 30/06/01 24.
AIRVISION (LOGO) KOREA PEP.DEM.R. Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) LECHTENSTEIN Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) MALAYSIA Pending 88/06223 10/10/88 9.
AIRVISION (LOGO) MALAYSIA Pending 88/06222 10/10/88 16.
AIRVISION (LOGO) MONACO Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) MOROCCO Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) NEW ZEALAND Registered 186296 10/06/88 186296 12/03/92 10/08/95 16.
AIRVISION (LOGO) NEW ZEALAND Registered 186296 10/06/88 186295 12/03/92 10/09/95 9.
AIRVISION (LOGO) NEW ZEALAND Registered 186297 10/06/88 186297 12/03/92 10/08/95 41.
AIRVISION (LOGO) NORWAY Registered 88-3633 01/06/88 146136 23/06/91 23/06/01 9.16.41.
AIRVISION (LOGO) POLAND Pending 2-82457 22/06/90
AIRVISION (LOGO) PORTUGAL Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) ROMANIA Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
AIRVISION (LOGO) SAN MARINO Registered 06/01/89 533525A 06/01/38 06/01/99 9.16.41
AIRVISION (LOGO) SINGAPORE Pending 5234/88 24/06/88 16.
AIRVISION (LOGO) SINGAPORE Registered 5232/88 24/06/88 6232/88 24/09/88 24/09/96 9.
AIRVISION (LOGO) SLOVENIA Registered 06/01/89 533525A 06/01/89 06/01/99 9.16.41.
</TABLE>
<PAGE> 137
<TABLE>
<CAPTION>
Mark Full Ctry Status Application Filing Registration Reg. Date Next Classes
Names No. Date No. Renewal
Date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIRVISION (LOGO) SOUTH KOREA Registered 18260/88 27/06/88 177776 29/08/89 29/06/99 51.
AIRVISION (LOGO) SOUTH KOREA Registered 1797/88 27/06/88 10637 16/11/99 16/11/99 111.
AIRVISION (LOGO) SOUTH KOREA Pending 18259/88 27/06/88 39.
AIRVISION (LOGO) SOUTH KOREA Registered 19261/88 27/06/88 177398 23/06/99 23/06/99 52.
AIRVISION (LOGO) SOVIET UNION Registered 06/01/89 533525A 06/01/99 06/01/99 9.16.41.
AIRVISION (LOGO) SPAIN Registered 06/01/89 533525A 06/01/99 06/01/99 9.16.41.
AIRVISION (LOGO) SUDAN Registered 06/01/89 533525A 06/01/99 06/01/99 9.16.41.
AIRVISION (LOGO) SWEDEN Registered 96-6794 12/08/88 227113 18/10/01 18/10/01 9.16.41.
AIRVISION (LOGO) SWITZERLAND Registered 06/01/89 533525A 06/01/99 06/01/99 9.16.41.
AIRVISION (LOGO) TAIWAN Registered 77-44068 22/09/88 437928 01/04/99 01/04/99 96.
AIRVISION (LOGO) TAIWAN Registered 77-44085 22/09/88 435018 16/03/99 16/03/99 49.
AIRVISION (LOGO) TAIWAN Registered 77-44069 22/08/88 445192 31/01/99 31/01/99 96.
AIRVISION (LOGO) TAIWAN Registered 77-44066 22/08/88 35082 15/01/99 18/01/99 1.
AIRVISION (LOGO) TAIWAN Registered 77-44067 22/08/88 447783 01/06/99 01/06/99 73.
AIRVISION (LOGO) UKRAINE Registered 06/01/89 533525A 06/01/99 06/01/99 9.16.41.
AIRVISION (LOGO) YUGOSLAVIA Registered 06/01/89 533525A 06/01/99 06/01/99 9.16.41.
</TABLE>
<PAGE> 138
ANNEX 5
LIST OF CONTRACTS LICENSES AND OTHER AGREEMENT
1. Pursuant to an Amended and Restated Asset Purchase Agreement (the
"Asset Purchase Agreement") between the Company and Philips Electronics North
America Corporation ("PENA") dated August 27, 1993, on October 13, 1993 the
Company purchased certain assets and liabilities from the Philips Airvision
division ("Airvision") of PENA, including certain patents, patent applications,
trademarks and trademark applications of Airvision.
Based on copies of affidavits and other letters of the inventors' attorney
in PENA's files, a public disclosure by the inventors of a representative
airline seat with seatback mounted television was made on or about October 1984
at a meeting of the World Airline Entertainment Association in San Diego. This
disclosure was not brought to the attention of the Patent and Trademark Office
examiner during the prosecution of this application.
Based on such affidavits and letters, it is believed that the mock-up
consisted of a small LCD color television screen supported by tape and wood
blocks in the seat headrest. The screen was removed from a hand-held portable
television and combined with electronic components externally of the seat to
provide a visual display with separate channels of a seatback mounted
television.
Such affidavits and letters disclose that the above mock-up was displayed
on a limited basis in a hotel room to others attending the conference for the
purpose of soliciting a research and development partner having access to an
aircraft upon which the system could be tested. At the time, no in-flight
demonstration testing had occurred.
Based on facts averred in a Declaration Under 37 C.F.R. 1.131 filed by the
inventors during prosecution of the application, there is also a possible basis
for the assertion that the television system was "on sale" more than one year
prior to the date of application. As PENA understands it, Airvision's
predecessor in interest (a) made a confidential offer to sell the system to The
Boeing Company on October 11, 1982 including a description of and offer to
include "Second Generation Devices" intended to permit a selection of movies;
(b) completed a first prototype (seat mounted LCD screen in 1983); (c) completed
a working second prototype (TV modular system for installation into passenger
seat) in September, 1984; (d) conducted market studies
<PAGE> 139
for the remainder of 1984 and 1985; (e) completed a third prototype (production
model) on August 13, 1985; and (f) filed a patent application on January 21,
1986, more than one year after the working prototype was made.
2. Pursuant to a Letter Agreement dated February 5, 1992 between Hughes
Avicom International and Philips Airvision Ltd., Airvision agreed not to assert
against Hughes Avicom Airvision's U.S. Patent No. 4,647,980, and Hughes Avicom
agreed not to assert against Airvision Hughes Avicom's U.S. Patent Application
Serial No. 07/579,335. Pursuant to the Asset Purchase Agreement, the Company has
assumed this agreement.
3. Pursuant to the Asset Purchase Agreement, the Company agreed with PENA
that the assignment of patents and patent applications thereunder was subject to
existing cross-licenses of PENA to which the Company will not have the benefit
and that PENA will have the right to renew and extend such cross-licenses under
such patents and patent applications.
4. The foreign trademarks of the Company were agreed to be transferred to
the Company pursuant to the Asset Purchase Agreement by Philips Electronics
N.V., a Netherlands corporation and indirect parent of PENA. However, until
certain transfer documents have been filed in certain jurisdictions outside of
the United States, the Company cannot be said to hold all ownership, right,
title and interest in and to such trademarks.
<PAGE> 140
ANNEX 6
LIST OF LOCATIONS AND TRADE NAMES
Part A - List of Locations
B/E Aerospace, Inc., Corporate Headquarters
1400 Corporate Center Way
Wellington, FL 33414
(561) 791-5000 Maine (561) 791-7900 Fax Mkt. & HR
(561) 791-3966 Fax Finance & Legal (561) 791-4402 Corp. Executive
B/E Aerospace, Inc., Galley Products Group
12807 Lake Drive
Delray Beach, FL 33444
(561) 276-6083 Main (561) 278-8031 Fax
B/E Aerospace, Inc., Galley Products Group
1111 N. Armando Street
Anaheim, CA 92806
(714) 630-5150 Main (714) 630-8510
B/E Aerospace, Inc., Galley Products Group
11710 Central Parkway
Jacksonville, FL 3224
(904) 641-4900 Main (904) 646-0281 Fax
B/E Aerospace, Inc., Inflight Entertainment Group
17481 Red Hill Avenue
Irvine, CA 92614
(714) 660-7722 Main (714) 660-7707 Fax
B/E Aerospace, Inc., Seating Products Group
607 Bantam Road
Litchfield, CT 06759
(860) 567-9441 Main (860) 567-3429 Fax
B/E Aerospace, Inc., Seating Products Group
1455 Fairchild Road
Winston-Salem, NC 27105-4588
(910) 767-2000 Main (910) 744-1009 Fax
<PAGE> 141
B/E Aerospace. Inc. Services Group
230 West Blueridge Avenue
Orange, CA 92865
(714) 279-3800 Main (714) 637-3296 Fax
B/E Aerospace, Inc. Services Group
15540 Woodinville-Redmond Rd.
Woodinville, WA 98072
(425) 482-3100 Main BESG (425) 482-3110 Fax
B/E Aerospace, Inc., Services Group
1530 E. Cliff Road
Burnsville, MN 55337
(612) 895-9525 Main (612) 895-9145 Fax
B/E Aerospace, Inc., Services Group
1075 Florida Central Parkway Suite #2300
Longwood, FL 32750
(407) 869-1333 Main (407) 869-1460 Fax
B/E Aerospace, Inc. - Longwood
900 Fox Valley Drive, Suite #104
Longwood, FL 32779
(407) 869-1333 Main (407) 869-1460 Fax
B/E Aerospace, Inc., Services Group in Amsterdam
Kujuitstraat, Building 239
1117 ZN Schiphol-East
The Netherlands
(31) 20-649-8452 Main (31) 20-648-8142 Fax
B/E Aerospace, Inc., Seating Products Group
Grovebury Road
Leighton Buzzard, Bedfordshire, England LU7 8TB
011 (44) 1525-854 Main 011 (44) 1525-853-204 Fax
B/E Aerospace, Seating Products Group in Northern Ireland
2 Moor Road
Kilkeel, County Down, Northern Ireland BT34 4NG
011 (44) 169-37-62471 Main 011 (44)-169-37-64297 Fax
-2-
<PAGE> 142
B/E Aerospace, Inc.
In Amsterdam
Glavanibaan 5
Nieuwegein 3430 BD, The Netherlands
011 (31) 3060-29200 Main 011 (31) 3060-36949 Fax
B/E Aerospace, Inc.
In Chesham
Aerospace House
Asheridge Road, Chesham, Buckinghamshire England, HP5
2QB
(44) 1494-791000 Main (44) 1494-785898 Fax
B/E Aerospace, Inc., Services Group
Jebel Ali Free Zone R/A 6-LOB6
P0 Box 61061
Dubai United Arab Emirates
011 (971) 4-817-477 Main 011 (974) 4-817-377 Fax
-3-
<PAGE> 143
Part B - Trade Names/State
<TABLE>
<CAPTION>
Trade Name State
---------- -----
<S> <C>
BE Avionics California
Florida
PTC Aerospace California
Connecticut
Aircraft Products Company California
Florida
Trans Video Systems Florida
New Jersey
BE Services California
Florida
Nordskog California
Florida
Acurex California
Florida
Burns Aerospace North Carolina
Florida
Royal Inventum The Netherlands
Aerospace Interiors Texas
Florida
</TABLE>
-4-
<PAGE> 144
ANNEX 7
PLEDGED MEMBERSHIP INTERESTS
<TABLE>
<CAPTION>
================================================================================
Certificate Nos. Percentage of
LLC Issuer (if any) Registered Owner Ownership Interest
- ---------- -------- ---------------- ------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
In-Flight
Entertainment, LLC None BE Aerospace, Inc. 100%
================================================================================
</TABLE>
Annex 7 to Amended and Restated Credit Security Agreement
<PAGE> 145
EXHIBIT A-2
AMENDED AND RESTATED GUARANTEE AND SECURITY AGREEMENT
AMENDED AND RESTATED GUARANTEE AND SECURITY AGREEMENT dated as of
November 19, 1997, amended and restated as of April 3, 1998, between In-Flight
Entertainment, LLC, a limited liability company duly organized and validly
existing under the laws of Delaware (the "Guarantor") and THE CHASE MANHATTAN
BANK, as agent for the lenders or other financial institutions or entities
party, as lenders, to the Credit Agreement referred to below (in such capacity,
together with its successors in such capacity, the "Administrative Agent").
BE Aerospace, Inc., a Delaware corporation (the "Company"), certain
lenders (the "Lenders") and the Administrative Agent are parties to a Credit
Agreement dated as of October 29, 1993, as amended and restated as of April 3,
1998 (as modified and supplemented and in effect from time to time, the "Credit
Agreement"), providing, subject to the terms and conditions thereof, for
extensions of credit (by making of loans and issuing letters of credit) to be
made by said Lenders to the Company.
To induce the Lenders to enter into the Credit Agreement and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor has agreed to guarantee the Guaranteed
Obligations (as hereinafter defined), and to pledge and grant a security
interest in the Collateral (as so defined) as security for the Secured
Obligations (as so defined). Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement (as
amended by Amendment No. 1) are used herein as defined therein. In addition, as
used herein:
"Accounts" shall have the meaning ascribed thereto in Section 4(a)
hereof.
"Collateral" shall have the meaning ascribed thereto in Section 4
hereof.
"Collateral Account" shall have the meaning ascribed thereto in
Section 5.01 hereof.
"Copyright Collateral" shall mean all Copyrights, whether now owned
or hereafter acquired by the Guarantor, including each Copyright
identified in Annex 1 hereto.
"Copyrights" shall mean all copyrights, copyright registrations and
applications for copyright registrations, including, without limitation,
all renewals and extensions
Guarantee and Security Agreement
<PAGE> 146
-2-
thereof, the right to recover for all past, present and future
infringements thereof, and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto.
"Documents" shall have the meaning ascribed thereto in Section 4(g)
hereof.
"Equipment" shall have the meaning ascribed thereto in Section 4(e)
hereof.
"Guaranteed Obligations" shall have the meaning ascribed thereto in
Section 2.01 hereof.
"Instruments" shall have the meaning ascribed thereto in Section
4(b) hereof.
"Intellectual Property" shall mean, collectively, all Copyright
Collateral, all Patent Collateral and all Trademark Collateral, together
with (a) all inventions, processes, production methods, proprietary
information, know-how and trade secrets; (b) all licenses or user or other
agreements granted to the Guarantor with respect to any of the foregoing,
in each case whether now or hereafter owned or used including, without
limitation, the licenses or other agreements with respect to the Copyright
Collateral, the Patent Collateral or the Trademark Collateral, listed in
Annex 4 hereto; (c) all information, customer lists, identification of
suppliers, data, plans, blueprints, specifications, designs, drawings,
recorded knowledge, surveys, engineering reports, test reports, manuals,
materials standards, processing standards, performance standards,
catalogs, computer and automatic machinery software and programs; (d) all
field repair data, sales data and other information relating to sales or
service of products now or hereafter manufactured; (e) all accounting
information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all computer
programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits,
variances, certifications and approvals of governmental agencies now or
hereafter held by the Guarantor; and (g) all causes of action, claims and
warranties now or hereafter owned or acquired by the Guarantor in respect
of any of the items listed above.
"Inventory" shall have the meaning ascribed thereto in Section 4(c)
hereof.
"LiveTV LLC" shall mean B/E Harris LiveTV LLC, a Delaware limited
liability company.
"LiveTV LLC Agreement" shall mean the Limited Liability Company
Agreement of B/E Harris LiveTV LLC.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
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"Patent Collateral" shall mean all Patents, whether now owned or
hereafter acquired by the Guarantor, including each Patent identified in
Annex 2 hereto.
"Patents" shall mean all patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties,
damages and payments now or hereafter due and/or payable under and with
respect thereto, including, without limitation, damages and payments for
past or future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding thereto
throughout the world.
"Secured Obligations" shall mean, collectively, (a) all obligations
of the Guarantor in respect of its Guarantee under Section 2 hereof and
(b) all other obligations of the Guarantor to the Lenders and the
Administrative Agent hereunder.
"Trademark Collateral" shall mean all Trademarks, whether now owned
or hereafter acquired by the Guarantor, including each Trademark
identified in Annex 3 hereto. Notwithstanding the foregoing, the Trademark
Collateral does not and shall not include any Trademark that would be
rendered invalid, abandoned, void or unenforceable by reason of its being
included as part of the Trademark Collateral.
"Trademarks" shall mean all trade names, trademarks and service
marks, logos, trademark and service mark registrations, and applications
for trademark and service mark registrations, including, without
limitation, all renewals of trademark and service mark registrations, all
rights corresponding thereto throughout the world, the right to recover
for all past, present and future infringements thereof, all other rights
of any kind whatsoever accruing thereunder or pertaining thereto,
together, in each case, with the product lines and goodwill of the
business connected with the use of, and symbolized by, each such trade
name, trademark and service mark.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York.
Section 2. The Guarantee.
2.01 The Guarantee. The Guarantor hereby guarantees to each Lender
and the Administrative Agent and their respective successors and assigns the
prompt payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the principal of and interest on the Loans made by the Lenders to,
and the Note(s) held by each Lender of, the Company and all other amounts from
time to time owing to the Lenders or the Administrative Agent by the Company
under the Credit Agreement and under the Basic Documents and all Reimbursement
Obligations and interest thereon, in each case strictly in accordance with the
terms thereof (such obligations being herein collectively called the "Guaranteed
Obligations").
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The Guarantor hereby further agrees that if the Company shall fail to pay in
full when due (whether at stated maturity, by acceleration or otherwise) any of
the Guaranteed Obligations, the Guarantor will promptly pay the same, without
any demand or notice whatsoever, and that in the case of any extension of time
of payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
2.02 Obligations Unconditional. The obligations of the Guarantor
under Section 2.01 hereof are absolute and unconditional irrespective of the
value, genuineness, validity, regularity or enforceability of the Credit
Agreement, the Basic Documents or any other agreement or instrument referred to
herein or therein, or any substitution, release or exchange of any other
guarantee of or security for any of the Guaranteed Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 2.02 that the obligations of the Guarantor hereunder shall be absolute
and unconditional under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or more
of the following shall not alter or impair the liability of the Guarantor
hereunder which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantor, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of the
Credit Agreement or the Basic Documents or any other agreement or
instrument referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement or the Basic Documents or any other agreement or instrument
referred to herein or therein shall be waived or any other guarantee of
any of the Guaranteed Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Administrative Agent or any Lender or Lenders as security for any of the
Guaranteed Obligations shall fail to be perfected.
The Guarantor hereby expressly waives diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Administrative
Agent or any Lender exhaust any right, power or remedy or proceed against the
Company under the Credit Agreement or the Basic Documents or any other agreement
or instrument referred to herein or therein, or against
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any other Person under any other guarantee of, or security for, any of the
Guaranteed Obligations.
2.03 Reinstatement. The obligations of the Guarantor under this
Section 2 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Company in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and the Guarantor agrees that it will indemnify
the Administrative Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by the
Administrative Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
2.04 Subrogation. The Guarantor hereby agrees that until the payment
and satisfaction in full of all Guaranteed Obligations and the expiration or
termination of the Commitments and all Letter of Credit Liabilities of the
Lenders under the Credit Agreement it shall not exercise any right or remedy
arising by reason of any performance by it of its guarantee in Section 2.01
hereof, whether by subrogation or otherwise, against the Company or any other
guarantor of any of the Guaranteed Obligations or any security for any of the
Guaranteed Obligations.
2.05 Remedies. The Guarantor agrees that, as between the Guarantor
and the Lenders, the obligations of the Company under the Credit Agreement and
the Basic Documents may be declared to be forthwith due and payable as provided
in Section 9 of the Credit Agreement (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9)
for purposes of Section 2.01 hereof notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Company and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Company) shall forthwith become due and payable by the Guarantor for purposes of
said Section 2.01.
2.06 Instrument for the Payment of Money. The Guarantor hereby
acknowledges that the guarantee in this Section 2 constitutes an instrument for
the payment of money, and consents and agrees that any Lender or the
Administrative Agent, at its sole option, in the event of a dispute by the
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring motion-action under New York CPLR Section 3213.
2.07 Continuing Guarantee. The guarantee in this Section 2 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
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2.08 General Limitation on Guarantee Obligations. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Guarantor under Section 2.01
hereof would otherwise be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under said Section 2.01, then, notwithstanding
any other provision hereof to the contrary, the amount of such liability shall,
without any further action by the Guarantor, the Administrative Agent, the
Lenders or any other Person, be automatically limited and reduced to the highest
amount that is valid and enforceable and not subordinated to the claims of other
creditors as determined in such action or proceeding.
Section 3. Representations and Warranties. The Guarantor represents
and warrants to the Lenders and the Administrative Agent that:
3.01 Action. The Guarantor has all necessary power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution, delivery and performance by the Guarantor of this Agreement have been
duly authorized by all necessary action on its part; and this Agreement has been
duly and validly executed and delivered by the Guarantor and constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and the application of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
3.02 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange are necessary for the execution, delivery or
performance by the Guarantor of this Agreement or for the validity or
enforceability hereof, except for filings and recordings of the Liens created
pursuant to this Agreement.
3.03 Collateral.
(a) When the Guarantor acquires any rights therein, the Guarantor
will be the sole beneficial owner of the Collateral and no Lien will exist
upon the Collateral at any tune (and no right or option to acquire the
same will exist in favor of any other Person), except for Liens permitted
under Section 8.06 of the Credit Agreement and except for the pledge and
security interest in favor of the Administrative Agent for the benefit of
the Lenders created or provided for herein, which pledge and security
interest constitute a first priority perfected pledge and security
interest in and to all of the Collateral (other than Intellectual Property
registered or otherwise located outside of the United States of America).
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(b) Annexes 1, 2 and 3 hereto, respectively, set forth a complete
and correct list of all Copyrights, Patents and Trademarks owned by the
Guarantor on the date hereof; except pursuant to licenses and other user
agreements entered into by the Guarantor in the ordinary course of
business, that are listed in Annex 4 hereto, the Guarantor owns and
possesses the right to use, and has done nothing to authorize or enable
any other Person to use, any Copyright, Patent or Trademark listed in said
Annexes 1, 2 and 3, and all registrations listed in said Annexes 1, 2 and
3 are valid and in full force and effect; except as may be set forth in
said Annex 4, the Guarantor owns and possesses the right to use all
Copyrights, Patents and Trademarks.
(c) Annex 4 hereto sets forth a complete and correct list of all
licenses and other user agreements included in the Intellectual Property
on the date hereof.
(d) To the Guarantor's knowledge, (i) except as set forth in Annex 4
hereto, there is no violation by others of any right of the Guarantor with
respect to any Copyright, Patent or Trademark listed in Annexes 1, 2 and 3
hereto, respectively, and (ii) the Guarantor is not infringing in any
respect upon any Copyright, Patent or Trademark of any other Person; and
no proceedings have been instituted or are pending against the Guarantor
or, to the Guarantor's knowledge, threatened, and no claim against the
Guarantor has been received by the Guarantor, alleging any such violation,
except as may be set forth in said Annex 4.
(e) The Guarantor does not own any Trademarks registered in the
United States of America to which the last sentence of the definition of
Trademark Collateral applies.
(f) Any goods now or hereafter produced by the Guarantor included in
the Collateral have been and will be produced in compliance with the
requirements of the Fair Labor Standards Act, as amended.
Section 4. Collateral. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, the Guarantor hereby pledges and grants to the
Administrative Agent, for the benefit of the Lenders as hereinafter provided, a
security interest in all of the Guarantor's right, title and interest in the
following property, whether now owned by the Guarantor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
(a) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of the Guarantor constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to the Guarantor in respect of any loans or advances or for
Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to the Guarantor under any
guarantee (not including a letter of credit) of the purchase price of
Inventory or
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Equipment sold by the Guarantor and all tax refunds (such accounts,
general intangibles and moneys due and to become due being herein called
collectively "Accounts");
(b) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of the Guarantor evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including (but not limited to) promissory notes, drafts, bills of exchange
and trade acceptances (herein collectively called "Instruments");
(c) all inventory (as defined in the Uniform Commercial Code) of the
Guarantor, including Motor Vehicles held by the Guarantor for lease
(including lease to Subsidiaries of the Guarantor), fuel, tires and other
spare pans, all goods obtained by the Guarantor in exchange for such
inventory, and any products made or processed from such inventory
including all substances, if any, commingled therewith or added thereto
(herein collectively called "Inventory");
(d) all Intellectual Property and all other accounts or general
intangibles not constituting Intellectual Property or Accounts;
(e) all equipment (as defined in the Uniform Commercial Code) of the
Guarantor, including all Motor Vehicles (herein collectively called
"Equipment");
(f) each contract and other agreement of the Guarantor relating to
the sale or other disposition of Inventory or Equipment;
(g) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of the Guarantor covering, evidencing or
representing Inventory or Equipment (herein collectively called
"Documents");
(h) all rights, claims and benefits of the Guarantor against any
Person arising out of, relating to or in connection with Inventory or
Equipment purchased by the Guarantor, including, without limitation, any
such rights, claims or benefits against any Person storing or transporting
such Inventory or Equipment;
(i) the balance from time to time in the Collateral Account; and
(j) all other tangible and intangible personal property of the
Guarantor, including, without limitation, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of the Guarantor described in
the preceding clauses of this Section 4 (including, without limitation,
any proceeds of insurance thereon) and, to the extent related to any
property described in said clauses or such proceeds, products and
accessions, all books, correspondence, credit files, records, invoices and
other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of
the
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Guarantor or any computer bureau or service company from time to time
acting for the Guarantor.
Notwithstanding the foregoing, the Collateral does not and shall not
include:
(i) any ownership interest in, or right, title or interest of the
Guarantor as a member in LiveTV LLC, but shall include (w) any and all
moneys, and any and all rights to receive such moneys, due or to become
due to the Guarantor now or in the future by way of distribution made to
the Guarantor in its capacity as a member of LiveTV LLC or otherwise
pursuant to the LiveTV LLC Agreement, (x) any other property or assets,
and any and all rights to receive such property or assets, of LiveTV LLC
to which the Guarantor now or in the future may be entitled in its
capacity as a member of LiveTV LLC, (y) any other claim which the
Guarantor now has or may acquire in its capacity as a member of LiveTV LLC
against LiveTV LLC and its property or arising out of or for breach or
default under the LiveTV Limited Liability Agreement and (z) all proceeds
of and to any of the foregoing clauses (w) through (y); and
(ii) the assets to be transferred to LiveTV LLC, including, without
limitation, rights and claims of the Company against In-Flight Phone
Corporation transferred to the Guarantor, whether asserted or unasserted
with respect to matters prior to the formation of LiveTV LLC and the
rights to certain technology, trademarks and trade names licensed to the
Guarantor by the Company and to be licensed by the Guarantor to LiveTV
LLC.
Section 5. Cash Proceeds of Collateral.
5.01 Collateral Account. The Administrative Agent may establish with
Chase a cash collateral account (the "Collateral Account"), which may be a
"securities account" (within the meaning of Section 8-501 of the Uniform
Commercial Code), in the name and under the sole control of the Administrative
Agent into which there shall be deposited from time to time the cash proceeds of
any of the Collateral (including proceeds of insurance thereon) required to be
delivered to the Administrative Agent pursuant hereto and into which the
Guarantor may from time to time deposit any additional amounts that it wishes to
pledge to the Administrative Agent for the benefit of the Lenders as additional
collateral security hereunder. The balance from time to time in the Collateral
Account shall constitute part of the Collateral hereunder and shall not
constitute payment of the Secured Obligations until applied as hereinafter
provided. Except as expressly provided in the next sentence, the Administrative
Agent shall remit the collected balance outstanding to the credit of the
Collateral Account to or upon the order of the Guarantor as the Guarantor shall
from time to time instruct. However, at any time following the occurrence and
during the continuance of an Event of Default, the Administrative Agent may
(and, if instructed by the Lenders as specified in Section 10.03 of the Credit
Agreement, shall) in its (or their) discretion apply or cause to be applied
(subject to collection) the balance from time to time outstanding to the credit
of the Collateral Account to the payment of the Secured Obligations in
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the manner specified in Section 6.09 hereof. The balance from time to time in
the Collateral Account shall be subject to withdrawal only as provided herein.
5.02 Proceeds of Accounts. At any time after the occurrence and
during the continuance of an Event of Default, the Guarantor shall, upon the
request of the Administrative Agent, instruct all account debtors and other
Persons obligated in respect of all Accounts to make all payments in respect of
the Accounts either (a) directly to the Administrative Agent (by instructing
that such payments be remitted to a post office box which shall be in the name
and under the control of the Administrative Agent) or (b) to one or more other
banks in the United States of America (by instructing that such payments be
remitted to a post office box which shall be in the name and under the control
of the Administrative Agent) under arrangements, in form and substance
satisfactory to the Administrative Agent pursuant to which the Guarantor shall
have irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all proceeds of such payments directly to the Administrative
Agent for deposit into the Collateral Account. All payments made to the
Administrative Agent, as provided in the preceding sentence, shall be
immediately deposited in the Collateral Account. In addition to the foregoing,
the Guarantor agrees that, at any time after the occurrence and during the
continuance of an Event of Default, if the proceeds of any Collateral hereunder
(including the payments made in respect of Accounts) shall be received by it,
the Guarantor shall as promptly as possible deposit such proceeds into the
Collateral Account. Until so deposited, all such proceeds shall be held in trust
by the Guarantor for and as the property of the Administrative Agent and shall
not be commingled with any other funds or property of the Guarantor.
5.03 Investment of Balance in Collateral Account. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the Guarantor (or, after the occurrence and during the
continuance of a Default, the Administrative Agent) shall determine, which
Permitted Investments shall if the Collateral Account is a "securities account"
(within the meaning of Section 8-501 of the Uniform Commercial Code) be credited
to the Collateral Account and otherwise shall be held in the name and be under
the control of the Administrative Agent, provided that (i) at any time after the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may (and, if instructed by the Lenders as specified in Section 10.03 of
the Credit Agreement, shall) in its (or their) discretion at any time and from
time to time elect to liquidate any such Permitted Investments and to apply or
cause to be applied the proceeds thereof to the payment of the Secured
Obligations in the manner specified in Section 6.09 hereof and (ii) if requested
by the Guarantor, such Permitted Investments may be held in the name and under
the control of one or more of the Lenders (and in that connection each Lender,
pursuant to Section 10.10 of the Credit Agreement) has agreed that such
Permitted Investments shall be held by such Lender as a collateral sub-agent for
the Administrative Agent hereunder).
5.04 Cover for Letter of Credit Liabilities. Amounts deposited into
the Collateral Account as cover for Letter of Credit Liabilities under the
Credit Agreement pursuant to Section 2.10(f) or Section 9 thereof shall be held
by the Administrative Agent in a separate sub-account (designated "Letter of
Credit Liabilities Sub-Account") and all amounts held in such
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sub-account shall constitute collateral security first for the Letter of Credit
Liabilities outstanding from time to time and second as collateral security for
the other Secured Obligations hereunder.
Section 6. Further Assurances; Remedies. In furtherance of the grant
of the pledge and security interest pursuant to Section 4 hereof, the Guarantor
hereby agrees with each Lender and the Administrative Agent as follows:
6.01 Delivery and Other Perfection. The Guarantor shall:
(a) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Administrative Agent may
request; provided, that so long as no Default shall have occurred and be
continuing, the Guarantor may retain for collection in the ordinary course
any Instruments received by the Guarantor in the ordinary course of
business and the Administrative Agent shall, promptly upon request of the
Guarantor, make appropriate arrangements for making any Instrument pledged
by the Guarantor available to the Guarantor for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent
deemed appropriate by the Administrative Agent, against trust receipt or
like document);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Administrative
Agent) to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Administrative Agent to exercise
and enforce its rights hereunder with respect to such pledge and security
interest, provided that notices to account debtors in respect of any
Accounts or Instruments shall be subject to the provisions of clause (ii)
below;
(c) from time to time as requested by any Lender, cause the
Administrative Agent to be listed as Lienholder of any Equipment covered
by a certificate of title or ownership, and within 120 days of such
request deliver evidence of the same to the Administrative Agent;
(d) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(e) furnish to the Administrative Agent from time to time (but,
unless a Default shall have occurred and be continuing, no more frequently
than quarterly) statements and schedules further identifying and
describing the Copyright Collateral, the Patent Collateral and the
Trademark Collateral, and such other reports m connection with the
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Copyright Collateral, the Patent Collateral and the Trademark Collateral,
as the Administrative Agent may reasonably request, all in reasonable
detail;
(f) promptly upon request of the Administrative Agent, following
receipt by the Administrative Agent of any statements, schedules or
reports pursuant to clause (e) above, modify this Agreement by amending
Annexes 1, 2 and/or 3 hereto, as the case may be, to include any
Copyright, Patent or Trademark which becomes part of the Collateral under
this Agreement;
(g) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Collateral,
and permit representatives of the Administrative Agent to be present at
the Guarantor's place of business to receive copies of all communications
and remittances relating to the Collateral, and forward copies of any
notices or communications received by the Guarantor with respect to the
Collateral, all in such manner as the Administrative Agent may require;
and
(h) upon the occurrence and during the continuance of any Event of
Default, upon request of the Administrative Agent, promptly notify (and
the Guarantor hereby authorizes the Administrative Agent so to notify)
each account debtor in respect of any Accounts or Instruments that such
Collateral has been assigned to the Administrative Agent hereunder, and
that any payments due or to become due in respect of such Collateral are
to be made directly to the Administrative Agent.
6.02 Other Financing Statements and Liens. Except as otherwise
permitted under Section 8.06 of the Credit Agreement, without the prior written
consent of the Administrative Agent (granted with the authorization of the
Lenders as specified in Section 10.09 of the Credit Agreement), the Guarantor
shall not file or suffer to be on file, or authorize or permit to be filed or to
be on file, in any jurisdiction, any financing statement or like instrument with
respect to the Collateral in which the Administrative Agent is not named as the
sole secured party for the benefit of the Lenders.
6.03 Preservation of Rights. The Administrative Agent shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.
6.04 Special Provisions Relating to Certain Collateral.
(a) Intellectual Property.
(1) For the purpose of enabling the Administrative Agent to exercise
rights and remedies under Section 6.05 hereof at such time as the Administrative
Agent shall be lawfully entitled to exercise such rights and remedies, and for
no other purpose, the Guarantor hereby grants to the Administrative Agent, to
the extent assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to the Guarantor) to use,
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assign, license or sublicense any of the Intellectual Property now owned or
hereafter acquired by the Guarantor, wherever the same may be located, including
in such license reasonable access to all media in which any of the licensed
items may be recorded or stored and to all computer programs used for the
compilation or printout thereof.
(2) Notwithstanding anything contained herein to the contrary, but
subject to the provisions of Section 8.05 of the Credit Agreement which limit
the right of the Company and its Subsidiaries to dispose of their property, so
long as no Event of Default shall have occurred and be continuing, the Guarantor
will be permitted to exploit, use, enjoy, protect, license, sublicense, assign,
sell, dispose of or take other actions with respect to the Intellectual Property
in the ordinary course of the business of the Guarantor. In furtherance of the
foregoing, unless an Event of Default shall have occurred and be continuing the
Administrative Agent shall from time to time, upon the request of the Guarantor,
execute and deliver any instruments, certificates or other documents, in the
form so requested, that the Guarantor shall have certified are appropriate (in
its judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to clause (1) immediately above
as to any specific Intellectual Property). Further, upon the payment in full of
all of the Secured Obligations and cancellation or termination of the
Commitments and Letter of Credit Liabilities or earlier expiration of this
Agreement or release of the Collateral, the Administrative Agent shall grant
back to the Guarantor the license granted pursuant to clause (1) immediately
above. The exercise of rights and remedies under Section 6.05 hereof by the
Administrative Agent shall not terminate the rights of the holders of any
licenses or sublicenses theretofore granted by the Guarantor in accordance with
the first sentence of this clause (2).
6.05 Events of Default, Etc. During the period during which an Event
of Default shall have occurred and be continuing:
(a) the Guarantor shall, at the request of the Administrative Agent,
assemble the Collateral owned by it at such place or places, reasonably
convenient to both the Administrative Agent and the Guarantor, designated
in its request;
(b) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;
(c) the Administrative Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to
the maximum extent permitted by law, to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral as if the
Administrative Agent were the sole and absolute owner thereof (and
Guarantee and Security Agreement
<PAGE> 158
-14-
the Guarantor agrees to take all such action as may be appropriate to give
effect to such right);
(d) the Administrative Agent in its discretion may, in its name or
in the name of the Guarantor or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account
of or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(e) the Administrative Agent may, upon ten Business Days prior
written notice to the Guarantor of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter come
into the possession, custody or control of the Administrative Agent, the
Lenders or any of their respective agents, sell, lease, assign or
otherwise dispose of all or any part of such Collateral, at such place or
places as the Administrative Agent deems best, and for cash or for credit
or for future delivery (without thereby assuming any credit risk), at
public or private sale, without demand of performance or notice of
intention to effect any such disposition or of the time or place thereof
(except such notice as is required above or by applicable statute and
cannot be waived), and the Administrative Agent or any Lender or anyone
else may be the purchaser, lessee, assignee or recipient of any or all of
the Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Guarantor,
any such demand, notice and right or equity being hereby expressly waived
and released. In the event of any sale, assignment, or other disposition
of any of the Trademark Collateral, the goodwill connected with and
symbolized by the Trademark Collateral subject to such disposition shall
be included, and the Guarantor shall supply to the Administrative Agent or
its designee, for inclusion in such sale, assignment or other disposition,
all Intellectual Property relating to such Trademark Collateral. The
Administrative Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjoumed from time to time
by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
6.05, including by virtue of the exercise of the license granted to the
Administrative Agent in Section 6.04(b) hereof, shall be applied in accordance
with Section 6.09 hereof.
The Guarantor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any pan of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Guarantor acknowledges that any such private sales may be at prices and on terms
less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have
Guarantee and Security Agreement
<PAGE> 159
-15-
been made in a commercially reasonable manner and that the Administrative Agent
shall have no obligation to engage in public sales and no obligation to delay
the sale of any Collateral for the period of time necessary to permit the
respective Issuer or issuer thereof to register it for public sale.
6.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 6.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Guarantor shall remain liable for any
deficiency.
6.07 Removals, Etc. Without at least 30 days prior written notice to
the Administrative Agent, the Guarantor shall not (i) maintain any of its books
and records with respect to the Collateral at any office or maintain its
principal place of business at any place, or permit any Inventory or Equipment
to be located anywhere, other than at the address indicated beneath its
signature hereto or at one of the locations identified in Part A of Annex 5
hereto or in transit from one of such locations to another or (ii) change its
corporate name, or the name under which it does business, from the name shown on
the signature pages hereto; provided, however, that the Guarantor may do
business in the states and under the names specified in Part B of Annex 5
hereto.
6.08 Private Sale. The Administrative Agent and the Lenders shall
incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 6.05 hereof conducted in a
commercially reasonable manner. The Guarantor hereby waives any claims against
the Administrative Agent or any Lender arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if the Administrative
Agent accepts the first offer received and does not offer the Collateral to more
than one offeree.
6.09 Application of Proceeds. Except as otherwise herein expressly
provided and except as provided below in this Section 6.09, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Administrative Agent
under Section 5 hereof or this Section 6, shall be applied by the Administrative
Agent:
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Administrative Agent and the reasonable fees and expenses
of its agents and counsel, and all reasonable expenses incurred and
advances made by the Administrative Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in each
case equally and ratably in accordance with the respective amounts thereof
then due and owing or as the Lenders holding the same may otherwise agree;
and
Guarantee and Security Agreement
<PAGE> 160
-16-
Finally, to the payment to the Guarantor, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 5.04 hereof shall be applied first to the Letter of Credit
Liabilities outstanding from time to time and second to the other Secured
Obligations in the manner provided above in this Section 6.09.
As used in this Section 6, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Guarantor or any issuer of or obligor
on any of the Collateral.
6.10 Attorney-in-Fact. Without limiting any rights or powers granted
by this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of the Guarantor for the purpose of carrying out the provisions
of this Section 6 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 6 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks made payable to the order of
the Guarantor representing any dividend, payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge for the
same.
6.11 Termination. When all Secured Obligations shall have been paid
in full and the Commitments of the Lenders under the Credit Agreement and all
Letter of Credit Liabilities shall have expired or been terminated, this
Agreement shall terminate, and the Administrative Agent shall forthwith cause to
be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of the Guarantor and to be
released and canceled all licenses and rights referred to in Section 6.04(a)
hereof. The Administrative Agent shall also execute and deliver to the Guarantor
upon such termination such Uniform Commercial Code termination statements,
certificates for terminating the Liens on the Motor Vehicles and such other
documentation as shall be reasonably requested by the Guarantor to effect the
termination and release of the Liens on the Collateral.
6.12 Further Assurances. The Guarantor agrees that, from time to
time upon the written request of the Administrative Agent, the Guarantor will
execute and deliver such further documents and do such other acts and things as
the Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.
Guarantee and Security Agreement
<PAGE> 161
-17-
6.13 Release of Motor Vehicles. So long as no Event of Default shall
have occurred and be continuing, upon the request of the Guarantor, the
Administrative Agent shall execute and deliver to the Guarantor such instruments
as the Guarantor shall reasonably request to remove the notation of the
Administrative Agent as lienholder on any certificate of title for any Motor
Vehicle; provided that any such instruments shall be delivered, and the release
effective only upon receipt by the Administrative Agent of a certificate from
the Guarantor stating that the Motor Vehicle the lien on which is to be released
is to be sold or has suffered a casualty loss (with title thereto passing to the
casualty insurance company therefor in settlement of the claim for such loss).
Section 7. Miscellaneous.
7.01 No Waiver. No failure on the part of the Administrative Agent
or any of its agents to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any of its agents of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
7.02 Notices. All notices, requests, consents and demands hereunder
shall be in writing and telexed, telecopied or delivered to the intended
recipient at the "Address for Notices" specified beneath its name on the
signature pages hereof or, as to either party, at such other address as shall be
designated by such party in a notice to the other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
7.03 Expenses. The Guarantor agrees to reimburse each of the Lenders
and the Administrative Agent for all reasonable out-of-pocket costs and expenses
of the Lenders and the Administrative Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (i) any
Default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (w) performance by the Administrative Agent of any obligations
of the Guarantor in respect of the Collateral that the Guarantor has failed or
refused to perform, (x) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, or any actual or attempted sale, or any
exchange, enforcement, collection, compromise or settlement in respect of any of
the Collateral, and for the care of the Collateral and defending or asserting
rights and claims of the Administrative Agent in respect thereof; by litigation
or otherwise, including expenses of insurance, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 7.03,
Guarantee and Security Agreement
<PAGE> 162
-18-
and all such costs and expenses shall be Secured Obligations entitled to the
benefits of the collateral security provided pursuant to Section 4 hereof.
7.04 Amendments, Etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the
Guarantor and the Administrative Agent (with the consent of the Majority Lenders
as specified in Section 10.09 of the Credit Agreement). Any such amendment or
waiver shall be binding upon the Administrative Agent and each Lender, each
holder of any of the Secured Obligations and the Guarantor.
7.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the
Guarantor, the Administrative Agent, the Lenders and each holder of any of the
Secured Obligations (provided, however, that the Guarantor shall not assign or
transfer its rights hereunder without the prior written consent of the
Administrative Agent).
7.06 Captions. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
7.07 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
7.08 Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the law of the State of New
York. The Guarantor hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of the
Supreme Court of the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Guarantor hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
7.09 Waiver of Jury Trial. EACH OF THE GUARANTOR, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Guarantee and Security Agreement
<PAGE> 163
-19-
7.10 Agents and Attorneys-in-Fact. The Administrative Agent may
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
7.11 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
Guarantee and Security Agreement
<PAGE> 164
-20-
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee
and Security Agreement to be duly executed and delivered as of the day and year
first above written.
IN-FLIGHT ENTERTAINMENT, LLC
By: BE Aerospace, Inc., Member
By
--------------------------------
Title:
Address for Notices:
In-Flight Entertainment, LLC
17481 Red Hill Avenue
Irvine, California 92614
Attn: Thomas P. McCaffrey
Guarantee and Security Agreement
<PAGE> 165
-21-
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
--------------------------------
Title:
Address for Notices:
The Chase Manhattan Bank,
as Administrative Agent
270 Park Avenue
38th Floor
New York, New York 10017
Attention: Matthew H. Massie
with a copy to:
The Chase Manhattan Bank
Agent Bank Services Group
8th Floor
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Frank Giacalone
Guarantee and Security Agreement
<PAGE> 166
ANNEX 1
LIST OF COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
<TABLE>
<CAPTION>
Title Date Filed Registration No. Effective Date
- --------------------------------------------------------------------
<S> <C> <C> <C>
[None)
</TABLE>
Annex 1 to Guarantee and Security Agreement
<PAGE> 167
ANNEX 2
LIST OF PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
Title Patent Country Registration No. Date
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[None]
</TABLE>
Annex 2 to Guarantee and Security Agreement
<PAGE> 168
ANNEX 3
LIST OF TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK
REGISTRATIONS
U.S. Trademarks
<TABLE>
<CAPTION>
Application(A)
Registration(R) Registration
Mark or Series No.(S) or Filing Date
- --------------------------------------------------------------
<S> <C> <C>
[None]
</TABLE>
Annex 3 to Guarantee and Security Agreement
<PAGE> 169
-2-
Foreign Trademarks
<TABLE>
<CAPTION>
Application (A) Registration or
Mark Registration (R) Country Filing Date (F)
- ---------------------------------------------------------------------
<S> <C> <C> <C>
[None]
</TABLE>
Annex 3 to Guarantee and Security Agreement
<PAGE> 170
ANNEX 4
LIST OF CONTRACTS, LICENSES AND OTHER AGREEMENTS
[None]
Annex 4 to Guarantee and Security Agreement
<PAGE> 171
ANNEX 5
LIST OF LOCATIONS
Pan A - List of Locations.
Pan B - Trade Names/State
<TABLE>
<CAPTION>
Trade Name State
---------- -----
<S> <C>
BE Aerospace, Inc. California
In-Flight Entertainment California
</TABLE>
Annex 5 to Guarantee and Security Agreement
<PAGE> 172
EXHIBIT B
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Fourth Amended and Restated Credit Agreement dated as of
October 29, 1993 and amended and restated as of April 3, 1998
(as so amended and restated, the "Credit Agreement"), between
BE Aerospace, Inc. (the "Company"), the lenders named therein
and The Chase Manhattan Bank, as Administrative Agent.
Ladies and Gentlemen:
As a Lender party to the Credit Agreement, we have agreed with the
Company pursuant to Section 11.12 of the Credit Agreement to use reasonable
precautions to keep confidential, except as otherwise provided therein, all
non-public information identified by the Company as being confidential at the
time the same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 11.12, we are permitted to provide you,
as a prospective [holder of a participation in the Loans (as defined in the
Credit Agreement)] [assignee Lender], with certain of such non-public
information subject to the execution and delivery by you, prior to receiving
such non-public information, of a Confidentiality Agreement in this form. Such
information will not be made available to you until your execution and return to
us of this Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf
of yourself and each of your affiliates, directors, officers, employees and
representatives) that (A) such information will not be used by you except in
connection with the proposed [participation] [assignment] mentioned above and
(B) you shall use reasonable precautions, in accordance with your customary
procedures for handling confidential information and in accordance with safe and
sound banking practices, to keep such information confidential, provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to your
counsel or to counsel for any
<PAGE> 173
-2-
of the Lenders or the Administrative Agent, (iii) to bank examiners, auditors or
accountants, (iv) to the Administrative Agent or any other Lender (or to Chase
Securities Inc.), (v) in connection with any litigation to which you or any one
or more of the Lenders or the Administrative Agent are a party, (vi) to a
subsidiary or affiliate of yours as provided in Section 11.12(a) of the Credit
Agreement or (vii) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first executes and delivers to you a Confidentiality Agreement
substantially in the form hereof; provided, further, that (x) unless
specifically prohibited by applicable law or court order, you agree, prior to
disclosure thereof; to notify the Company of any request for disclosure of any
such non-public information (A) by any governmental agency or representative
thereof (other than any such request in connection with an examination of your
financial condition by such governmental agency) or (B) pursuant to legal
process and (y) that in no event shall you be obligated to return any materials
furnished to you pursuant to this Confidentiality Agreement.
Please indicate your agreement to the foregoing by signing as
provided below the enclosed copy of this Confidentiality Agreement and returning
the same to us.
Very truly yours,
[INSERT NAME OF LENDER]
By
-----------------------------
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By ]
----------------------------
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement No. 333-47649 of BE
Aerospace, Inc. on Form S-4 of our report, which includes an explanatory
paragraph relating to the Company's change in its method of accounting for
engineering expenditures, dated April 10, 1997, appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 20, 1998
<PAGE> 1
Exhibit 25
FORM T-1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
----------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)_____
----------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
----------
BE AEROSPACE, INC.
(Exact name of issuer as specified in its charter)
Delaware 06-1209796
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1400 Corporate Center Way 33414
Wellington, FL (Zip Code)
Telephone (561) 791-5000
(Address including zip code, and telephone number, including area code,
of issuer's principal executive offices)
----------
8% Series B Senior Subordinated Notes Due 2008
(Title of the indenture securities)
================================================================================
<PAGE> 2
Exhibit 25
-2-
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3,4,5,6,7,8,9,10,11,12,13,14 and 15:
BE Aerospace, Inc. currently is not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3,4,5,6,7,8,9,10,11,12,13,14 and 15 of Form
T-1 are not required under General Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 3
-3-
Exhibit 25
16. LIST OF EXHIBITS
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of April 13, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U.S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
---------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 13th day
of April, 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Margaret Ciesmelewski
---------------------------
Margaret Ciesmelewski
Assistant Vice President
<PAGE> 4
Exhibit 25
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
___________________________
By: /s/ Gerald F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT 25
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
DECEMBER 31, 1997
($ IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and Due from Banks $ 80,246
Short-Term Investments 386,006
Securities, Available for Sale 661,596
Loans 1,774,551
Less: Allowance for Credit Losses 16,202
----------
Net Loans 1,758,349
Premises and Equipment 61,477
Other Assets 124,499
----------
TOTAL ASSETS $3,072,173
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 686,507
Interest Bearing 1,773,254
----------
Total Deposits 2,459,761
Short-Term Credit Facilities 295,342
Accounts Payable and Accrued Liabilities 149,775
----------
TOTAL LIABILITIES $2,904,878
==========
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 100,235
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,524
----------
TOTAL STOCKHOLDER'S EQUITY 167,295
----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $3,072,178
==========
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
February 9, 1998
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